Chap1

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Chap1

  1. 1. NATURE OF MANAGEMENT CONTROL SYSTEMS
  2. 2. Basic Concepts • Control:  Devices should be in place to ensure that strategic intentions are achieved  Elements of control system: Detector or sensor – to measure actual behaviour Assessor – compare actual with standard Effector – called ‘feedback’, it alters behavior if assessor indicates need to do so Communications network – transmit information between detector and assessor & assessor and effector
  3. 3. Management • CEO or team of senior managers decides on overall strategies that enable the organisation to meet its goals • Various business unit managers formulate additional strategies for their respective units subject to CEO’s approval • Number of layers in organisation are based on its Complexity • Management control process is the process where managers at all levels ensure that the people they supervise implement their intended
  4. 4. Management Control Processes • Standard is not preset • Management control is not automatic  manager must personally be the assessor • Management control requires coordination among individuals • Connection from perceiving the need for action to determining the action required to obtain the desired result may not be clear  System works like a “Black Box • Much management control is self-control
  5. 5. System • It is a prescribed and usually repetitious way of carrying out an activity or set of activities • Here, more or less routine decisions are taken for which recurring series of steps are available • Management control systems:  far more complex & judgemental  rules are not well-defined  managers have to use their best judgement to decide on best course of action
  6. 6. Management Control • It is the process by which managers influence other members of the organisation to implement organisational strategies • Its activities include:  planning  coordinating  communicating  evaluating  deciding  influencing
  7. 7. Management Control • Goal Congruence • Tool for implementing strategy Management Controls Strategy Organisation Structure HRM Culture Performance
  8. 8. Management Control • Financial and non-financial emphasis  financial – ‘bottomline’ of the company  non-financial parameters like product quality, market share, customer satisfaction etc. • Aid in developing new strategies:  Interactive control focuses management attention on positive and negative developments, which signal the need for new strategy formation  information of non-financial nature is used to make strategic decisions
  9. 9. Strategy Formulation • It is the process of deciding on goals of the organisation and the strategies for attaining those goals • Strategies are important, big plans, showing the direction in which senior management wanted the organisation to move • Need for formulating strategies usually arises in response to a perceived threat or opportunity • Complete responsibility should never be assigned to a particular person or organisational unit
  10. 10. Strategy Formulation v/s Management Control • Definition •Strategy formulation is essentially unsystematic while management control is systematic • Strategy formulation involves much judgement and numbers are usually rough estimates while management control has a series of steps in a predictable sequence and with reliable estimates • Strategy formulation involves relatively few people, while management control involves managers & staff at all levels in the organisation
  11. 11. Task Control • It is the process of assuring that specified tasks are carried out effectively and efficiently • Task control is transaction-oriented • Many task control activities are scientific i.e. using management science and OR techniques • Most of the information in an organisation is task control information • Many activities performed by managers in the past have been automated and are task control activities
  12. 12. Task Control v/s Management Control • Task control is scientific but management control can never be reduced to a science • Managers interact with other managers in management control; in task control, either human beings are not involved at all or the interaction is between a manager and a non-manager • Management control focuses on organisational units while task control focuses on specific tasks performed by these organisational units
  13. 13. Internet for Management Control • Instant access • Costless communication • Multi-targeted communication • Ability to display images • Shifting power and control to the individual • Facilitates coordination and control • Availability of large amounts of data
  14. 14. Elements of Management Control • Judgements required to design & operate optimal control system involve:  understanding relative importance of competing goals  developing specific objectives for business units, functional areas and departments  determining key variables for an individual’s contribution to strategic goals  evaluating actual performance  designing right reward structure

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