MCS

A management control systems (MCS) is a system

which gathers and uses information to evaluate the
performance of different organizational resources
like human, physical, financial and also the
organization as a whole considering the
organizational strategies....
 Definition of MCS
According to Prof. John Dearden:

MCS is the process by which managers assure

that resources are obtained and used effectively
and efficiently in the accomplishment of the
organization goals.
According to Prof. Joseph A Maciariello &
Calvin J Kirby:

MCS is a set of interrelated communication

structures that facilitates the processing of
information for the purpose of assisting
managers in coordinating the parts and attaining
the purpose of an organization on a continuous
basis.
 Elements of MCS
Strategic planning
Budgeting
Resource allocation
Performance measurement
Evaluation and reward
Responsibility centre allocation
Transfer pricing
Here we are concerned with 3 words:
Management
Control
System
 Organization is a group of two or more people.

Organization consists of hierarchy of managers with

the CEO at the top.

Each Manager is superior and a subordinate.

The management control process is the process by

which managers at all levels ensures that people they
supervise implement their intended strategies
 Control is a process of planning, implementing and
evaluating the results.

Control may be formal or informal.

Formal Control Systems make possible the delegation

of authority, in that, formal systems make explicit the
structure, policies and procedures to be followed by
members of the organization.

Formal documentation of these structure, policies and

procedures assist members of the organization in
performing their duties.
 Informal systems require of the management, a mind set
that differs.
Formality in the system refers to the extent to which the
behavior is segregated from the ongoing activities and is
made explicit.
Informality refers to the relaxation of sharp
differentiation and explicit description of behavior
Control consists of the following elements:
A Detector
An Assessor
An Effecter
A Communications Network
 Elements of control system

Control Assessor comparison with

device standard

Detector- information about Effectors- behavior, alteration,

What is happening if needed

Entity
Being
controlled
 Elements of control system
Detector or sensor- a device that measures what is
actually happening in the process being controlled
Assessor - determine significance of what is actually
happening by comparing with some standard or
expectation of what should happen
Effector a device that alter behavior if the assessor
indicate the need to do so
Communication network- devices that transmit
information between the detector and assessor and
between the assessor and effector
e.g. Thermostat

Automobile Driver
 Examples
Thermostat (A thermostat is a component of a
control system which senses the temperature of a
system)
Thermometer ( detector )
Assessor ( compare )
Effector ( emit heat )
Communication network ( thermometer to assessor
and assessor to heating element)
 Body temperature
Detectors (Sensory nerves )
Assessor ( hypothalamus )
Effector ( muscles and organs )
Communication network ( system of nerves)
 Automobile driver
Detectors ( eyes )
Assessor ( brain )
Effector ( directs your foot )
Communication network ( from eyes to brain and
brain to foot )
 A system is a prescribed usually repetitious way of
carrying out an activity or a set of activities

Characteristics:
More or less rhythmic
Coordinated
Recurring series of steps intended to accomplish a specified
purpose
 Boundaries of management control

Activity Nature of end product

Strategy Goals ,strategies, policies

formulation

Management
control Implementation of strategy

Task
control Efficient and effective performance
of individual work
 Tools for implementing strategy
Framework for Strategy Implementation

Management
control

strategy Organization
HRM performance
structure

culture
Strategy formulation
Strategy formulation is the process of deciding on the
goals of the organization & the strategies for attaining
goals
Strategy Formulation v/s
Managerial control
Strategy formulation is the process of deciding on
new strategies; management control is the process of
implementing those strategies

Strategic analysis involves much judgment, & the

numbers used in the process are usually rough
estimates. By contrast, the management control
process involves a series of steps that occur in a
predictable sequence according to a more-or-less fixed
timetable & with reliable estimates
 Strategy formulation involves the sponsor of the idea,
headquarters staff, & senior management. By contrast,
the management control process involves managers &
their staff at all levels in the organization
 Management control
Management Control is the process by which
managers influence other members of the
Organization to implement the organizations
strategies.

Involves Planning, Coordinating, communicating,

Evaluating, Deciding & Influencing the people
 Management control activity
Planning what organization should do

Coordinating the activities of several parts of

organization

Communicating information

Evaluating information

Deciding what, if any, action should be taken

Influencing people to change their behavior

 Task control
It is the process of assuring that specified tasks are
carried out effectively and efficiently

Task control is transaction-oriented

Many task control activities are scientific i.e. using

management science and OR techniques

Most of the information in an organization is task

control information

Many activities performed by managers in the past

have been automated and are task control activities
Task control v/s managerial control
Task control is scientific but management control
Involves behavior of manager

Managers interact with other managers in

management control; in task control, either human
beings are not involved at all or the interaction is
between a manager and a non-manager

Management control focuses on organisational units

while task control focuses on specific tasks
performed by these organisational units
Boundaries of Management
Control
Strategy
formulation Manageme Task control
Least nt control Most
systematic Between systematic
Focuses on Between Focuses on
long run Between short run
activities Planning activities
Rough and Current
approximation controlling accurate data
of future are equal Emphasize
Emphasize on controlling
on planning
Impact of internet on
management control
Instant access
Multi targeted communication
Costless communication
Ability to display image
Shifting power and control to the individual
 The internet facilitates coordinates & control through the
efficient & effective processing of information, But
Internet cannot substitute for the Fundamental processes
that are involved in Management Control.

The availability of electronic access to database

contributes little to the judgment calls required to design
& operate an optimal control systems. Such judgment
involve:
1. Understanding the relative importance of the various
& sometimes competing, goals that drives individual
to act

2. Aligning various individual goals with those of the

organization

3. Developing specific objectives by which business

units, functional areas & individual departments will
be judged
4. Communicating strategy & specific performance
objectives throughout the organization

5. Determining the key variables to be measured in

assessing an individuals contribution to strategic goals

6. Evaluating actual performance relative to the standard

& making inferences as to how well the manager has
performed
7. Conducting productive performance review meeting

8. Designing the right reward structure

9. Influencing individuals to change their behavior