Page 11 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes 4. Output is .......................... and ............................... against a plan.
5. Every control system has at least four elements, viz. ............................, ..........................,
....................... and a ............................. .

6. The controller’s main responsibility is to ensure that the systems throughout the
organization are .............................. and compatible with one another.
7. Information system should be properly designed and managed by the ............................ .

1.3 Basic Concepts

A control system is a set of formal and informal systems to assist the management in steering
the organization towards its goals. Controls help in guiding employees effectively towards the
accomplishment of the organization’s goals. Establishing a control system in an environment of
distributed accountability, reengineered processes, and local autonomy and empowerment is a
challenging task.

1.3.1 Important Features of Management Control Systems

Nature of Decisions

Management control decisions are based on the framework established by the organization’s
strategies. Management control decisions also take into account the quantity and quality of
resources available. Within the constraints of the available resources and the policies of the
organization, a manager should be able to implement activities that are best suited for a particular
business unit.
Decisions are made at the highest level, but their actual implementation may require some
time. For instance, employees need time to adapt to a new technology.

Decisions are Systematic and Rhythmic

Decisions in management control process are systematic and rhythmic i.e. they are in accordance
with the strategies and procedures laid down by the top management. Plans developed for a
unit must encompass the whole organization, and the plans for each of the organization’s units
must be coordinated with one another, so that there is a balance between different activities. For
example, operations and distribution should be balanced with the sales program.

Strategy Implementation Tool

Management control helps an organization to move towards its strategic objectives. It is an
important vehicle for the execution of strategy. It explains how strategies are implemented
through management controls, organizational structures, human resource management, and
culture. Effective execution can take place with the help of an efficient organizational structure,
human resource management and culture. All these are influenced by the system of management
control, and hence it is an important aspect of strategy implementation.

What are the categories that correspond to the generic MCS components?
Did u know?
The criteria are organized into five categories that correspond to the generic MCS
components. The five categories are: Organization, Planning and Budgeting, Accounting,
Analysis, and Revisions/Access.

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