MANAGEMENT CONTROL SYSTEM By Saqib Khan CIIT/FA16-PHM-060ATD subject Pharmacy Practice (Pharmaceutical Management and Marketing) Submitted to Sir Muhammad Awais COMSATS University Islamabad, Abbottabad Campus Fall, 2020 Table of Contents 1. Introduction: ................................................................................................................................. 2 2. Scope Of Management Control System: ..................................................................................... 2 2.1 The Close Management Control System: ................................................................................... 2 2.2 The Open Management Control System: .................................................................................... 2 3. Component of a management control system ............................................................................. 2 4. Interdisciplinary Approach .......................................................................................................... 3 5. Need Of Management Control Systems ...................................................................................... 3 6. Important Features of Management Control Systems .............................................................. 4 6.1 Nature of Decisions....................................................................................................................... 4 6.2 Decisions are Systematic and Rhythmic ....................................................................................... 4 6.3 Strategy Implementation Tool ...................................................................................................... 4 7. Three basic skills to be Efficient manager .................................................................................. 4 7.1 Manager:.......................................................................................................................................... 4 7.2 Important Skills Of Manager......................................................................................................... 5 7.2.1 Technical Skills ......................................................................................................................... 5 Importance: ................................................................................................................................... 5 Example: ........................................................................................................................................ 5 7.2.2 Good communication: .............................................................................................................. 5 Importance..................................................................................................................................... 5 Example: ........................................................................................................................................ 6 7.2.3 Planning and strategy skills ....................................................................................................... 6 Importance..................................................................................................................................... 6 Example: ........................................................................................................................................ 6 8. References: ..................................................................................................................................... 7 1 MANAGEMENT CONTROL SYSTEM 1. 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. 2. Scope Of Management Control System: Business organizations have a singular goal to pursue which ultimately defines the nature of the business they are in. However, within the business, there are several activities which need to work in tandem to reach the common goal. Since, most of these activities are diverse in nature, there need to be a mechanism which will direct and control these to achieve the common goal. The scope of management control System comes in picture because of this. In this context management control system is basically a system of information processes which validates and verifies the physical processes in the organization. The management control systems are, therefore, two types in nature. 2.1 The Close Management Control System: The Close Management Control System where the information flow through the activity, the result, the matching of the standard preset, analyzing the variation if any and taking corrective step to mitigate the mistake. The closed end control mechanics uses a receptor and a corrector mode of operation. 2.2 The Open Management Control System: The Open Management Control System where the feedback mechanism is continuous on every step of the activity and follows a matrix system where several receptors interact with several correctors in the system. 3. Component of a management control system A management control system has essentially the four component A detector or sensor: This part detect the change or deviation. An assessor: This part measures the change in relation to a set standard. An effecter (feedback and alternator): This part began the control process by taking in the feedback and altering the process to what is deemed to be normal. A communicating network: This is the backbone of the control system as all the above mentioned three part actually work with help of this network by transferring information through it. 2 4. Interdisciplinary Approach: Management control system is an interdisciplinary subject. It uses the knowledge of all branches of management as it gives a direction to the business and helps to run the business effectively. This interrelating part of management control system makes it an integral part of the business strategy. It is believed that management control system provides for the implementation of the strategy and measuring the deviation too. 5. Need Of Management Control Systems As observed earlier, the need of the management control system is to provide a direction to the overall process of the business and to steer the organization towards the realization of such goals which the business has set for itself. Management Control System runs like a thread in the system and acts like a backbone which supports the organizational systems. The need of the control system is to maintain that desired state of activity in the business. Information about the actual state of the organization is compared with the desired state, and if there is a major deviation, corrective actions are taken. Control systems in an organization involve the following functions: Analyzing and planning the activities of an organization Coordinating the activities of the organization. Communicating information to different levels of the hierarchical structure Evaluating information and deciding the action to be taken. Influencing employees of the organization to change and accommodate to the new system. In the planning stage, the management of an organization decides what the organization should do. The control process compares actual accomplishments with the set plans, Another important purpose of the control system is to ensure that the work of each part of the organization is in harmony with that of the other. Control systems are designed to bring about unity of purpose in an organization through the efforts of individuals. The purpose of management control is to ensure that the right strategies are carried out to attain the organization’s goals. Management control systems anticipate future conditions. They are not self-regulating in nature. Managers usually operate in situations of uncertainty and the control systems ensure that proper actions are taken whenever needed, in spite of the uncertainty. Management control systems help the management in decision-making. In the management control process, decisions are made according to procedures and timetables. 3 6. Important Features of Management Control Systems 6.1 Nature of Decisions Management control decisions are based on the framework established by the organization’s strategies. Management control decisions also take into account the quantity and quality of resources available. Within the constraints of the available resources and the policies of the organization, a manager should be able to implement activities that are best suited for a particular business unit. Decisions are made at the highest level, but their actual implementation may require some time. For instance, employees need time to adapt to a new technology. 6.2 Decisions are Systematic and Rhythmic Decisions in management control process are systematic and rhythmic i.e. they are in accordance with the strategies and procedures laid down by the top management. Plans developed for a unit must encompass the whole organization, and the plans for each of the organization’s units must be coordinated with one another, so that there is a balance between different activities. For example, operations and distribution should be balanced with the sales program. 6.3 Strategy Implementation Tool Management control helps an organization to move towards its strategic objectives. It is an important vehicle for the execution of strategy. It explains how strategies are implemented through management controls, organizational structures, human resource management, and culture. Effective execution can take place with the help of an efficient organizational structure, human resource management and culture. All these are influenced by the system of management control, and hence it is an important aspect of strategy implementation. 7. Three basic skills to be Efficient manager 7.1 Manager: Manager is the person who is expected to be efficient and successful and who must carry out the arrangements that will ensure the institution reaches its purpose and targets. In other words the manager is the name of the person, who is expected to reach and achieve certain 4 purposes by displaying administrative functions, regardless of the institution's structure or current position level. According to an extensive definition the manager is "the person who directs material and human production factors put under his command, to achieve determined purposes within a specific time, by considering the developments happening around, and who is responsible from the effectiveness of his owned resources” (Kogoglu, 2010). 7.2 Important Skills Of Manager 7.2.1 Technical Skills It is defined as the accumulation of knowledge about methods, processes, procedures, methods and key points to carry out specialized activities and skills to use tools and materials related to such activities (Yukl, 2004). Technical skill is the skill that include usage of various tools, methods and technologies to carry out organizational activities (Çetinkaya 2009). Importance: Without technical skills a manager wouldn’t know how to operate the different technical ongoing activities within the organisation. Instead of being authoritative he would be dependent on his colleagues for basic things. Example: Take an example of a sales manager, he should know how to operate the computer, the whole calculations, the date bases and their further analysis. By being expert in this skill, he would be able to coordinate and cooperate with colleagues in case of any mishap in the system or any robbery in the organisation. 7.2.2 Good communication: Having good communication skills is probably the most important skill of all for managers to have. Unless you can properly communicate with those you supervise, the rest of the skills really won't matter. Importance: If a manager doesn’t have good communication skills, he wouldn’t be able to deliver the right messages in the right way. There would be lack of persuasion, motivation, and influence in the organisation. Miscommunication and misunderstanding would pave way for further disturbance and chaos. 5 Example: Take an example of a sales representative, he should have the skill to attract customers, to influence them to buy the product and to persuade them for multiple visits. For advertisement, for marketing and for well reputation, good communication is needed. 7.2.3 Planning and strategy skills In an organization a manager’s core responsibility is to identify the problems and insufficiencies; to analyze them and prepare a series of steps to encounter those problems. The manager develops different strategies to overcome different types of current and future problems. Importance: Without these abilities, a manager would face great difficulties and his organization would face tremendous financial loss; that is why situation handling is a basic requirement of being a manager. Example: Planning programs for professional societies is another way to develop and document planning abilities. Mastering planning software, like NetSuite OpenAir, and project management software, like Workfront, can prove that you're able to tap technology that's instrumental to sound planning. College students should take on leadership positions with campus organizations to hone their planning skills. Analyzing Business Problems Analyzing Expenditures Critical Thinking Devising Plans for New Business Development, Entrepreneurialism Identifying the Interests and Preferences of Stakeholders Proposing Solutions to Business Problems Problem Solving Research, Qualitative Skills Strategic Planning Strategic Thinking 6 8. References: 1. Dutta, M. (2011). Management control systems. Jaico publishing house. 2. PRIMER, C. O. M. CONFERENCE PROCEEDİNGS OF THE İNTERNATİONAL ACADEMY OF BUSİNESS AND PUBLİC ADMİNİSTRATİON DİSCİPLİNES. 3. https://mbahumanresource.files.wordpress.com/2016/01/mcs-lpu-material.pdf 4. http://14.139.206.50:8080/jspui/bitstream/1/4340/1/Management%20control%20syste ms.pdf 5. https://study.com/academy/lesson/what-are-technical-skills-in-managementdefinition-examples-quiz.html 6. https://www.brightonsbm.com/news/6-essential-skills-managers/ 7. https://www.indeed.com/career-advice/career-development/management-skills 7
