Management Control and

Information Systems
Basic Concepts of Management Control System

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

1
School (IBS) Hyderabad
Basic Concepts of Management Control System
• An organization consists of a group of people, who work together to achieve
some desired results called its goals

• Management :
The leaders of the organization are collectively called as “Management”

• An organization has several “units” and “subunits”

• The “units” are as follows:

• Sales
• Production
• Finance
• Personnel etc
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
2
School (IBS) Hyderabad
 Basic Concepts of Management Control System
• The “subunits” are as follows:
• Sales Administration
• Sales Accounting
• Market Research
• Sales Promotion and
• After-sale-services

• Each of these units and subunits perform their respective activities for
accomplishment the responsibilities assigned to them

• From the Chief Executive to the supervisor at the shop-floor level, there is a
continuous chain of units and subunits

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

3
School (IBS) Hyderabad
 Basic Concepts of Management Control System
• Layers of hierarchy depend on nature,
size and complexity of the
organization

• Manager

Source : https://greatergood.berkeley.edu/article/item/four_keys_to_a_healthy_workplace_hierarchy

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

4
School (IBS) Hyderabad
 Basic Concepts of Management Control System
• Control :
Control is the regulating, directing, restraining and unifying action in an
organization that brings unity out of the diverse activities performed by
various units and subunits

• It is the system of ensuring that actual state of affairs is in line with the
desired state of affairs

• It is the process of ensuring that the efforts and activities are producing the
desired results, which ultimately reach the objectives and goals

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

5
School (IBS) Hyderabad
Basic Concepts of Management Control System
• Control :
A control system has 4 essential elements:
Detector/Sensor : what is happening?
Assessor/Selector : Determining the significance
Effector/feedback : Alters the behavior
Communication network : Transfers the information

Thermostat
Human Body Temperature
Motor Car

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

6
School (IBS) Hyderabad
Basic Concepts of Management Control System
• Control : To maintain a desired state of condition

A control system has 4 essential elements:

Detector/Sensor : what is happening?
Assessor/Selector : Determining the significance
Effector/feedback : Alters the behaviour
Communication network : Transfers the information

Robert Anthony
John Dearden and
Richard Vancil

Authored a classic contribution to management control, Management Control

Systems (MCS)
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
7
School (IBS) Hyderabad
Basic Concepts of Management Control System
2
Control Device Assessor
3
1 Effector
Detector
4
Communication

Entity being
Controlled
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
8
School (IBS) Hyderabad
Basic Concepts of Management Control System
• Examples:

Thermostat
Human Body Temperature
Motor Car

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

9
School (IBS) Hyderabad
Basic Concepts of Management Control System
• System:

System is a group of interacting, interrelated or interdependent functional

elements forming a collective entity

An organization consists of a number of units and subunits carrying out

diverse activities with the objective of achieving its goals

A system is a method of carrying out those activities. It consists of a

structure and a process

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

10
School (IBS) Hyderabad
Basic Concepts of Management Control System
• Management Process and Control:

The functions of management usually include planning, organizing, directing

and controlling an organization

Control in an organization does not come primarily as a result of action

initiated by an external regulatory device as in a thermostat.

Control is mostly self-control : managers take action by using their own

judgements

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

11
School (IBS) Hyderabad
Basic Concepts of Management Control System
Activities in management Control:
• Planning
• Coordinating
• Communicating
• Evaluating
• Deciding
• Influencing

Purpose and scope of management control:

The purpose of management control system is to assist management in
the coordination of the parts of organization, allocation of its resources
and steering those parts towards achievement of the mission, vision,
objectives and goals of the organization

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

12
School (IBS) Hyderabad
Basic Concepts of Management Control System
Purpose and scope of management control:

The work of management control system operates at three levels of

resource allocation process. It is concerned with
1. The formulation of “expectations”
2. The “allocation” of an organization’s resources
3. The “monitoring performance”

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

13
School (IBS) Hyderabad
Basic Concepts of Management Control System
Purpose and scope of management control:

Scope:
There are two schools of thought:

Management Accounting Perspective

• Anthony
• Dearden and
• Govindrajan

Strategic Planning, Management Control and Operational Control:

Successful implementation of the strategy and strategic plan

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

14
School (IBS) Hyderabad
Basic Concepts of Management Control System
Purpose and scope of management control:

Scope:
There are two schools of thought:

Cybernatics : Self regulatory principles of human biological system

• Joseph Maciarello and
• Calvin Kirby

Strategic Planning, Management Control and Operational Control:

Successful implementation of the strategy and strategic plan

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

15
School (IBS) Hyderabad
Course Overview and Briefing

Thank You

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

16
School (IBS) Hyderabad