MANAGEMENT CONTROL SYSTEMS [302]BY : Pravin Tungare

UNIT 1Conceptual Framework of Control Function

1.1 Nature of Control FunctionTwo management functions – Decision making & controlControl ensures performance as expectedControl process is: - Continuous - Dynamic - Future oriented - Regulation of actions - Monitoring of activities Carried out by managers Managers are accountable for loss of control Control depends on management plans

1.2 Significance of Control Function

Optimum utilization of resources Brings clarity of purpose Eliminates conflicts & confusion Decides managerial efficiency & effectiveness Timely feedback to concerned persons Useful to implement JIT, TQM, TPM etc. Provides framework for performing various tasks Enhances span of control

1.3 Control System Four elements - Detector or sensor identifies state of process to be controlled - Assessor is device for comparing standards with actual - Effecter i.e. feedback - Communication network Steps involved Step 1: Setting standards Step 2: Providing appropriate resources Step 3: Monitoring actual performance Step 4: Initiate corrective actions for deviations

Advantages of Control System - Executives can concentrates on important activities - Basis for future plans, policies & programs - Provides standard & structured framework to perform various tasks - Useful for coordination - Ensures that everything performed as planned - Motivation through achievement of targets - Brings discipline in organization - Ensures cost control - Ensures financial control - Useful for good corporate governance & better organization culture

1.4 Feedback control Vs Feed forward control(i) Closed loop control system (i) Open loop control system (ii) Input & output are not coupled (ii)Input & output are coupled (iii) System waits for loop to complete(iii) System does not so wait (iv) Do not rely on inputs & process (iv) Relies on inputs & process to initiate control to initiate control(v) Rarely useful in managerial tasks (v) Very much useful(vi) Response time prohibitively long (vi) Quick response time(vii) May introduce system instability (vii) Not likely to introduce (viii)Reacts to deviations (viii) Reacts to factors causing deviations(ix) Output cannot be manipulated (ix)Output can be manipulated as per inputs on the basis of inputs (x) Examples (x) Examples - Material variance - Output of chemical system - Budgetary Control System - Quality & Quantity of automobile product

1.5 System Approach to Management Control (MCS) System characteristics - Integration of interrelated & interacting activities - Provides cohesive framework to achieve desired results - Encountered by internal & external factors - Assures same results every time - Three components: Input – process – Output - Performs same operations - Performs given task with optimum efficiency - Deterministic or Probabilistic - Provides interdisciplinary approach

Business System - It has three sub systems (i) Programmed/Structured (Accounting, Processing) (ii) Non programmed/ Unstructured (Decision making) (iii) Semi structured (R & D, C.R.M. P.R.) - Includes several functions with specific objective - Various interacting elements are involved - Framework: Organization structure, goals, policies, programs - Performance improvement by management techniques - Efficiency depends on professional management - Information system which collects, analyses, evaluates & reports actual against expected performance. This is useful to initiate actions for correcting deviations