Management

Control systems
Nature Of
Management
Control systems
Nature of Management
Control Systems
 System is a prescribed & usually repetitious way of
carrying an activity or set of activities
Nature of Management
Control Systems
 Robert N. Anthony defined Management Control as, “the
process by which managers influence other members of
the organization to implement the organization’s
strategies”
 Management control systems are tools to aid management
for steering an organization toward its strategic objectives
 Management controls are only one of the tools which
managers use in implementing desired strategies
 Strategies get implemented through management
controls, organizational structure, human resources
management and culture
 Management Control System Evaluates performance of
different organizational resources and organization as a
whole considering the organizational strategies
Nature of Management
Control Systems
 According to Chenhall - terms management accounting
(MA), management accounting systems (MAS),
management control systems (MCS), and organizational
controls (OC) are sometimes used interchangeably.
 In this case –
 MA refers to a collection of practices such as budgeting or
product costing
 MAS refers to the systematic use of MA to achieve some goal
 MCS is a broader term that encompasses MAS and also
includes other controls
 OC is sometimes used to refer to controls built into activities
and processes such as statistical quality control, just-in-time
management
Nature of Management
Control Systems
 According to Maciariello Management control is concerned
with coordination, resource allocation, motivation, and
performance measurement
 Practice and design of management control systems draws
upon a number of academic streams -
 Involves extensive measurement and hence requires
contributions from accounting especially management
accounting
 Involves resource allocation decisions and is therefore
related to economics especially managerial economics
 Involves communication, motivation which means it
must draw contributions from social psychology
especially organizational behavior
Management Control
System - Activities
 Planning
 Coordination – Communication
 Evaluation of information
 Initiate activities, direction
 Influence people to work towards goals
Elements of Control System
 Detector or sensor
 Observed information about what is happening
 Assessor
 Comparison with Standard
 Effector (feedback)
 Behavior altering communication, if needed
Importance of Control
Systems
 Nature of decisions
 Resources – quality,quantity, availability
 Decision at higher level .. Execution down the level
 Decisions are systematic and rhythmic
 Strategies, core values, mission-vision, procedures,
policies
 Strategy implementation tool
 Needs framework, infrastructure, control to implement
 Behavioral Considerations
 Direction, motivation, strengths - limitations
Characteristics of good
Management Control System
 Future oriented
 Clear objective 
 Minimum control losses
Strategy formulation

Strategy formulation is the process

of deciding on the goals & strategies
for attaining those goals
Strategy Formulation – Management
Control – Task Control

Activity Result - Output

Goals, Strategies,
Strategy formulation Policies

Management Control Implementation strategies

Task control Efficient & effective

performance Of
individual task
Strategy Management Task control
formulation Control

Basic & Applied Control Research Execute & Monitor

Research Organisation Individual Research
Projects

- No. of months RM
Improve Inventory/ inventory
Current Ratio Receivables - Slow/non moving
Control inventory
- Credit period scrutiny