MANAGEMENT CONTROL
P. GURU PRASAD
FACULTY MEMBER
for FINANCE &
ACCOUNTS
MCS – AN OVERVIEW
An enterprise has to use its resources
effectively and efficiently, in order to
achieve its objectives and excel in its
chosen domain of operations.
A competitive edge needs to be maintained
over competitors in terms of cost and
quality.
MCS – AN OVERVIEW
In order to survive and sustain
themselves in a complex business
environment, organizations are
required to simultaneously meet the
growing demands of their
stakeholders .
CONTROL
Control refers to the activities of
Establishing standards of
performance,
Evaluating actual performance
against these standards, and
Implementing corrective actions to
accomplish organizational objectives
CONTROL
In a complex and volatile business
scenario, the most carefully
crafted plans can go wrong. The
enterprise requires control systems to
monitor the developments in the
external marketplace and to adapt to
them.
CONTROL
MCS help in not only assuring better
quality but also in coping with
unanticipated change and creating
faster cycles to market
Definition
A management control system is a
set of interrelated communication
structures that facilitates the
processing of information for the
purpose of assisting managers in
coordinating the parts and
attaining the purpose of an
organization on a continuous
basis
MCS
It assists the management in
Formulating strategies,
Coordinating the activates of the
organization, and in
Steering those activates toward the
achievement of the overall goals and
objectives.
Cybernetic approach to
MANAGEMENT CONTROL
Cybernetics is the study of the
entire field of control and
communication theory,
whether in the machine or the
animal.
Cybernetic approach to
MANAGEMENT CONTROL
When exercising the control
function, a manger measures the
performance of an individual, a
plan, or a program against
certain predetermined standards
and takes corrective actions if
there are any deviations
Basic control process
Determining areas to control
Establishing standards
Measuring performance
Comparing actual performance against
standards
Rewarding good performance
Taking corrective action when
necessary
Adjusting standards when necessary
Management by Objectives
MBO was a concept popularized by
Peter F. Drucker in 1954 in his
book “ The practice of
Management “. The key features
of MBO is setting of goals jointly
by the supervisor and the
subordinate.
Management by Objectives
This helps establish a system
of mutual controls within the
organizations, which enables
mangers to control their
subordinates as well as each
other
Management by Objectives
The MBO process can be implemented
through a series steps.
In the first step of the MBO process,
managers must determine the
mission and strategic goals of he
enterprise. Goals must be set for all
the key result areas of the
organization.
Management by Objectives
In the second stage, goals are set for
various organizational levels so that each
goal contributes to the achievement of the
overall goals set for the organization.
Once the goals of various departments,
subunits, and individuals have been set,
action plans must be developed.
Action plans state what is to be done in
order to achieve a goal and how, when,
where , and by whom.
Management by Objectives
Once the objectives have been set
and action plans determined, the
subordinates should be given
considerable freedom to carry out
their activates and implement their
plans. MBO is expected to help
subordinates get a clear idea of what
they should achieve
Management by Objectives
The MBO process not only gives
subordinates a sense of direction. It
also allows them to evaluate their
own progress.
Periodic reviews have to be done to
ensure that plans are being
implemented properly and that
objectives are being achieved.
Objectives of management control
According to the committee of
sponsoring organizations of the
Treadway commission ( COSO):-
Effectiveness and efficiency of
business operations
Reliability of financial reporting
Compliance with applicable regulatory
and legal frame work.
Thanking you
Success is getting what you want.
Happiness is wanting what you get.
Dale Carnegie
Knowledge speaks, but wisdom
listens.
Jimi Hendrix
US rock musician & singer (1942 - 1970)