Group No.

16
 NAME OLD ROLL NO. NEW ROLL NO.
Shweta Naimane 068 20-S-083

Kalpesh Shinde 102 20-S-129

Tanmay Jagtap 034 20-S-042

Yash Pujari 085 20-S-104

Gauravkumar Thakur NA 20-S-141

Dhruvika Mehta 141 20-S-071

Tushant Kumar 051 20-S-146

Shubham Wankar 120 20-S-151

Introduction to Management Control
System

Shweta Naimane
Old Roll No: 068, New Roll No: 20-S-83
What is Management Control System?
Management control systems consist of the various ways in which the organization’s
top management team attempt to enhance the organization’s performance in line with
strategic objectives

Elements of MCS:

● Strategic Planning
● System Designing
● Capital Budgeting
● Resource Allocation
● Responsibility Centre Allocation
● Perforcement Management
● Transfer Pricing

Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 43, 142
Management Control Activities

● Planning what the organization should do

● Coordinating the activities of several parts of the organization
● Communicating information
● Evaluating information
● Deciding what, if any, action should be taken
● Influencing people to change their behaviour

Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 142
Strategy Implementation using MCS

Organizational structure: specifies the roles, reporting

HRM: selection, training, evaluation, promotion and termination
relationships and division of responsibilities that shape
of employees so as to develop the knowledge and skills
decision making within an organization
required to execute organizational strategy

Management control: Process by which managers

Culture: the set of common beliefs, attitudes and norms that
influence other members to implement the
explicitly or implicitly guide managerial actions
organization’s strategies
Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 141- 145
Controlling (Nature & Functions)
And Establishing the Plan

Kalpesh Shinde
Old Roll No: 102 | New Roll No: 20-S-129
Nature of Management Control Systems
Formal control system Informal control system

● The Organisation has clear:

● Procedure ● Informal and unwritten
● Rules & Guidance processes in place to
● Co-ordinate behaviors of motivate employees
superiors and subordinates
● Boost goal congruence

Reference: A total systems approach to management control – Paul M Stokes. Pg. No. – 58-65.
CONTROL OF FINANCIAL NON-FINANCIAL FUNCTIONS

● Financial Control
○ Financial control has to do with the flow of money through a
business and an awareness at any one time of financial condition
○ Accounting and other financial metrics as the key evaluation metric
● Non-financial Control
○ Measured with surveys and other feedback forms
○ The management can learn more, improve planning, and
enhance control

Reference: A total systems approach to management control – Paul M Stokes. Pg. No. – 58-65.
 ESTABLISHING THE PLAN
Profit plan Funds plan
● Profit budget ● Inventory budget –
● Sales budget Allowable level of stock
● Production budget ● Finance budget – Capital
● Expenditure budget expenditure, funds budget
● Overheads budget

Integrated managerial controls – R.O.Boyce. Pg. no. – 57-85.Management control System – Robert N Anthony, Vijay Govindrajan. Pg. No. – 380-394, 425-437.
Planning & Budgeting

Tanmay Jagtap
Old Roll No: 034, New Roll No: 20-S-042
Budgeting

What is Budgeting? Types:

Creating a numerical plan 1. Revenue Budget
for allocating resources to 2. Expense Budget
specific activities. 3. Profit Budget
1. Fixed 4. Cash Budget
2. Variable

Management by Stephen P. Robbins and Mary Coulter Page: 633-634

Budgeting Guidelines
● Collaborate and communicate.
● Be flexible.
● Goals should drive budgets—budgets should not determine goals.
● Coordinate budgeting throughout the organization.
● Use budgeting/planning software when appropriate.
● Remember that budgets are tools.
● Remember that profits result from smart management, not because you budgeted for
them.

Management by Stephen P. Robbins and Mary Coulter Page: 633-634

Budget Preparation Process

Suggestions Revisions
Organisation

Guidelines Negotiations & Contingency

Reviews Budgets

Management by Stephen P. Robbins and Mary Coulter Page: 635-637

Responsibility
Centers

Presented By : Yash Pujari

Old Roll No. : 085
New Roll No. : 20-S-104
 What are Responsibility Centers?

Management
● Responsibility Accounting methodology Control
● Apportioning of responsibility to a Manager
of an organizational unit Input Output
● Core element of a financial results control WORK MACHINE
Costs Returns
system of an organization
● Consists of responsibilities that are defined
in financial terms Types of Responsibility Centers

● An organization consists of multiple centers

● Assignment of centres to organizational Investment Cost Revenue Profit
units reflects the overall strategy

Reference: Management control system – Kenneth Merchant, Wim Van der Stede, Pg. No. 269 - 273 - Robert N Anthony, Vijay Govindrajan, Pg. No. 565 - 575
 Types of Responsibility Centers
Investment Center Profit Center

Complete
Gross Margin Incomplete Profit Before tax Profit
Profit
Investments Returns

Monetary
ROI - Investment Revenues Costs
ROE - Equity
Stock sale RELATED
ROCE - Capital
Subsidiaries RONA - Assets

1. Top level Corporate

1. Chief Executive officer
managers
2. Chief Operating officer
2. Middle level Corporate
3. Top level Corporate
managers
managers

Reference: Management control system – Kenneth Merchant, Wim Van der Stede, Pg. No. 269 - 273 - Robert N Anthony, Vijay Govindrajan, Pg. No. 565 - 575
 Types of Responsibility Centers
Revenue Center Cost Center

Directly Those costs that can be associated

Incurred Revenue Engineered with a cost centre
Costs Expense E.g. Direct labour, direct material,
components, supplies and utilities

Marketing NOT Net sales The centre includes administrative

Expenditure RELATED Revenue Discretionary and office support units
Expense The cost incurred depend on
management’s judgment

1. Marketing Managers
2. Sales Managers 1. Production Managers
2. R&D Managers

Reference: Management control system – Kenneth Merchant, Wim Van der Stede, Pg. No. 269 - 273 - Robert N Anthony, Vijay Govindrajan, Pg. No. 565 - 575
 Hierarchy of Responsibility Centers

Board of Directors
Investment
Centers
Senior Management

Middle Management
Profit Centers

Production Research and

Revenue Center Sales Unit
Unit Development

Cost Centers

Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 566
USE OF MACHINES FOR CONTROLLING

Gauravkumar Thakur
Old Roll No: NA, New Roll No: 20-S-141
USE OF MACHINES FOR CONTROLLING & DECISION MAKING
Effects of Machines : Influence of Machines :

➔ Throughout history the immediate When the history of our age is written it will
effects of machines has been to record two important technological
increase the productivity. developments:
➔ Machine Control Software (MCS)
is used to monitor, control, & ➔ Computers - It multiplies man’s ability
optimize machines. MCS may be to do work.
programmed to control wide ➔ Automation - This greatly increases
variety of machines in a wealth of the man’s ability to use tools.
applications.
 COMPUTER SYSTEM FOR MANAGEMENT

ONLINE REAL TIME COMPUTER SYSTEM (OLRT) :

❖ Online : It indicates that the computer is connected online & data/information can be
accessed anywhere anytime.
❖ Real Time : Information that is delivered immediately after collection.
❖ Sharing : Time sharing controls within the computers are essential to cope with
information queuing problems.
 OBJECTIVES & USES OF OLRT

Timely Response
OBJECTIVES

Meeting Deadlines
OLRT

Gather & update business

data instantly

USES
Results in short time
 LIMITATIONS OF OLRT

❏ Uses heavy system resources

❏ Complex Algorithms
❏ Fragmentation
❏ Device driver & interrupt signals
 Corporate
Governance
Dhruvika Mehta
Old Roll No. 141
New Roll No. 20-S-071
 Corporate Governance
● What is Corporate Governance?

Corporate Governance

Role Role Role

Controllers Auditors Ethics

Management Control Systems - Kennith A. Merchant, Wim A. Van Der Stede: Page 577, 631-633
 Corporate Governance
Role Controllers:
Controllers

External Financial Reporting Management Control

to: Systems Internal Control
•Capital markets •Internal reporting •Accuracy of information
•Creditors •Analysis and Interpretation •Protection of assets
•Tax authorities •Planning and Budgeting
•Regulators •Capital budgeting

Management Control Systems - Kennith A. Merchant, Wim A. Van Der Stede: Page 577, 631-633
 Corporate Governance
Role of Auditors:
Promote Accountability

Represent Interest Of
Shareholders

Crisis Management
Auditor
Risk Assessment And
Mitigation Planning

Maintain Strong Relationship

With Regulators

Management Control Systems - Kennith A. Merchant, Wim A. Van Der Stede: Page 577, 631-633
 Corporate Governance
Role of Ethics: Rights and
duties

Ethical
Justice/fairness
Models

Virtues

Management Control Systems - Kennith A. Merchant, Wim A. Van Der Stede: Page 685-689
Management Control
in Non-Profit
Organizations
Tushant Kumar
Old Roll No. 051
New Roll No. 20-S-146
 Non-Profit Organizations

What is a non-profit organization?

➢ Organizations which are formed not

for earning profits but for a charitable
or social purpose are called as non-
profit organisations.
➢ NPOs fill a number of important
societal roles. All Government
organizations, museums,labour
unions, NGOs and political
organizations are non-profit
organizations.
Management Control Systems - Kennith A. Merchant, : Page 781-78
 Categories of Non-Profit Organizations
Non-Profit Organizations are broadly categorised in three types
⮚ Client oriented organizations
⮚ Public oriented organizations
⮚ Borderline cases
◼ Client oriented organizations
⮚ Service to individual clients
⮚ Revenue generation by the fee that is charged to the client
⮚ Examples- Hospitals, Colleges and universities, Bus transportation

Management control in nonprofit organizations – Robert N. Anthony, Regina Herzlinger: Page 01-15
 Categories of Non-Profit Organizations
◼ Public oriented organizations
⮚ Service to the public at large segment
⮚ Revenue generation is not collected directly
⮚ Examples- Legislative and judiciary branches of the government, Department of
agriculture,Police and fire department
◼ Borderline cases
⮚ Partly client oriented and partly public oriented
⮚ Examples- Postal services

Management control in nonprofit organizations – Robert N. Anthony, Regina Herzlinger: Page 01-15
 Characteristics of Non-Profit Organizations

➢ Absence of the profit measure

➢ Tendency to be service organizations

➢ The lesser role of the marketplace

➢ The dominance of the professionals

➢ Differences in ownership

➢ Governance
Management Control in nonprofit organizations – Robert N. Anthony, Regina Herzlinger: Page 34-58
 Non-Profit Organizations Characteristics and Management Control

➢ Goal Ambiguity and conflict : Varied organizations have different goals.

➢ Difficulty in measuring performance : No Quantitative performance indicator
➢ External Scrutiny : Answerable to donors, govt. entities and society at large
➢ Legal Constraints : More extensive. Specific law and condition attached.
➢ Employee Characteristics : Less compensation but more committed employee
➢ Services Provided : Quality is concern as services are mostly non-tangible

Management Control Systems - Kennith A. Merchant, : Page 781-789

 Decision
Making
Aids to Decision
Making

Shubham Wankar
Old Roll No.120 New: 20-S-151
 Operation
OPERATION Research
RESEARCH in TO
AS AID Decision Making
DECISION MAKING

MANAGEMENT 14E Stephen P. Robbins Page No.44-65

 Decision Making in Production

Integrated Managerial Controls- R. O. Boyce Page No.- 246-252

 Economic Concepts in Decision Making

Introduction to Financial Management -C. P. Jones (Chapter 2)

Interview Q&A
Mr. Aashish Doshi, Senior Solutions Manager at Axis Bank
 Q1: What were the key challenges in upskilling yourself as technology was growing
rapidly? What techniques have you learned and persuaded others to follow them?

Technological and societal shifts occurred during the 2010’s decade. And many of these developments became so
quickly ingrained in our daily lives that they often went relatively unnoticed, and their impact all was forgotten.

For example, digitization has changed the way banks and finance companies communicate with clients in a way that
they want to interact- In the age of desktop computers, social media was a collection of what happened in the past –
a collection of experiences uploaded after the fact. As social media shifted to the smartphone it became an instant
broadcast of life experiences. In those times Credit cards and debit cards along with 4G were the biggest change
and now we have UPI .

Technology prevalent in each industry, required a change to make people more analytical. Traditionally, roles that
may not have needed to look at data, are now making decisions from insights. So we have to keep up with Business
analytics techniques, softwares and huge knowledge of information. Earlier we use to calibrate things on our own
and now as competition needs we are using devices that can solve too complex problems.Technology boom was so
rapid that even companies started training their employees frequently. Hiring employees got changed
itself.Encouraging employees was a new normal though people started growing themselves for new skills.
Q2: With respect to investment banking role what are some of the common issues you run into?

● Very few business owners want to spend time with investment bankers for various reasons.
However you can earn credibility by being honest and talking about things owners don’t want to
necessarily hear. Sometimes those conversations don’t end well, but this is a long-term game and
you build credibility by conducting yourself honestly and consistently.
● Other issue that particularly bankers face is that they are in sell-side of the market and when they
reach out to get a good deal (of funding). It's often seen that owners don’t want to spread a news
in market that they are in need of any additional fund before the deal, specially listed entity. So
here you have to be very particular about your research work & binding of contract must be
done coupled with trust for longevity.
Q3: How would you describe the most important contribution of a manager in a workplace?

● First of all it's very important that a manager knows that there is no filter to filter out good
employees from other employees and everybody plays their role in unique manner and everyone
is important.And manager must not differentiate. Which will also add-up to the good leadership
that a manager exhibits in workplace.
● Secondly the most important thing that the manager can contribute in work place is the creation
of wavelength which when surrounds the task at workplace with generate the feeling of self
association among the employees. Which will eventually increase the efficiency.
● So it's all abstract things a manager must focus more upon in a workplace.
 Q4: How does managerial behaviour impact the relation between team members and its impact on
the overall output of the organization?

•The role of the manager in the workplace is the most significant in terms of impact on organizational performance.

•It includes setting goals for the group, and determining how best to meet those, dividing work into manageable
activities, and assigning these to relevant team members, communicating decisions clearly, and analyzing s
performance, basically developing staff as company assets.

•It is important to support effective managers: need to provide the necessary tools and communication channels
required to connect managers with their teams, move towards an agile performance management culture,
encouraging managers to provide frequent and informal feedback alongside structured reviews

•When we have a strong, united and capable leadership team, the benefits can be extensive and hugely profitable.

Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 142
Q5: Since you are from the financial services industry, what factors do you look at when
preparing a financial plan for clients? What precautions do you take for unforeseen events
such as the current pandemic?

● There are 2 different types of risks that we look at:

a. Known Knowns: Risk is known and its effects are largely known. There might be
variances in the losses, but shouldn’t be beyond the acceptable limit.
b. Known Unknowns: Risks are known and expectations to be them true is also high but the
impact is not properly measured or fully understood.
● To counter these risks, for our risk averse clients, we used to create a financial plan such that no
matter what happens, they would be reaching their goals. This would be done by preparing for
every possible scenario
● After this pandemic, we now hedge with the risks that no one is pricing in, and hence those are
available extremely cheap. If the risk doesn’t materialize, we don’t lose much, but if it does, we
compensate for most of the losses

Reference: Management control system - Robert N Anthony, Vijay Govindrajan, Pg. No. 142
Q6: What are the major characteristics required of a manager to create a positive workplace
environment? And the major challenges a manager faces in order to create a successful workplace?

● Open and honest communication, adequate growth opportunities and to provide a good balance
between work and afterwork life can create a very productive and stress free workplace.
● The very important thing that a manager must focus is to bring sense of security in the team and
also to be able to draw out the drive from each members for the common team goals.
● A manager set the example by being punctual, give honest feedback to team and whatever
behavior one expect from the team that must be shown by him to lead by example.
● Lack of communication,inadequate support, pressure to perform and not providing sufficient
growth opportunities for the team members can lead to poor teamwork and resentment among
team members that would most likely hamper the productivity of the team.
Q7: How effective is the Management control enforced virtually in these pandemic times? What
challenges does it pose to the strategic business goals of the organization?

● In addition to creating an appropriate organizational structure, effectively executing strategy

depends on the skillful use of organizational control systems
● Executives create strategies to try to achieve their organization’s vision, mission, and goals by
implementing these control systems around the hierarchy of management
● Organizational control systems allow executives to track how well the organization is performing,
identify areas of concern, and then take action to address these concerns
● Three basic types of control systems are widely known among executives
● Different organizations emphasize different types of control, but most organizations use a mix of
all three types

Output Behavioural Clan

Control Control Control
Q8: Impact of COVID-19 on Banking Industry?

● The Indian economy wasn’t in great shape even before the Covid-19 outbreak, which
has only made matters worse
● Banks may be more risk-averse to restructuring loans this time around, having
already suffered big losses in previous restructuring efforts
● Huge write-offs in previous restructuring might make banks more risk-averse
● Banks will be a lot more prudent towards restructuring in this cycle vs past
restructuring cycles.
 Case Study

Set Airways started operations in 1993. For many years it was the largest Indian Carrier. It provided word class
product made in India. Initially it got advantage because the only competitor was the state-run airline & country’s
aviation market was taking off. It got listed on Shrirampur Stock Exchange in December 2004. Till 2006 it was a
cash rich company. Starting 2006, they ordered 22 wide body aircrafts for delivery in about 18 months. It also
acquired another airline for USD 340 Mio in April 2007 that had ageing fleet & did not fit its corporate culture.
Meanwhile new airline, A Low-Cost Carrier (LCC) had started chipping in Set Airways market share with cheap
fares & it became the largest airline of the giving facing fierce competition. Set Airways embarked on an
international expansion plan. In 2012 they took delivery of 9 different aircraft types i.e. (ATR’s & Airbus 330). All
these decisions of management led to depletion cash reserves.
 Case Study

From 2013, they started to face the heat & were survived by selling 24% stake in the airline, slots at London’s
Heathrow Airport & 51% stake in frequent flyer programme to another foreign carrier. To compete with the low-
cost carriers, Set Airways lowered fares without reducing its expensive services. High fuel prices & hefty taxes
compounded the spending issues. After two consecutive years of profits in Fiscal 2016 & 2017, Set incurred loss of
76 crore during FY 2018. In August 2018 it informed employees to take salary cuts. It also informed its employees
airline would not be able to operate beyond 60 days unless cost cutting measures put in place. Debt was mounted to
INR 12,000 crore & consequently it had to cease its operations.
Q1.

Given the situation, if you were given the responsibility to turn around Set
Airways and re-establish its market positioning back :

What would be the Management Decisions and Solutions suggested by you?

Why?
Q2.

If we were to hypothetically go back into the past, what would you have done
differently to avoid such a disaster?

Think from a financial perspective

 Proposed Solutions
Solution to Q1
Cost cutting measures:
1. To only cater to routes connecting tier 1 and metro cities
2. Only single variant of the aircraft to reduce maintenance
expense
Revenue maximization
1. Last minute ticket surge depending on the destinations
2. Diversification of revenue generators by profit sharing
partnerships with cab portals such as ola and uber
 Proposed Solutions
Solution to Q2
Primary we would like to cut down costs. There are 2 major costs for any airline:
1. Fuel
2. Aircraft lease

To reduce the aircraft leasing costs, company will look at all their past data of
how many passengers fly on an average, and based on that they will lease only
one or atmost two types of aircrafts. This will lead to a substantial reduction in
costs.

To control the fuel costs, they can buy crude oil futures whenever the oil prices
arr extremely low. This will lock in a cheap fuel cost. This means that no matter
what happens to the oil price, they will be earning profits.
THANK YOU