Management Control System

MANAGEMENT CONTROL SYSTEMS
MANAGEMENT CONTROL TECHNIQUES
BEHAVIOURIAL IMPLICATIONS OF MANAGEMENT CONTROL

1. TOPIC : MANAGEMENT CONTROL SYSTEMS
MANAGEMENT CONTROL TECHNIQUES
BEHAVIOURIAL IMPLICATIONS OF MANAGEMENT CONTROL
PRESENTED BY : KARAN MEHRA
ROLL NUMBER : 29

2. https://en.wikipedia.org/wiki/Management_control_system
http://www.strategiccontrol.24xls.com/en200
http://kalyancity.blogspot.in/2011/05/control-techniques-10-
types-of.html
https://www.cliffsnotes.com/study-guides/principles-of-
management/control-the-linking-function
https://www.slideshare.net/mugdhapednekar/managerial-control-
itc-casestudy
http://www.yourarticlelibrary.com/management/7-behavioural-
implications-in-the-process-of-control-in-an-organisation
http://study.com/academy/lesson/behavioral-implications-of-
different-organizational-designs.html

3. What is MCS What is MCS ?
The term management control system consists
of three words, namely:
1. Management
2. Control
3. Systems

4. Management:Management:
•It is broadly defined as planning, organizing, staffing,
directing, evaluating and controlling (POSDEC) the
activities of an organization in order to achieve the
pre-determined goals within the allocated reserves.
•Hence the management has to get the task performed
in an efficient and effective manner and ensure the
achievement of organization’s goals.

5. Control:Control:
•In today’s dynamic and fiercely competitive world it
becomes essential for the management to control the
resources, namely- human, physical and financial.
•Exercising control is one of the major functions of
the management . It is required to ensure actual
performance conforms to pre-determined standards.

6. Control involves:
a)Measurement of performance against predetermined
goals
b)Identification of deviations from the goals
c)Initiating corrective actions to rectify the deviations
and
d)Influencing people to change their behaviour / action.
- Hence control is ensuring that the actual performance
meets the desired level of performance.

7. System:System:
•System can be defined as “ a group of elements,
working together, in an integrated, interdependent
and coordinated manner to achieve synergy and
ultimate goal.

8. •Management Control System Management Control System is a set of formal and
informal systems to assist management in the
coordination of various activities / functions of an
organization and to steer the entire organization
toward the achievement of overall goals and
objectives.
•A control system is so designed to bring unity out of
the diverse activities of an organization to fulfill
overall objectives.

9. •Size and spread of the enterprise
•Nature of operations and divisibility
•Type of responsibility centres
•People and their perceptions

10. Types of management control systems:Types of management control systems:
•MCS in an organization generally fall under two
categories:
MCS
FORMAL CONTROL INFORMAL CONTROL

11. Formal control system (FCS):Formal control system (FCS):
•The controls are laid down by the management in
writing to influence the behaviour of employees in
achieving organization’s goals.
•Examples:
-Rules and regulations
-Procedures
-Work plan / work instructions.

12. •FCS establishes well defined organizational
structure, policies and procedures to be followed
by the members of the organization.
•FCS can be classified into three types: !"!#"$
INPUT CONTROLS#"%"!#"$
PROCESS CONTROL" ! !"!#"$
OUTPUT CONTROL

13. Informal control system:Informal control system:
•These are unwritten, people initiated mechanisms that
influence the behaviour of individuals or groups in
business units.
Example:
-Group behaviour
-Work culture
-Organizational norms and beliefs.

14. There are three types of informal control :%$"!#"$
SELF CONTROL"&$"!#"$
SOCIAL CONTROL $! #&$
"!#"$
CULTURAL
CONTROL

15. Levels of controls in an organization:Levels of controls in an organization:
Top
Mgt.
Middle Mgt.
Lower level Mgt.
Strategic
control /
planning
Management control
Operational control

16. Strategic control:Strategic control:
•It is the function of the top management.
•It involves strategy formulation for the entire
organization, identifying goals, strategies and
policies for the entire organization.
•It is long term in nature.

17. Management control:Management control:
•It deals with the effective utilization of resources
made available by the top-management for the
accomplishment of organization’s objectives.
•It is exercised by the middle management through
interaction with the top management and lower level
management.
•It is medium term in nature.

18. Operational control:Operational control:
•It is exercised by the lower level / shop floor level
management.
•It is short term in nature, the benchmarks are well
defined and the outcomes are tangible and easily
measurable.

19. Management Control TechniquesManagement Control Techniques

20. Traditional
techniques
Modern
techniques

21. Personal observation
Budgeting
Break-even analysis
Financial statement
Statistical data & report
Setting examples
Standard costing
Written instructions

22. •This is the most traditional method of control.
•It helps managers to collect first hand information.
•It also creates a psychological pressure on the
employees to perform well as they are aware that
they are being observed personally on their job.
•How ever it is very time consuming , & not suitable
for all kinds of jobs.

23. Meaning-
A budget is a statement which reflects future
incomes ,expenditures & profits of the firm.
Benefit of budgeting-
1.Standards of performance
2.Planning
3.Predicting the future
4.Financial planning

24. •It deals with the study of the relationship between
costs, volume, & profit.
•It determines the probable profit and losses at
different levels of activity.
•The sales volume at which there is no profit, no loss
is known as breakeven point.
•It can be calculated as ,
Breakeven point=fixed cost/selling price per unit –
variable cost per unit.

25. •Financial statements shows financial position of a
firm over a period of time, generally one year.
•These are prepared along with last year statements,
so that firm can compare its present performance
with last year’s performance & improve its future
performance.
•It offers information on :
1.Liquidity
2.Financial strength
3.profitability

26. •Statistical analysis in the form of averages ,
percentages , ratios,..etc.
•Data can be used for diagramatic representations like
histograms, pie chart, bar graphs..etc.
•A Report is a statement that represents data in the
form of information for carrying out the controlling
function.

27. •It is old saying that “example is better than precepts”
•Some managers follow this and put good examples of
performance before subordinates and expect the same
from them.
•Behaviour and actions of subordinates can be
controlled through exemplary behaviour of the
manager.

28. •It is a technique of cost control.
•Under this technique ,standard costs of
materail,labour,overheads etc. are determined.
•Actual cost are recorded and compared with the
standard costs and variances are found out.
•Then measures are taken to prevent variances in
future.

29. •These instructions are issued time to time to the
organization members.
•These provide latest information and instructions in
the light of changing rules and conditions.
•These are supplementary control technique.

30. 1.Return on investment.
2.Management audit.
3.Management information system (MIS).
4.PERT/CPM.

31. •Investment consists of fixed asset
and working capital used in business.
•Profit on the investment is a reward for risk taking.
•If the ROI is high then the financial performance of a
business is good and vice-versa.
•It also shows the areas where corrective actions are
needed.

32. •Management Audit is an evaluation of the
management as a whole. It critically examines the
full management process.
•It finds out the efficiency of the management.
•Management auditing is conducted by a team of
experts.
•The data is analyzed and conclusions are drawn about
managerial performance and efficiency.

33. •In order to control the organisation properly the
management needs accurate information.
•Information is collected continuously to identify
problems and find out solutions.
•They need information about the internal working of
the organisation and also about the external
environment.
•MIS collects data, processes it and provides it to the
managers.

36. ITC’s vision and ITC’s vision and
missionmission
THE ITC VISION » Sustain ITC's position as one of
India's most valuable corporations through world class
performance, creating growing value for the Indian
economy and the Company's stakeholders
THE ITC MISSION »To enhance the wealth generating
capability of the enterprise in a globalising
environment, delivering superior and sustainable
stakeholder value.

37. • Fast Moving Consumer Goods
Cigarettes
Foods
Lifestyle Retail
Personal Care
Education and safety
Agarbattis (incense)
•Hotels
•Paperboard and specialty paper
•Agribusiness
Agri Commodities & rural Services
Agri Business- ILTD
E - Choupal
•Information Technology
•Group Companies
ITC’S DIVERSIFIED BUSINESSESITC’S DIVERSIFIED BUSINESSES

38. Control TechniquesControl Techniques
CPM (Critical Path Method):
It helps reduce project duration and
cost.
It reveals all the dependencies in the
organization.
Too much of confusion when dealing
with a complex project.
PERT (Program Evaluation and Review
Technique):
The large amount of project data can
be organized.
Visible critical path
PERT is not easily scalable for
smaller projects.

39. Control techniquesControl techniques
Direct supervision and observation:
The managers himself observes
the employee and their work.
Many problems are solved
during the supervision.
Auditing:
Operational auditing

External auditing

40. BEHAVIOURAL IMPLICATIONS OF CONTROLBEHAVIOURAL IMPLICATIONS OF CONTROL