Principles of Management

Scope of Management Control System

A management control system refers to the framework by which managers can ensure control over the actions of their subordinates as well as control over the organization as a whole. It is a total system in the sense that it embraces all aspects of the firm’s operations so that the different parts of the organization are in balance with one another.

According to Anthony, “A management control system is an explicit set of activities, policies, procedures and reports intended to institutionalize the, formal aspects of the management control process.”

This definition reveals that the scope of management control system is not necessarily restricted to measuring, the performance of a subordinate manager toward the achievement of an objective established for, his function.… Read the rest

Abey Francis

Principles of Management Control

Management Control Principles

The basic principles of management control can be grouped into three categories reflecting their purpose and nature, structure and process. These principles of management control are given below.

  1. Principle of Assurance of Objective. The basic purpose of management control is the attainment of objectives does this by detecting failures, in plans. Potential or actual, deviations from plans should be detected enough to permit effective corrective action.
  2. Principle of Efficiency of Controls. A management control system should detect and highlight the causes of deviations from plans with minimum possible costs and unwanted consequences. The principle of efficiency is particularly important in control because techniques tend to become costly and burdensome.
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Types of Management Control

Management Control Types

There are three major types of management control over behavior in organizations. Each control has its own standards, its own monitoring system and its own system for corrective action when behavior does not meet standards. These three types of management controls are given below:

  1. Organizational Controls. The organizational controls refer to the formal rules and standard operating procedures that are communicated throughout the organization. Such controls are concerned with the total organization and may, therefore, be called administrative controls. The direction for organizational controls comes from the plans and purposes of the organization. In business organizations, this direction is often expressed in terms of market share, cost reduction, return on investment etc.
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Organization Structure and Management Control

Four different types of organization structures have been identified for managing the tasks of the organization. These are (i) a centralized functional structure,     (ii) a decentralized divisional structure, (ii) a hybrid (matrix) structure, and (iv) network/coupling structure. An important aspect in the design of management control systems is that it should be linked with responsibility centers. Because of this   intimate linkage between the control system and the organization structure, it becomes important to know about key control considerations in the choice of an organization structure. Important parameters on the basis of which choice of the structure can be decided are (i) efficiency and effectiveness, (ii) economies of scale, (iii) problems of coordination, (iv) assignment of profit responsibility, (v) conflict and cooperation.… Read the rest

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Management by Objectives (MBO) – Definition, Advantages and Disadvantages

Many approaches have been utilized to integrate individual and group goals with overall goals of the organization of an enterprise. Management by Objectives (MBO) is basically a process whereby the superior and subordinate managers of an enterprise jointly (i) identify its common goals, (ii) define each individuals major areas of responsibility in terms of results expected of him, and (iii) use these measures as guides for operating the unit (or enterprise) and assessing the contribution of each of its members. The goals are jointly established by the manager and his subordinates and agreed upon in advance. These goals emphasize either output variables or intervening variables, or some combination of both.… Read the rest

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Steps in Management by Objectives (MBO) Process

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book ‘The Practice of Management’. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: “It’s just another tool.… Read the rest

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