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MCS Assignment 1

Name: Bikramjit Dey Due Date / Day: 28/7/2011 Class: Roll No: 2802308 Subject: MCS

Assignment No: 1 Topic: Mgmt Control Systems Title of the Assignment: Mgmt Control Systems in an Organization Signature: (Of the student)

Name (Of the faculty) : Prof. A. Kanetkar Signature: Date of Evaluation:

Marks out of 15

Remarks (By Faculty): _________________________________________ ________________________________________ _________________________________________ _________________________________________

MANAGEMENT CONTROL SYSTEMS

Management control is a must in any organization. Management control system is essentially a strategic tool for holding managers accountable and responsible for their performance. Existence of such a system also provides feedback for managers to know how they perform, in which direction the organization is heading, and what type of course correction may be required to stay on course. Management Control Systems (MCS) theory is a useful integrative tool for organizing, explaining, and understanding the jargon and concepts of performance measurement. MCS theory can help make sense of the criteria by providing a way of organizing and remembering the criteria and the related jargon and concepts. A good place to start in understanding the relationship between the criteria and MCS theory is with the stated objective of the criteria. A management control systems (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole considering the organizational strategies. Finally, MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. But it must fit the company s strategies. Management control is one of three planning and controlling functions that are present in almost every organisation. The other two are strategy formulation, the largely unsystematic process of identifying threats and opportunities and deciding on new strategies in response and task control. Control in short, is exercised by managers who supervise responsibility centers.

Characteristics of Control System Involvement of people. Information about the actual state of the organization is compiled by people. It is compared by people. With the desired state decided by people. For significant difference, a course of action is recommended by people. Action taken by people.

Management Control System Component 1. 2. 3. 4. 5. Performance management Budgets Comparisons Reporting Adjustments

Elements of management control process:1. A detector or sensor: - it is a device that measures what is actually happening in the process being controlled. 2. An assessor: - it is a device that determines the significance of what is actually happening by comparing it with some standard or expectation of what should happen. 3. An effector: - it is a device that alters behavior if the assessor indicates the need to do so. 4. A communication network: - it is a device that transmits information between the detector and the assessor and between the assessor and the effector.

ELEMENTS OF MANAGEMENT CONTROL PROCESS

CONTROL DEVICE

ASSESSOR

DETECTOR

EQUITY BEING CONTROLLED

EFFECTOR

FUNCTIONS OF MANAGEMENT CONTROL STSTEM

Planning activities of an organization Coordinating activities of an organization Communication information to different levels of the hierarchical structure Evaluating information and deciding the actions to be taken Influencing people to change their behavior.

OBJECTIVES OF MANAGENT CONTROL SYSTEMS (a) Indicate work progress, (b) Properly relate cost, schedule and technical accomplishment, (c) To be valid, timely and auditable, and (d) Supply DoD managers with information at practicable level of summarization ADVANTAGES OF MANAGEMENT CONTROL STSTEM

The management system began with the planning process. There are many advantages of control systems in business management. A market control system is a flexible system. These control systems should be thoroughly examined and applied in order to be a successful manager and have a business run smoothly. The types of control systems are bureaucratic control, market control, and clan control. Market control uses prices, competition, profit centers, and exchange relationships to establish control, and it works well where tangible output can be identified and market can be established between parties. This control system works best where no one is strictly the decision maker and employees are encouraged to provide input, make choices, and act independently. This is a new control system that is starting to become popular with the increased need for innovation. Management Control systems are valuable to management in business, and understanding the three basic control systems is important when implementing a control system in a business. Management control systems provide information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers.

DISADVANTAGES OF MANAGEMENT CONTROL STSTEM This type of control system is unpopular because the constant fluctuation of the market causes complications with the security of this control system. The value is always changing and employees may suffer from companies being repeatedly bought and sold. Disadvantages of this system are lack of employee morale and lack of room for change and innovation. Independent workers and strict guidelines can make employees feel undervalued, and this is a disadvantage for business and management. Management Control Systems does not make decisions, they provide the information to managers who make more accurate and timely decisions to manage their operations. Management control is neither automatic nor mechanical, rather it involves interactions among individuals. Management control systems require coordination among individuals.

MANAGEMENT CONTROL ACTIVITIES

1) 2) 3) 4) 5) 6)

It helps in planning of the organisation. It helps in coordinating the activities of several parts of the organisation. It helps in communicating information. It helps the evaluating the information correctly. It helps in the process of decision making and right action to be taken. It also influences people to change their behavior.

IMPLEMENTATION MECHANISMS

MANAGEMENT CONTROLS

STRAT EGY

ORGANIZATIO N STRUCTURE

HUMAN RESOURCE MANAGEMENT

PERFORM ANCE

CULTURE

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