1. NATURE OF
MANAGEMENT
CONTROL SYSTEMS

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. 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. 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. 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. 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. Management Control
• Goal Congruence
• Tool for implementing strategy
Management
Controls
Strategy
Organisation
Structure
HRM
Culture
Performance

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. 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. 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. 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. 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. 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. 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