Management Control Management Control SystemsSystems

What is Control ?What is Control ? Controlling is the measurement and Controlling is the measurement and

correction of performance of activities in correction of performance of activities in order to ensure that the planned objectives order to ensure that the planned objectives are accomplished.are accomplished.

Control, centres on the prevention and Control, centres on the prevention and correction of deviations in a system’s correction of deviations in a system’s behaviour from those of standards that behaviour from those of standards that have been specified at a given time.have been specified at a given time.

ControlControl An organization must be controlled by An organization must be controlled by

placing all its elements in its appropriate placing all its elements in its appropriate position to ensure that its strategic position to ensure that its strategic intentions are achieved.intentions are achieved.

Controlling organization is very Controlling organization is very complicatedcomplicated

FeedbackFeedback Key element for control procedure is Key element for control procedure is

feedback.feedback. Comparison of output values is made with Comparison of output values is made with

the standards and information concerning the standards and information concerning the degree of deviation is fed back to the the degree of deviation is fed back to the other elements in the system’s structure so other elements in the system’s structure so that preplanned activities may be changed if that preplanned activities may be changed if necessary.necessary.

A feedback system is driven by two signals: A feedback system is driven by two signals: Input Signal & Feedback Signal.Input Signal & Feedback Signal.

It gives the system capability to act as a self-It gives the system capability to act as a self-correcting mechanism.correcting mechanism.

It decreases the effects of disturbance and It decreases the effects of disturbance and noise signals in the forward path of the noise signals in the forward path of the feedback loop.feedback loop.

Systems: Closed/OpenSystems: Closed/Open Closed Systems: Information tight controlClosed Systems: Information tight control Open Systems: No information tight controlOpen Systems: No information tight control

Management Control SystemManagement Control System

Is the process of evaluating, monitoring and Is the process of evaluating, monitoring and controlling the various sub-units of the controlling the various sub-units of the organization so that there is effective and organization so that there is effective and efficient allocation and utilization of efficient allocation and utilization of resources in achieving the predetermined resources in achieving the predetermined goals.goals.

Elements Of A Control SystemElements Of A Control System

Detector

Communication Network

Assessor

Effectors

Characteristics of Control Characteristics of Control System In OrganizationSystem In Organization

Involvement of peopleInvolvement of people Information about the actual state of the Information about the actual state of the

organization is compiled by people.organization is compiled by people. It is compared by people.It is compared by people. With the desired state decided by people.With the desired state decided by people. For significant difference, a course of action For significant difference, a course of action

is recommended by peopleis recommended by people Action taken by peopleAction taken by people

The management decides the desired The management decides the desired state or standards against which state or standards against which performance is compared.performance is compared.

It decides what the organization plans to It decides what the organization plans to achieve in a given time framework which achieve in a given time framework which is known as Planning Process.is known as Planning Process.

Actual Performance is compared to Actual Performance is compared to Planned Performance in control, so Planned Performance in control, so planning and controlling are interlinked planning and controlling are interlinked and are known as P&C systemsand are known as P&C systems

MeasurementMeasurement Co-ordinatingCo-ordinating Multivariable Control SystemMultivariable Control System

3-Level Management3-Level Management

Corporate ManagementCorporate Management: Responsible for : Responsible for the performance of the organization as a the performance of the organization as a whole.whole.

Divisional ManagementDivisional Management: Responsible for : Responsible for total performance of particular regions total performance of particular regions or product divisions.or product divisions.

Operating ManagementOperating Management: Management of : Management of unit operations, responsible for the unit operations, responsible for the accomplishment of specific operational accomplishment of specific operational tasks.tasks.

3-Levels of Decision Making3-Levels of Decision Making

The The institutional levelinstitutional level for strategic thinking and for strategic thinking and planning.planning.

The The managerial levelmanagerial level focuses on gathering, co- focuses on gathering, co-ordinating and allocating resources for the ordinating and allocating resources for the organization.organization.

The The technical leveltechnical level involving the acquisition and involving the acquisition and utilization of technical knowledge for operational utilization of technical knowledge for operational controls.controls.

Types Of ControlTypes Of Control

Informal Group

Controls

Organizational

Controls

Individual Level

Controls

Organizational ControlOrganizational Control

Consists of formal rules and standard Consists of formal rules and standard operating procedures plus the informal operating procedures plus the informal procedures that are also communicated procedures that are also communicated throughout the organization.throughout the organization.

Informal Group ControlInformal Group Control Based on the principle of mutual controls, Based on the principle of mutual controls,

which envisage checks and balances on each which envisage checks and balances on each other’s activities as a result of the mutual other’s activities as a result of the mutual commitments of the members of the group commitments of the members of the group to each other.to each other.

The Individual Level ControlThe Individual Level Control

Is the result of control exercised by the Is the result of control exercised by the individual on himself or herself with a view individual on himself or herself with a view to achieving personal goals and aspirations.to achieving personal goals and aspirations.

Internal ControlInternal Control Based on Internal check and mutual Based on Internal check and mutual

control.control. Encompasses every type of accounting Encompasses every type of accounting

technique and can be extended beyond the technique and can be extended beyond the internal audit to encompass management internal audit to encompass management audit.audit.

Insidious ControlInsidious Control Dangerous and powerful due to deceptive Dangerous and powerful due to deceptive

nature.nature. Various Kinds:Various Kinds:

Control through indicating intentions.Control through indicating intentions. Pleasures & DispleasuresPleasures & Displeasures Through informal controlsThrough informal controls By imposing time disciplineBy imposing time discipline

Through dominant coalitionThrough dominant coalition Through employees’ loyaltyThrough employees’ loyalty By keeping insiders at key strategic By keeping insiders at key strategic

positionspositions By constantly reminding employees of By constantly reminding employees of

their dependence on org.their dependence on org. By not allowing individuals to become By not allowing individuals to become

bigger than org.bigger than org. By rewarding loyal employeesBy rewarding loyal employees

Punishing vocal employeesPunishing vocal employees Informal dinnerInformal dinner Business meetingsBusiness meetings Distorting facts & informationDistorting facts & information Spouse’s talesSpouse’s tales