Page 247 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes These measures are subject to appropriate qualifications and in most circumstances the assessment
of performance is finally a matter of human judgement by superiors, peers, self subordinates
and clients.
Judgements made by superiors are the most common. Professional organizations increasingly
use formal systems to collect performance appraisals as a basis for personnel discussion and for
discussion with the professional. Some systems require numerical ratings of specified attributes
of performance and provide for weighted average of these ratings. Compensation may be tied
in part to these numerical ratings. In a matrix organisation, both the project leader and the head
of the functional unit, that is the professional organizational “home” judge performance.

Did u know? Appraisals by professional peers, or by subordinates, are sometimes part of a
formal control system. In some organizations, individuals are asked to make a self-appraisal.
The budget can be used as a basis for measuring cost performance and the actual time taken can
be compared with the planned time. Budgeting and control of discretionary expenses are as
important in a professional firm as in a manufacturing company. Such financial measures are
relatively unimportant in assessing a professional’s contribution to the firms profitability. The
professional major contribution is related to quantity and above all quality of work and its
appraisal is largely subjective.

Notes In some professions, internal audit procedures are used to control quality.

Self Assessment

Fill in the blanks:
3. ............................... organizations are labour-intensive and the labour is of a special type.
4. The ........................... can be used as a basis for measuring cost performance and the actual
time taken can be compared with the planned time.

13.3 Financial Service Organizations

Financial service organizations include commercial bank and thrift institutions, insurance
companies and securities firms. These companies are in business primarily to manage money.

13.3.1 General Observations

1. The financial services sector constitutes an important backbone to world economies.
2. Some years earlier, commercial banking, investment banking, retail brokerage and
insurance existed as distinct and separate industries; firms specialized in a single industry
and tended to compete in a single country. Deregulation has removed industry and
geographic boundaries.
3. Financial services firms have used the information technology revolution to invent new
products and discover new methods of trading.

4. The need for controls in the financial services sector has become paramount to Indian
financial crises during the second half of 1990s was in part, the result of inadequate controls
in the banks in Thailand, Indonesia, Japan and other Asian countries.

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