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The Nature of Management Control System (Chapter1)

This document discusses the key elements of management control systems (MCS), including strategic planning, budgeting, performance measurement, and transfer pricing. It presents two views on how MCS and decentralization relate - either MCS dictates strategy or strategies emerge through experimentation influenced by MCS. The basic concepts of control, systems, and the management control process are defined. MCS are described as influencing members to implement strategies through activities like planning, evaluating, and decision making. The relationships between strategy formulation, MCS, and task control are outlined.

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DrBabita Singla
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20 views12 pages

The Nature of Management Control System (Chapter1)

This document discusses the key elements of management control systems (MCS), including strategic planning, budgeting, performance measurement, and transfer pricing. It presents two views on how MCS and decentralization relate - either MCS dictates strategy or strategies emerge through experimentation influenced by MCS. The basic concepts of control, systems, and the management control process are defined. MCS are described as influencing members to implement strategies through activities like planning, evaluating, and decision making. The relationships between strategy formulation, MCS, and task control are outlined.

Uploaded by

DrBabita Singla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 12

2.

The Nature of
Management Control System
(Chapter1)

Elements of MCS

Strategic planning
Budgeting
Resources allocation
Performance measurement
Evaluation and reward
Responsibility center allocation
Transfer pricing

MCS and decentralization


View1: MSC must first develop through a formal
and rational process, and this strategy then
dictates the desing of th firms management.
(Predictable)
View2:
strategies
emerge
through
experimentation, which are influenced by the
firms management system. MCS can affect the
development of strategies. (Change)
3

Basic concepts (1)


Control: devices must be place to ensure that its
strategic intentions are achieved.
Elements of control system:
Control
device
1. Detector:
information

2. Assessor:
comparison
3. Effector:
alteration

Entity
Being
crontrolled

Basic concepts (2)


System: repetitious way of carrying out an
activity or a set of activities.
Many management actions are unsystematic
(judgment).
If all systems ensured the correct action for all
situations, there would be no need for human
managers.
5

Basic concepts (3)


Management control process: managers at all
levels ensure that people they supervise
implement their intended strategies.
Involves both planning and control.
Requieres coordination among individuals.
The action required to obtain the desired result
may not be clear.
Needs self-control and judgment.

Basic concepts (4)


Management control: managers influence other
members of the organization to implement the
organizations strategies.
Activities:
Communicating;
Influencing.

Planning;
Evaluating;

Coordinating;
Deciding; and,

Goal congruence: the goals of an organizations


individual members should be consistent with the
goals of the organization itself.
7

Basic concepts (5)


Strategy excecution: move an organization toward its strategic objectives.

Implementation Mechanism

Management
controls
Strategy

Organization
structure

Human
resources

Performance

Culture
8

Relationships among
Planning and Control
Strategy
formulation

Management
control

Task
control

Goals, strategies, and policies

Implementation of strategies

Efficient and effective performance


of individual task
9

Strategy formulation
Deciding on the goals of the organization and the
strategies for attaining them.
Goals are timeless; they exist until they are changed.
Strategies are big and important plans. They state the
direction to move the organization.
Management
control
is
the
implementating those strategies.

process

of

10

Task control

Process of enssuring that specified task are


carried out effectively and efficiently.
Task control:
Systems are scientific.
Focus on specific task
perfomed by
organizational units.
Humans nor involved; or
interaction between
managers and
nonmanagers.

Management control
Involves behavior of
managers.
Focus on organization
units.
Managers interact with
other managers.
11

Bibliography
Anthony y Govindarajan. Management Control
System. 12th Edition. McGraw-Hill.
Guan, Hansen and Mowen. Cost Management.
6th Edition. McGraw-Hill.
Ramrez Padilla, David. Contabilidad
Administrativa. 8va. Edicin. McGraw-Hill.
12

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