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Basic Concepts
Anthony and Govindarajan (12th Ed., 2007)
Chapter 1

Elements of a control system:

1. A detector
2. An assessor
3. An effector
4. A communication network

The Nature of Management Control

Systems

Zuni Barokah, Ph.D.

Magister Manajemen
Fakultas Ekonomika dan Bisnis UGM
2015
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Example: You are driving a car

Basic Concepts (Cont.)

1. A detector or sensor: a device that measure what is
actually happening in the process being controlled.

1. Detectors: Your eyes

2. Assessor: Your brain

2. An assessor: a device that determines the significance

of what is actually happening by comparing it with some
standards or expectations of what should happen.

3. Effector: Your foot

4. Communication network: Your nerves
system

3. An effector (feedback): a device that alters behavior if

the assessor indicates the need to do so.
4. A communications network: consist of devices that
transmit information between the detector and the
assessor and between the assessor and the effector.
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Boundaries of Management Control

Example: You are driving a car

Your eyes (detectors) measure actual speed by observing the
speedometer.

Strategy formulation: the process of deciding on the

goals of the organization and the strategies for
attaining these goals.

Your brain (assessor) compares actual speed with desired speed

(standard: the highest speed is 80 km/hour) to detect a deviation from
standard.

Management control: the process by which

managers influence other members of organization to
implement the organizations strategies.

Your brain (assessor) directs your foot (effector) to ease up the

accelerator if actual speed (90 km/hour) is faster than the standard
speed (80 km/hour), press down the accelerator if the actual speed
(70 km/hour) is slower than standard speed (80 km/hour).

Task control: the process of ensuring that specified

tasks are carried out effectively and efficiently.

Your nerves (communication network) form the communication system

that transmits information from eyes (detectors) to brain (assessor)
and brain (assessor) to foot (effector).
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Strategy Formulation vs Management Control

(Cont.)

Strategy Formulation vs Management Control

Characteristics

Strategy Formulation

System design

Management Control

Unsystematic, Strategic
decision may be made at any
time

Rhythmic, predetermined
procedures

Nature of
information

Tailor-made to faced
problems, more external and
predictive, less accurate

Involved people

Top management and

headquarters staffs

Characteristics

Strategy Formulation

Management Control

Number of involved
people

Few people

Many people

Integrated, more internal

and historical, more
accurate

Mental activity

Creative and analytic

Administrative and
persuasive

Top management and line

managers

Discipline

Economics

Social psychology

Time horizon

Tend to be long-term

Tend to be short-term

End products

Goals, strategies

Strategy implementation

Management Control vs Task Control

Characteristics

Control Management

Management Control vs Task Control (Cont.)

Task Control

Characteristics

Focus of activity

The whole of operation

Individual task or
transaction

Nature of
information

Integrated, many financial data

Tailored-made to
individual task, more nonfinancial data

Involved people

Management

Supervisor or none

Mental activity

Administrative and persuasive

Follow direction or none

End products

Strategy implementation

Tasks are carried out

effectively and efficiently

Control Management

Task Control

Mental activity

Administrative and
persuasive

Follow direction or none

Discipline

Social psychology

Economics, physics

Time horizon

Weekly, monthly, annually

Daily

Type of cost

Discretionary costs

Engineered costs

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Decisions in Planning and Control: Examples

Strategy
Formulation

Management
Control

Task Control

Enter a new business

Expand a plant

Schedule production

Change debt to equity

ratio

Issue new debt

Manage cash flows

Add direct mail selling

Determine advertising
budget

Book TV commercials

Decide magnitude and

direction of research

Control of research
organization

Run individual research

project

Acquire an unrelated
business

Introduce new product or Coordinate order entry

brand within product line

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