Page 49 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes Although planning and reporting appear to be two distinct processes, there should be a certain
degree of integration. Strategic programs are funded out of current operations and grow out of
current activities. Further, strategic plans and programs have a great impact on current operations
and so, these strategic plans should be adjusted from time to time in line with their effect on
operations.
Informal Control Process

Management decisions are based upon experience, intuition and feeling. Informal control processes
are formed as a result of interaction between people. The informal control process helps in the
development of new goals and objectives. There are a number of mechanisms for control through
informal systems. One mechanism is the use of ad hoc teams to solve problems, improve
productivity and achieve organizational change. Informal teams usually consist of cross-
organizational groups which work in coordination to solve problems related to a particular
client, product or market. Informal communication systems evolve as people develop work
relationships. Informal communication is helpful in supporting the key values of the organization.
Fostering informal communication is critical to the development and maintenance of effective
informal controls.
Informal rewards and recognition are conferred upon the key team members within the informal
system. The respect an individual is shown is an informal reward for performance.
Communication systems are not highly guarded in informal systems.

Self Assessment

Multiple Choice Questions:

11. Identify the main functions of a controller?
(a) To design the control system
(b) To prepare financial reports and statements for the clear understanding of the
shareholders and external parties
(c) To develop internal auditing systems for the control of the physical and monetary
assets of the firm
(d) All of the above
12. In which type of organization employees are permanently assigned to a functional
organization unit, they work temporarily on a project and when that work is completed
they are assigned to another project?

(a) Complex organization (b) Matrix organization
(c) Control organization (d) Line organization
13. Most of the formal information flowing through an organization in its daily operations
constitutes.
(a) Management control information (b) Task control information
(c) Operational control information (d) All of the above

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