This document discusses management control systems (MCS) and their key elements and concepts. It outlines two views on the relationship between MCS and decentralization - whether strategies dictate MCS design or vice versa. The basic concepts of control, MCS as a system, and the management control process are defined. Key relationships between strategy formulation, MCS, and task control are also presented.

1. 2. The Nature of
Management Control System
(Chapter1)
1

2. Elements of MCS
• Strategic planning
• Budgeting
• Resources allocation
• Performance measurement
• Evaluation and reward
• Responsibility center allocation
• Transfer pricing
2

3. MCS and decentralization
• View1: MSC must first develop through a formal
and rational process, and this strategy then
dictates the desing of th firm’s management.
(Predictable)
• View2: strategies emerge through
experimentation, which are influenced by the
firm’s management system. MCS can affect the
development of strategies. (Change)
3

4. Basic concepts (1)
• Control: devices must be place to ensure that its
strategic intentions are achieved.
• Elements of control system:
Control 2. Assessor:
device comparison
1. Detector: 3. Effector:
information alteration
Entity
Being
crontrolled 4

5. Basic concepts (2)
• System: repetitious way of carrying out an
activity or a set of activities.
• Many management actions are unsystematic
(judgment).
• If all systems ensured the correct action for all
situations, there would be no need for human
managers.
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6. Basic concepts (3)
• Management control process: managers at all
levels ensure that people they supervise
implement their intended strategies.
• Involves both planning and control.
• Requieres coordination among individuals.
• The action required to obtain the desired result
may not be clear.
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• Needs self-control and judgment.

7. Basic concepts (4)
• Management control: managers influence other
members of the organization to implement the
organization’s strategies.
• Activities: Planning; Coordinating;
Communicating; Evaluating; Deciding; and,
Influencing.
• Goal congruence: the goals of an organization’s
individual members should be consistent with the
goals of the organization itself.
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8. Basic concepts (5)
• Strategy excecution: move an organization
toward its strategic objectives.
Implementation Mechanism
Management
controls
Strategy Organization Human Performance
structure resources
Culture
8

9. Relationships among
Planning and Control
Strategy Goals, strategies, and policies
formulation
Management
Implementation of strategies
control
Efficient and effective performance
Task
of individual task
control
9

10. Strategy formulation
• Deciding on the goals of the organization and
the strategies for attaining them.
• Goals are timeless; they exist until they are
changed.
• Strategies are big and important plans. They
state the direction to move the organization.
• Management control is the process of
implementating those strategies. 10

11. Task control
Process of enssuring that specified task are
carried out effectively and efficiently.
Task control: Management control
•Systems are scientific. •Involves behavior of
•Focus on specific task managers.
perfomed by •Focus on organization
organizational units. units.
•Humans nor involved; or •Managers interact with
interaction between other managers.
managers and
nonmanagers. 11

12. Bibliography
• Anthony y Govindarajan. Management Control
System. 12th Edition. McGraw-Hill.
• Guan, Hansen and Mowen. Cost Management.
6th Edition. McGraw-Hill.
• Ramírez Padilla, David. Contabilidad
Administrativa. 8va. Edición. McGraw-Hill.
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