Management

Control systems
Expectations..Assumptions

The student should be well

versed in management
principles and perspectives.
Must go through management
journals and articles to
broaden their horizons
Objective

To gain knowledge, insights and

analytical skills related to how a firm’s
managers go about designing,
implementing and using planning &
control systems to implement & realise
firm’s strategy
Our Strategy…to follow
Interactive
Participative
Self Learning
Connect with Experience
Industry parallels
Facilitation…. (no teaching !!!!!)
Triggered learning's
Presentations
Projects
Management
Control systems
Introduction to
Management
Control systems
Nature of Management
Control Systems
 System is a prescribed & usually repetitious way
of carrying an activity or set of activities
 Management control is the process by which
managers influence other members of the
organisation to implement organisation’s
strategies
Management Control
System - Activities
 Planning
 Coordination – Communication
 Evaluation of information
 Initiate activities, direction
 Influence people to work towards goals
Elements of Control System
 Detector or sensor
 Observed information about what is
happening
 Assessor
 Comparison with Standard

 Effector (feedback)
 Behavior altering communication, if needed
Importance of Control
Systems
 Nature of decisions
 Resources – quality,quantity, availability

 Decision at higher level .. Execution down the

level
 Decisions are systematic and rhythmic
 Strategies, core values, mission-vision,
procedures, policies
 Strategy implementation tool
 Needs framework, infrastructure, control to
implement
 Behavioral Considerations

Characteristics of good
Management Control System

 Future oriented
 Clear objective 
 Minimum control losses
Strategy formulation

Strategy formulation is
the process of deciding on
the goals & strategies for
attaining those goals
Strategy Formulation –
Management Control – Task
Control
Activity Result - Output

Goals, Strategies,
Strategy formulation Policies

Management Control Implementation strategies

Task control Efficient & effective

performance Of
individual task
Strategy Management Task control
formulation Control

Basic & Applied Control Research Execute & Monitor

Research Organisation Individual Research
Projects

- No. of months RM
Improve Inventory/ inventory
Current Ratio Receivables - Slow/non moving
Control inventory
- Credit period scrutiny
Behaviour in
Organisation
Goals & Goal Congruence
 Goals
 Goal Congruence
“Goal Congruence means that, as far as is
feasible, the goals of organisation’s
individual members should be consistent
with goals of organisation itself”
Goal Congruence
 Factors impacting
 Internal

• Cultural
• Management Style
• Informal Organisation
• Perception & Communication
 External – Work ethics, Set of attitudes
Types of Management
Control Systems
 Formal Control Systems
 Input Control

 Process Control

 Output Control

 Informal Control Systems 

 Self Control

 Social Controls

 Cultural Controls
Subsystems and
components of MCS
 Formal Control Process
• Formal Planning Process
• Formal Reporting Process
 Informal Control Process
 Informal communication
Use of Information
Technology
 Impact
 Speed

 Accuracy

 Efficiency

 Integration

 Real-time

 Common data base

Designing Control
Process &
Management
Controls
Designing Management Control
System – Cybernetic Approach
 To steer
 Cybernetics is the interdisciplinary study of the
structure of complex systems, especially
communication processes, control mechanisms
and feedback principles
 Cybernetics is closely related to control theory
and systems theory
 An art/study of or related to governing,
controlling processes and communication
 Deals with -
 Complex Structures
 Mutual interactions
 Evolvalability of structure
Designing Management Control
System - Contingency Approach
 No one best way to manage & to be effective, planning,
organizing, leading & controlling must be tailored to
particular circumstances faced by an organization
 Questions such as –
 What is the right thing to do?
 A functional or divisional structure?
 Wide or narrow spans of management?
 Tall or flat organizational structures?
 Simple or complex control and coordination
mechanisms?
 Should we be centralized or decentralized?
 Should we use task or people oriented leadership styles?
 What motivational approaches and incentive programs
should be used?
 Contingency approach (situational approach) to
Designing Management Control
System - Contingency Approach….
 Right thing to do depends on a
 Critical environmental changes

 Internal contingencies

 Technology

 Organisation structure
Designing Management
Control System -
Management Control
process approach
Meaning of Strategy
 In the military, strategy often refers to
maneuvering troops into position before the
enemy is actually engaged. In this sense,
strategy refers to the deployment of troops
 A strategy is a long term plan of action
designed to achieve a particular goal, most
often “winning”
Meaning of Business
Strategy
The way in which an organization
uses its knowledge and other
resources to achieve its economic
purpose
Strategy & Control system
 Corporate strategy
 Business Unit strategy
 Functional strategy
 Mission & Vision
 Competitive advantage
 Differentiation

 Focus
MISSION…
 An organization’s MISSION
 Reflects management’s vision of what firm
seeks to do & become
 Provides clear view of what firm is trying to
accomplish for its customers
 Indicates intent to stake out a particular
business position
MISSION …..
 Reason why Organisation exists
 Sense of purpose
 Social Reasoning
 Corporate Philosophy
 Identity, Character, Image of Organisation
SAMPLE MISSION STATEMENTS

 RENT-A-CAR…..Our business is
renting cars. Our mission is
total customer satisfaction.
 WAL-MART…..To offer all of the
fine customers in our
territories all of their
household needs in a manner
in which they continue to think
of us fondly
Levels of Organizational
Strategy
Corporate Corporate
Strategy Head Office

Business Divisions/ Divisions/

Strategy Segments Segments

Manufacturing Manufacturing
Functional
Strategy Marketing Marketing
Research Research
Finance Finance
Control Process Hierarchy

 Communication structures
 Reporting structures
Key Success
Variables &
Measures of
Performance
Key Success variables
 Identifying key variables
 Input variables

• Raw material Availability

• Raw material quality
• Raw material Cost
 Production Variables

• Capacity Utilisation
• Loss/Wastage/Yield
• Quality Control
• Maintenance/Downtime/Breakdowns
• Costs
• Delivery
Key Success variables…..
 Marketing Variables
• Order book position
• Market share
• Institutional sales
 Management Variables – performance
indicators
• Asset Turnover
• Inventory Turnover
• ROI
• EVA
Sources of Key variables
 Industry Characteristics
 Environmental factors
 Political

 Global impact

 Competitive strategy
 Stakeholders
 Functional Organisation structure