SERVICE ORGANIZATIONS

Chapter 14
 SERVICE ORGANIZATIONS

Characteristics :
• Absence of inventory buffer
• Difficulty of controlling quality
• Labor intensive
• Multi unit organizations
 PROFESSIONAL SERVICE
ORGANIZATIONS

Characteristics :
• Goals
• Professional : labor intensive
• Output and input measurement. Input : number of
hours. Output : the effectiveness of the work
• Small size. Less need for a sophisticated management
control system
• Marketing : conducted by professionals
 MANAGEMENT CONTROL SYSTEM

• Pricing. Hourly billing rate : based on

compensation of the grade of the professional
plus overhead cost and profit
• Profit centers and transfer pricing
• Strategic planning and budgeting : long range
staffing plan
 MANAGEMENT CONTROL SYSTEM

• Control operations : scheduling the time of

professionals
• Performance measurement and appraisal.
Assessment of performance by superiors,
peers, self, subordinates and clients
 FINANCIAL SERVICE ORGANIZATIONS

Commercial banks, insurance, securities, leasing

Special characteristics :
• Monetary assets
• Time period of transactions
• Risk and rewards
• Technology
 HEALTH CARE OFGANIZATION

Hospital, clinics, home care, retirement

and nursing homes, medical
laboratories
Special characteristics :
• Difficult social problem
• Change in mix of providers
• Third party payers : insurance
company
• Professional. Their primary loyalty
is to the profession
• Importance of quality control
 NONPROFIT ORGANIZATIONS
Cannot distribute assets or income to, or for the
benefit of, its members, officers or directors
Special characteristics :
• Absence of the profit measure
• Contributed capital : plant and endowment
• Governance : by board of trustees
 MANAGEMENT CONTROL SYSTEM

• Product pricing

• Strategic planning and budget preparation : to allocate

limited resources to worthwhile activities

• Operation and evaluation