The Nature of Management Control Systems

1. The Nature of Management Control Systems

2. Basic Concepts Elements of a control system consists of: • A detector • An assessor • An effector • A communication network

3. A detector or sensor is a device that measure what is actually happening in the process being controlled. • An assessor is a device that determines the significance of what is actually happening by comparing it with some standards or expectations of what should happen. • An effector (feedback) is a device that alters behavior if the assessor indicates the need to do so. • A communications network consist of devices that transmit information between the detector and the assessor and between the assessor and the effector.

4. Example: You are driving a car • Detectors= Your eyes • Assessor= Your brain • Effector= Your foot • Communication network= Your nerves system

5. Your eyes (detectors) measure actual speed by observing the speedometer. Your brain (assessor) compares actual speed with desired speed (standard: the highest speed is 80 km/hour) to detect a deviation from standard. Your brain (assessor) directs your foot (effector) to ease up the accelerator if actual speed (90 km/hour) is faster than the standard speed (80 km/hour), press down the accelerator if the actual speed (70 km/hour) is slower than standard speed (80 km/hour). And, your nerves (communication network) form the communication system that transmits information from eyes (detectors) to brain (assessor) and brain (assessor) to foot (effector).

6. Boundaries of Management Control • Strategy formulation is the process of deciding on the goals of the organization and the strategies for attaining these goals. • Management control (Anthony and Govindarajan, 2004): is the process by which managers influence other members of organization to implement the organization’s strategies. • Task control is the process of ensuring that specified tasks are carried out effectively and efficiently.

7. Distinctions between strategy formulation and management control:

8. Distinctions between strategy formulation and management control:

9. Distinctions between management and task controls:

10. Distinctions between management and task controls:

11. Examples of decisions in planning and control function: