01 - the nature of management control systems
TRANSCRIPT
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Chapter 1
The Nature ofManagement Control Systems
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BASIC CONCEPTS
Define the terms in the name ofthe course:
Control
Management
Systems
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Control
Control: to ensure that strategic intentionsare achieved.
Elements of a control systems:1. A detector or sensor (sensor)
2. An assessor (penilai)
3. An effector (umpan balik)
4. A communications network (jaringankomunikasi)
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Elements of Control Process
Control
device
Entity
being
controlled
2. Assessor. Comparison
with standard.
3. Effector. Behavior
alteration, if needed
1.Detector. Information
about what is happening
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Controlling Examples
Thermostat
A thermometer
An assessor
An affector
A communication network
Body temperature The sensory nerves
The hypothalamus The muscles & organs
Overall communications system of nerves
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Controlling Examples
Automobile driver
Eyes (detector)
Brain (assessor)
Foot (affector)
Nerves (communication network)
Eyes Brain Foot
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Management
An organization consist of a group of people whowork together to achieve common goals(satisfactory profit).
Organization are led by a hierarchy of managers.1. CEO overall strategies
2. Managers of business units strategies
3. Managers of department strategies
4. Managers of section strategies
GOALS
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The management control process is theprocess by which managers at all levels
ensure that the people they supervise
implement their intended strategies.
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Management Control Process VsSimpler Control Processes
1. Standard is not preset (involved planning &control).
2. Management control is not automatic.
3. Management control requires coordinationamong individuals.
4. The connection from the perceiving the need foraction to determining the action required toobtain the desired result may not be clear.
5. Much management control is self-control.
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Systems
A systemis a prescribed and usually repetitiousway of carrying out an activity or a set ofactivities.
Systems are characterized by a more or lessrhythmic, coordinating, & recurring series ofstepsintended to accomplish a specific purpose.
Many management action are unsystematic
(based on judgment).
If all systems ensured the correct action for all situations,
there would be no need for human managers.
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BOUNDARIES OFMANAGEMENT CONTROL
Define management control.
Distinguish it from two other systems (or
activities) that also require planning &control:
Strategy formulation
Task control
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General Relationships Among Planningand Control Functions
Activity Nature of End Product
Strategy
formulation
Management
control
Task
control
Goals, strategies, and policies
Implementation of strategies
Efficient and effective
performance of individual task
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Management Control
Management control is the process by whichmanagers influence other members of theorganization to implement the organizations
strategies. Management Control Activities:
Planning
Coordinating
Communicating Evaluating
Deciding
Influencing
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Management Control Activities
Management control does not necessarilyrequire that all actions correspond to apreviously determined plan (ex. budget).
Based on circumstances
Conforming to a budget is not necessarily good, and
departure from a budget is not necessarily bad.
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Goal Congruence
Goal congruence means the goals of anorganizations individual members should beconsistent with the goals of the organization itself.
Management control process is systematic, butnot mechanical.
Involves interaction among individuals.
The management control systems should be designed &
operated with the principle of goal congruence in mind
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Tools for Implementing Strategy
Management control focuses primarilyon strategy execution.
Management controls a are only one ofthe tools managers use in implementingdesired strategies.
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Framework for Strategy Implementation
Managementcontrols
Implementation Mechanism
Human
Resource
Management
Organization
Structure
Culture
PerformanceStrategy
Framework for Strategy Implementation
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Organizational structurespecifies the roles,reporting relationship, & division ofresponsibilities that shape decision-making with
in an organization. Human resource managementis the selection,
training, evaluation, promotion, & termination ofemployees so as to develop the knowledge &skills required to execute organization strategy.
Culturerefers to the set of common beliefs,attitudes, & norms that explicitly or implicitlyguide managerial actions.
Continued
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Financial & Nonfinancial Emphasis
Management control systemsencompass both financial &nonfinancial performance
measure. Financial: net income, ROE
Nonfinancial: product quality,market share, customersatisfaction
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Aid in Developing New Strategies
Interactive control
Management control canprovide the basis for
considering new strategies. Calling management attention
to developments that need fornew strategic initiatives.
Todays
controls
Tomorrows
strategy
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Strategy Formulation
Strategy formulation is the process of deciding onthe goals of the organization & the strategies forattaining these goals.
Goals the broad overall aims of an organization Objectives specific steps to accomplish the goals
within a given time frame.
Goals are timeless.
In the strategy formulation, goals of theorganization are usually taken as given.
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Continued
Strategy are big plans, important plans
The need for formulating strategies usuallyarises in response to a perceived threat or
opportunity.
A threat or opportunity can arise from anywhere& at any time.
Complete responsibility for strategy formulation should
never be assign to a particular person or organizational unit
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Distinctions between StrategyFormulation & Management Control
Management Control
Implementing strategies
Systematic.
Involves a series of stepsthat occur in a predictablesequence.
Reliable estimates.
Involves managers &their staffs at all level.
Strategy Formulation Deciding on new
strategies.
Unsystematic. Involves judgment.
The numbers used areusually rough estimates.
Involves few people(sponsor of the idea,headquarters staff &senior management).
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Task Control
Task control is the process of assuring thatspecified task are carried out effectively &efficiently.
Transaction-oriented.
Some are mechanical.
Scientific.
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Distinction between Task Control &Management Control
Task Control
Not scientific Focus on specific
task
Relate to specific
task
ManagementControl
Scientific
Organizational units
Concerned withbroadly definedactivities.
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Examples of Decisions in Planning &Control Functions
Strategy Formulation
Acquire an unrelated
business
Enter a new business
Add direct mail selling
Change debt/equity ratio
Adopt affirmative actionpolicy
Devise inventory
speculation policy
Management Control
Introduce new product or
brand within product line
Expand a plant
Determine advertising
budget
Issue new debt
Implement minorityrecruitment program
Decide inventory level
Task Control
Coordinate order entry
Schedule production
Book TV commercials
Manage cash flows
Maintain personnelrecords
Reorder an item
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Impact of the Internet onManagement Control
Benefits of internet: Instant access.
Multi-targeted communication.
Costless communication.
Ability to display images.
Shifting power & control to the individual.
Impact of internet in the world of business:
Change the rules of the game in the business-to-individual consumer sector.
Change business-to-business commerce.
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Impact of the Internet onManagement Control
Internet makes the processing ofinformation involved in MCS easier &faster, with few errors.
Internet facilitates coordination & controlthrough the efficient & effective processingof information.
But the internet cannot substitute for the fundamental
processes that are involved in management control