Unit 1
Basic Concepts of
Management Control
By
Akshay
Definition Of Management
Management control can be defined as a
systematic effort by business management to
compare performance to predetermined
standards, 'plans, or objectives in order to
determine whether performance is in line with
these standards and presumably in order to
take any remedial action required to see that
human and other corporate resources are being
used in the most effective and efficient way
possible in achieving corporate objectives.
DEFINITION OF CONTROL
Controlling is seeing that actual performance is
guided towards expected performance. It is an
important function of management and is
related to all other management functions. All
other management functions cannot be
completed effectively without performance of
the control.
'Control' is
Knowing exactly what work is to be done as to (a)
quantity; (b). quality; and (c) time available.
Knowing what resources are available for doing the
work as to (a) personnel; (b) materials; and (c) other
facilities.
Knowing that the work has been done or ,is being
done (a) with the resources available; (b) within the
time available; (c) at a reasonable cost; and (d) in
accordance with the required standard of quality.
Knowing immediately of any delays, hold-ups or
variations as to (a) what happened; (b) its cause; and
(c) remedy
Elements of Control
Control is a function of management
Control is a dynamic process
Control is a continuous activity
Control is forward looking
Planning and Controlling are'closely related
with each other
Significance of Control
The significance of control emerges from the
need to maximize the use of scarce resources.
and also to attain an orderly, systematic. and
purposeful behaviour of an organisation and its
members.
Control consists in verifying whether everything
occurs in conformity with the plans adopted, the
instructions issued and principals established. It.
has for object to point out weaknesses and errors
in order to rectify them and prevent recurrence. It
operates on everything, things, people, action".
Scope of Control
The scope of control is very wide. It virtually
covers all the areas of business, namely,
policies, procedures, men, money, .machines
and equipment, public relations, human
relations, research and development and so
on. Generally, Control is exercised by
concentration on key areas of business on
which the success of the business depends. It
is known as 'Key-point Control'. The key
points vary-from enterprise to enterprise
NATURE OF MANAGEMENT
CONTROL SYSTEMS
Planning the future course of action
Coordinating and communicating the various
activities of the organization to different
departments
Evaluating information and deciding the
various activities; and finally,
Influencing people to work in accordance with
the goals of the organization.
IMPORTANT FEATURES OF MANAGEMENT CONTROL
SYSTEMS
Nature of decisions
Decisions are systematic and rhythmic
Strategy implementation tool
Framework for Strategy Implementation
Process Followed in Solving
Control Problems
Diagnose the situation and review all of the facts in
order to find and define the problem..
Examine the problem and review the facts in order
to find the key factors affecting the problem and its
solution. This step is sometimes referred to as
premising.
Develop alternative solutions to the problem.
Test and evaluate the alternatives to determine the
best solution.
Construct a clear statement of the solution selected,
and Convert the decision into a plan of action.
Characteristics of a Good
Management Control System
Future-oriented
Clear Objects
Minimum control losses
Phases of Management Control System
Programming
Budgeting
Operating and Accounting
Reporting and Analysis
Basic Steps Of Management
Control Systems
The classification of organization into Responsibility
Centers.
Fixing up responsibility in accordance with the firm's
objectives and deciding critical variables/key factors
for each Responsibility Centre.
Developing information system which facilitates real
time information regarding operations which deviate
from the desired results. specifically critical variables
and relate results to individual accountability. .
Performance reporting to management for remedial
measures.
Real time control action by Management.
Standards of Performance
standard should be capable of achievement with
reasonable amount of effort and time.
Standards should concentrate at results and not
the procedures.
Standards should not be rigid. They should be
capable of being changed whenever the need
arises.
As far as possible standard should be expressed
in quantitative terms and should be . based on
the result of work measurement carried with the
help of time and motion studies.
Types of Standards
Physical Standards
Cost Standards
Revenue Standards
Capital Standards
Intangible Standards
STEPS IN THE CONTROL PROCESS
Establishing standards
Appraising performance
Comparison
Taking corrective action
Phases Of Corrective Action
The Operative Phase
Prompt investigation of the causes of the
deviation.
Decision concerning the required corrective
action.
Prompt direction for correcting the situation
in accordance with the decision.
Close supervision of the corrective action to
ensure that it is taking place according to the
instructions and is effective
Contd…
The Administrative Phase
Further investigation of recurring difficulties
to determine the basic factors, either human
or physical, that are responsible.
Disciplinary action, either positive or
negative, as the situation requires.
Creative planning to prevent a recurrence of
the situation
Recognition of the situation and the
introduction of the planned measures
Follow-Through : Recommending corrective
actions also is not sufficient and the manager
shouldn't assume that his responsibility is
over with this action.
Feedback in Control: in the control process
performance is measured and reported back
to the manager. Performance information
thus measured and- channeled back to
management is known as Feedback. It tells
what kind of job is being done.