The Nature of Management

Control Systems
Management Control Systems
Chapter 1

July 2014

Iwan Pudjanegara SE., MM.

Purpose
To understand The Nature of
Management Control Systems
Basic Concepts
Boundaries of Mgt Control
Understanding MCS
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
Systems:
A system is a prescribed and usually
repetitious way of carrying out an
activity or a set of activities.
Systematic
Un-systematic
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
Control:
All those activities undertaken to ensure that
actual operations conform to planned
operations (Fred R. David).
A process in which corporate activities and
performance results are monitored so that
actual performance can be compared with
desired performance (Thomas L. Wheelen & J.
David Hunger)
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
Elements of a Control System :
1.
2.
3.
4.

July 2014

A detector or sensor
An assessor
An effector
A communication network

Iwan Pudjanegara SE., MM.

July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
Elements of a Control System:
A detector or sensor: a device that
measures what is actually happening in the
process being controlled.
An assessor: a device that determines the
significance of what is actually happening
by comparing it with some standard or
expectation of what should happen.
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
An effector: a device (feedback) that
alters behavior if the assessor indicates
the need to do so.
A communication network: devices that
transmit information between the
detector & the assessor and between
the assessor & the effector.
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
Management:
An organization consists of a group
of people who work together to
achieve certain common goals (ex.
Profit).
Led by a hierarchy of managers
(CEO & Managers)
July 2014

Iwan Pudjanegara SE., MM.

Basic Concepts
The Management Control
Process...
is the process by which managers
at all levels ensure that the people
they supervise implement their
intended strategies.
July 2014

Iwan Pudjanegara SE., MM.

10

Boundaries of 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.
July 2014

Iwan Pudjanegara SE., MM.

11

Boundaries of Management Control

Management Control Activities:
Planning What the organization should do.
Coordinating the activities of several parts of
the organization.

July 2014

Communicating information.
Evaluating information.
Deciding what action should be taken.
Influencing people to change behavior.
Iwan Pudjanegara SE., MM.

12

Boundaries of Management Control

The management control system should
be designed and operated with the
principle of goal congruence in mind.
Goal Congruence means that the goals
of an organizations individual
members should be consistent with the
goals of the organization itself.
July 2014

Iwan Pudjanegara SE., MM.

13

Boundaries of Management Control

Management Control focuses primarily
on strategy execution.
Management controls are only one of the
tools managers use in implementing
desired strategies.
Strategies are also implemented through
the organizations structure, management
of HR, and its culture.
July 2014

Iwan Pudjanegara SE., MM.

14

July 2014

Iwan Pudjanegara SE., MM.

15

Boundaries of Management Control

Three planning and control functions
that are present in almost every
organization are :
1) Management Control
2) Strategy Formulation
3) Task Control
July 2014

Iwan Pudjanegara SE., MM.

16

July 2014

Iwan Pudjanegara SE., MM.

17

Boundaries of Management Control

Strategy Formulation
Is the process of deciding on the goals of the
organization and the strategies for attaining
these goals.
Goals are timeless exist until changed and
changed only rarely.
The need for formulating strategies usually
arises in response to a perceived threat and
opportunity.
July 2014

Iwan Pudjanegara SE., MM.

18

Distinctions between Strategy Formulation &

Management Control
Strategy Formulation

Management Control

The process of deciding on

new strategies.
Unsystematic, strategic
decisions may be made at
any time.
Strategic analysis involves
much judgement and the
numbers used in the process
are usually rough estimates.
Involves few people.

The process of implementing

those strategies.
Systematic
Involves a series of steps that
occur in a predictable
sequence according to a
more-or-less fixed timetable,
& with reliable estimates.
Involves managers & staffs
at all levels.

July 2014

Iwan Pudjanegara SE., MM.

19

Boundaries of Management Control

Task Control
Is the process of ensuring that specified
tasks are carried out effectively and
efficiently.
Is transaction-oriented. It involves the
performance of individual tasks
according to rules established in the
management control process.
July 2014

Iwan Pudjanegara SE., MM.

20

Distinctions between Task Control &

Management Control
Task Control

Management Control

Scientific.
Interaction is between a
manager and a nonmanager.
Focus on specific tasks
performed by these
organizational units.
Relates to specified tasks,
and require little or no
judgement to perform.

Involves the behavior of

managers and cannot be
expressed by equations.
Managers interact with other
managers.
Focus on organizational
units.
Concerned with the broadly
defined activities of
managers.

July 2014

Iwan Pudjanegara SE., MM.

21

July 2014

Iwan Pudjanegara SE., MM.

22

Boundaries of Management Control

Impact of the internet on Mgt Control
Mgt Control systems involve information
Organizations require an infrastructure to
process that information.
The internet provides that infrastructures,
making the processing of information
easier & faster, with fewer errors.
July 2014

Iwan Pudjanegara SE., MM.

23

Boundaries of Management Control

Benefits of Internet compare to
Telephone:
Instant access
Multi-targeted communication
Costless communication
Ability to display images
Shifting power & control to the
individual
July 2014

Iwan Pudjanegara SE., MM.

24