-Prof. Naik,
Flow of lecture 1









Relation of course with overall MMS/PGDM syllabus
Newspaper cuttings
Measurement
Taxi Riksha fares
Third wave-Alvin Toffler
Cost centre-Responsibility Centre
Profit centre
Transfer price
Controller
 A few months from now, most of you will be working
or having your own set up
 Some of you may work for a large organisation, some
for small; some for MNCs, some in family business
 But no matter where you work, all organisations will
have something in common
 WHAT IS IT?
Where does MCS stand in your education?
Persp I
Cost & Mgmt
Accounting
Persp Mgmt
II
FMI
MCS
Business Policy
OB & HRM
Admission Mania
 It is that time of the year which brings anxiety to parents
and students seeking college admissions.
 Government of Maharashtra brought another scheme this
year - 85% or above Percentage reserved for students
appearing for SSC board to compensate for the extra
marks being allegedly awarded by ICSE and other
boards.
 Our correspondents moved from South Mumbai colleges
to Central and Western Suburban Colleges and finally
to colleges in the Eastern suburbs.
Admission Mania
 Here is what they found out.
College
Sydenham
60,000 – 70,000
HR College
70,000 – 1,00,000
Poddar
40,000 – 60,000
Ruparel Arts
60,000 – 65,000
Ruia
30,000 – 40,000
Elphistone
25,000
NM
70,000
Kelkar
25,000
Ruparel Science
80,000
Students appear to prefer Commerce streams over Art and Science.
What Counts
gets measured
What gets
rewarded
really counts
Strategy
What gets done
gets rewarded
What gets
measured
gets done
MCS
 Understanding Strategies Perspective of Management
Control Systems.
Basic concepts Boundaries of Management Controls
Goals The concept of Corporate and Business Unit
Strategies
Financial Goal Setting
 EVA, Free Cash Flow market Gap, RONW, P/E, EPS
and their Inter- relationship, ROI and Sensitivity
Analysis.
 Organization Hierarchies and Behavior
 Goal Congruence, Information Factors that influence
 Goal Congruence, Types of Organization and the
Formal Control Systems, Functions of Controller
Responsibility Centers
Responsibility Centre, Revenue,
Expenses and Investment Centers,
Administrative Support and R and D
Centers, Responsibility Budgeting
Profit Centers
General Consideration, concept,
Identification and Creation Matrix
Structure, Profit Centers for Control
and Decentralization
Transfer Pricing
Objectives, Cost, Market and
Margin based Methods, Pricing
Corporate Services, Administration
of TPs
Measuring and Controlling Profits and Assets
EVA, Free Flow, ROI and Residual
Income Measuring Assets
Employed, Alternatives for
Managerial Performance
Management
Performance Measurement and Control
Information for performance
control, Interactive Control, Balance
Scorecard
MCS in Service and Non Profit Organizations
Service Organizations in General,
Professional and Non-Profit
Organizations
Summing Up
Controls for Differentiated
Strategies, Top Management Styles,
Summing up
Audit
 Efficiency Audit and Management Audit
 Case Study: West Port Electric Company
 Case Study: North Country Auto or any Other Similar
Case
 Case Study: Birch Paper Company
 Case Study: Quality Metal Service
 Case Study: General Electric B
Suggested Readings
1.
2.
Management Control systems by Rober Antony and Vijay
Govindrajan (Tata McGraw Hill)
Management Control Systems Dr. R.S Aurora and Prof S R kale (Jaico
Publishing House)
OTHER INFORMATION
1.
2.
3.
Each session of 90 Minute duration. For Quantitative topics, basis
application knowledge required but advanced techniques topics,
basic application knowledge is required but advanced techniques are
not expected to be covered
Emphasis should be covering the subject of Management Control as
a “Process” (and not as Techniques)
Due attention would be given to behavioral aspects of all the topics
Strategy and Strategic Management
 Concept of Strategy
 Strategic Managent
Concept of strategy
 Strategy indicates the general direction in which an organisation
plans ot move to attain its goals
 In some organisations it may not be stated explicitly
 Strategy is usually developed by matching core competencies
with industry oportunities. Another school of thought-NOT
MATCH STRETCH
Strategic Management
 Develop vision, mission
 Set objectives
 Craft strategy to achieve objectives
 Implement and execute strategy
 Monitor, evaluate, take corrective action
MCS
 Management Control Systems are systems intended to help
implement strategies.
 In your First Semester Perspective Management course, you have
covered that control cannot exist without planning and that
planning and control are two sides of the same coin
 Control includes Planning and Control processes
MCS
 Course is designed to help you to think through how
you would manage strategy implementation dilemas
in which operating managers find themselves. In
particular, course is meant for you to gain knowledge,
insights and analytical skills related to how managers
go about designing and implementing formal systems
for strategy implementation
KEY IDEAS
 Obviously different organisations ,even in the same
industry have different strategies
 Different Control Systems are required to effectively
implement strategies
MCS
The following material is based on correspondence with
Dr Anthony
 Any technological process should and does bring
about improvement
 Obviously technology will lead to improvements in the
effectiveness and efficiency of management
control in ways not foreseen
Dr Anthony (contd)
 Framework for MCS was developed in the 60s
 Much technological changes, particularly in the field of IT have
taken place since
 However, MCS framework has not changed and is unlikely to
change in the immediate future
BECAUSE IT IS GROUNDED ON HUMAN NATURE
Dr Anthony(contd)
 Management Control Proces is behavioural-involving
interactions among managers, between managers and their
subordinates
 Because managers differ from one another in their ability,
leadership qualities, interpersonal skills, experience, approach to
decision making, understanding ability and affinity to numbers
and in other ways the DETAILS of management control process
varies from organisation to organisation and among centres
Dr Anthony(contd)
 The differences relate to the way the control system is USED.
However, to function effectively, the FORMAL system must be
basically the same THROUGHT the organisation
 The importance of the subject matter covered in this
subject is captured well in the widely accepted truism among
management consultants- that over 90%of business and
(nonprofit organisations) keep foundering on the rocks of
implementation---
Dr Anthony(contd)
----either strategies never come into being, or get distorted or the
implementation is much more costly and time consuming than
anticipated. However laudable strategic intentions maybe—to
change the product mix, to improve the quality of products, to
become the lowest cost producer, to build market share or to
maximise short term earnings and cash flow—if the strategies
do not get converted into reality, they are usually not the
paper they are written on
Dr Anthony (contd)
 Soon most of you will be soon in positions, where you
will be directly responsible for strategy
implementation, material in this course is of high
relevance to you
BUT
Dr Anthony(contd)
 The topic is completely new,and the early reaction of
students is one of frustration
 In particular, first two topics (covered in Chapters 1
and 2)in which some of the ‘givens’ must be
recognised and dealt with in the design of a control
system, frequently don’t make the impact on the
students (AT THE TIME) that is desirable
Dr Anthony (contd)
 The Gap between student achievement and faculty expectation reduces





in Chapters 3 &4 when students begin to fit the earlier pieces together
in specific CASE contexts.
The delayed student appreciation of the intellectual content and
administrative importance of the course is unavoidable
Additional Case Studies(10 marks in paper and 20 marks in internal
assessment plus theory is reinforced)
Class participation
Regularity in attendence/studies
Perseverance