The Nature of

Chapter
1 Management Control
system

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Part I Introduction

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Management Control System (MCS):
Definition

A system designed for executives or

management to plan and control the firms
performance

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 Task Control

Mechanism to monitor an Individual in terms

of performing a clerical duty or task properly

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 Elements of MCS

Performanc
Strategic Budgetin Resources e Evaluatio Responsibil Transfer
Reward
Planning g allocation measurem n ity center Pricing
ent

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 Management Control System:
Issues

Management control is a must in any organization

that practices decentralization
MCS must fit the firms strategy
MCS can affect the development of strategies

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Part II Basic Concept

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 Control: Definition

Directing situation, person or activity in

order to achieve desired objectives

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 Elements of Control System
A device that measures what is actually
A detector happening

A device that determines the significance of

An assessor what is actually happening

A device that alters behavior if the assessor

An effector indicates the need to do so

A Device that transmit information between the

communication detector and the assessor and between
assessor and the effector
network
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 Elements of the Control Process

Assessor
Control Device Comparison with
standard

Detector Effector
Information about
Behavior alteration, if
what is happening
needed

Entity being controlled

 Management : Terminology

Field of study: Group of executives

Study to manage people in
organization organization

CEO + Functional
Managers

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 Management Control Process

The process by which managers at all levels

ensure that the people they supervise
implement their intended strategies

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 Management Control Vs Simpler Control

Management Simpler Control

Control

Standard Preset in Planning Not Preset

Process Not Automatic Automatic
Detection
Involvement Coordination among Single individual
individual
Action May not be clear Clear
initiative Self control regulation
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 System

A prescribed and usually repetitious

way of carrying out an activity or set
of activities

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Part III Boundaries of Management Control

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 Strategy Formulation, Task Control and
Management Control

Strategy Task Control Management

Formulation Control
Systematica least systematic the most in between
lly systematic
Certainty Approximations of Current accurate in between
the future data
Focus Planning Process Control process Planning and
Control

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 Management Control

Management control is the process by which

managers influence other members of the
organization to implement the organization
strategies

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Relationships among Planning and Control
Functions
Strategy
Formulation Goals, Strategies, Policies

Management Implementation of
Control strategies

Efficient and Effective

Task Control performance of individual
task

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 Management Control activities

Planning

Coordinating

Communicating

Evaluating

Deciding

Influencing

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 MCS and Goal Congruence

Goal Congruence is synergy between personal

goals and organizations goal
MCS should be designed and operated with
principle of goal congruence in mind

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 MCS and Strategy Implementation

Management control focuses primarily on strategy

execution
Management controls are only one of the tools
managers use in implementing desired strategies

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 Framework for Strategy Implementation
Implementation
Mechanism Organizational
Structure:
the roles, reporting
Human
relationships, division of
Manageme Resources responsibilities
nt Controls Manageme Human Resources
nt Management:
Performan The selection, training,
Strategy
ce evaluation, promotion,
termination
Organizati
on Culture
Structure Culture:
Set of common beliefs,
attitudes and norms

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MCS and Development of New Strategies
The primary role management control is to ensure that the
execution of chosen strategies are working properly
If MC is already done properly, but strategies are not
working, it takes implication for developing new strategies
MC that drives development of new strategies called as
Interactive Control

Interactive
Control
Todays Tomorrows
controls strategy

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 Strategy Formulation
Strategy formulation is the process of deciding on the
goals of the organization and the strategies for
attaining these goals
Strategy is big plan or important plan
Strategy describes the direction in which senior
management wants to the organization to move
The need for formulating strategies usually arises in
response to perceived threat or opportunity

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Strategy Formulation Vs Management Control

Strategy Management
formulation Control

Process Process of deciding Process of

on new strategies implementing
strategies

Nature Unsystematic Systematic

Strategic Analysis much judgment and a series of steps
rough estimates and reliable
estimates
Involvement of Few people Relatively many
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people people
 Task Control
Task control is the process of ensuring that
specified tasks are carried out effectively and
efficiently
Task control is transaction oriented ( clerical), it
involves the performance of individual tasks

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 Task Control Vs Management Control

Task Control Management

Control

Procedure Scientific Art

Focus Specific task Organizational units
Action to perform Little or no judgment Mostly Judgement
Involvement of Only supervisor with Interacting with
people task or dutys results other managers

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 Internet and Management Control
The internet provides infrastructure, making the
process of information easier and faster
Managers can collect huge of data, store that data,
analyze it in different forms and send it to anyone in
the organization
The internet facilitates coordination and control
through the efficient and effective processing of
information

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Questions

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 Questions
Explain, distinction between Management Control Systems (MCS) and
Task Control / Simple Control ?
Why is MCS so important for decentralized organization?
What is the essence of MCS must be fitted with organizations
strategy?
What is relationship between strategy formulation, management
control and task control?
Explain, what is the meaning todays control is tomorrows
strategy?
Explain, how does framework for strategy implementation work?

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