Management Control Systems - Session1
Management Control Systems - Session1
Management Control Systems - Session1
Session 1
Syllabus
University paper 100 marks Portion
Financial Goal setting Organizational Growth ( Responsibility centers / profit centers) Mechanics of determining profit objectives of profit centers MCS in special sectors Performance measurement of assets employed
Session 1
Nature of management control systems Understanding strategies Organization Hierarchies and Behavior
Compare
Simple control process The standard is preset This is automatic A function performed by a single individual The connection from perceiving the need for action to obtaining the desired result is clear Control is maintained by an external regulating device Management control process The standard is not preset This is not automatic Co-ordination among individuals The connection from perceiving the need for action to obtaining the desired result may not be clear This is self control
Management control
Implementation of strategies
Strategy formulation
Process of deciding on the goals of the organisation and the strategies for attaining the same. Goals are overall aims of the organisation Once a firm has formulated the strategies, it operates in accordance with the strategies.
Management control
Process of implementing strategies. There is generally a fixed time table and series of steps in accordance with which management control takes place. Management control involves the behavior of managers and this cannot be shown in the form of equations.
Task control
Process of ensuring that specified tasks are carried out effectively and efficiently This is transaction oriented Performance of individual tasks according to the rules established in the management control process. This is a focus of many management science and operations research techniques.
Task control Consists of seeing that rules are followed Is a science There limited interaction between manager and subordinate Focus is on specific tasks
Implementing of strategies Systematic This involves managers and staff at all levels Focus is on organization units
Strategy
Derived from Greek word strategos which means general It is the determination of the basic long term goals & objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals.
Understanding strategies
Strategy is the determination of the basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals To formulate strategies, one has to know the objectives and policies that should be followed. This is a future oriented plan This is universally applicable to businesses as well as non-business organizations. A company develops its strategies by matching its core competencies with industry opportunities Strategies can be found at two levels i.e whole organization and for business units within an organization.
Strategies/ Policies
Strategy
Major courses of action or plans which help in achievement of organizational goals Rule for decision making Cannot be delegated downward This is concerned with uncertainties, risks etc. It is a specific statement. Can be written in explicit terms
Policy
Statements or guidelines for decision making It is a contingent decision Guidelines for decisions which can be delegated downwards It is an overall guide that governs and controls the managerial action It is a general statement which can be expressed or implied
Strategies/ tactics
Strategy
Major plans that are to be undertaken and allocated the resources to achieve these plans Developed at top management For a long period of time Higher uncertainty in case of strategy formulation and implementation Important for the entire organisation Affected by the personal values of the person involved in the strategy formulation process.
tactics
Means by which previously determined plans are executed Employed at lower levels of management to implement the plans Framed for a short period of time Fewer elements of uncertainty and risks They are concerned with specific part of the organization May be free from personal values of those who take tactical decisions.
Types of strategy
Corporate level Business level
Degree of relatedness
Related diversification
Extend of diversification
Related diversification
Sharing of core competencies/ resources across businesses P&G J&J
Unrelated diversification
Totally autonomous business in very different markets GE
examples
Macdonals
BCG
As you can see, each of the products is positioned upon the Matrix. You'll notice that the Javelins do not appear - they were thrown away long ago. Manor way still make a range of barbed fish hooks which are now banned in some markets. Both Oliver and Manor Way have invested heavily in gardening tools and expect sales to increase in the future since people have more leisure time and a larger disposable income. Maner Way has 10% of the new market, and Oliver has 15%.
GE planning model
Behavior in organization's
This is a study of human behavior in organizational settings, the interface between human behavior & the organization. It is for the purpose of applying the above knowledge towards improving an organizations effectiveness The determinants of organizational behavior
people Structure Technology
Employees
Informal
Work ethic Work culture Management style Perception and communication Informal organization Co-operation and conflict
Types of organization
Functional Business Matrix Network
Functional organisation
Functional organization has been divided to put the specialists in the top position throughout the enterprise. This is an organization in which we can define as a system in which functional department are created to deal with the problems of business at various levels. Functional authority remains confined to functional guidance to different departments. This helps in maintaining quality and uniformity of performance of different functions throughout the enterprise. The concept of Functional organization was suggested by F.W. Taylor who recommended the appointment of specialists at important positions. For example, the functional head and Marketing Director directs the subordinates throughout the organization in his particular area. This means that subordinates receives orders from several specialists, managers working above them.
Business unit
Matrix organization
The matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. An example would be a company that produces two products, "product a" and "product b". Using the matrix structure, this company would organize functions within the company as follows: "product a" sales department, "product a" customer service department, "product a" accounting, "product b" sales department, "product b" customer service department, "product b" accounting department. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature. Weak/Functional Matrix: A project manager with only limited authority is assigned to oversee the cross- functional aspects of the project. The functional managers maintain control over their resources and project areas. Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers. It brings the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing power is delicate proposition. Strong/Project Matrix: A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.
Network organization
Another modern structure is network. While business giants risk becoming too clumsy to proact (such as), act and react efficiently,the new network organizations contract out any business function, that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy. The potential management opportunities offered by recent advances in complex networks theory have been demonstrated including applications to product design and development, and innovation problem in markets and industries.
Rules
Strategic planning
Revise
Budgeting
Revise
Corrective action
Feedback communication
Functions of a controller
Designing & operating information & control systems in an organization Developing personnel in the organization & participating in the training & development of the personnel to carry out their functions effectively . Supervise internal audit & accounting control procedures Prepare & analyze performance reports
Questions 2011
Define MCS. Which level of managers are involved in it. How does MCS differ from simpler control processes. Briefly describe functional, divisional and matrix organization. which is the most appropriate from the point of control. Where are the other two suitable What are organization structure and management control implications of corporate level strategies.
Questions 2010
Explain briefly the various stages of management control process citing salient features of each. Short note on MCS in a matrix organization What do you understand by goal congruence. What are the informal factors that influence goal congruence. Briefly describe overall framework of management control. How does it relate to strategic planning & operations control What is an SBU. What are the conditions required for creating an SBU. How is the performance measured. What are the merits/ demerits of creating SBUs How does corporate level strategies differ from business unit level strategies. How is budgeting done at SBU under different strategic mission.
Questions 2009
Explain briefly the various stages of management control process citing salient features of each. Organizations with business divisions format have observed that divisional controllers experience divided loyalty in carrying out their functions, causing a possible dysfunction. How should such a situation be resolved. Define the role of controller which suits your suggestion. What do you understand by goal congruence. What are the informal factors that influence goal congruence. Short note on MCS in a matrix organization.
Questions 2008
Differences of strategy formulation and task control Differences of management control and task control