7/24/2019 Ch_1_Nature_of_MCS

1/2

27/02/2015

1

Anthony and Govindarajan (12thEd., 2007)

Chapter 1

The Nature of Management Control

Systems

Zuni Barokah, Ph.D.

Magister Manajemen

Fakultas Ekonomika dan Bisnis UGM

2015

Elements of a control system:

1. A detector2. An assessor

3. An effector

4. A communication network

2

Basic Concepts

1. A detector or sensor: a device that measure what is

actually happening in the process being controlled.

2. An assessor:a device that determines the significance

of what is actually happening by comparing it with some

standards or expectations of what should happen.

3. An effector (feedback): a device that alters behavior if

the assessor indicates the need to do so.

4. A communications network:consist of devices that

transmit information between the detector and the

assessor and between the assessor and the effector.

3

Basic Concepts (Cont.)

1. Detectors: Your eyes

2. Assessor: Your brain

3. Effector: Your foot

4. Communication network: Your nerves

system

4

Example: You are driving a car

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 thestandard

speed (80 km/hour),press down the accelerator if the actual speed

(70 km/hour)is slower than standard speed (80 km/hour).

Your nerves (communication network)form the communication system

that transmits information from eyes (detectors) to brain (assessor)and brain (assessor) to foot (effector).

5

Example: You are driving a car

Strategy formulation:the process of deciding on the

goalsof the organization and the strategiesfor

attaining these goals.

Management control: the process by which

managers influence other members of organization to

implementthe organizations strategies.

Task control: the process of ensuring that specified

tasks are carried out effectively and efficiently.

6

Boundaries of Management Control

7/24/2019 Ch_1_Nature_of_MCS

2/2

27/02/2015

2

7

Strategy Formulation vs Management Control

Characteristics Strategy Formulation Management Control

System design Unsystematic, Strategic

decision may be made at anytime

Rhythmic, predetermined

procedures

Nature of

information

Tailor-made to faced

problems, more external and

predictive, less accurate

Integrated, more internal

and historical, more

accurate

Involved people Top management and

headquarters staffs

Top management and line

managers

8

Strategy Formulation vs Management Control

(Cont.)

Characteristics Strategy Formulation Management Control

Number of involved

people

Few people Many people

Mental activity Creative and analytic Administrative and

persuasive

Discipline Economics Social psychology

Time horizon Tend to be long-term Tend to be short-term

End products Goals, strategies Strategy implementation

9

Management Control vs Task Control

Characteristics Control Management Task Control

Focus of activity The whole of operation Individual task or

transaction

Nature of

information

Integrated, many financial data Tailored-made to

individual task, more non-

financial data

Involved people Management Supervisor or none

Mental activity Administrative and persuasive Follow direction or none

End products Strategy implementation Tasks are carried out

effectively and efficiently

10

Management Control vs Task Control (Cont.)

Characteristics Control Management Task Control

Mental activity Administrative and

persuasive

Follow direction or none

Discipline Social psychology Economics, physics

Time horizon Weekly, monthly, annually Daily

Type of cost Discretionary costs Engineered costs

11

Decisions in Planning and Control: Examples

Strategy

Formulation

Management

Control

Task Control

Enter a new business Expand a plant Schedule production

Change debt to equity

ratio

Issue new debt Manage cash flows

Add direct mail selling Determine advertising

budget

Book TV commercials

Decide magnitude and

direction of research

Control of research

organization

Run individual research

project

Acquire an unrelated

business

Introduce new product or

brand within product line

Coordinate order entry