management control systems-lec 1

8/7/2019 Management Control Systems-lec 1

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ManagementControl Systems

Wise men talk because they have something to say; Fools also talk, because they

have to say something.


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The Nature of Management Control

Systems

Designing and implementing of managementsystems, used to plan and control the firmsperformance.

They include; (Elements of MCS) Strategic planning

Budgeting

Resource allocation Performance measurement, evaluation, reward

Responsibility center allocation

Transfer pricing


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Concepts of MCS

The MCS builds on concepts from

Business Strategy,

Organizational Behavior, Human Resource and

Financial & Managerial Accounting.


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Nature of Management Control Systems

ManagementManagement

ControlControl M.C.S.M.C.S.

SystemSystem

SuccessfulSuccessfulStrategyStrategyExecutionExecution


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Management is -

- Getting things done in the desired manner.

- Ensure optimum utilization of resources

- Ensure group works towards a common goal.

- Exercise Generic Functions - Planning, organizing,directing, coordinating, motivating, controlling etc

- Ensure, entire organization hierarchy is putting

its efforts towards achieving the set Goal.


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Management:-

The main objective of management isThe main objective of management is

to achieve the strategic goal throughto achieve the strategic goal through

effective and efficient utilization ofeffective and efficient utilization of

resources.resources.


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Control :-

The objective of control isto ensure that the things/activities

follow the pre-determined track.


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Control System of A Car

Press the accelerator , and your car goes

faster, rotate the steering wheel, and it

changes direction. Press the brake pedal,

and the car slows or stops. With these

devices, you control speed and direction, if

any of them is inoperative, the car does

not do what you want it to . In other words,it is out of control


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Control of an Organization

An organization must also be

controlled. That is devices must be in

place to ensure that its strategicintentions are achieved. But

controlling an organization is much

complicated than controlling a car


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Elements of Control System

Every control system has at least four elements

1.Detector or Sensor a device that measures

what is actually happening in the process being

controlled.

2.An Assessor a device that determines the

significance of what is actually happening by

comparing it with

some standard or expectationof what should happen


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Elements of Control System

3.An effectors a device that alters behavior

if the assessor indicates the need to do so.

4. A communications network a devicethat transmit information between the

detector and the assessor and between

the assessor and the effectors


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The Three examples of CS

1. Thermostat

2. Body Temperature

3. Driver of an automobile


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Thermostat

1. Thermometer which measures the

current temperature of a room (detector)

2. An Assessor which compares the current

temperature with

th

e accepted standardfor what the temperature should be.


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Thermostat

3.An effectors which prompts a furnace to emit

heat or activates an air conditioner which also

shuts off these appliances when the temperature

reaches the standard levels

4. A communication network, which transmit

information from thermometer to the assessor

and from the assessor to the heating or cooling

element


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Body temperature

1. The sensory nerves scattered throughthe body

2. The Hypothalamus center in the brain,which compares information receivedfrom detectors with the 98.6 f standard.

3. The muscles and organs (effectors) that

reduce the temperature when it exceedsthe standard and rise the temperaturewhen it falls below the standard


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Body temperature

4. The overall communications system of

nerves is self regulating. If the system is

functioning properly, it automatically

corrects for deviations from the

standards with out requiring conscious

effort.


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Automobile Driver

Assume you are driving on a high way

where the legal speed 65 kmph. Your

control system acts as the following.

1. your eyes measures actual speed by

observing the speedometer.

2. your brain compares the actual speed

with desired speed, and, upon detecting a

deviation from the standard.


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Automobile Driver

3. Directors your foot to ease up or press

down on the accelerator.

4. As in body temperature regulation yournerves form the communication system

that transmit information from eyes to

brain and brain to foot.


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Management

An organization consist of a group ofpeople who work together to achievecertain common goals. The CEO decides

on the overall strategies that will enablethe organization to meet its goals.

Subject to the approval of the CEO , thevarious business unit mangers formulateadditional strategies that will enable theirrespective units to further these goals


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Management

The management control process is the

process by which managers at all levels

ensure that the people they supervise

implement their intended strategies.


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systems

A system is a prescribed and usually

repetitious way of carrying out an activity

or a set of activities. Systems are

characterized more or less r hythmic,

coordinated, and recurring series of steps

intended to accomplish a specified

purpose.


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System is -

2. Set of coordinated efforts/Components

3. Rhythmic process

4. Recurring pattern giving assured output

1. Well defined/ formal/systematic method of

accomplishing a task.

Thus a system is a - A well prescribed way of

doing an activity usually in repetitive manner.

5. Framework to carry an activity ( I-P-O )


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Boundaries of Management Control

Strategy

formulation

ManagementControl

Task Control

Activity Nature of End Product

Goals, Strategies, policies

Implementation of strategies

Efficient and effective performance

Of individual tasks

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