Professional Documents
Culture Documents
MANAGEMENT
CONTROL
SYSTEM
OPINE GROUP
Mr. Hemant Thakar
OPINE GROUP
MANAGEMENT CONTROL SYSTEM IN SERVICE ORGANIZATION
• Inventory Building :
o Unlike manufacturing organization’s , product of the service
organizations / business unit is “SERVICE”, it is intangible in nature
one can not store it e.g. Lawyer’s hours, Doctor’s time, Hotel room etc
o Unlike physical products, it can not keep buffer stock of services.
o Revenue of manufacturing organization can be earned from the
product manufactured in the past, but if not sold today, the resources
are lost forever.
o The key performance issue in the service organization is how to
minimize the unused capacity
• Resource Characteristic :
o Service industry is normally labour intensive. It is not easy to adjust
the capacity of production and control the performance if the
production factors due to the behavioural factors of labour
o Service industry heavily relies on special class of labour. They need
special class of skilled personnel and high calibre of professionals,
who seeks more autonomy in working. This makes MCS more difficult
• Quality of services:
o Quality of services is always dependent on actual service provider
o Service quality of a professional is depends on varied factors such as
resource availability, time, behavioural factors etc
o Service quality of a professional can not be precisely controlled
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• Pricing of service
o A usual manufactured product provides a standard base for its
costing and thereby it’s pricing.
o But the costing of the service is influenced by many factors and which
is quite complex to arrive at.
o Cost of services is a flexible nature and it depends on various factors
such as quality, time, efforts etc
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General considerations of MCS in service organization
• Pricing
o Usually pricing of services are made on full cost basis
o Its is generally related with the time spent by an expert on a client
o It’s a subjective assessment of the input / cost
• Control of operations
o Billed time ratio provides better insight in to the professional’s
efficiency
Hours Billed
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Performance Measurement and Appraisal tool
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Different Service Sectors and Management Control Approach
• This sector includes the firms like banks, financial institutes, insurance
firms and investment firms. They engaged in money management. The
primary asset of these institutions is money.
• Time period for the transaction may range from hours (stock market), days
(credit notes), years (FDs, long term securities). Therefore the performance
assessment is quite complex in these organizations
• Risk & reward – Risk in pure financial transaction are more evident than a
manufacturing organization. The actual risk assessment may be very
complex in financial transactions
• Information Technology has changed the face of this sector. It has paved
great improvement in the financial services sector however the threats are
also increasing e.g. credit card business, online trading etc
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Not for profit organizations and MCS
• By law NPO are allowed to make profit but are restrained from
distributing it to owners and management. Such organizations include
religious, charitable and educational trusts.
• Prime goal of management control systems in such organization is
enhancing the service spread first and if possible then cost control rather
than operating efficiently
• Absence of profit leads to the problem of assessing the efficiency of the
organization
• NPO employ contributed capital and assets. The organizations has to
fund the activities from these contributions hence can not reap the
interest on it keeping the principal amount intact
• Non profit basis makes performance evaluation quite impossible
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Projects and MCS
• Project is usually a unique / single task having specific time limit and
specified resources allotted for its completion.
• Project being normally unique in nature, perfect standards can not be
developed for performance assessment
• Frequent changes, expectations are affect the performance / final output
of the project.
• Most projects start on small note, build up to peak activity and then slow
down as completion nears, unlike manufacturing activity which is a
continuous and steady drill
• Project usually follows matrix type of organization structure where there
is lot of interactions and interdependence among different functions
leading to difficult control process.
• Usually the companies outsource their non core activities to an outside firm.
• The advantages it offers are cost savings, efficiency, improved quality of
services, savings management efforts, risk aversion, enhanced performance,
scaling up the business with ease etc.
• Most organizations perceive the fear of losing control, while taking the
outsourcing decision.
• Questions in the mind of outsourcing decision viz.
o How to measure the contribution of BPO in the firm’s success?
o Are we going to lose control on the business process?
o How to manage the BPO’s association and integrate their functions in
the firms overall operations?
o How to measure the performance of a BPO?
o Whether the outsourcer will deliver successfully?
o Outsourcer will diminish my importance?
• For many executives, the greatest challenge of BPO is not operational but
managerial.
• Cultivate a broad view of control: The most successful executives go beyond
direct, supervisory control mechanisms to help them achieve BPO objectives.
Rather they simply policing the critical limits of acceptable results, they also
use indirect and enabling controls that deliver high performance by
motivating alignment and effort.
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Six types of additional controls executives tap.
• Strategic attention
• Senior team affiliation
• Financial upside
• Performance visibility
• Management of roadblocks
• Employee loyalty
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