1. The Nature of Management Control Systems Management Control Systems Chapter 1 July 2014Iwan Pudjanegara SE., MM.1

2. Purpose  To understand The Nature of Management Control Systems  Basic Concepts  Boundaries of Mgt Control  Understanding MCS July 2014Iwan Pudjanegara SE., MM.2

3. Basic Concepts  Systems: A system is a prescribed and usually repetitious way of carrying out an activity or a set of activities. Systematic Un-systematic July 2014Iwan Pudjanegara SE., MM.3

4. Basic Concepts  Control:  All those activities undertaken to ensure that actual operations conform to planned operations (Fred R. David).  A process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance (Thomas L. Wheelen & J. David Hunger) July 2014Iwan Pudjanegara SE., MM.4

5. Basic Concepts Elements of a Control System : 1.A detector or sensor 2.An assessor 3.An effector 4.A communication network July 2014Iwan Pudjanegara SE., MM.5

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7. Basic Concepts Elements of a Control System:  A detector or sensor: a device that measures what is actually happening in the process being controlled.  An assessor: a device that determines the significance of what is actually happening by comparing it with some standard or expectation of what should happen. July 2014Iwan Pudjanegara SE., MM.7

8. Basic Concepts  An effector: a device (feedback) that alters behavior if the assessor indicates the need to do so.  A communication network: devices that transmit information between the detector & the assessor and between the assessor & the effector. July 2014Iwan Pudjanegara SE., MM.8

9. Basic Concepts  Management:  An organization consists of a group of people who work together to achieve certain common goals (ex. Profit).  Led by a hierarchy of managers (CEO & Managers) July 2014Iwan Pudjanegara SE., MM.9

10. Basic Concepts  The Management Control Process... is the process by which managers at all levels ensure that the people they supervise implement their intended strategies. July 2014Iwan Pudjanegara SE., MM.10

11. Boundaries of Management Control  Management Control  Is the process by which managers influence other members of the organization to implement the organization’s strategies.  Involves planning, coordinating, communicating, evaluating, deciding, & influencing. July 2014Iwan Pudjanegara SE., MM.11

12. Boundaries of Management Control Management Control Activities: Planning  What the organization should do. Coordinating the activities of several parts of the organization. Communicating information. Evaluating information. Deciding what action should be taken. Influencing people to change behavior. July 2014Iwan Pudjanegara SE., MM.12

13. Boundaries of Management Control  The management control system should be designed and operated with the principle of goal congruence in mind.  Goal Congruence means that the goals of an organization’s individual members should be consistent with the goals of the organization itself. July 2014Iwan Pudjanegara SE., MM.13

14. Boundaries of Management Control  Management Control focuses primarily on strategy execution.  Management controls are only one of the tools managers use in implementing desired strategies.  Strategies are also implemented through the organization’s structure, management of HR, and its culture. July 2014Iwan Pudjanegara SE., MM.14

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16. Boundaries of Management Control  Three planning and control functions that are present in almost every organization are : 1)Management Control 2)Strategy Formulation 3)Task Control July 2014Iwan Pudjanegara SE., MM.16

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18. Boundaries of Management Control  Strategy Formulation  Is the process of deciding on the goals of the organization and the strategies for attaining these goals.  Goals are timeless  exist until changed and changed only rarely.  The need for formulating strategies usually arises in response to a perceived threat and opportunity. July 2014Iwan Pudjanegara SE., MM.18

19. Distinctions between Strategy Formulation & Management Control Strategy Formulation The process of deciding on new strategies. Unsystematic, strategic decisions may be made at any time. Strategic analysis involves much judgement and the numbers used in the process are usually rough estimates. Involves few people. Management Control The process of implementing those strategies. Systematic Involves a series of steps that occur in a predictable sequence according to a more-or-less fixed timetable, & with reliable estimates. Involves managers & staffs at all levels. July 2014Iwan Pudjanegara SE., MM.19

20. Boundaries of Management Control  Task Control  Is the process of ensuring that specified tasks are carried out effectively and efficiently.  Is transaction-oriented. It involves the performance of individual tasks according to rules established in the management control process. July 2014Iwan Pudjanegara SE., MM.20

21. Distinctions between Task Control & Management Control Task Control Scientific. Interaction is between a manager and a nonmanager. Focus on specific tasks performed by these organizational units. Relates to specified tasks, and require little or no judgement to perform. Management Control Involves the behavior of managers and cannot be expressed by equations. Managers interact with other managers. Focus on organizational units. Concerned with the broadly defined activities of managers. July 2014Iwan Pudjanegara SE., MM.21

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23. Boundaries of Management Control  Impact of the internet on Mgt Control  Mgt Control systems involve information  Organizations require an infrastructure to process that information.  The internet provides that infrastructures, making the processing of information easier & faster, with fewer errors. July 2014Iwan Pudjanegara SE., MM.23

24. Boundaries of Management Control  Benefits of Internet compare to Telephone: Instant access Multi-targeted communication Costless communication Ability to display images Shifting power & control to the individual July 2014Iwan Pudjanegara SE., MM.24