Application of MCS in

Service Organizations
 Objectives
• To understand the service organization in
general and its characteristics.
• To analyze different types and characteristics
of service organization like;
- Professional service organization
- Financial service organization
- Health Care organization
- Non profit organization
 Characteristics of service Organization
• For several reasons, management control in services
industries is different than the manufacturing industry.
• There are many factors which affect the management
control system of the service organization based on the
characteristics of it.
• The main characteristics of the service organization are
as below:
1. Absence of Inventory
2. Difficulty in controlling quality
3. Labor intensive
4. Multi-unit organizations
 Service Organizations in General
1) Absence of Inventory Buffer
▪ Services cannot be stored
▪ Minimize unused capacity
▪ Costs fixed in the short run
▪ Current capacity matching with demand
▪ a) Stimulate demand in off-peak periods
▪ b) Adjust size of workforce to anticipated demand
 Service Organizations in General
2) Difficulty in controlling quality
▪ Service company cannot judge service quality,
until rendered
 Service Organizations in General
3) Labor Intensive
▪ Manufacturing companies add equipment and
automate production lines; thereby replacing
labor and reducing costs
▪ Service companies are labor intensive and cannot
do this.
 Service Organizations in General
4) Multi – Unit Organizations
▪ Service organizations operate many units in
various locations (fast food restaurant chains)
▪ Similarity of separate units provides a common
basis for evaluating performance (not available to
the mfg. company)
 Professional Service Organization
• Research and development, law firms, accounting firms,
health care organizations, engineering firms, architectural
firms, advertising agencies are examples of professional
service organizations.
▪ Professional organization has fewer tangible
assets as compared to a manufacturing
organization
▪ ROA is hence meaningless
▪ Possible goals are:
▪ Adequate compensation to their employees
▪ Growth (strength, offices etc.)
 MCS for Professional service organization
• Pricing
• Profit Centers and Transfer Pricing
• Strategic Planning and Budgeting
• Control of Operations
• Performance Measurement and appraisal
 Financial Service Organization
• Financial service organization include commercial banks,
insurance companies, securities firms etc.
• These companies are in business primarily to manage
money and some act as an intermediary, risk shifters,
traders etc.
• The special characteristics of the financial organizations
are;
- Monetary assets
- Time period for transaction
- Risk and reward
- Technology
 Contd.
1. Commercial Banks :
General Characteristics
- Regulatory capital
- New products
- Risks
- Automation
Management Control Implications:
- Interest rates
- Volume of deposits to cover costs
- Loan losses
- Expenses
- Joint Revenues
- Accounting systems
 Contd.
2. Securities Firms:
Management Control Implications:
- Customer relationship
- Stars and teamwork
- Need for rapid information
- Focus on short run
- Measuring financial performance
3. Insurance Companies:
Management Control Implications
- Product Pricing
- Sales performance
- Expense control
- Control of investing
 Health Care Organizations
• The health care organizations consists of hospitals, clinics,
health maintenance organizations, medical laboratories
etc.
• The special characteristics of health care organizations
are;
- Difficult social problems
- Change in mix of products
- Third – party payers
- Professionals
- Importance of quality control
 Control Issues
• Strategic Planning
• Annual budget
• Operating Activities Control
• Financial Performance
• Equipment

14
 Non – profit organizations
• A non profit organization is an organization that can not
distribute assets or income, or for the benefits of the
members, officers and directors.
• The special characteristics are ;
- Absence of the profit measure
- Contributed capital: plant and endowment capital
- Fund accounting
- Governance
The control system here includes following components:
- Product Pricing
- Strategic planning and budget preparation
- Operation and evaluation
 Government Organization
• General characteristics:
- Political influences
- Public information
- Attitude toward clients
- More regulations
- Management compensation
- Financial Accounting
 Control Systems In Government Organizations

• Strategic planning
– The objective of strategic planning is to allocate resources judiciously.
Governments employ the benefit/cost analysis method to make
strategic decisions. Political pressure often influences managers’
decisions.
• Performance measurement
– Governments have developed nonmonetary indicators for performance
measurement. These measures can be classified in various ways. On
the basis of the purpose of measurement, they are classified as
• (1) results measures,
• (2) process measures, and
• (3) social indicators.

17
Budgeting in Non-Profit Sports
Organizations
 Introduction
• Olympic Gold Quest is a private non-profit organization, founded by
sportsmen, Geet Sethi and Prakash Padukone in 2007, with the aim
to bring the Indian athletes at par with the best athletes in the world
and to provide them support in winning win Olympic medals.
• OGQ finances its operations by soliciting donations and
contributions from donors belonging to different segments.
• Through its digital and social media marketing initiatives OGQ has
been able to create a community on Facebook of over 1.1 million
sports enthusiasts who interact, share and contribute towards OGQ.
During London Olympics alone, the OGQ Facebook page received
over 5.3 Million impressions.
• The study of interest is the NFP model, based on donations and
contributions, to achieve success in sports at elite level.
 Approaches towards OGQ Budgeting

• Through government, where substantial sum is spent from national

budgets for development of sports and athletes.
• The other approach is through non-government funds. While, the
government design sports budget for political power and supremacy ,
getting corporate funds require large fan base and media attraction for
the sport.
 Funding
• OGQ‟s entire revenue stream
consists of voluntary donations and
contributions from individuals or
corporate.
• To connect with donors, OGQ
organizes fund-raising dinner two-
three times in a year, in different
cities, attended by OGQ directors
and sports stars.
• In its quest to expand the footprint
of corporate/HNI donations, OGQ
signed an MOU with Confederation
of Indian Industries in January 2012,
aimed at promoting corporate
involvement through CII.
• The PYC campaign uses both offline
and online route to reach its Donations received by
potential donors. OGQ
 OGQ Budgeting Tips

• When are membership fees/dues, fundraising, and

donations coming in?
• Are the expenses set a realistic level?
• Does the number of members effect the expenses?
• Set aside money for large expenses; emergency
funding, gas and drivers for travel, drinks, hotels, and
more.
 Short Term and Long Term Budgeting
of OGQ

• The major difference between short-term and long-term

budgeting is relatively simple.
• Short-term is usually anything that refers to less than a
year, and long-term is anything over that.
• Whereas long-term might refer to large training
equipment or vehicles.
• Setting a short-term budget first will show you how
much money is left in the budget for long-term
investments.
Board of Control for Cricket in India
• Founded in December 1928
• Headquarters in Mumbai
• Richest Sporting Body in India , Richest Cricket Board in the world
• Sourav Ganguly is the current president
• Does not depend on government for finances
• Affiliation with ICC and Asia Cricket Council.
Budget for the Financial Year 2017-18
 Different types in budgets in NPO

• Income Based Budgets - • Capital Budget -

⮚ Media Rights
⮚ Royalty Income
⮚ Interest Income
⮚ Shares from ICC & ACC
• Incremental Budgets -
⮚ Surplus from IPL
⮚ Surplus from Tours
⮚ Infrastructure
⮚ Advertisements
• Material Budget
-
⮚ Kits & Clothing
⮚ Cricket Balls

• Operation wide Budgets -

⮚ Ranji Trophy, Vijay Hazare
Trophy,etc
⮚ U-19 & U-23 Zonals
⮚ India A team Tours
⮚ Women's International Tours
End of the Module & Course
 Paper Pattern
• Total Marks – 25

• ??
Thank You

All the best