The Nature of Management Control Systems: Unpad

UNPAD
Universitas
Padjadjaran
Chapter 1:
The Nature of Management Control
systems From West Java
for Indonesia
to The World
through SDGs
Part I Introduction
Management Control System (MCS):
Definition
“ The system used by management to control activities of

an organization in order to achieve desired firm’s
performance”
Universitas Padjadjaran
Task Control
“Mechanism to monitor an Individual in terms of

performing a clerical duty or task properly”
Elements of MCS
Strategic Resources Performance Responsibility Transfer

Budgeting measurement
Evaluation Reward center
Planning allocation Pricing
Management Control System: Issues
 Management control is a must in any organization

that practices decentralization
 MCS must fit the firm’s strategy
 MCS can affect the development of strategies
Part II Basic Concept
Control: Definition
Directing situation, person or activity in

order to achieve desired objectives
Elements of Control System
A detector • A device that measures what is actually happening
• A device that determines the significance of what is

An assessor actually happening
• A device that alters behavior if the assessor indicates the

An effector need to do so
A communication • Device that transmit information between the detector

network and the assessor and between assessor and the effector
Elements of the Control Process
Control Device Assessor

Comparison with standard
Detector
Information about what Effector
is happening Behavior alteration, if needed
Entity being controlled

Management Control Process
The process by which managers at all levels

ensure that the people they supervise
implement their intended strategies
Management Control Vs Simpler Control
Management Control Simpler Control
Standard Preset in Planning Not Preset

Process Detection Not Automatic Automatic
Involvement Coordination among individual Single individual
Action May not be clear Clear
initiative Self control regulation
System
“A prescribed and usually repetitious way of

carrying out an activity or set of activities”
Part III Boundaries of Management Control
Strategy Formulation, Task Control and Management
Control
Strategy Formulation Task Control Management

Control
Systematically least systematic the most systematic in between
Certainty Approximations of the Current accurate in between

future data
Focus Planning Process Control process Planning and Control
Management Control
“Management control is the process by which managers

influence other members of the organization to implement
the organization strategies”
Relationships among Planning and Control Functions
Strategy
Formulation Goals, Strategies, Policies
Management
Control Implementation of strategies
Efficient and Effective

Task Control performance of individual task
Management Control activities
Planning
Coordinating
Communicating
Evaluating
Deciding
Influencing
MCS and Goal Congruence
• Goal Congruence is synergy between personal

goals and organization’s goal
• MCS should be designed and operated with
principle of goal congruence achievement
MCS and Strategy Implementation
• Management control focuses primarily on

strategy execution
• Management controls are only one of the tools
used by managers in implementing desired
strategies
Framework for Strategy Implementation
Implementation Mechanism
Organizational Structure:
the roles, reporting relationships,
division of responsibilities
Human
Management
Resources Human Resources Management:
Controls
Management
The selection, training,
evaluation, promotion,
Strategy Performance
termination
Organization
Culture
Structure Culture:
Set of common beliefs,
attitudes and norms
MCS and Development of New Strategies
• The primary role management control is to ensure that the execution of

chosen strategies are working properly
• If MC is already done properly, but strategies are not working, it takes
implication for developing new strategies
• MC that drives development of new strategies called as Interactive Control
Interactive Control
Tomorrow’s
Today’s controls
strategy
Strategy Formulation
• Strategy formulation is the process of deciding on the goals of the

organization and the strategies for attaining these goals
• Strategy is big plan or important plan
• Strategy describes the direction in which senior management wants
to the organization to move
• The need for formulating strategies usually arises in response to
perceived threat or opportunity
Strategy Formulation Vs Management Control
Strategy formulation Management Control
Process Process of deciding on Process of implementing

new strategies strategies
Nature Unsystematic Systematic

Strategic Analysis much judgment and a series of steps and
rough estimates reliable estimates
Involvement of people Few people Relatively many people
Task Control
• Task control is the process of ensuring that specified tasks are

carried out effectively and efficiently
• Task control is transaction oriented ( clerical), it involves the
performance of individual tasks
Task Control Vs Management Control
Task Control Management Control
Procedure Scientific Art

Focus Specific task Organizational units
Action to perform Little or no judgment Mostly Judgement
Involvement of people Only supervisor with task or Interacting with other
duty’s results managers
Internet and Management Control
• The internet provides infrastructure, making the process of

information easier and faster
• Managers can collect huge of data, store that data, analyze it in
different forms and send it to anyone in the organization
• The internet facilitates coordination and control through the
efficient and effective processing of information
Questions
• Explain, distinction between Management Control Systems (MCS) and
Task Control / Simple Control ?
• Why is MCS so important for decentralized organization?
• What is the essence of MCS must be fitted with organization’s strategy?
• What is relationship between strategy formulation, management
control and task control?
• Explain, what is the meaning “ today’s control is tomorrow’s strategy?
• Explain, how does framework for strategy implementation work?

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UNPAD

“ The system used by management to control activities of

“Mechanism to monitor an Individual in terms of

Strategic Resources Performance Responsibility Transfer

 Management control is a must in any organization

Directing situation, person or activity in

A detector • A device that measures what is actually happening

• A device that determines the significance of what is

• A device that alters behavior if the assessor indicates the

A communication • Device that transmit information between the detector

Control Device Assessor

Entity being controlled

The process by which managers at all levels

Management Control Simpler Control

Standard Preset in Planning Not Preset

“A prescribed and usually repetitious way of

Strategy Formulation Task Control Management

Certainty Approximations of the Current accurate in between

“Management control is the process by which managers

Efficient and Effective

• Goal Congruence is synergy between personal

• Management control focuses primarily on

• The primary role management control is to ensure that the execution of

• Strategy formulation is the process of deciding on the goals of the

Strategy formulation Management Control

Process Process of deciding on Process of implementing

Nature Unsystematic Systematic

• Task control is the process of ensuring that specified tasks are

Task Control Management Control

Procedure Scientific Art

• The internet provides infrastructure, making the process of

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