Introduction to Management control

information system
1. Controlling a car
-brakes & accelerator

2 controlling temp. of
body/driving car • Sensor or detector
– Sensory nerves/eyes
– Brain
– Muscle & organs/legs &
• Assessor
hands
• Effectors
 Management control

It is a set of interrelated communication

structures that facilitates the processing of
information to assist the managers in
coordinating the parts to achieve goals on
continuous basis bringing out the unity
/harmony out of the diverse activities.
 Management control /simple control

• Standard ( like 98.6 ) are not preset

• It is adaptive & needs planning & control together
• Not automatic as car because it involves human
beings
• Coordination among individuals
• Actions taken are not specified
• It is more about self control
 System
A prescribed & repetitive way to carry out
operations.But the management problems
are uncertain & complex.
Systematic control
-formal management control
eg:-task control
Unsystematic control
informal management control
eg:-strategy control (IBM mainframe to
PC )
 PURPOSE OF MCIS

• Planning of activities- control actual accomplishment with set plans

• Coordinating Activities- Harmony among functional unit

• Communicating - information to various levels of hierarchy

• Evaluating - information & decide actions

• Influencing - people to change their behaviour

 Domain of MCS
• Strategic planning
• Management control
• Task control
• Control of strategy
• Control of operations
Strategy Management Task control
formulation control
unsystematic Lies in between Systematic

Top managers Staff at all levels Task group

Threat,estimate , Not very often scientific

opportunities

Top managers Interaction Use of computers

between &
managers man
 Definition of MCIS
Process by which managers influence others
-Anthony & Govindrajan
Basic phase & essential part of M’ment functions
-Newman
Cybernetic view- entire organisation is a control
system & considers both strategy
& operations
-Stafford Beer
Book “ cybernetic 1947” – Norbert Weiner
 Organisation context of MCS
•Organisation is divided into sub units having independent autonomy
& objectives
•MCS lowers cost to coordinate them
•MCS bring out efficiency & effectiveness
•Now MCS meet requirement of constituents & overall purpose both
•Facilitates adaptation, innovation.
•Maintain inducement-contribution balance among stakeholders
•To maintain MCS- Understand human behaviour as human beings are
rational, creative, strong /week morals, desire association/community
 Adaptive control system
•System is said to be adaptive when its sub systems are internally
consistent with each other
•Control system of two organisation differs but basic 5 subsystems
are common
•Formal system makes explicit the structure, rules, procedures,
policies to be followed by the managers by documentation
- Plans, budgets, regulations, quotas

•Informal system consists of interpersonal relationships &

supplement adaptability in dynamic & unpredictive environment
- strategy control
Infrastructure
•Organisation structure
Management style & culture
•Strategy/SBU
•Operations •Prevailing style
•Pattern of autonomy •External/internal/mixed
•Measurement methods
•Responsibility centers
Principal values (corporate culture)
•Transfer pricing •Norms & beliefs

•Formal control process

•Strategic planning -capital budget
•Operation planning – cost account & budgeting
•Reporting systems ( monthly/qtrly )
•Operation/variance analysis
•Strategy & project M'ment

Coordination & integration

Rewards •Standing committee
•Strategy ( Top Mgmt.)
•Individual & group
•Operations
•Strategic & operational •Formal conference
•Promotion policy •Involvement techniques
Infrastructure Management style & culture
•Personal contacts Management style & culture
•Networks
•Prevailing
•Prevailingstyle
style
•Expertise oriented
•External/internal/mixed
•Minimal structure •External/internal/mixed
•Emergent roles Principal values
( informal relationship) •Normsvalues
Principal & beliefs

•Norms & beliefs

•Informal control process

•Search /alternative generation
•Adhoc ( for particular purpose )
•Uncertainty coping
•Rationalization/dialogue
( compare with value & beliefs)

Informal rewards Coordination & integration

•Recognition & respect •Based upon trust
•Status oriented •Simple /direct/personal/cross org group
•personal involvement of giver •Telephone/communication vehicle
•Performance & stature oriented •Personal memo/adhoc teams
 Interaction between
formal & informal system
• Control system should support org. in both stable &
unstable environment
• Both formal & informal control system support/overlap
each other
• In times of major change---informal dominates
• When environment settles---formalise rules,procedures
• Key is to use the system according to situation
• Each sub system in a system support the other.
• Both set of subsystems mutually supportable
• Indoctrination socializes members to values/policies while
skill training imparts knowledge of methods.combination
is effective for a control process