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Basic Concepts (Cont.) : The Nature of Management Control Systems

The document discusses the key elements of a control system and different types of management control. It defines the four main elements of a control system as a detector, assessor, effector, and communication network. It provides the example of driving a car to illustrate these elements. The document also discusses the differences between strategy formulation, management control, and task control. Strategy formulation involves deciding goals and strategies, management control involves implementing strategies, and task control ensures tasks are completed efficiently. It outlines several characteristics to compare the three types of control, such as time horizon, involved people, mental activities, and end products.

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Rini Tri Subekti
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28 views2 pages

Basic Concepts (Cont.) : The Nature of Management Control Systems

The document discusses the key elements of a control system and different types of management control. It defines the four main elements of a control system as a detector, assessor, effector, and communication network. It provides the example of driving a car to illustrate these elements. The document also discusses the differences between strategy formulation, management control, and task control. Strategy formulation involves deciding goals and strategies, management control involves implementing strategies, and task control ensures tasks are completed efficiently. It outlines several characteristics to compare the three types of control, such as time horizon, involved people, mental activities, and end products.

Uploaded by

Rini Tri Subekti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

27/02/2015

Basic Concepts
Anthony and Govindarajan (12th Ed., 2007)
Chapter 1

Elements of a control system:


1. A detector
2. An assessor
3. An effector
4. A communication network

The Nature of Management Control


Systems

Zuni Barokah, Ph.D.


Magister Manajemen
Fakultas Ekonomika dan Bisnis UGM
2015
2

Example: You are driving a car

Basic Concepts (Cont.)


1. A detector or sensor: a device that measure what is
actually happening in the process being controlled.

1. Detectors: Your eyes


2. Assessor: Your brain

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. Effector: Your foot


4. Communication network: Your nerves
system

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

Boundaries of Management Control

Example: You are driving a car


Your eyes (detectors) measure actual speed by observing the
speedometer.

Strategy formulation: the process of deciding on the


goals of the organization and the strategies for
attaining these goals.

Your brain (assessor) compares actual speed with desired speed


(standard: the highest speed is 80 km/hour) to detect a deviation from
standard.

Management control: the process by which


managers influence other members of organization to
implement the organizations strategies.

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).

Task control: the process of ensuring that specified


tasks are carried out effectively and efficiently.

Your nerves (communication network) form the communication system


that transmits information from eyes (detectors) to brain (assessor)
and brain (assessor) to foot (effector).
5

27/02/2015

Strategy Formulation vs Management Control


(Cont.)

Strategy Formulation vs Management Control


Characteristics

Strategy Formulation

System design

Management Control

Unsystematic, Strategic
decision may be made at any
time

Rhythmic, predetermined
procedures

Nature of
information

Tailor-made to faced
problems, more external and
predictive, less accurate

Involved people

Top management and


headquarters staffs

Characteristics

Strategy Formulation

Management Control

Number of involved
people

Few people

Many people

Integrated, more internal


and historical, more
accurate

Mental activity

Creative and analytic

Administrative and
persuasive

Top management and line


managers

Discipline

Economics

Social psychology

Time horizon

Tend to be long-term

Tend to be short-term

End products

Goals, strategies

Strategy implementation

Management Control vs Task Control


Characteristics

Control Management

Management Control vs Task Control (Cont.)

Task Control

Characteristics

Focus of activity

The whole of operation

Individual task or
transaction

Nature of
information

Integrated, many financial data

Tailored-made to
individual task, more nonfinancial 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

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

10

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 Coordinate order entry


brand within product line

11

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