Which of the following is an initial requirement of a management control system

MANAGEMENT CONTROL SYSTEMS

1. Control is one of the managerial functions like planning, organizing, staffing and directing. It is an important function because it 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.

Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established. It ['s] object [is] to point out weaknesses and errors in order to rectify [them] and prevent recurrence.

Management control can be defined as a systematic effort by business management to compare performance to predetermined standards, plans, or objectives in order to determine whether performance is in line with these standards and presumably in order to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives.

Also control can be defined as "that function of the system that adjusts operations as needed to achieve the plan or to maintain variations from system objectives within allowable limits". The control subsystem functions in close harmony with the operating system. The degree to which they interact depends on the nature of the operating system and its objectives. Stability concerns a system's ability to maintain a pattern of output without wide fluctuations. Rapidity of response pertains to the speed with which a system can correct variations and return to expected output.

From these definitions it can be stated that there is close link between planning and controlling. Planning is a process by which an organization’s objectives and the methods to achieve the objectives are established, and controlling is a process which measures and directs the actual performance against the planned objectives of the organization. Thus, planning and control are often referred to as Siamese twins of management.

1. Importance of Control

The concept of control is of fundamental importance to organizations. It has been identified as a significant influence on;

• The formation of organizational strategy,
• The design of organizational structure,
• The selection, socialization and evaluation of personnel and
• The ongoing process of leadership and motivation.

1. Characteristics of Control

From the definitions and nature of control, the following characteristics can be identified;

1. Control is a continuous process
2. Control is a management process

• Control is embedded in each level of organizational hierarchy

1. Control is forward looking
2. Control is closely linked with planning
3. Controlling is tool for achieving organizational activities

1. The elements of control

There are four basic elements in a control system, namely;

[1] The characteristic or condition to be controlled,

[2] The sensor,

[3] The comparator, and

[4] The activator — occurs in the same sequence and maintains a consistent

   relationship to each other in every system.

• 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. For example, it may be the heat energy produced by the furnace or the temperature in the room which has changed because of the heat generated by the furnace. In an elementary school system, the hours a teacher works or the gain in knowledge demonstrated by the students on a national examination are examples of characteristics that may be selected for measurement, or control.
• The second element of control, 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 home heating system this device would be the thermostat, and in a quality-control system this measurement might be performed by a visual inspection of the product.
• The third element of control, 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.
• The fourth element of control, the activator, is 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. It may be a hydraulic controller positioned by a solenoid or electric motor in response to an electronic error signal, an employee directed to rework the parts that failed to pass quality inspection, or a school principal who decides to buy additional books to provide for an increased number of students. As long as a plan is performed within allowable limits, corrective action is not necessary; this seldom occurs in practice, however.

1. Relationship between the elements of control and information

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. To illustrate how information flow facilitates control, let us review the elements of control in the context of information.

1. Kinds/Classification of control

Control may be grouped according to three general classifications: [1] the nature of the information flow designed into the system [that is, open- or closed-loop control], [2] the kind of components included in the design [that is man or machine control systems], and [3] the relationship of control to the decision process [that is, organizational or operational control].

• The Nature of Information Flow into the System [Open- and Closed-Loop Control]

The difference between open-loop control and closed-loop control is determined by whether all of the control elements are an integral part of the system being regulated, and whether allowable variations from standard have been predetermined. In an open-loop system, not all of the elements will be designed into the system, and/or allowable variations will not be predetermined.

Open-loop system

A Street-lighting system controlled by a timing device is an example of an open-loop system. At a certain time each evening, a mechanical device closes the circuit and energy flows through the electric lines to light the lamps. Note, however, that the timing mechanism is an independent unit and is not measuring the objective function of the lighting system. If the lights should be needed on a dark, stormy day the timing device would not recognize this need and therefore would not activate energy inputs. Corrective properties may sometimes be built into the controller [for example, to modify the time the lights are turned on as the days grow shorter or longer], but this would not close the loop. In another instance, the sensing, comparison, or adjustment may be made through action taken by an individual who is not part of the system. For example, the lights may be turned on by someone who happens to pass by and recognizes the need for additional light.

Closed-Loop System

If control is exercised as a result of the operation rather than because of outside or predetermined arrangements, it is a closed-loop system. The home thermostat is the classic example of a control device in a closed-loop system. When the room temperature drops below the desired point, the control mechanism closes the circuit to start the furnace and the temperature rises. The furnace-activating circuit is turned off as the temperature reaches the pre-selected level. The significant difference between this type of system and an open-loop system is that the control device is an element of the system it serves and measures the performance of the system. In other words, all four control elements are integral to the specific system.

An essential part of a closed-loop system is feedback; that is, the output of the system is measured continually through the item controlled, and the input is modified to reduce any difference or error toward zero. Many of the patterns of information flow in organizations are found to have the nature of closed loops, which use feedback. The reason for such a condition is apparent when one recognizes that any system, if it is to achieve a predetermined goal, must have available to it at all times an indication of its degree of attainment. In general, every goal-seeking system employs feedback.

• The kind of components included in the design [Man and Machine Control]

Machine Systems

The elements of control are easy to identify in machine systems. For example, the characteristic to be controlled might be some variable like speed or temperature, and the sensing device could be a speedometer or a thermometer. An expectation of precision exists because the characteristic is quantifiable and the standard and the normal variation to be expected can be described in exact terms. In automatic machine systems, inputs of information are used in a process of continual adjustment to achieve output specifications. When even a small variation from the standard occurs, the correction process begins. The automatic system is highly structured, designed to accept certain kinds of input and produce specific output, and programmed to regulate the transformation of inputs within a narrow range of variation.

Human Control Systems

In human control systems, the relationship between objectives and associated characteristics is often vague; the measurement of the characteristic may be extremely subjective; the expected standard is difficult to define; and the amount of new inputs required is impossible to quantify. To illustrate, let us refer once more to a formalized social system in which deviant behavior is controlled through a process of observed violation of the existing law [sensing], court hearings and trials [comparison with standard], incarceration when the accused is found guilty [correction], and release from custody after rehabilitation of the prisoner has occurred.

In general, Machine systems can be complex because of the sophisticated technology, whereas control of people is complex because the elements of control are difficult to determine; and, Most organized systems are some combination of man and machine; some elements of control may be performed by machine whereas others are accomplished by man. In addition, some standards may be precisely structured whereas others may be little more than general guidelines with wide variations expected in output. Man must act as the controller when measurement is subjective and judgment is required. Machines such as computers are incapable of making exceptions from the specified control criteria regardless of how much a particular case might warrant special consideration.

• The Relationship of Control to the Decision Process [Organizational and Operational Control]

The concept of organizational control is implicit in the bureaucratic theory of Max Weber. Associated with this theory are such concepts as "span of control", "closeness of supervision", and "hierarchical authority". Weber's view tends to include all levels or types of organizational control as being the same. More recently, writers have tended to differentiate the control process between that which emphasizes the nature of the organizational or systems design and that which deals with daily operations.

Organizational control tends to review and evaluate the nature and arrangement of components in the system, whereas operational control tends to adjust the daily inputs.

Organizational Control

The direction for organizational control comes from the goals and strategic plans of the organization. General plans are translated into specific performance measures such as share of the market, earnings, return on investment, and budgets. The process of organizational control is to review and evaluate the performance of the system against these established norms. Rewards for meeting or exceeding standards may range from special recognition to salary increases or promotions. On the other hand, a failure to meet expectations may signal the need to reorganize or redesign.

In organizational control, the approach used in the program of review and evaluation depends on the reason for the evaluation — that is, is it because the system is not effective [accomplishing its objectives]? Is the system failing to achieve an expected standard of efficiency? Is the evaluation being conducted because of a breakdown or failure in operations? Is it merely a periodic audit-and-review process?

Operational Control

In contrast to organizational control, operational control serves to regulate the day-to-day output relative to schedules, specifications, and costs. Is the output of product or service the proper quality and is it available as scheduled? Are inventories of raw materials, goods-in-process, and finished products being purchased and produced in the desired quantities? Are the costs associated with the transformation process in line with cost estimates? Is the information needed in the transformation process available in the right form and at the right time? Is the energy resource being utilized efficiently?

In a nut shell, the most difficult task of management concerns monitoring the behavior of individuals, comparing performance to some standard and providing rewards or punishment as indicated. Sometimes this control over people relates entirely to their output. For example, a manager might not be concerned with the behavior of a salesman as long as sales were as high as expected. In other instances, close supervision of the salesman might be appropriate if achieving customer satisfaction were one of the sales organization's main objectives.

The larger the unit, the more likely that the control characteristic will be related to some output goal. It also follows that if it is difficult or impossible to identify the actual output of individuals, it is better to measure the performance of the entire group. This means that individuals' levels of motivation and the measurement of their performance become subjective judgments made by the supervisor. Controlling output also suggests the difficulty of controlling individuals' performance and relating this to the total system's objectives.

1. VARIOUS CONTROL SYSTEMS

The systems include;

• Management Control Systems [MCS],
• Feed Forward Control Systems,
• Feed Back Control Systems,
• Cybernetics Control Systems, e.t.c

7.1 MANAGEMENT CONTROL SYSTEMS [MCS]

Management Control Systems [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 considering the organizational strategies. Finally, MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. The term ‘management control’ was given of its current connotations by Robert N. Anthony [Otley, 1994].

Robert N. Anthony [2007] defined management control as the process by which managers influence other members of the organization to implement the organization’s strategies. Management control systems are tools to aid management for steering an organization toward its strategic objectives. Management controls are only one of the tools which managers use in implementing desired strategies. However strategies get implemented through management controls, organizational structure, human resources management and culture Anthony & Young [1999] showed management control system as a black box. The term black box is used to describe an operation whose exact nature cannot be observed. MCS involves the behavior of managers and these behaviors cannot be expressed by equations. Anthony & Young [1999] showed that management accounting has three major subdivisions: full cost accounting, differential accounting and management control or responsibility accounting.

According to Horngren et al. [2005], management control system is an integrated technique for collecting and using information to motivate employee behavior and to evaluate performance.

Chenhall [2003] mentioned that the terms management accounting [MA], management accounting systems [MAS], management control systems [MCS], and organizational controls [OC] are sometimes used interchangeably. In this case, MA refers to a collection of practices such as budgeting or product costing. But MAS refers to the systematic use of MA to achieve some goal and MCS is a broader term that encompasses MAS and also includes other controls such as personal or clan controls. Finally OC is sometimes used to refer to controls built into activities and processes such as statistical quality control, just-in-time management.

7.1.1 Tools in Management Control Systems [MCS]

There are various tools employed in Management Control Systems [MCS], which include, but not limited to the following;

• Balanced scorecard
• TQM
• Kaizen [Continuous Improvement]
• Activity-based costing
• Target costing
• Benchmarking and Bench trending
• JIT
• Budgeting
• Capital budgeting
• Program management techniques, etc.

7.2 FEED FORWARD CONTROL SYSTEMS

Feed-forward is a term describing a kind of system which reacts to changes in its environment, usually to maintain some desired state of the system. A system which exhibits feed-forward behavior responds to a measured disturbance in a pre-defined way — in contrast with a feedback system.

This is a control technique that can be measured but not controlled. The disturbance is measured and fed forward to an earlier part of the control loop so that corrective action can be initiated in advance of the disturbance having an adverse effect on the system response.

Feed-forward control can respond more quickly to known and measurable kinds of disturbances, but cannot do much with novel disturbances.

7.2.1 Pre-requisites for a Feed Forward Control System to be Effective

The following conditions must always hold for a feed forward control system to be possible;

• The disturbance must be measurable,
• The effect of the disturbance to the output of the system must be known and
• The time it takes for the disturbance to affect the output must be longer than the time it takes the feed-forward controller to affect the output.

If these conditions are met, feed-forward can be tuned to be extremely effective.

7.3 FEED BACK CONTROL SYSTEMS

Feed-back control deals with any deviation from desired system behavior, but requires the system's measured variable [output] to react to the disturbance in order to notice the deviation.

Feedback control is typically used to regulate a variable [or variables] in a control systems design which has time varying disturbances, and or operating parameters. It is also used when the accuracy afforded by feed forward controls is not adequate to meet the application performance specifications.

However, the two types of control are not mutually exclusive; the feed-forward system just described could be combined with the feed-back system of conventional cruise control to allow quick response with the feedback system cleaning up for any error in the predetermined adjustment made by the feed-forward system. See Model predictive control.

7.3.1 When to Use Feed Forward, When to Use Feedback?

If you read the above two sections on feed forward, and feed-back control, you should have a good idea of when to use the two approaches. Here are some basic guidelines that cover 99% of the designs found in industrial controls applications:

1] Use ONLY feed forward control if:

• The physics/chemistry of the application are well known
• You can easily measure or calculate the variables in the equations
• There are no significant process disturbances
• The accuracy of the measurements used is an order of magnitude better than the application specifications

2] Use ONLY feedback control if:

• Significant un-modeled process disturbances exist
• You cannot measure or calculate variables in the equations describing the physics/chemistry of the application.
• The accuracy of the measurements used is NOT an order of magnitude better than the application specifications.

3] Use both when:

• The physics/chemistry of the application are well known
• You can easily measure or calculate the variables in the equations
• The accuracy of the measurements used is on the order of the application specifications
• You want to prevent saturation of the controller integrators
• You want to improve trajectory tracking, but 2nd and higher order dynamics in the plant limit your controller bandwidth

7.4 CYBERNETICS CONTROL SYSTEMS

Cybernetics was defined by the mathematician Norbert Wiener in 1947 as the science of communication and control in the animal and the machine. That is to say that cybernetics studies the flow of information round a system and the way in which that information is used by the system as a mean of controlling itself; it does this for the animate and inanimate systems indifferently. For cybernetics is an interdisciplinary science, owing as much to biology as to physics, as much as the study of the brain as to the study of computers, and owing also a great deal to the formal languages of science for providing tools with which the behaviour of all systems can be objectively described.

The most recent definition has been proposed by Louis Kauffman, President of the American Society for Cybernetics, "Cybernetics is the study of systems and processes that interact with themselves and produce themselves from themselves"

Cybernetics is the interdisciplinary study of the structure of complex systems, especially communication processes, control mechanisms and feedback principles. Cybernetics is closely related to control theory and systems theory, but both in its origins and in its evolution in the second-half of the 20th century, cybernetics is equally applicable to social [that is, language-based] systems.

7.4.1 Management cybernetics

The starting point for the management cybernetic model of the organization is the input – transformation – output schema. This is used to describe the basic operational activities of the enterprise. The goal or purpose of the enterprise is, in management cybernetics, invariably determined outside the system [as with a first-order feedback arrangement]. Then, if the operations are to succeed in bringing about the goal, they must, because of inevitable disturbance, be regulated in some way. This regulation is effected by management. Management cybernetics attempts to equip managers with a number of tools that should enable them to regulate operations. Chief among these are the black box technique and the use of feedback to induce self-regulation into organizations. The latter is often supplemented by strategic control, based on feed-forward information, and external control.

1. PROBLEMS OF CONTROL

The perfect plan could be outlined if every possible variation of input could be anticipated and if the system would operate as predicted. This kind of planning is neither realistic, economical, nor feasible for most business systems. If it were feasible, planning requirements would be so complex that the system would be out of date before it could be operated. Therefore, we design control into systems. This requires more thought in the systems design but allows more flexibility of operations and makes it possible to operate a system using unpredictable components and undetermined input. Still, the design and effective operation of control are not without problems. The most prominent problems include;

8.1 Measurement of Output

When objectives are not limited to quantitative output, the measurement of system effectiveness is difficult to make and subsequently perplexing to evaluate. Many of the characteristics pertaining to output do not lend themselves to quantitative measurement. This is true particularly when inputs of human energy cannot be related directly to output.

8.2 Information Flow

Another problem of control relates to the improper timing of information introduced into the feedback channel. Improper timing can occur in both computerized and human control systems, either by mistakes in measurement or in judgment. The more rapid the system's response to an error signal, the more likely it is that the system could overadjust; yet the need for prompt action is important because any delay in providing corrective input could also be crucial. A system generating feedback inconsistent with current need will tend to fluctuate and will not adjust in the desired manner.

The most serious problem in information flow arises when the delay in feedback is exactly one-half cycle, for then the corrective action is superimposed on a variation from norm which, at that moment, is in the same direction as that of the correction. This causes the system to overcorrect, and then if the reverse adjustment is made out of cycle, to correct too much in the other direction, and so on until the system fluctuates ["oscillates"] out of control.

8.3 Setting Standards

Setting the proper standards or control limits is a problem in many systems. Parents are confronted with this dilemma in expressing what they expect of their children, and business managers face the same issue in establishing standards that will be acceptable to employees. Some theorists have proposed that workers be allowed to set their own standards, on the assumption that when people establish their own goals, they are more apt to accept and achieve them.

Standards should be as precise as possible and communicated to all persons concerned. Moreover, communication alone is not sufficient; understanding is necessary. In human systems, standards tend to be poorly defined and the allowable range of deviation from standard also indefinite. For example, how many hours each day should a professor be expected to be available for student consultation? Or, what kind of behavior should be expected by students in the classroom? Discretion and personal judgment play a large part in such systems, to determine whether corrective action should be taken.

What are the requirements of an effective management control system?

What are the requirements of control system?

What is the basic concept of management control system?

What is the purpose of a management control system?