Management Control
Systems
Concept of Management
Control
Ensure that Resources are mobilised and deployed
efficiently and effectively.
Methods and procedures adopted by management
to provide reasonable assurance that available
resources and assets are properly deployed and
safe guarded against waste, mismanagement and
frauds.
Management control covers the administrative,
accounting and financial management areas.
MANAGEMENT CONTROL
DEFINED
Robert Anthony and Vijay Govindrajan:
Management control is a process by which
managers influence other members of the
organization to implement the organization
strategy.
William Newman: According to him-control one of
the basic phases of managing, along with
planning, organizing and leading.
Control is an integral and essential art of the
management process and all the managerial
efforts of an organization.
CHARACTERISTICS OF
MANAGEMENT CONTROL
Focuses on programs and responsibility centers.
Relies on two types of information viz. planned
data and actual data.
Aims at assuring that all aspects are in balance
and are operating in close co-ordination.
Built around financial structures
Follows a definite pattern and time schedule
Co-coordinated and integrated to other sub
systems
PROCESS OF MANAGEMENT
CONTROL
Organizing the process
Segmenting the organization
Risk assessments:
Planning further activities
Management control evaluations:
Corrective actions
Reporting:
FACTORS AFFECTING
MANAGEMENT CONTROL
Identify the key factors in the business
operations
Basis for establishing standards of
performance such as budgets, standard cost
Define the information required for
measuring the performance
Establishing a reporting system
process of measuring may lack objectivity
Management control specialists
MANAGEMENT CONTROL
SYSTEMS
It system refers to a framework by which the
manager controls the actions of his
subordinates and the entire operation of an
organization.
It facilitates target fixation, collection of
information, comparison of actual with
targets, identifying and reporting variations
and initiating suitable action to ensure
attainment of objectives.
NATURE OF MANAGEMENT
CONTROLS
Focuses on those activities that facilitate
attainment of targets of responsibilities
centres.
functions on the basis of two sets of
information viz. planned data and actual
data.
Management Control System covers all
functional aspects of a company’s
operation.
It is built around financial variables,
although non-monetary variables are also
taken in to consideration.
It follows a definite pattern and sequence of
activities.
Management Control System is a
coordinated and integrated system.
SCOPE OF MANAGEMENT
CONTROL SYSTEM
Management control system process involves
communications and interactions in the form
of memoranda meetings and conversations
In addition it also includes the following
Programs/Goals
Budgeting
Operating and Accounting
Reporting and Analysis
ESSENTIALS OF A GOOD MANAGEMENT
CONTROL SYSTEM
Effective Planning
Involvement of Top Management:
Motivation of Employees:
Establish proper communication mechanism:
Importance of a well structured
control system
Control systems in an organization involve the
following activities:
i. Planning-decides what the organization should do
ii. Coordinating the activities of the organization
iii. Communicating information to different levels of
the hierarchical structure
iv. Evaluating information and deciding the action to
be taken.
v. Influencing people to change their behavior.
Significance of human behaviour
pattern in Management control.
Perception
Attitudes and Beliefs
Motivation
Goal Congruence
Inter-unit Conflict and Cooperation
Managerial Styles
Force Field Analysis
Resistance to Change
Entrapment
Compromising and Sacrificing
Socio-Cultural Influences
STRATEGIC PLANNING,
MANAGEMENT CONTROL AND
OPERATIONAL CONTROL
a) Level
b) Focus
c) Complexity
d) Element of Judgement
e) Information
f) Purpose of Estimates
g) Persons involved
h) Source discipline
i) Time Horizon
j) Nature of activity