Module IX Service Organization

Objectives
To understand the service organization in general and its characteristics. To analyze different types and characteristics of service organization like;
Professional service organization Financial service organization Health Care organization Non profit organization

Characteristics of service Organization

1. 2. 3. 4.

For several reasons, management control in services industries is different than the manufacturing industry. There are many factors which affect the management control system of the service organization based on the characteristics of it. The main characteristics of the service organization are as below: Absence of Inventory Difficulty in controlling quality Labor intensive Multi-unit organizations

Professional Service Organization

Research and development, law firms, accounting firms, health care organizations, engineering firms, architectural firms, advertising agencies are examples of professional service organizations. There are certain special characteristics of this type of organization like; - Goals - Professionals - Output and input measurement - Small size - Marketing

MCS for Professional service organization

Pricing Profit Centers and Transfer Pricing Strategic Planning and Budgeting Control of Operations Performance Measurement and appraisal

Financial Service Organization

Financial service organization include commercial banks, insurance companies, securities firms etc. These companies are in business primarily to manage money and some act as an intermediary, risk shifters, traders etc. The special characteristics of the financial organizations are; - Monetary assets - Time period for transaction - Risk and reward - Technology

Contd.
1. Commercial Banks : General Characteristics Regulatory capital New products Risks Automation Management Control Implications: Interest rates Volume of deposits to cover costs Loan losses Expenses Joint Revenues Accounting systems

Contd.
2. Securities Firms: Management Control Implications: - Customer relationship - Stars and teamwork - Need for rapid information - Focus on short run - Measuring financial performance

3. Insurance Companies:
Management Control Implications - Product Pricing - Sales performance - Expense control - Control of investing

Health Care Organizations

The health care organizations consists of hospitals, clinics, health maintenance organizations, medical laboratories etc. The special characteristics of health care organizations are; - Difficult social problems - Change in mix of products - Third party payers - Professionals - Importance of quality control

Non profit organizations

A non profit organization is an organization that can not distribute assets or income, or for the benefits of the members, officers and directors. The special characteristics are ; - Absence of the profit measure - Contributed capital: plant and endowment capital - Fund accounting - Governance The control system here includes following components: - Product Pricing - Strategic planning and budget preparation - Operation and evaluation

Government Organization
General characteristics:
Political influences Public information Attitude toward clients More regulations Management compensation Financial Accounting

Management Control Systems:

- Strategic Planning and Budget Preparation - Performance measurement