Ch.1 - The Nature of Management Control Systems

Summary

This video explains the concept of Management Control Systems based on the book by Anthony Govindarajan. It begins by breaking down key components such as 'control', 'management', and 'system', explaining their roles and interconnection. The speaker outlines the essential elements of control, the purpose of management, and the process of formulating and implementing strategies. The video also touches on the relationship between strategy formulation and management control, highlighting the importance of task control. Finally, it explores how the internet impacts management control, offering tools for real-time communication and decision-making.

Takeaways

• 😀 Management control system is a method for guiding organizations towards their goals by ensuring employees follow the desired strategy.
• 😀 A management control system consists of four key elements: detector, assessor, effector, and communication network.
• 😀 The 'detector' measures what is actually happening in the process being controlled.
• 😀 The 'assessor' evaluates the significance of what the detector has identified.
• 😀 The 'effector' provides feedback and takes action based on the evaluation.
• 😀 'Communication network' ensures smooth information flow between the detector, assessor, and effector.
• 😀 Management is a group of people working together to achieve organizational goals through coordination and control.
• 😀 The key activities in management control are planning, coordinating, communicating, evaluating, deciding, and influencing.
• 😀 Strategy formulation is the process of defining organizational goals and the strategies to achieve them.
• 😀 Strategy formulation is related to management control because control systems ensure that the strategy is implemented effectively.
• 😀 The Internet plays a significant role in management control by providing instant access, multi-target communication, low-cost options, and enhanced visuals for meetings.

Q & A

What is a Management Control System (MCS)?

A Management Control System (MCS) is a system used by organizations to ensure that managers and employees follow strategies, control processes, and align actions towards achieving the company’s goals.

What are the key elements involved in control within an MCS?

The four key elements of control in MCS are: 1) Detector - measures what is happening, 2) Assessor - evaluates the significance of the event, 3) Effector - provides feedback, and 4) Communication Network - facilitates communication between detector, assessor, and effector.

How does the concept of 'management' relate to MCS?

Management refers to a group of people within an organization who work together to achieve shared organizational goals. In the context of MCS, management plays a critical role in guiding and overseeing the control processes to ensure alignment with the company's objectives.

What defines a 'system' in the context of MCS?

In MCS, a system refers to a predetermined, repetitive method or process used to carry out activities and tasks. It is essential that the system is structured and consistently followed to ensure control and efficiency.

What is the role of strategy in MCS?

Strategy plays a crucial role in MCS, as the system ensures that the organization follows the intended strategies formulated by management. MCS helps execute strategies effectively by aligning operations and activities with the strategic goals.

What are the six main activities involved in management control?

The six main activities in management control are: 1) Planning, 2) Coordinating, 3) Communicating, 4) Evaluating, 5) Deciding, and 6) Influencing.

How does 'strategy formulation' relate to management control?

Strategy formulation is the process of creating a strategy to achieve organizational goals. Management control, on the other hand, is the process of applying and executing the formulated strategy within the organization.

What is the difference between task control and management control?

Task control focuses on ensuring specific tasks are carried out effectively and efficiently within a unit, whereas management control is broader, aiming at the overall organizational structure and ensuring the strategies are implemented across the entire organization.

How does the internet influence Management Control Systems?

The internet influences MCS by providing instant access to data, facilitating multi-target communication, reducing communication costs, enabling video conferencing for visual interaction, and allowing for decentralized control, where individuals can manage and influence their tasks remotely.

What does 'management control' aim to achieve within an organization?

Management control aims to ensure that all activities within the organization align with the strategies formulated by management, ensuring that the organization efficiently reaches its goals while adhering to desired strategies.