Characteristics of Management control system

A total system: Management control system is a total system as it covers all aspects of companys operations. It is an overall process of the enterprise to fit together the separate plans for various segments. Monetary standards: All the resources and outputs are expressed in terms of the money. Definite pattern: The Management control process follows a definite pattern and timetable. It is a continuous process even if the plans are changed in the light of experience or change in technology.

 Coordinated system: MCS is fully coordinated and integrated system. If the information for one process varies from that collected for another purpose, the data reconcile with one another. Line managers: The line managers are the focal points in management control system who alone can influence others to improve the performance. They can encourage persons to work efficiently in the interests of the enterprise as to achieve the objectives set forth.

Scope of Management control system

Policies control: The success of a business hangs on formulation of sound policies and their proper implementation. There is a great need of control over policies. Control over organization: designing and organizing various departments for the smooth running of the business is very essential. If any problem or conflict arises the management control attempts to remove the causes of such frictions and rationalize the organizational structure as to ensure its efficient working. Control over personnel: Anything that the business accomplishes is the result of the action of those people who work in the organization. The personnel manager is responsible to draw a control plan for having control over the personnel of the concern.
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 Control over costs: The cost accountant who is responsible to control costs sets cost standards, labour, material and overheads. He makes comparison of actual cost data with standard cost. Control over techniques: It implies the use of best methods and techniques so as to eliminate all wastage in time, energy and material. The task is accomplished by periodic analysis and checking of activities of each department with a view to avoid and eliminate all non essential functions and methods. Control over capital expenditure: Various projects entailing huge amounts require control. This is exercised through a system of evaluation of projects interms of capital. Capital budget is prepared for the whole concern. Capital budgeting, project analysis, breakeven analysis, study of cost of capital etc. are carried on extensively.
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 Production control: The function of production control is to plan, organize, direct and control the necessary activities to provide products and services. Routing, scheduling, dispatching, follow up, Inventory control, quality control are the various techniques of production control. Overall control: A master plan is prepared for overall control and all the concerned departments are made to involve in this procedure. Control over Research and Development: Research activities, being technical in nature cannot be controlled directly. But it should be seen that all facilities are provided to the research staff to improve their ability and keeping in touch with the up-to-date techniques and devices. Training facilities should also be provided by having a research budget in the business.

Process of control
Well defined objectives and Goals: The objectives and goals of the organization should be crystal clear and well defined in the purpose of control. The organizational goals should be split into sub-goals at departmental level. The planned goals of the enterprise orof a particular department serve as a standard for performance measurement. Determination of strategic point of control: The responsibility centers and strategic points of control should be selected and fixed. To make the control process effectively, the management should concentrate upon strategic points only.

 Establishment of control standards: These standards are established criteria against which actual performance can be compared and measured in terms of money, time, physical unit or some other index. Control is not possible unless actual performance and the standard against which it is being measured are comparable. Determination of controllable costs and control period: Optimum control does not mean excessive control. Sometimes good results are achieved only if critical points arre identified. Secret of good control is to establish strategic points where corrective actions will be the cheapest and most effective.

 Strengthening of Organization: The complete framework of control is aimed at strengthening the organization. There should be a system of checks on the managerial activities of subordinates. Controls should incorporate sufficient flexibility in them so as to remain effective despite the failure of plan. Measurement of performance: It is not only the process of comparison of actual performance with the objectives, but to initiate steps to achieve the objectives. The evaluation of performance is very necessary. It involves the measurement of performance in respect of work and in terms of control standards. The comparison should be done at frequent intervals so that immediate corrective action could be taken.
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 Control period: The proper control period is the shortest period of time in which management can usefully intervene and in which significant changes in performance are likely. The key cost element of the centre may be measured daily. Report on overall performance, particularly those going to the levels of the management are often on a monthly basis and sometimes for quarterly or longer intervals.

Requirements for making control effective

The following are the important requirements for making any control system effective in application: Control by objectives: The control must be goal oriented and by objectives. The control system should be according to the nature and needs of organization. Direct control: Control should be exercised on people who work on machines and materials. Thus, it should be employee-oriented rather than work-oriented. It is therefore, necessary to alter the attitude of personnel who oppose control measures. Forward looking control: Control should be always be forward looking. It should bring out the deviation inlight as soon as possible. It must focus on strategic points with exception.
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 Managerial self control: Control should be enforced through managerial positions in the organizational structure. Each manager must be vested with adequate authority for exercising control and taking decisions. Simple and balanced control: To be effective control must be simple and well-balanced. Control lines must be simple and intelligible both to the controller and the controlled. Flexibility: There should be nothing like rigidity in control. Even the best plans and other predetermined criteria need to be changed from time to time to meet a particular situation. However, an effective control system should retain its basic structure.
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 Economy: A simple control system is bound to be economical. It should not be cumbersome and expensive. Feedback: feedback is the process of adjusting future actions based upon information about past performance. It proves worth and utility of control process.

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