The Management Control

Process
1. The Environment

a.Nature of organization
b.Rules,Guidelines and Procedures
c.Internal and External Environment
A. Nature of Organization

In general way, we can define term as a group of

individuals who are interacting with each other and
contributing each efforts towards the attainment of
certain goals and objectives.
Two types of Nature of Organizations

Formal Organizations
Informal Organizations
 Two Types of Nature of
Organizations

Formal Organization Informal Organization

The formal organization is The informal organization is

basically goal oriented entity regarded as any joint personal
that exist to accurate the activity without conscious joint
efforts of individuals and it purpose even though possibly
refers to structure of jobs and contributing joint result.
positions with clearly defined
functions responsibilities and
authorities.
 Characteristics of Formal Organization

1. Organization structure stands on divisions of labor which

brings efficiency in Organizations operations.
2. Policies and objectives of Organizations are determine.
3. Individual activities are limited.
4. Organizations communicate messages through straight
chain of command.
5. Arbitrary structure of organization
 Characteristics of Informal Organization

1.Structure wise Information of organization is flexible

and unplanned.
2.Theres no define relationship.
3.Informal organization involves spontaneous
relationship.
4.People have to right to join more than one informal
groups at the same time.
B. Rules,Guidelines and
Procedures
Rules
Statement that established a principle or standard and serve
as a norm for mandating action or conduct.

Failure to comply result in disciplinary action.

Focus on desired result not on means implementation
Further define by standard and guidelines
Guidelines
General statements,recommendations,or administrative instructions
designed to achieve the policy objectives by providing a framework
within which to implement procedure.

A guideline can change frequently based on the Environment and should be reviewed
more frequently than stand and policies.
A guidelines is not a mandatory rather a suggestion of a best practices .hence guidelines
and best practices and interchangeable.
Procedures
Procedures describe the process, who does what, where they do it,
and under what criteria.They can be text based or outlined in a
process map.Represent implementation of policy.

Procedures define how to protect resources and the mechanism to enforces policy.
Procedures help eliminate the problem of a single point of failure.
A series of steps taken to accomplish an end goal.
C. Internal and External
Environment
 Internal Environment

The internal Environment is the Environment that has direct impact on the business. There
are some maternal factors which are generally controllable because the company has
control over this factors.
 Factors of internal Environment

a. Value system
b. Mission ,Vision ,and Objectives
c. Management structure and nature
 External Environment

It refers to the Environment that has indirect influence over in the business the factors are
uncontrollable by the business. There are two types of external Environment.
Micro Environment

The micro environment is also known as the task environment and operating environment
because the micro environmental forces have direct bearing on the operations of the
firm.
 Factors of Micro environment

a. Suppliers
b. Customer
c. Marketing intermediaries
d. Financers
e. Public
Macro environment

a. Macro environment is also known as general environment and remote

environment.macro factors are generally more uncontrollable than micro environment
factors.when the macro factors become u controllable the success of company depends
upon its adaptability of the environment.
Factors of Macro Environment

a. Economic environment
b. Social environment
c. Political environment
d. Legal environment
e. Technical environment
2. Phases of Management Control

Strategic planning
Budgeting
Measuring and Reporting
Evaluation
 Strategic planning

Is an organizational management activity that is used to set priorities focus energy and
resources, strengthen operations ensure that employees and other stakeholders are
working toward common goals established agreement intended outcomes results and
asses and adjust the Organization direction in response to a changing environment.
 Steps in Strategic planning

1. Analysis or Assessment
2. Strategy formulation
3. Strategy execution
4. Evaluation or sustainment management
 Budgeting

Budgeting is a formal financial plan for each years a budget known as short range plan is
a technique of expressing revenues and expenses physical targets like production and
sales profit asset and liabilities usually for a period of one future year.
 Measuring and Reporting

Measuring and Reporting provides information that is factually asked on measures

progress effectiveness of a process while monitoring if outcomes are being achieved.
 Evaluation

Management Control Process ends with the evaluation phase in which the performances
of mangers are evaluated.
3. Accounting Information System:An Overview

o An accounting information system contains various elements important in the

accounting cycle. Although the information contained in a system varies among
industries and business sizes, a typical accounting information system includes data
relating to revenue, expenses, customer information, employee information and tax
information.

o Specific data includes sales orders and analysis reports, purchase requisitions, invoices,
check registers, inventory, payroll, ledger, trial balance and financial statement
information.

o In addition, accounting information systems are often highly secured platforms with
preventative measures taken against viruses, hackers and other external sources
attempting to collected information.
4. Accounting Information Used in Management
Control

1. Get your cash numbers. Cash is the most important business asset. Managers should use
accounting information to see where the business is cash-wise and to plan for financing
and other strategies for short-term and long-term planning.

2. Mind your budget, which is an estimate of income and expenses for a certain point in
time. It is a guide to ensure that a business is on track, as planned. Managers should be
aware of budget numbers and how they compare to actual numbers.

3. Follow up on accounts receivable. Accounting can help management figure out who
owes the company money and for how long. An "aging receivable report," a useful
detailed accounting report, can be used by managers to identify slow paying clients and
to follow up on them, preventing possible loss of income. Cash is king, especially with small
businesses, and the faster customer pays, the better off the firm is to meet its financial
obligations.
5. Behavior Aspect of Management Control

Management, while devising and implementing any control system must pay due
attention to the behavioural aspects of controlling i.e. why people resist to the controlling
system and what should to be done to overcome such resistance; so that controlling is a
successful exercise both technically and behaviourally.
5. Behavior Aspect of Management Control

Manifestations of Behavioural Implications of Controlling:

Behavioural implications of controlling are usually manifested in the following phenomena:

(i) There is spoiling of human relations in the organization; because people resist control for
any reasons whatsoever.

(ii) Suppressing initiative and creativity; this leads to underutilization of human potential and
also leads to poor motivation and morale.

(iii) Creation of a feeling of fear in subordinates; because of imposition of fines, penalties etc.
for non-compliance with standards. This phenomenon makes people internally aggressive
and frustrated and gives an impetus to the emergence of powerful informal groups.

(iv) Minimum performance by people: this is the outcome of negative controls. People just do
minimum work to conform to control standards and usually not try to exceed standards