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information system
1. Controlling a car
-brakes &
•
accelerator
2 controlling temp. of •
body/driving car
– Sensory nerves/eyes
• Sensor or detector
– Brain •
– Muscle & organs/legs
& hands • Assessor
• Effectors
Management control
It is a set of interrelated communication
structures that facilitates the processing of
information to assist the managers in
coordinating the parts to achieve goals on
continuous basis bringing out the unity
/harmony out of the diverse activities.
Management control /simple control
•
Domain of MCS
• Strategic planning
– Control of strategy
• Management control
• Task control
– Control of operations
End term 2008 10 m
Strategy Management Task control
formulation control
unsystematic Lies in between Systematic
•
CYBERNETIC SYSTEM OF
MCIS
Prediction Values
source Initial & &. Initial
data inference choice action
s
Feedba Values
Prediction
source ck & Action
& inference
data choices
CYBERNETICS APPROACH TO
CONTROL
• Kybernetics----steersman---person who directs the
movement of ship along the planned course
• Norbert Weiner coined the term
• Study of entire fieldof control whether man or machine ,
strategy (planning) or operations ( process)
• It sets some norms or target -----the action is taken-----
observations……feedback recovered in data bank------
next process
•
•
•
ORGANISATIONAL DISASTER &
MANAGEMENT CONTROL
• Impossible to predict disaster but steps may be taken to
minimise it
• External factor difficult to control while internal can be
• No control at time of disaster
• SBU provides qualitative reports about causes & harms.
• DISASTER DISASTER
FORECASTING PREPAREDNESS
POST DISATER
OPERATIONS FACING THE
DISASTER
ACCOUNTING DATABASE FOR
CONTROL
•
•
• FINACIAL ACCOUNTING----historical-----GAAP/statutory
• COST ACCOUNTING---operational control----only costing
• DECISION ACCOUNTING---problem/decision---make or buy
expand or not
• CONTROL ACCOUNTING---includes overall goals…through
planning phase securing consistency
• RESPONSIBILITY ACCOUNTING---tracing
cost/revenue/profit/ investment to individual sub
units responsible for decision making
•
INDUSTRIAL DYNAMICS &
MANAGEMENT CONTROL
APPLICANT CURRICULU
M
DP
ADMISSIO
DP
N
DP
DP
PROCESSING
DP
PLACEMENT
INDUSTRIAL DYNAMICS &
MANAGEMENT CONTROL
• It insights into control through the key role of information
flowing
• Org. is complex interlocking of information channels &
activities
• These channels emerges at various points to control
physical process
• Aim is to arrive at the right decision with the help of
information
• Control systems are concerned with the DP
• At decision points the actual & desired condition are
compared & right decision is taken
KEY VARIABLES
• A key variable is a significant indicator of business activity
whose sudden & unpredictable change warrants immediate
actions by the management
• SOURCES
Industry characteristics - occupancy rates/admissions
Environmental factors - postal rates/rules for
admission/interest rates
Competitive strategy - low cost strategy--cost
performance
capacity utilization
Stakeholders - customers/suppliers/employees
Significant functions - treasurer for interest rates /
operational manager for quality
INPUT-THROUGH-OUTPUT MODEL
• Input variable
raw material availability BSP
quality Bela Deela / tea taster / cotton selector
costs Tribal area / buying in season
• Production variables
capacity utilisation ONGC / PVR / College
losses Storage / process / Transpt. loss
quality control crash test/auto testing / placement
maintenance productive hour lost
delivery dairy / newspaper
cost per unit Perk
• Marketing variables
order book position manufacturing based on orders- turbines
market share
institutional sales BHEL / Defense dept
•
INPUT-THROUGH-OUTPUT MODEL (CONTD.)
• Asset management variables
asset turnover
working capital turnover
• Insurance
• Banking
• Hotel
• Sugar
• Steel
• Management training institute
• Power industry
• Beverage
• Public relations
OTHER KEY VARIABLES
Integration effect
Among variables
Environmental Process
variables variable
Strategy Structure
variables variable
Accomplishment
Of
goals
DIMENSIONS
STRUCTURE organizational autonomy,structure,
centralization,authority -responsibility
ENVIRONMENTAL scope,diversity,uncertainty
G G
G2 G4
1 3
g g1 g1 g1
g7 g8 g9 g13
6 0 1 2
Decentralization & loose coupling
•
• The limitation on information processing ability of decision makers creates the
need to decentralize decision making authority, sub goals (cost) & to hold
each responsibility center responsible for one small portion of the overall
goals(ROI)
Example MUL
• Production unit cost,schedule
• Quality control efficiency & effectiveness
• R&D tech innovation—tech & expense objectives
• Marketing revenue & market share,customer feedback
price cost ratio data
None of the following responsible for ROI but the ROI (overall goal)enters into
decision making very indirectly.MCIS is knitting all the responsibility centers
we cannot say that profit is not the goal when we see sub goals of the
responsibility centers but the decision making system is loosely coupled system
where ROI (overall goal ) is one of the constraints & it enters into sub systems
in indirect ways
Organizational slack
• Firm achieve goals--------------less pressure on coupling between
overall goals & sub goals of responsibility centers-----may
result in conflict in between different responsibility
centers--------under exploitation of environment -----------
cost & dividend may be higher & extra inventory will be there
& extra expenditure on discretionary expense centers
• Thus total payments to organizational participants
minustotal necessary payments is called as organizational
slack.
• From point of economy slack is not good but in terms of MCIS
small slack act as cushion in variable environment
Three different types of corporate control mechanism
bureaucracies--- formal rules, procedures, directives
markets market oriented incentives
clan driven depends on value & belief to steer
Normally the org uses optimum mix of all the three but the
simplest & effective coordination occurs when org share
common goals & values.
Great org has set of beliefs on which policies & actions are
based
Values &beliefs are key to success but in changing scenario
these have to be changed as we see in example below
Failure of IBM –Watson the founder instilled following beliefs
product characteristics
design requirement
process specification
Style & culture necessary for TQM
•
• Customer oriented process to satisfy both internal &
external customer
•
• Style that encourage goal oriented team activity
•
• Continuous improvement by every individual
•
• Emphasis on gathering objective data
•
• Seeking new techniques constantly
•
• Belief in every member
How will you implement TQM
•
•
• Establish the policy & key philosophical principles
• Establish company wide improvement team ( stress on
informal) which will communicate philosophy to lower
level & report progress to top
• Team establishes requirement for product,services,processes
• Measure the gap between customer need & output
• The informal process facilitates active planning
&coordination
• The formal documents the planning & keep the team focused
• The engineering teams include manufacturing,purchasing
,product & process design concurrently
• Adhoc teams are organized to resolve specific issue
•Style-
participative/team
•SBU •Values
•Prob solving team Strong customer
•Responsibility for quality focus
•Staff support Continuous improve
Innovation
trust
Statistical quality control
Competitive benchmarking
Activity based costing
Target costing
Cost of quality measurement
•
•Based on quality
•Recognition •Training in TQM
•Consistency •Employees
•Skepticism tolerance involvement
•Cynicism rejected •Open & candid comm.
Managerial style & design of control
system
EXTERNAL INTERNAL MIXED
•
• Harold Geneen Ed Carlson Roy Ash
•
• ITT United airlines Litton industries
•
• decision making at participative participation
top after gathering data with central
from lower level direction
•
• powerful center, 1700 cost & revenue diversified
authoritative centers ( decent.) but decision
at HQ (IBS)
Contd.
EXTERNAL
INTERNAL MIXE
•
• Incentives Bonus & Recog. Promote best
•
CEO
Manufacturing Marketing
manager manager
M M M M
M M R1 R2
P1 P2
TYPES OF ORGANISATION
• BUSINESS UNIT ORGANISATION
CEO
controller
M M
UNIT X UNIT Y
controller
Plant Marketin
Plant Marketi
manage g
manage ng
r manager
r manager
Functional organisation
– Manager is responsible for specific function
– A skilled functional manager can do better than a
manager responsible for both functions
– Can supervise workers in same functions thus
efficiency increases
– Disadvantages
– Organisation cannot adapt easily to environmental
changes
– As decision making is concentrated at top.
Dispute or suggestion at lower level can be
resolved at top level
– Ex- BOEING- Designer & product manager
different
• Afterwards design –build teams introduced
– Ex –GLAXO- Scientist lack business sense
• Afterwards therapeutic strategy teams
Business structure organization
• Business unit manager are responsible for all functions
involved in producing & marketing of a product line.
• All disputes/suggestions are taken care of in same
unit& performance is measured by profitability of
the BU
• Unit managers work as separate companies
• Business unit manager demonstrate same entrepreneurial
spirit as CEO
• Unit manager is quite close to market as compared to Top
so the unit may react quickly to threats &
opportunities
• Disadvantages
• But this may result in increase in cost
• Boeing resolved cost issue by creating central fabrication
unit & all manufacturing activities of narrow & wide
bodies requiring skill was placed within it
• Unit manager is generalist but subordinate are functional
WHAT SHOULD CONTROLLER DO
•
• Controls become less important if there is strong culture
(self control) & quick information processing but when
the organisation has to launch new products lines or
have to go geographically wide then the the complex
organization cannot take decisions & there the need of
DECENTRALIZATION arises.---------------
CHANDLER
•
•
• The multidivisional structure is a decentralized structure
where in divisional managers have a fair degree of
autonomy & held accountable for profit & asset
utilization ( efficiency ).Each unit is called as a
responsibility center.
BENEFITS OF DECENTRALISATION
• Closer control & coordination within the division
• Facilitates information processing as analysis of trade off
between cost, revenue & investment is at lower level
closer to impact of decision
• Managerial motivation as they are empowered to take
decision
• Evaluate performanceof organizational sub units
• Ensures the managers a right environment & autonomy
and are trained to take right decision
( entrepreneurship)
• Decentralization should be done if :
• when benefit is more than cost
• Large projects to support permanent
functional organisation
• Company can support functional groups on
continuous basis
EVOLOUTION OF MATRIX
CEO
PERSO
MRKT. ENGG MNF. PROJ
N.
M M. M M.
M
Procurement
Quality
assurance
Manufacturing
Program
management
Total prog.
requirements
PROJECT ORGANISATION
• Cost ,quality & schedules are key variables of a project
• Various functions are represented in rows
• Program undertaken are represented in columns
• Total functional output is calculated in last column
(hrs/units/Rs.)
• Project manager has responsibility (cost/time/quality)
for a particular project But he has no control over
the functional authorities
• Thus there are two authorities
– Knowledge based (functional)
– Resource based (project manager)
• Matrix structure brings coordination between project &
functional authority by formal & informal
relationship among them.
PRODUCT ORGANISATION
GENERAL
MANAGER
MANAGE PROD
MKT ADVT SALES R PER’NEL
UCTI
M M M OF ONM
PRODUCT M
S
PRODUCT
PRODUCT PRODUCT
MANAGE
MANAGER MANAGER
R
A B
C
PRODUCT ORGANISATION
• MATRIX STRUCTURE IS APPROPRIATE FOR
MANAGEMENT OF PRODUCTS WHEN :-
– Number of products grow relatively more
– Product require close coordination among various
functions
– Market is small to justify separate product division
• CHARACTERSTICS
– Functional specialist reports to functional managers
& not to product manager
– Matrix structure preserves economy as functional
heads are shared & coordination by providing
total management to each product
– For economy functional groups are kept centralized
– Product managers purchase services from them whenever
required
SERVICE ORGANISATION
CEO
CLENT M’MENT
AUDIT TAX SERVICES
M M SERVICES
M M
M
M M
BANGALOR
DELHI MUMBAI
E
SERVICE ORGANISATION
• CHARACTERSTICS
–
– MULTIPLE SERVICES OFFERED THROUGH
CLOSE CORDINATION OF VARIUOS HIGH
SKILLED FUNCTIONS OR DISCIPLINES
– EXAMPLE tourism, advertising, hotel, law, CA
firm
– Even though functional organisation is desired, focal
point is the client of the particular region
– Clients are best served when local office provides all
the services
– Functional personnel report directly to the functional
head & the local office manager purchase services
from the functional resources whenever required
MATRIX IN MULTINATIONAL
PRESIDEN
T
DIVISIONAL DIVISIONAL
MANAGERS MANAGERS OF
OF AREA PRODUCTS
MATRIX
MANAGER
P -1 IN A-1
F1 F2 F3 F4
MATRIX IN MULTINATIONAL
•
• Teams are cross- unit group made up of task-relevant
representatives who meet periodically to focus on
clients,products,market or problems
•
• These teams are formal or informal,temporary or permanent
&may include experts
•
• Sometimes teams are formed for particular project where
their structure is simple,temporary & more informal as
compared to Matrix
Control factor in organizational design
• Centralized -responsibility & authority for all
products,project &services rest with top
• Decentralized- division or departments have the authority
over functions
• Matrix -hybrid which capture benefit of both
• Controller has to choose among the three alternatives for
highest benefit or he may do variation in each model
• The factors to be kept in mind is Efficiency &
coordination
• We should compare the incremental gain in coordination
versus the incremental managerial cost & lost scale
economies.If net benefits are positive & large one
should go for decentralization
Matrix Vs Functional
• There is improved coordination & motivation in Matrix
but
– Cost increases two fold- additional layer of management
– Difference in orientation between program ( time )
& functional personal (quality ).Rewards can be
linked to both authorities to solve this problem
– Diffuse responsibility--program responsibility lies
upon program manager while technical
responsibility lies upon functional manager in
Matrix, so it is difficult to isolate responsibility
– Organizational limbo– In temporary projects
,program staff feels insecure after completion of
project & hence they linger on the program
thereby inflating cost especially in adverse
economy
– Effective informal relationship & goal congruent
The controller’s organization
• Person responsible for designing & implementing the MCIS is
called as controller.
• His main responsibilities are :-
– To design control system
– Prepare financial reports & statements
– Develop internal audit system to control monetary & non
monetary assets
– Conduct educative sessions to create awareness about his
function
– Advise management on financial implications of
decisions
– Analyze budgets & program & coordinate various
segments of the organization
• In matrix division controller has two bosses-
– Corporate controller- functional accountability
– GM division- operational accountability
The controller’s organization
•
• Characteristics of a strong controller
– Personal -energy,motivation,integrity,professional
commitment
– Technical-accounting knowledge & analytical skills
– Business judgment- understand what management
needs
– Communication skills- Grasps, Think, summarize,
communicate
– Building effective interpersonal relationships-
Accepted by all
– Able to challenge management –constructive
criticism
– Dual accountability-coordinate both division &
corporate m’ment
Control in Adaptive organization Q 4 2006
mid term 15 m & Q3 in end term 2006 10 m
• Environment changes continuously & controller should modify
the structure accordingly.( open system)
• Resources should be steered & realigned & culture should be
reorganized
• Factors which create need for adaptive organization
• Environmental uncertainty- Adhoc teams & verbal
communication
– --do -- complexity- Decentralize into focused market
segments
– ---do--- diversity - Autonomous business unit for
each market
– ----do---- hostility - centralization done,quick data
gathering & quick decisions example-political or new
competition
• Informal control in adaptive organization
• •Global operating
•Emergent roles for perspective
Local markets •Opportunistic action
•Acceptance of oriented
Temporary assignment •Change oriented
•Lifelong learning
•Agile to new assignment
•Verbal informal
action
•Multidisciplinary
team
for problem solving