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Management Control Systems

The document discusses management control systems, outlining three levels of control - strategic, business unit, and operational control - that are concerned with long-term planning, annual budgets/plans, and short-term operating plans respectively. It also describes the key elements of an effective management control system, including defining objectives and key performance factors, measuring deviations, developing alternative action plans, and monitoring performance. The purpose of a management control system is to evaluate and monitor sub-units in order to efficiently allocate resources and achieve predetermined goals.

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ynkamat
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315 views

Management Control Systems

The document discusses management control systems, outlining three levels of control - strategic, business unit, and operational control - that are concerned with long-term planning, annual budgets/plans, and short-term operating plans respectively. It also describes the key elements of an effective management control system, including defining objectives and key performance factors, measuring deviations, developing alternative action plans, and monitoring performance. The purpose of a management control system is to evaluate and monitor sub-units in order to efficiently allocate resources and achieve predetermined goals.

Uploaded by

ynkamat
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Management Control Systems

Introduction
Prof.C.S.Balasubramaniam
Basics of MCS
managerial pyramid of control
• Strategic Control concerned with Long
range corporate planning for 3 or more
years dealing with corporate performance
analysis ,review of strategies, action plans
and decisions for modifications through
quarterly /half yearly reports on
ROCE/ROI,
• growth in sales, market share,
• PESTLE factors
Business Unit Control
• Concerned with annual plan /budgets
dealing with product group ,regional
performance analysis ,decisive actions on
correctional actions through
monthly/quarterly reports on sales,
• costs and profits ,
• working capital assets & liabilities
Operational Control
• Concerned with operating plans and
schedules for the month /quarter dealing
with review of programmes/activities for
each production section
/branch/product/sales /territory and task
and decisions on corrections at the field
level /segments of customers
Scope and Means
• Defining the scope and objectives of control efforts
• Ascertaining key factors that have impact on
performance
• Measuring deviations from planned course &their
significance
• Evolving, testing ,evaluating alternative action plans for
control
• Determine appropriate tools /techniques for
implementing actions
• Compiling a performance monitoring ,review reports ,and
deciding on corrective paths
What is MCS ?
trouble shooting exercise
• Problem solving scheme
• Decision making through authority and
action plans at appropriate levels by
people oriented tasks
• Human judgments play critical role
• Involving managerial skills
MCS at unit level
• A process of evaluating ,monitoring & controlling
the various sub units /divisions
• Effective & efficient allocation and utilization of
resources in achieving the predetermined goals
• The focus of action plans is on identifying the
managers who are responsible for performance
of their departments –Responsibility Centre
• Assessing planned performance
(targets/budgets) against actual performance
which are decided on the basis of available
resources of men, materials and money
MCS at the unit level
Actual against planned performance levels
compared at regular time intervals so as to
identify resource gaps and if need be
provide managers with higher resources
transfer resources from one sub unit to
another with the objective of better
utilization and profits for the company as a
whole
MCS is not idealistic !
• Does not necessarily mean that actions should
correspond to the plan (budget/targets)
• The stated plans were based on circumstances
at that time of formulation
both inside and outside the unit /organization
Purpose of MCS is discovering a better way of
achieving organization’s goals and MCS would
not prohibit the new ways and competitive
means
Elements of control process
Strategy formulation Management control Task control

Acquire unrelated business Introduce new product Coordinate order entry


/brand
Enter new business Expand plant Schedule production

Add direct mail selling Determine advertising Book TV channels


budget
Change debt equity ratio Issue new debt Manage cash flows

Devise inventory policy Decide inventory levels Reorder an item

Decide magnitude and Control of research Run individual research


action /direction organization project
Adopt affirmative action Implement minority Maintain personnel records
policy recruitment program
MCS-behavioral considerations
• It involves interactions among individuals
/managers ,their personal goals against
organizational goals – Goal Congruence
• Specification of organization hierarchy
/structure ,roles and reporting relationships
• Responsibilities that shape decision making
within the organization
• Organizational culture guiding managerial
actions under leaders’ directions
MCS –financial /non financial ?
• Financial dimensions –’bottom line’ ,net
income ,ROI , Return on equity etc.
• Non financial –product quality ,market share,
customer satisfaction, on time delivery ,
employee morale
• Interactive control calls for management’s
attention for developments –either new
troubles /opportunities –new strategies ,
• Integral part of MCS –essentially non financial

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