Unit 5 (P 40): Management control system: concept, element, nature, purpose, benefits

Concept

• Controlling function helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in desired manner.
• According to modern concepts, control is a foreseeing action whereas earlier concept of control was used only when errors were detected. Control in management means setting standards, measuring actual performance and taking corrective action. Thus, control comprises these three main activities.
• Control is checking current performance against pre-determined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance.
• Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished.

Elements of effective control/requirements for effective control .They are as follows:

1. Suitability: Suitable according to need of the organization.
2. Simplicity: the control system should be simple to operate and understand.
3. Objectivity: Every control system should focus to the objectives and goals of the organizations
4. Economical: the system must be in the financial capabilities of the organization
5. Comprehensive: It must cover all the functional areas of the organization.
6. Capable to communicate: the system should provide regular information and feedback to the management.
7. Suggestive: It must be able to suggest in cases of deviations.
8. Flexibility: It must be able to adjust with the dynamic circumstance to the internal and external environment.
9. Responsibility- based: the system must be responsible to full its duties in stipulated time and accuracy.
10. Strategic: the system must be clear on strategies on how to determine the error, how to measure and how to give feedback.
11. Forward looking: The effective control system should focus on future by quickly identifying the problem.

The four basic elements in a control system  

1. The characteristic or condition to be controlled: The first element is the characteristic or condition of the operating system which is to be measured. We select a specific characteristic because a correlation exists between it and how the system is performing. The characteristic may be the output of the system during any stage of processing or it may be a condition that has resulted from the output of the system.
2. The sensor:  Is a means for measuring the characteristic or condition. The control subsystem must be designed to include a sensory device or method of measurement. In a quality-control system this measurement might be performed by a visual inspection of the product.
3. The comparator: determines the need for correction by comparing what is occurring with what has been planned. Some deviation from plan is usual and expected, but when variations are beyond those considered acceptable, corrective action is required. It is often possible to identify trends in performance and to take action before an unacceptable variation from the norm occurs. This sort of preventative action indicates that good control is being achieved. 
4. The activator: The corrective action taken to return the system to expected output. The actual person, device, or method used to direct corrective inputs into the operating system may take a variety of forms.

As long as a plan is performed within allowable limits, corrective action is not necessary, but this seldom occurs in practice, however. Information is the medium of control, because the flow of sensory data and later the flow of corrective information allow a characteristic or condition of the system to be controlled. 

Nature / characteristics of control

1. Control is a continuous process
2. Control is a management process
3. Control is embedded in each level of organizational hierarchy( pervasive)
4. Control is forward looking
5. Control is closely linked with planning
6. Control is a tool for achieving organizational activities
7. control is an end process

Purpose of control:

The six major purposes of controls are as follows:

1. Controls make plans effective. Managers need to measure progress, offer feedback, and direct their teams if they want to succeed.
2. Controls make sure that organizational activities are consistent. Policies and procedures help ensure that efforts are integrated.
3. Controls make organizations effective. Organizations need controls in place if they want to achieve and accomplish their objectives.
4. Controls make organizations efficient. Efficiency probably depends more on controls than any other management function.
5. Controls provide feedback on project status. Not only do they measure progress, but controls also provide feedback to participants as well. Feedback influences behavior and is an essential ingredient in the control process.
6. Controls aid in decision making. The ultimate purpose of controls is to help managers make better decisions. Controls make managers aware of problems and give them information that is necessary for decision making.

Benefits of control:

1. Improving the quality of goods and services.
2. Standardizing process
3. Efficiently utilizing organizational resources
4. Improving employee accountability