MANAGEMENT CONTROL

SYSTEM.

Presented by: Shreya Gupta

Roll no: 59
MANAGEMENT CONTROL SYSTEM.

 What is MCS ?
The term management control system consists of
three words, namely:
 1. Management

 2. Control

 3. Systems
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.
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.
 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.
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.
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.
TYPES OF MANAGEMENT CONTROL SYSTEM.
 MCS in an organization generally fall under
two categories:
MCS

FORMAL CONTROL INFORMAL

CONTROL

Formal management control system.
 The organization has clear
procedures, rules and guidelines in
place to explain the different
managerial requirements.
These guide, motivate and direct
the management, as well as the
subordinates, to perform their
tasks in a manner that helps
achieve the operational goals. They
are also used to co-ordinate
behaviours of superiors and
subordinates.
 An example of a formal system
would be the rules and guidelines
used by the human resource
department in terms of functions
such as hiring and developing staff.
Informal management control
system
 The organization will also have
informal and unwritten processes
in place for management control.
These are aimed to provide higher
motivation amongst the employees
and ensure organizational goals
and strategies are appropriately
implemented.
Informal control systems also boost
goal congruence.
 An example of informal control
system would be the good
behaviour expected from managers
and subordinates, such as loyalty
towards the organization and
respect of the organizational
culture.
NATURE OF MCS.
 Universal Process: Wherever there is human activity, there is
management. Without efficient management, objectives of the company can
not be achieved.
 Factor of Production: Qualified and efficient managers are essential to
utilization of labor and capital.
 Goal Oriented: The most important goal of all management activity is to
accomplish the objectives of an enterprise. The goals should be realistic and
attainable.
 Supreme in Thought and Action: Managers set realizable objectives and
then mastermind action on all fronts to accomplish them. For this, they
require full support form middle and lower levels of management.
 Group activity: All human and physical resources should be efficiently
coordinated to attain maximum levels of combined productivity. Without
coordination, no work would accomplish and there would be chaos and
retention.
 Dynamic Function: Management should be equipped to face the changes in
business environment brought about by economic, social, political,
technological or human factors. They must be adequate training so that can
enable them to perform well even in critical situations.
 Social Science: All individuals that a manager deals with, have
different levels of sensitivity, understanding and dynamism.
 Important Organ of Society: Society influences managerial
action and managerial actions influence society. Its managers
responsibility that they should also contribute towards the society
by organizing charity functions, sports competition, donation to
NGO’s etc.
 System of Authority: Well-defined lines of command, delegation
of suitable authority and responsibility at all levels of decision-
making. This is necessary so that each individual should what is
expected from him and to whom he need to report to.
 Dynamic Function: Management should be equipped to face the
changes in business environment brought about by economic,
social, political, technological or human factors. They must be
adequate training so that can enable them to perform well even in
critical situations.
 SCOPE OF MCS.
1. Subject-Matter of Management: Planning, organizing, directing,
coordinating and controlling are the activities included in the subject
matter of management.
2. Management is an Inter-Disciplinary Approach: For the
correct implementation of the management, it is important to have
knowledge of commerce, economics, sociology, psychology and
mathematics.
3. Universal Application: The principles of management can be
applied to all types of organizations irrespective of the nature of
tasks that they perform.
4. Essentials of Management: Three essentials of management are:
 Scientific method
 Human relations
 Quantitative technique
5. Modern Management is an Agent of Change: The management
techniques can be modified by proper research and development to
improve the performance of an organization .
6. Functional Areas of Management: These include:
 Financial Management includes accounting, budgetary
control, quality control, financial planning and managing
the overall finances of an organization.
 Personnel Management includes recruitment, training,
transfer promotion, demotion, retirement, termination,
labor-welfare and social security industrial relations.
 Purchasing management includes inviting tenders for
raw materials, placing orders, entering into contracts and
materials control.
 Production Management includes production planning,
production control techniques, quality control and
inspection and time and motion studies.
 Maintenance Management involves proper care and
maintenance of the buildings, plant and machinery.
 Transport Management includes packing,
warehousing and transportation by rail, road and air.
 Distribution Management includes
marketing, market research, price-determination,
taking market risk and advertising, publicity and sales
promotion.
 Office Management includes activities to properly
manage the layout, staffing and equipment of the
office.
 Development Management involves
experimentation and research of production
techniques, markets, etc
EXAMPLE:
 Leah is the director of human resources at a
small company. Lately, she’s been feeling like
more employees have been leaving this year than
last year. She would like to have some kind of
system in place so that she can have data to
either back up or refute her feeling and use that
data to coach her team in the future. How can a
MCS help Leah to keep track of this metric in the
future?
 Leah should track employee turnover. By using
this control system, she will know if more
employees are leaving than usual and can look
into why this might be happening.