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Systems
Introduction
Basic Concepts
From Corporate Angle, Study of
Management Control System requires
understanding of 3 terms
Control
Management
Systems
Collapse Of Companies
Consider
World-Class Companies
Consider
Control
Control refers to keeping track of the
organizational activities & regulating
diversions through a mechanism.
To do this, knowledge of elements of a
Control System is required.
Broadly, there are 4 elements.
1.
Your eyes
Assessor= Your brain
Effector= Your foot
Communication network= Your nerves
system
Automobile driver
Assessor (brain)
Detector (eyes)
Control System
Communication Network
(nerves
Effecter (foot)
Example
Your
Your
Example
Your
Example : Thermostat
1.
3.
Management
2)
Systems
Barings Bank
Founded in 1762 Britains Oldest Merchant
Bank
It was the official bank of British Queen
Barings Bank
Nick Leeson was a trader with Barings banks
Singapore office from 1992 to 1995.
At the age of 27, in 1994, he got an annual
compensation of GBP 2,00,000
He single handedly pulled down the Barings
Bank in 1995
His illegal trading activities resulted in a loss of
US $ 1.3 billion (GBP 837 million) for the Bank
The bank declared bankruptcy and shut its doors
in Feb 1995
Barings Bank
It did not happen suddenly. Leeson was
accumulating losses since 1992 in a fake account
number 88888.
By the end of 1992, the 88888 account was under
water by about GBP 2 million. By the end of 1993
losses had mushroomed to GBP 23 million. By the
end of 1994, 88888 account had lost a total of
GBP 208 million.
Barings Banks Head Quarters in London did not
know what was happening in Singapore.
A classic example why business organizations
need to ensure control over their activities
The lesson
It
Concept of Management
Control
MANAGEMENT CONTROL
DEFINED
CHARACTERISTICS OF
MANAGEMENT CONTROL
PROCESS OF MANAGEMENT
CONTROL
Organizing
the process
Segmenting the organization
Risk assessments:
Planning further activities
Management control evaluations:
Corrective actions
Reporting:
FACTORS AFFECTING
MANAGEMENT CONTROL
Identify
MANAGEMENT CONTROL
SYSTEMS
It
NATURE OF MANAGEMENT
CONTROLS SYSTEMS
SCOPE OF MANAGEMENT
CONTROL SYSTEM
Management
A total system
Monetary standards
Definite pattern
Coordinated system
Line manager
Effective Planning
Involvement of Top Management:
Motivation of Employees:
Establish proper communication mechanism:
Activities of Management
Control Systems
Boundaries of management
control
Strategy Formulation
Management Control
Task Control
Implementation of strategies
Strategy Formulation
Strategy
Management Control
Management
Task Control
Task
Strategy Formulation
Management
Control
System design
Unsystematic, Strategic
Rhythmic,
decision may be made any predetermined
time
procedures
Nature of
information
Tailored-made to faced
problems, more external
and predictive, less
accurate
Integrated, more
internal and
historical, more
accurate
Communication Simple
of information
Difficult
Top management
and line managers
Strategy Formulation
Management
Control
Number of
Few people
involved people
Many people
Mental activity
Administrative and
persuasive
Discipline
Economics
Social psychology
Time horizon
Tend to long-term
Tend to short-term
End products
Goals, strategies
Strategy
implementation
Management
Control
Task Control
Focus of
activity
The whole of
operation
Individual task or
transaction
Nature of
information
Integrated, many
financial data
Tailored-made to
individual task, more
non-financial data
Supervisor or none
Mental activity
Administrative and
persuasive
Follow direction or
none
End products
Strategy
implementation
Management
Control
Task Control
Mental activity
Administrative and
persuasive
Follow direction or
none
Discipline
Social psychology
Economics, physics
Time horizon
Weekly, monthly,
annually
Daily
Type of cost
Discretionary costs
Engineered costs
Management
Control
Task Control
Enter a new
business
Expand a plant
Schedule
production
Change debt to
equity ratio
Decide magnitude
and direction of
research
Control of research
organization
Acquire an
unrelated business
Run individual
research project
Perception
Attitudes and Beliefs
Motivation
Goal Congruence
Inter-unit Conflict and Cooperation
Managerial Styles
Force Field Analysis
Resistance to Change
Entrapment
Compromising and Sacrificing
Socio-Cultural Influences