MANAGEMENT

CONTROL SYSTEM-2

J.K.OKE
MANAGEMENT CONTROL
21ST CENTURY BUSINESS
CHALLENGES

 LPG / WTO
 SURVIVING IN A LIBERALISED
ENVIRONMENT
 RESEARCH & DEVELOPMENT
 TECHNOLOGY UPGRADATION
MANAGEMENT CONTROL
21ST CENTURY BUSINESS CHALLENGES

 SYSTEMS IMPROVEMENT
 PRODUCT / SERVICE INNOVATION
 CUSTOMER SATISFACTION /
DELIGHT / LUV
 ORGANISATIONAL STRUCTURE /
CHANGES
 PROFESSIONALISATION
MANAGEMENT CONTROL
21ST CENTURY BUSINESS CHALLENGES

 ATTRACT / RETAIN COMPETENT

PEOPLE
 CREATE / RETAIN MARKET
LEADERSHIP
 QUALITY CULTURE (TQM / TPM )
 EXPORT ORIENTATION
MANAGEMENT CONTROL
21ST CENTURY BUSINESS CHALLENGES

 LEARNING ORGANISATIONS
( LEARNING – DE-LEARNING /
RE-LEARNING)
 CHANGE MANAGEMENT
 MIND-SET CHANGE ( COMMITMENT /
GRIT / WINNING/ OUTWARD ATTITUDE)
 COMPETITIVE
(COST / PRICE / QUALITY /
TECHNOLOGY/INNOVATION)
WHY STRATEGY?
 TO ACHIEVE THESE GOALS &
TO MAKE AN ORGANISATION
 GAIN, RETAIN & SUSTAIN
COMPETITIVE ADVANTAGE
 IN TODAY’S
 COMPETITIVE BATTLEFIELD
 THERE IS A NEED FOR STRATEGY
WHAT IS STRATEGY
 PUTTING IT
BRIEFLY &
SUCCINCTLY,
 STRATEGY CAN
BE VIEWED AS:
‘WHAT AN
ORGANISATION
IS TODAY &
 WHAT IT OUGHT
TO BE
TOMORROW’
WHAT IS STRATEGY
 STRATEGY IS A
UNIFIED,
COMPREHENSIVE,
INTEGRATED &
INTERPRETATIVE
PLAN
 THAT RELATES THE
STRATEGIC
ADVANTAGE OF
THE ENTERPRISE
TO THE
CHALLENGE OF
ENVIRONMENT
WHAT IS STRATEGY
 IT IS THE
DETERMINATION
OF THE BASIC
LONG TERM
GOALS &
OBJECTIVES IN
AN ENTERPRISE
& ADOPTION
OF THE
COURSES OF
ACTION,&,..
WHAT IS STRATEGY
 …..THE
ALLOCATION
OF RESOURCES
NECESSARY
FOR
CARRYING
OUT THESE
GOALS
(CHANDLER)
 STRATEGY:DEFINITIONS
 STRATEGY IS THE LONG TERM
DIRECTIONS & SCOPE OF THE
ORGANISATION THAT AIMS AT
GAINING A COMPETITIVE ADVANTAGE
FOR THE ORGANISATION IN THE
COMPETITIVE SETTING
 IN THE LIGHT OF THE
ORGANISATION’S
 RESOURCES & CONSTRAINTS
 IN ORDER TO GENERATE CUSTOMER
DELIGHT & TO MEET & EXCEED
 STAKE-HOLDER NEEDS
 STRATEGY:CHARACTERISTICS

 STRATEGIC DECISIONS MUST HAVE:

 INTERNAL CONSISTENCY,
 EXTERNAL FIT,
 RESOURCE FIT,
 STRETCH,(EXERCISE ?)
 EFFECTIVE COMMUNICATION, &
 IMPLEMENTATION
DEVELOPING STRATEGY
 STRATEGY IS
 “WHAT AN ORGANISATION IS
TODAY, AND WHAT IT OUGHT TO
BE TOMORROW”
 STRATEGY IS ALSO ABOUT
DECIDING:
 WHERE TO COMPETE
 HOW TO COMPETE
DEVELOPING STRATEGY
 WHERE TO COMPETE:
 CUSTOMER SEGMENT
 PRODUCT SEGMENT
 CHANNEL SEGMENT
 VERTICAL INTEGRATION
DEVELOPING STRATEGY
 HOW TO COMPETE
 VALUE PROPOSITION
 COMPETITIVE ADVANTAGE
 PARTNER RELATIONSHIPS
 RELATIONSHIPS WITH OTHER
STAKEHOLDERS
STEPS IN
STRATEGY DEVELOPMENT
 STEP 1. VISIT THE COMPANY
PURPOSE:VISION / MISSION
 STEP 2. ASSESS THE DEMAND
 STEP 3. UNDERSTAND THE
COMPETITION
 STEP 4. UNDERSTANDING THE
OPERATING ENVIRONMENT
 STEP 5. SUMMARISE THE CURRENT /
LIKELY INDUSTRY /
SEGMENT SCENARIO
STEPS IN
STRATEGY DEVELOPMENT
 STEP 6. IDENTIFY THE CSF & THEIR
MEASURES
 STEP 7. DETERMINE THE COMPANY’S
ABILITY TO COMPETE
w.r.t. THE CSF
 STEP 8. DEVELOP STRATEGIC OPTIONS
 STEP 9. DEVELOP CHOSEN STRATEGY
 STEP 10. DEVELOP KEY INITIATIVES &
SHORT / LONG TERM TARGETS OF
PERFORMANCE, WITH APPROPRIATE
COMPARISONS
PLANNING & CONTROL
RELATIONSHIPS
ILLUSTRATIVE DECISIONS IN
PLANNING/CONTROL FUNCTIONS
STRATEGY MANAGEMENT TASK CONTROL
FORMULATION CONTROL
ACQUIRE AN INTRODUCE NEW CO-ORDINATE
UNRELATED PRODUCT OR ORDER ENTRY
BUSINESS BRAND WITHIN
PRODUCT LINE
ENTER A NEW EXPAND PLANT / SCHEDULE
BUSINESS CAPACITY PRODUCTION
ADD DIRECT MAIL DETERMINE BOOK MEDIA
SELLING ADVERTISEMENT SPACE/SLOT
BUDGET
ILLUSTRATIVE DECISIONS IN
PLANNING/CONTROL FUNCTIONS
STRATEGY MANAGEMENT TASK CONTROL
FORMULATION CONTROL
CHANGE ISSUE NEW DEBT MANAGE CASH
DEBT/EQUITY FLOWS
RATIO
DEVISE DECIDE IDENTIFY / LIST
COMPETITIVE INVENTORY VENDORS &
INVENTORY LEVELS REORDER AN ITEM
POLICY
WHY MANAGEMENT CONTROL?
 THERE IS NEED FOR
CONTROL
 MANAGEMENT
CONTROL IN
PARTICULAR
 IN VIEW OF:
 EXECUTE OR BE
EXECUTED,
 DELIVER OR BE
DELIVERED,
 PERFORM OR PERISH.
WHY CONTROL?
 CONTROL PERVADES
& PERMEATES THE
WHOLE SYSYEMS
CONCEPT
 IN FACT,
 SYSTEMS ARE PUT
IN TOGETHER,
DIRECTLY OR
INDIRECTLY, TO
ENSURE CONTROL
WHAT IS CONTROL?
WHAT IS CONTROL?
 IS IT ONLY TO
FIND FAULT?
 IS IT A TOOL TO
BE USED ONLY TO
FIX A PERSON?
 IS IT A VEHICLE TO
TAKE AWAY
FREEDOM /
POWERS FROM
SUB-ORDINATES?
WHAT IS CONTROL?
 CONTROL IS
BASICALLY A
POSITIVE TOOL
WHAT IS CONTROL?
 CONTROL IMPLIES
MEASUREMENT OF
ACCOMPLISHMENT
AGAINST
STANDARDS &
CORRECTIONS OF
DEVIATIONS, IF
ANY, TO ENSURE
PLAN ATTAINMENT
WHAT IS CONTROL?
 CONTROL,
THEREFORE,
MEANS
BRINGING OR
MAINTAINING:
 PERFORMANCE
OF GROUP OR
INDIVIDUAL……
WHAT IS CONTROL?
 ……
 CHARACTERISTICS
OF GROUP OR
INDIVIDUAL
 OR VALUE OF A
VARIABLE,
 WITHIN
PRESCRIBED
LIMITS.
WHAT IS CONTROL?
 CONTROL, THEREFORE, MEANS:
 SETTING STANDARDS OF
PERFORMANCE,
 MEASURING PERFORMANCE
AGAINST STANDARDS,
 TAKING COURSE-CORRECTIVE
ACTIONS TO REDUCE DEVIATION
FROM STANDARDS
FEATURE STRATEGIC MGT. OPS.
PLANNING CONTROL CONTROL

LEVEL TOP MGT. ALL SUPER-

LEVELS VISORY

SCOPE TOTAL OVERALL OPS.

TIME LONG 1 TO 5 SHORT

SPAN RANGE YEARS RANGE
FEATURE STRATEGIC MGT. OPS.
PLANNING CONTROL CONTROL

ENVIRON- MAINLY INTERNAL ONLY

MENT EXTERNAL CUM INTERNAL
EXTERNAL

STRUC- MOSTLY FLEXIBLE RIGID/

TURE UNSTRUC- UNSTRUC- CLEAR/
TURED TURED STRUCTUR
ED
ACTIVITY/ IRREGU- REGULAR HIGHLY
PERIOD LAR ROUTINE

GOALS CORE TANGIBLE TANGIBLE

FEATURE STRATEGIC MGT. OPS.
PLANNING CONTROL CONTROL

ACTIVITY CREATIVE ADMINISTR AS TOLD /

TYPE ATIVE DIRECTED

FOCAL WHOLE ALL OPS. / OPERA-

POINT ORGN. LINE MGT. TING
UNITS
SO,WHAT IS
“MANAGEMENT CONTROL”?
MANAGEMENT CONTROL
 MANAGEMENT
CONTROL IS
 THE CONTROL
 EXERCISED BY
THE
MANAGEMENT
 OVER THE
MANAGERS.
MANAGEMENT CONTROL
 IT IS A
PROCESS OF
ENSURING
 THAT
RESOURCES ARE
OBTAINED &
USED
 EFFECTIVELY &
EFFICIENTLY …..
MANAGEMENT CONTROL
 ….. IN THE
ACCOMPLISHMENT
OF
ORGANISATION’S
GOALS
 “WITHIN
OVERALL PLAN”.
 (STRATEGY-WHAT
U R, & WHAT U
WANT TO BE?)
MANAGEMENT CONTROL:
 IT IS A PROCESS OF EVALUATING ,
MONITORING & CONTROLLING THE
VARIOUS SUB-UNITS OF THE
ORGANISATION SO THAT THERE IS
EFFECTIVE & EFFICIENT
ALLOCATION & UTILISATION OF
RESOURCES IN ACHIEVING THE
PRE-DETERMINED GOALS
MANAGEMENT CONTROL:
 IT IS A SYSTEMATIC EFFORT BY BUSINESS
MANAGEMENTS / MANAGERS
 TO COMPARE PERFORMANCE
 TO PRE-DETERMINED STANDARDS, PLANS OR
OBJECTIVES
 IN ORDER TO DETERMINE WHETHER
 ACTUAL PERFORMANCE IS IN LINE WITH THESE
STANDARDS, PLANS & OBJECTIVES,
MANAGEMENT CONTROL:
 CONTD…..

 PRESUMABLY IN ORDER TO TAKE

 ANY REMEDIAL ACTION REQUIRED TO SEE THAT
 HUMAN & OTHER CORPORATE RESOURCES
 ARE BEING USED
 IN THE MOST EFFECTIVE & EFFICIENT WAY
POSSIBLE,
 IN ACHIEVING
 CORPORATE GOALS / OBJECTIVES.
MANAGEMENT CONTROL
SYSTEM
 IT IS THE
WHOLE NET-
WORK
 BY WHICH
 A MANAGER
ENSURES THAT
 THE TARGETS
WILL BE
ACHIEVED.
MANAGEMENT CONTROL
SYSTEM
 IT IS A
FRAMEWORK / SET-
UP BY WHICH
 THE MANAGER CAN
ENSURE CONTROL
OVER THE ACTIONS
OF HIS SUB-
ORDINATES AS WELL
AS CONTROL OVER
THE WHOLE
OPERATIONS IN AN
ORGANISATION.
MANAGEMENT/TACTICAL
CONTROL : DEFINITIONS

2. “MANAGEMENT CONTROL IMPLIES

THE MEASUREMENT OF
ACCOMPLISHMENTS AGAINST THE
STANDARDS AND THE CORRECTION
OF DEVIATIONS TO ASSURE
ATTAINMENT OF OBJECTIVES
ACCORDING TO PLANS”.
–Koontz and O’Donnel
MANAGEMENT/TACTICAL
CONTROL : DEFINITIONS

3. IT IS “THE HANDLING OF PEOPLE -

EMPLOYEES WITHIN THE
ADMINISTRATION AND CLIENTS,
SUPPLIERS, GOVERNMENT
OFFICIALS, BANKERS, OUTSIDE IT
- TO GET DECISIONS MADE AND
CARRIED OUT IN WAYS THAT WILL
ACHIEVE THE FIRM’S OBJECTIVES.
− Arthur Mills
MCS : PRE-REQUISITES

 CONTROL REQUIRES PLANS

 CLEAR-CUT ORGANISATIONAL
STRUCTURE
 TOP MANAGEMENT INVOLVEMENT
 EMPLOYEE MOTIVATION
 EFFECTIVE COMMUNICATION
 SUPPORTING ACCOUNTING &
INFORMATION SYSTEMS
MCS : CHARACTERISTICS
 FOCUSSES ON PROGRAMMES &
RESPONSIBILITY CENTRES
 IT EXAMINES PLANNED DATA & ACTUAL
DATA – BOTH INTERNAL & EXTERNAL.
 IT EMBRACES ALL ASPECTS OF THE
ORGANISATION’S OPERATIONS
 IT IS USUALLY BUILT / WOVEN AROUND
FINANCIAL/ ACCOUNTING STRUCTURE
MCS : CHARACTERISTICS
 IT TENDS TO BE PERIODIC / RHYTHMIC
 IT IS A CO-ORDINATED & INTEGRATED
SYSTEM & IS AN ONGOING PROCESS
 IT INVOLVES FORMAL / INFORMAL
INTER-ACTIONS & COMMUNICATIONS
 IT SHOULD BE IMPLEMENTED BY A CO-
ORDINATING AGENCY
MCS : CHARACTERISTICS
 IT SHOULD ENSURE GOAL-ORIENTATION &
GOAL CONGRUENCE
 IT MUST BE ‘UNIVERSAL’ AS REGARDS ITS
APPLICATIONS IN THE ORGANIZATION.
NOBODY SHOULD BE “MORE EQUAL THAN
OTHERS”
 IT SHOULD BE FLEXIBLE & RESPONSIVE TO
CHANGES WITHIN & OUTSIDE OPERATING
ENVIRONMENT
 (RECENT RAILWAY RESERVATION
GUIDELINES ABOUT CHANGING NAME TO
NEAR BLOOD RELATIONS)
MCS DESIGN : BASIC STEPS
 PLANNING WHAT
THE ORGANISATION
SHOULD DO
 CO-ORDINATING THE
ACTIVITIES OF
SEVERAL PARTS OF
THE ORGANISATION
 (WHO / WHAT /
WHEN / HOW ,&
NOT EVERYBODY /
SOMEBODY /
ANYBODY/
NOBODY !!!)
MCS DESIGN : BASIC STEPS
 CLASSIFICATION
OF ORGANISATION
INTO
RESPONSIBILITY
CENTRES
MCS DESIGN : BASIC STEPS
 FIXING
RESPONSIBILITY IN
ACCORDANCE WITH
THE GOALS OF THE
ORGANISATION, &
DECIDING CRITICAL
VARIABLES / CSFs
/KEY FACTORS /
KRAs FOR EACH
RESPONSIBILITY
CENTRE
MCS DESIGN : BASIC STEPS
 DEVELOPING /
PUTTING IN PLACE
APPROPRIATE
ACCOUNTING /
INFORMATION
SYSTEMS
FACILITATING REAL
TIME INFORMATION
REGARDING
OPERATIONS …….
MCS DESIGN : BASIC STEPS
 …..
 REGARDING
OPERATIONS WHICH
DEVIATE FROM PRE-
DETERMINED /
DESIRED GOALS /
NORMS / PARAMETERS
/ BENCH-MARKS &
RELATE RESULTS TO
RESPECTIVE
RESPONSIBILITY
CENTRES
MCS DESIGN : BASIC STEPS
 PERFORMANCE
REPORTING TO
MANAGEMENT,
EVALUATION /
REVIEW OF
INFORMATION
 DECIDING WHAT, IF
ANY, REMEDIAL/
CORRECTIVE
ACTIONS /
MEASURES TO BE
INITIATED …..
MCS DESIGN : BASIC STEPS
 MEASURES TO BE
INITIATED …..
 “ REAL TIME ”
CONTROL BY
MANAGEMENT
 INFLUENCING
PEOPLE TO
CHANGE THEIR
BEHAVIOUR
?????