Factors Influencing Management Control

PUTTU GURU PRASAD FACULTY FINANCE & ACCOUNTS

Effective and Efficiency
• An effective organization is able to achieve it purpose and goals by utilizing allotted time and resources. where as • Efficiency of an organization is its ability to achieve outcomes by utilizing the minimum resources.

Schemes for classifying controls
Classification Basis Object of Controls Classifications
•Action controls:-Behavioral restrictions pre- action appraisals Action accountability •Result controls •Personal / Cultural controls

Extent of Formalization of controls Time of Implementation of Controls

Formal controls Informal controls Open loop control Closed loop control:Feed forward control Feedback control

Formal controls
• Also referred to as bureaucratic controls, involve establishing standards rules for control of activities and their out come. the examples of formal controls are • Rewards, penalties , and approvals to ensure compliance. Policies, standard operating procedures (SOPs), budgetary controls, financial reporting , audit, performance measurement systems, and incentive systems.

Informal controls
• They generally found in organizations which rate high on innovations and creativity. Such controls may be nurtured through management training, office parties, peer interaction, self-initiation, etc., which encourage establishment of informal networks and contracts. • Informal controls complement formal control and in way, dilute some of the drawbacks of formal control.

Contextual factors influencing Management control
• The design and use of control systems is dependent upon the particular context of the environment and organizational setting in which the controls operate. • There are different factors which influence the effectiveness and operation of management control systems. These factors can be either internal or external to the organization.

Some of the influencing factors of MCS • The nature and purpose of the organization, • Organization structure and size • National culture • Strategic mission and competitive strategy • Corporate strategy and • organizational diversification • Competitive strategy • Managerial styles • Organizational slack • Stakeholders expectations and controls • Organizational life cycle

Competitive strategy
• Michel porter suggested three generic strategies which a business may pursue to gain competitive success. They are • Overall cost leadership • Differentiation. And • Focus

Managerial Styles
• The two common managerial styles are autocratic and democratic. An autocratic manager generally takes decisions by himself, and the subordinates have to follow them. • A democratic manager allows the subordinates to participate in the decision making process

Greet Hofstede’s Dimensions of National culture Dimension Power distance
Uncertainty avoidance

Definition
Accepting of hierarchical levels, that is , inequality in the distribution of power

Avoiding risk and ambiguity
Higher masculinity shows higher competitive spirit, independent thinking, assertiveness, etc., while higher femininity shows higher interdependence, nurturing nature, etc., People ‘s preference to work as individuals or in a team

Masculinity / femininity

Individualism/ collectivism

Responsibility of Organizations towards stakeholders Employment/management
Share holders Financial returns Sustainable growth
Reward system Safety and health Participative Decision making Job satisfaction Career growth

Suppliers/creditors Proper pricing and licensing Continuing business relation Adherence to payment terms

Organization

Customers Right quality and quantity Right time and place Value Safety and health Community Safety and security Protection of the environment Promoting human development Respecting human rights

Government Compliance Competitiveness Fair business practices

Thank you
• Never trust someone who lies to you. • Never lie to someone who trusts you. • A wise man gets more use from his enemies than a fool from his friends. • The sole advantage of power is that you can do more good.
Baltasar Gracian The Art of Worldly Wisdom, 1647

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