Introduction to Mcs

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    Management Control Systems

    -An Introduction

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    Elements of Control Systems

    Measure what is actually happening -Detector

    Comparing it with what should be happening-

    AssessorAlters behaviour if assessor so desires- Effector

    Transmit information between the detector and

    the assessor and between the assessor and theeffector- Communication network

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    Why do organisations need control

    In spite of the pitfalls in any control

    system, why do organisations need

    control?

    It is expensive to keep controls

    It is cumbersome to make investment in

    systems and processes

    Possibilities of failure of controls

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    Why do.

    Controls provide strategic advantages

    Controls facilitate management by

    exception

    Systems and processes are facilitators of

    efficiency

    Provides for a self correcting mechanism

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    How to go about with MCS?

    Standard is not preset- It is a subjective decision of themanagement

    Management control is not automatic-It involves lot of

    discretionary decisions of the manager Coordination among individuals and people management

    The connection from perceiving the need for action todetermining the action required for the desired result may

    not be clear Most of Management Control is self control- judgement

    is the key.

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    Activities in Management

    Control

    Planning-Depends on the strategic theme

    of the organisation

    Coordination

    Communicating plans and the process

    controls using suitable information systems

    Evaluation of information received

    Corrective actions- financial as well as

    other

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    Scope of Management Control

    Strategic Planning

    Management Control

    Operational Control

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    Strategic Planning

    Strategic plan- covers some aspects or part

    of business at any given time

    Not a periodic process-infrequent and need

    based

    Linked to external environment

    Data used for decision making are

    approximate and not current

    Limited to top management

    Coverin the lon term ob ectives of the

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    Operational Control

    Planning is task specific

    Output is attempted to be defined

    Inputoutput relationship cannot be

    quantitative always

    Related to direct activities of production

    Indirect activities come under the purview

    of management control

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    Management Control

    Focuses on programmes and responsibility

    centres

    Use of planned and actual data

    Most of the data are real time

    Covers all aspects of companys operations

    Same set of information to be used for

    various purposes

    System is ongoing and continuous, not one

    time

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    Management control involves line and staff

    functions

    Two important features in Management

    Control- Reciprocity and expansibitlity

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    Relationship between functions-

    Strategy, Operations and

    ManagementManagement control occurs between the

    top and the lower levels- communication of

    strategies to lower level and reportingoperational efficiencies to the top

    management

    Strategylong run focus and operations-short run focus

    Management control is a combination of

    both planning and control

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    Output of MCS

    Emphasis on bottom line- using measures

    such as ROI and EVA

    Non Financial- Product quality, market

    share, customer satisfaction, employee

    morale etc.- using tools such as Balanced

    Score card