Management Control System

ASSIGNMENT
TOPIC: EFFECTIVENESS OF MANAGEMENT CONTROL IN AN

ORGANIZATION
Submitted by: POOJA.P.P
S4 MBA
Submitted to: Prof. Pramudha

INTRODUCTION
A management control system (MCS) is a system which gathers and uses

information to evaluate the performance of different organizational resources
like human, physical, financial and also the organization as a whole in light of
the organizational strategies pursued.
Management control system influences the behaviour of organizational

resources to implement organizational strategies. Management control system
might be formal or informal.
Management Control System — Formal and Informal:
Management control system includes both formal control system and informal
control system. A formal control system requires that an organisation should
have clear-cut rules, procedures, guidelines, plans relating to different
managerial aspects. Such things are needed to guide, direct, motivate the
managers and other employees and coordinate their behaviour to achieve
organisational goals. In an organisation, many formal control systems may exist
such as cost accounting system, management accounting system, production
engineering systems, human resource system, quality maintenance system etc.
Informal management control systems are always unwritten and implicit.
However, they contribute greatly in the implementation of business goals and
strategies and help the organisation to attain high degree of motivation and goal
congruence. Examples of informal management control systems are unwritten
norms about good behaviour of managers and employees, loyalties, shared
values, organisational culture and ethics, mutual commitments among managers
and employees.
CONTENT
Management Control System is a tool businesses can use to measure its

performance and to compare its desired objectives against its actual
objectives. By establishing a management control system, the business makes it
easier to align individual decision making with the larger organizational
objectives. The system is rather comprehensive, creating a framework in which
not only are the internal aspects controlled and monitored, but the external
behaviours and environments are also looked after.
Effective Organizational Control Systems

The management of any organization must develop a control system tailored to
its organization's goals and resources. Effective control systems share several
common characteristics. These characteristics are as follows:
 A focus on critical points. For example, controls are applied where

failure cannot be tolerated or where costs cannot exceed a certain amount.
The critical points include all the areas of an organization's operations
that directly affect the success of its key operations.
 Integration into established processes. Controls must function
harmoniously within these processes and should not bottleneck
operations.
 Acceptance by employees. Employee involvement in the design of
controls can increase acceptance.
 Availability of information when needed. Deadlines, time needed to
complete the project, costs associated with the project, and priority needs
are apparent in these criteria. Costs are frequently attributed to time
shortcomings or failures.
 Economic feasibility. Effective control systems answer questions such
as, “How much does it cost?” “What will it save?” or “What are the
returns on the investment?” In short, comparison of the costs to the
benefits ensures that the benefits of controls outweigh the costs.
 Accuracy. Effective control systems provide factual information that's
useful, reliable, valid, and consistent.
 Comprehensibility. Controls must be simple and easy to understand.
FUNCTIONS OF MANAGEMENT CONTROL SYSTEM
1. Operational objectives
Management control system outline and document both the long-term and short
term goals of an organization. It could relate to both non-financial and financial
performance as well as social objectives
2. Operational policies and strategies
Achieving operational objectives is not just a piece of cake as you need to be

aware of how to achieve it. Management control system outline and document
the policies in place in the organization along with the resources and equipment
needed for implementing proper strategies.
3. Organizational processes
Tools are necessary to assess the performance of organizational processes. The

management control system helps to gather information and data from
numerous sources so that the management can check what and how it is
operating. The system offers a detailed outline of the policies and strategies
4. Comparing performances
The actual essence of the business system is to compare actual performance

with the desired performance of the company. The structures, resources,
working, planning , implementing, documenting and comparing are part of a
business and the management control system helps the company in comparing
performances about policies and objectives so that it can take necessary steps if
needed for the growth of the company.
5. Rectifying deviations
The function of a management control system is to execute an appropriate

course of action so that it can rectify any deviations if found and take corrective
measures to bring back the company on its path of growth and eventual success.
CONCLUSION
Control ensures efficiency by monitoring the allocation and use of resources.

Through control that managers ensure that the resources of an organization are
obtained and utilized effectively for the attainment of desired objectives. The
control process involves carefully collecting information about a system,
process, person, or group of people in order to make necessary decisions about
each.
REFERENCES:
 https://www.cliffsnotes.com
 https://www.cleverism.com

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ASSIGNMENT

TOPIC: EFFECTIVENESS OF MANAGEMENT CONTROL IN AN

Submitted by: POOJA.P.P

Submitted to: Prof. Pramudha

A management control system (MCS) is a system which gathers and uses

Management control system influences the behaviour of organizational

Management Control System — Formal and Informal:

Management Control System is a tool businesses can use to measure its

Effective Organizational Control Systems

 A focus on critical points. For example, controls are applied where

2. Operational policies and strategies

Achieving operational objectives is not just a piece of cake as you need to be

Tools are necessary to assess the performance of organizational processes. The

The actual essence of the business system is to compare actual performance

The function of a management control system is to execute an appropriate

Control ensures efficiency by monitoring the allocation and use of resources.

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