Page 228 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 11: Management Compensation

2. The criterion has to do with the role of staff. There should be enough staff support to line Notes
management so as to facilitate or provide a catalyst for the control process.
3. The third criterion has to do with the extent to which the systems focus upon building
commitment to organisational goals and objectives. To build commitment, organization
should encourage participation in the planning and control process. Emphasis should be
laid on gaining explicit commitments during the control process.
4. The fourth criterion is that the system should encourage strategic and operational thinking
on the part of all managers in the organisation. It should not encourage premature and
excessive quantitative manipulations, which crowd one’s thinking about fundamental
business variables. The philosophy of the formal control system should be to focus upon
strategic and operational resources and by using good data.
The formal planning process in complex organisations tends to focus the limited time of managers
upon the issue and data that are important for strategic and operational decision-making. It is a
process within which decisions are made that match the human, physical and technological
resources of the firm with the potential demands of the environment within which the firm
operates. The limited resources of the firm are allocated under time pressure, in the face of
uncertainty about the environment and within policy and structural constraints placed upon
organisational units. The cybernetic paradigm indicates the crucial importance of environmental
scanning to achieve control. Control is possible only to the extent; the environmental disturbances
are predicted in advance to allow adequate reaction time.

Self Assessment

Fill in the blanks:

7. The ……………….. process in complex organisations tends to focus the limited time of
managers upon the issue and data that are important for strategic and operational decision-
making.
8. ………………… includes base pay, benefits, recognition awards and incentives.

Tasks
1. The manager’s total compensation consists of three components - which one is
correct?
(a) Salary
(c) Benefit and Perquisite
(b) Incentive

(d) All the three above
2. Short-term incentive plans are based on:
(a) Performance in the current year
(b) Performance of the earlier year

(c) Performance of the last 3 years
(d) Performance during last 5 years
Contd...

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