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Unit 13: Management Control of Service Organisation

7. Formal control process: The formal control tool is the budget. The budgeting process is Notes
complicated in the absence of clear, quantifiable performance objectives for evaluating
programmes. As part of programme evaluation, it is necessary to determine programme
costs. Programme costs are usually subdivided into two categories: direct and indirect. In
most non-profits, overhead is allocated on the basis of direct labour costs.
In case of hospital, control within the medical side is necessary for quality patient care.
This is done by using the patient record chart, which is divided into many segments
containing progress notes, reports, and requests for all diagnostic and therapeutic
procedures performed within each department, there are many levels of control related to
the patient care mission to ensure the highest quality care.
A hospital is divided into mission centres i.e., the departments that work with patients
directly.

Example: Inpatient care, laboratory radiology. Service centres such as, housekeeping,
laundry and medical records provide support to each of the mission centres.
In addition, there are other support cost such as supplies, depreciation and insurance that
serve both service and mission centers. Programme costing then involves choosing the
final cost objective such as cost of care per day or cost associated with a particular diagnostic
category. To do this, all direct costs associated with the final costs objective are traced to
that cost objective. To allocate in direct cost, the standard practise is to take cost of support
pools and allocate them to both service and mission centres based on allocation criteria
that had the closest bearing on how the costs were incurred. The service centre costs are
allocated to mission centres using allocation base that most nearly reflect the demand for
service activities in mission centers. Cost variances are compared to budget can be worked
out and analyzed.
8. Communication systems: Board members if organized properly can provide a very
valuable contribution to the communication systems of the non-profit institution. If their
strategic work is organized by committee and each committee meets regularly with the
relevant operating committee to add vision and perspective, the board can play a very
strong function in furthering the mission of the organisation.

Notes In case of hospital, there is plethora of communication mechanisms within both the
medical and administrative sides. On the medical side, there is usually a computerized
hospital information system that provides up-to-date patient information at nursing
stations and contributes to the patient control process. The medical committees are
comprised of physicians trying to work out the best course of treatment for a particular
patient. These committees begin to alter the physician behaviour to achieve better cost
performance while providing the highest quality of care.

9. Rewards: The paid staff as well as volunteer staff is committed to the mission of the
organisation, hence financial rewards are not very important. Promotion opportunities
are also not frequent.
In case of hospital, the primary rewards are derived from the satisfaction received from
the fulfillment of the mission to provide high-quality health care. Physicians are well paid
but other professionals are paid slightly less than their counterparts in the profit sector.
Promotion in hospitals is few, given the flat organisation structure. There is little crossover
from the medical side to the administrative side.

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