E: OPERATIONS

ELECTIVE COURSE – III: MANAGEMENT CONTROL SYSTEMS

Unit I

1) Nature of Management control

The nature of management control is the process by which managers ensure that the activities of their organization are
consistent with their strategies and objectives.

Management control is a key component of organizational governance that enables managers to monitor and evaluate
performance, correct deviations from established plans, and implement changes to improve performance.

2) Control in organisations
Control in organizations is necessary to ensure that activities are carried out efficiently and effectively, and that objectives are
achieved.

This involves establishing standards and targets, measuring performance against these standards, and taking corrective action
where necessary.

3) Phases of management control system

There are four phases of management control system:

1. Setting Objectives: Establishing specific goals and objectives that are aligned with the organization’s strategy and mission.

2. Measuring Performance: Developing metrics and key performance indicators (KPIs) to track progress towards set goals and
objectives.

3. Comparing Performance: Analyzing performance data to identify trends, patterns, and deviations from established standards.

4. Taking Corrective Action: Implementing changes to improve performance and achieve organizational goals.

4) Management control Vs Task control.

Management control is different from task control, which involves the supervision of individual tasks and activities.

Management control is focused on the overall performance of the organization, whereas task control is focused on the details of
specific tasks or projects.

Management control is also broader in scope, while task control is typically more immediate and focused.

Unit II
1) Control and organisational Behaviour
Control and organizational behaviour are two important concepts that are closely related in the management of modern
organizations.

Control refers to the process of monitoring and evaluating organizational performance to ensure that activities are carried out
effectively and efficiently, while organizational behaviour refers to the study of how people behave within an organizational
setting.

2) Types of organisations and their implications

1. For-profit organizations: These organizations exist to make a profit and are owned by their shareholders.

2. Non-profit organizations: These organizations do not exist to make a profit and are typically focused on social or
environmental causes.

3. Government organizations: These organizations are owned by the government and exist to provide services to the public
4. International organizations: These organizations are usually created by multiple countries to address global issues.

5. Small businesses: These organizations are usually independently owned and operated, and their success is closely tied to the
owner's personal finances.

3) Types of control and variations in controls based on organisational structure and design.
Organisational structure and design play a crucial role in determining the types of control that are needed to ensure effective
operations in an organisation.

1. Bureaucratic control
2. Market control
3. Clan control
4. Technical control
5. Management control

Unit III

1) Goals and strategies

1. Achieving financial targets and objectives
2. Enhancing operational efficiency and effectiveness
3. Improving decision-making processes
4. Ensuring compliance with legal and ethical standards
5. Establishing clear performance metrics and targets
6. Implementing effective budgeting and planning processes
7. Adopting advanced technologies and data analytics tools

2) Key variables in Management control Design and their types

1. Goals and objectives
2. Performance measures
3. Organizational structure
4. Reward systems
5. Communication systems
6. Accounting and financial systems
7. Information technology systems
8. Evaluation and feedback

3) Key Result Areas.

Key Result Areas (KRAs) are the areas of performance or activities in which individuals, departments or organizations must
excel in order to achieve desired outcomes and goals.

KRAs are used to assess and evaluate the overall performance of individuals, teams or organizations and to measure their
progress towards achieving their goals.

- Sales
- Customer Service
- Operations
- Human Resources
- Marketing

Unit IV

1) Management control structure

Management control structure refers to the framework that ensures the effective and efficient use of resources in achieving
organizational goals and objectives

2) Expense control
the process of monitoring and managing expenses to ensure that they don't exceed the budgeted limit.
3) Profit centers
units of an organization that generate revenue/sales and contribute to the overall profitability of the company.

4) Transfer pricing
the setting of prices for goods and services exchanged between different units or divisions of a company.

5) Investment centers
units of an organization that are responsible for making investment decisions and managing the assets of the company.

6) Management control process

the systematic approach used to plan, monitor, and evaluate the activities of an organization.

7) Programming and budgeting

the process of setting goals and objectives for an organization and allocating resources to achieve those goals.

8) Analyzing reporting: the process of reviewing and analyzing financial and non-financial information to make informed
decisions.

9) Performance evaluation
the process of assessing the performance of individuals, teams, and units to determine whether they are meeting the set targets.

Unit-V

1) M.I.S. for Management Control:

Management Information System (MIS) refers to the use of information technology and computer systems to collect, process,
and provide data that can be used in decision-making processes.

In the case of management control, MIS is used to provide information to managers that will enable them to control and monitor
their operations.

The use of MIS helps in improving communication and coordination between different departments thereby making it easier for
managers.

2) Systems Theory and Management Control:

Systems theory is based on the idea that any organization is a complex system made up of interdependent parts.

In management control, systems theory is used to explain how different parts of an organization are interconnected and how
changes in one area can affect the whole organization.

It helps managers to understand how to manage their operations effectively.

3) Installation of Management Information & Control System:

The installation of an MIS involves several steps such as identifying the needs of the users, specifying the requirements of the
system, selecting the suitable software and hardware, designing the system, testing it, and implementing it.

The success of the installation process depends on the careful attention to detail and the involvement of all stakeholders.

4) Structured and Unstructured Decisions and Implication for Control:

Structured decisions are those that are repetitive and routine, and can be easily processed by a computer.

Unstructured decisions, on the other hand, are those that require human judgment and decision-making skills.

MIS can support both types of decisions by providing relevant data and information.

In terms of control, structured decisions allow for consistency and standardization, while unstructured decisions require more
flexibility and a focus on the decision-making process.
5) Special Management Control Situations:
Multinational Companies: Multinational companies operate in different countries with varying legal, political, and economic
systems.

This makes control more complex and requires a robust MIS system to support communication and coordination across borders.

6) Service Organizations:
Service organizations require a high level of customer interaction, and hence, management control requires a focus on customer
experience.

MIS can help in monitoring customer feedback, complaints, and satisfaction levels to enable managers to make informed
decisions.

7) Non-profit Organizations:
Non-profit organizations require a focus on social impact and community involvement.

Control in this context requires a focus on achieving social objectives while maintaining financial sustainability.

MIS can help in tracking social metrics and financial performance.

8) Multi-Project Organizations:
Multi-project organizations require a high degree of coordination and communication across projects.

MIS can help in monitoring progress across all projects, identifying potential conflicts, and supporting resource allocation.