Page 13 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes The Internet facilitates co-ordination and control through efficient and effective processing of
information but the internet cannot substitute for the fundamental process that is involved in
management control, i.e., the judgements required to design and operate in Optimal Control
System. Such judgements involve:
1. Understanding the relative importance of the various and sometimes competing goals
that drive individuals to act e.g. personal achievement versus collective achievement,
value creation for customers and shareholders rather than oneself.

2. Aligning various individual goals with those of the organization.
3. Developing specific objectives by which business units, functional areas and individual
departments will be appraised.

4. Communicating strategy and specific performance objectives throughout the organization.
5. Determining the key variables to be measured in assessing an individual’s contribution to
strategic goals.

6. Evaluate actual performance relative to the standard and making inferences as to how
well the manager has performed.
7. Conducting productive performance review meetings.

8. Designing the right reward structure.
9. Influencing individuals to change their behaviours.
In sum, though the Internet has vastly improved information processing, the fundamental
elements of management control – what information to collect and how to use it – are essentially
behavioural in nature and thus, not amenable to a formula approach.

Self Assessment

Fill in the blanks:

13. The planning process is more important in ............................. while the control process is
more important in .............................. .
14. Management Control does not necessarily mean that actions should correspond to a
.......................... .
15. Designing of the system is to be carried out after considering the ...........................
requirements of different levels of management.

16. The strategic plan is converted to an annual budget that focuses on the planned revenues
and expenses for individual ............................... .
17. .................................... refers to the set of common beliefs, attitudes and norms that explicitly
or implicitly guide managerial actions.

1.5 The Domain of Management Control System

There is a difference of opinion about the proper domain of control systems among experts in
the field. There are many views: Antony and Govindarajan in their book “Management Control
System”, Eleventh Edition, consider strategic planning, management control and task control as
three separate interrelated process of planning and control. Management control is seen by
them as the process by which managers influence the other members of the organization to
implement the organization strategies. In their views, the proper domain for management

8 LOVELY PROFESSIONAL UNIVERSITY