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Management Control Systems




                    Notes
                                                    Figure  2.2:  Framework  for  Strategy  Implementation

                                                                Management Controls



                                                  Organization                Human Resources
                                      Strategy                                                     Performance
                                                    Structure                   Management


                                                                    Culture

                                   Organization  structure  specifies  the  roles,  reporting  relationships  and  divisions  of
                                   responsibilities that shape decision-making in an organization.
                                   Human resources management is the selection, training, evaluation promotion and termination
                                   of employees so as to develop the knowledge and skills required to execute organizational
                                   strategy.
                                   Culture refers to the set of common beliefs, attitudes and norms that explicitly or implicitly
                                   guide managerial actions.
                                   Financial and non-financial emphasis: Management control system includes both financial and
                                   non-financial performance measures. The financial dimension focuses on the monetary “bottom
                                   line” – net income after tax, return on equity and so forth. But there are non-financial objectives
                                   as well such as product quality, market share, and customer satisfaction, on time delivery and
                                   employee  morale.
                                   Aid in developing new strategies: As discussed earlier, the primary role of management control
                                   is to ensure execution of chosen strategies. In industries where environment is changing rapidly,
                                   management control information  especially of non-financial nature can provide a basis for
                                   considering new strategies. This is known as interactive control.




                                     Notes  Interactive control calls management  attention to developments – both negative
                                     (e.g. loss of market share, customer complaints) and positive (e.g. the opening of a new
                                     market because of elimination of govt. regulations) that indicate the need for new strategic
                                     initiatives.

                                   Self Assessment

                                   Fill in the blanks:
                                   5.  Management control is the process by which managers influence other members of the
                                       organization to implement the organization’s ………………… .
                                   6.  ………………. means  that as far as  feasible, the goals of an organization’s individual
                                       members should be consistent with the goals of the organization itself.












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