The document outlines the fundamental components of management control systems, including detectors, assessors, effectors, and communication networks. It distinguishes between strategy formulation, management control, and task control, emphasizing their different focuses, processes, and time horizons. The text also provides practical examples to illustrate how these concepts are applied in real-world situations, particularly in the context of driving a car as an analogy.

1. 1
The Nature of Management
Control Systems

2. 2
Basic Concepts
Elements of a control system consists of:
1. A detector
2. An assessor
3. An effector
4. A communication network

3. 3
1. A detector or sensor is a device that measure
what is actually happening in the process being
controlled.
2. An assessor is a device that determines the
significance of what is actually happening by
comparing it with some standards or expectations
of what should happen.
3. An effector (feedback) is a device that alters
behavior if the assessor indicates the need to do so.
4. A communications network consist of devices
that transmit information between the detector and
the assessor and between the assessor and the
effector.

4. 4
Example: You are driving a car
• Detectors= Your eyes
• Assessor= Your brain
• Effector= Your foot
• Communication network= Your nerves
system

5. 5
• Your eyes (detectors) measure actual speed by
observing the speedometer. Your brain (assessor)
compares actual speed with desired speed
(standard: the highest speed is 80 km/hour) to
detect a deviation from standard. Your brain
(assessor) directs your foot (effector) to ease up the
accelerator if actual speed (90 km/hour) is faster
than the standard speed (80 km/hour), press down
the accelerator if the actual speed (70 km/hour) is
slower than standard speed (80 km/hour). And,
your nerves (communication network) form the
communication system that transmits information
from eyes (detectors) to brain (assessor) and brain
(assessor) to foot (effector).

6. 6
Boundaries of Management Control
• Strategy formulation is the process of deciding
on the goals of the organization and the strategies
for attaining these goals.
• Management control (Anthony and
Govindarajan, 2004): is the process by which
managers influence other members of organization
to implement the organization’s strategies.
• Task control is the process of ensuring that
specified tasks are carried out effectively and
efficiently.

7. 7
Distinctions between strategy formulation and
management control:
Characteristics Strategy Formulation Control
Management
System design Unsystematic, Strategic
decision may be made
any time
Rhythmic,
predetermined
procedures
Nature of
information
Tailored-made to faced
problems, more external
and predictive, less
accurate
Integrated, more
internal and
historical, more
accurate
Communication
of information
Simple Difficult
Involved people Top management and
staffs
Top management and
line managers

8. 8
Distinctions between strategy formulation and
management control:
Characteristics Strategy Formulation Control
Management
Number of
involved people
Few people Many people
Mental activity Creative and analytic Administrative and
persuasive
Discipline Economics Social psychology
Time horizon Tend to long-term Tend to short-term
End products Goals, strategies Strategy
implementation

9. 9
Distinctions between management and task
controls:
Characteristics Control Management Task Control
Focus of
activity
The whole of operation Individual task or
transaction
Nature of
information
Integrated, many financial
data
Tailored-made to
individual task, more
non-financial data
Involved people Management Supervisor or none
Mental activity Administrative and
persuasive
Follow direction or
none
End products Strategy implementation Tasks are carried out
effectively and
efficiently

10. 10
Distinctions between management and task
controls:
Characteristics Control Management Task Control
Mental activity Administrative and
persuasive
Follow direction or
none
Discipline Social psychology Economics, physics
Time horizon Weekly, monthly,
annually
Daily
Type of cost Discretionary costs Engineered costs

11. 11
Examples of decisions in planning and control
function:
Strategy
Formulation
Management
Control
Task Control
Enter a new business Expand a plant Schedule production
Change debt to
equity ratio
Issue new debt Manage cash flows
Add direct mail
selling
Determine
advertising budget
Book TV
commercials
Decide magnitude
and direction of
research
Control of research
organization
Run individual
research project
Acquire an unrelated
business
Introduce new
product or brand
within product line
Coordinate order
entry

12. 12