Management Control Systems (MCS)
Management Control Systems (MCS) is a system which collects the information and uses that information for measure the performance of various organizational resources like human, physical, financial and organizational strategies. In other words, MCS influences the allocation of organizational resources to the respective department for the achievement of organizational goal. MCS might be formal or informal. MCS is a tool which is used by manager to implement the strategies through various control system, human resources management, organizational structure and culture.
MCS can be interchanged with various other names like Management accounting (MA), management accounting systems (MAS), and organizational controls (OC). Management control systems use many techniques such as Balanced scorecard, TQM, Kaizen (Continuous Improvement), Activity-based costing, Target costing, Benchmarking, JIT, Budgeting, Capital budgeting, Program management techniques, etc.
The Xerox Corporation was established in April 18, 1906. The corporation is divided into four segments, i.e. Document processing, insurance, third-party financing, and finally investment banking services. Xerox operation is divided means; Xerox Corporation works in the Western hemisphere, in Europe its subsidiary handle the operation, Rank Xerox Ltd. and in pacific nation Fuji Xerox is responsible for operations.
NEED FOR MANAGEMENT CONTROL SYSTEM:-
During 1970’s, the level of competition increases and due to that they lose their market share from 96% to 45%. After analyzing the situation they came to know that this happen because of the absence of effective management control systems, which can give them an alarm against the competition. To counter this, company introspect his internal and external environment and come up with some control system, For example, they come up with a plan called “Leadership through Quality.” In this strategy they give an emphasis on benchmarking and employee involvement. They also provide standardized report formats and also work over the management information system.
MCS AT XEROX:-
IT control system:-
Xerox Online Management System:-
Xerox is a multinational company so the visibility and the tracing were very poor in the distribution channel, which create a problem in the calculation of ROI.
Xerox opted for a web based lead distribution and management system. This Online Management System (OMS) provide a total downstream control and visibility to Xerox by tracking the activity of channel partner. The main portal is easy to use and allow the Xerox to follow the deal from generation to closure.
The OMS has now run over forty campaigns across eleven countries, and has distributed approximately four millions leads to over six thousand channel partners (as at August 2009).
STRATEGIEC & OPERATIONAL CONTROL:-
Lot of strategic control exists in the Xerox. Like, employees are guided, monitored, and evaluated on the meeting of annual objectives. In orer to achieve the effectiveness, operational control systems sets four essential objectives; Set standard of performance, measure the actual performance, identify deviations from standards set, and finally initiate corrective action. We can see the various examples in the Xerox. Like, Xerox focused on “key success factors”, such as improved productivity, high employee morale, improved product-service quality, and growth in market share.
COST CONTROL SYSTEM:-
The internal cost plays an important role in company performance. By reducing the internal cost the company can increase his profit and also enhance its performance in many ways. Xerox uses various solutions to control its various cost. Some of the solutions are mention below:-
BEAR’s cost management module provides opportunities to organization to reduce their cost by proper tracking and managing the various activities like photocopying, printing, point-of-sales/purchase, etc. The main profit of using this kind of system is that they provide real time information regarding the various transactions and reporting. By getting the real time information, company can take a faster decision and also streamline the processes for better result.
This application helps the company to control and recover the cost of copying, printing, faxing and scanning, etc. solution helps in the tracking of document which is transferred by email, taxi hire, credit card, etc. The solution is multi site compatible. It generates a detail report of various expenses which is mentioned above so the management can take the decision according to that.
RISK MANGEMENT CONTROL SYSTEM:-
Internal control can be achieved by the Risk management.
Xerox adopted “plan, do, check and act” (PDCA) cycle for risk management. The proper risk management can be achieved by the framework. Framework consists of the fundamental risk management policies, which consist of basic objectives and action guidelines.
Basic rules of risk management which is followed by the Xerox are mentioned below:-
QUALITY CONTROL SYSTEM:-
To maintain the quality standard of the company Xerox is following the TQM method. Before implementing the TQM ten element of total quality management is checked within the company. Some of the elements are shown below for example:-
Develop a customer orientation, which emphasizes that quality is what the customer says it is.
Focus on the company’s business processes.
Develop customer and supplier partnerships.
Adopt an error-free attitude.
Every manager and employee to participate.
Continuous improvement, etc.
Xerox successfully maintains the entire elements and by maintaining entire element he is able to meet the quality standard.
Financial control system:-
In the initial stages, Xerox was not performing well. After searching the cause for not performing well in the market thy come to know the importance of analyzing the internal financial capabilities and policies of an organization. After knowing the importance they used trend analysis to find the economic health of the company. This method also helps to forecasts the financial future of the company.
After this incident company use various kind of reports which are generated by their ERP system. These reports are used for the purpose of financial analysis. To analyze the financial performance they mostly used the profitability, liquidity, leverage and finally activity ratios. The causes for using these ratios are given below:-
The activity ratios indicate how effectively a firm is using its resources.
Profitability ratios indicate how effectively the total firm is being managed.
Leverage ratios identify the source of a firm’s capital.
Liquidity ratios are used as indicators of a firm’s ability to meet its short-term obligations.
So the various reports which is generated by the ERP system and various other source are act as a financial control system. The reports are generated according to requirement as well as on the periodic basis. The periodic report is used for the regular analysis and the requirement based report is used for the analysis of some important factor.
The other financial control is the ratio which is calculated on the basis of this report. Xerox decided the range of the each variable and if the variable varies more than that Xerox take an corrective action.
In the end, I just want to say, the performance of the company depends on the effectiveness of the management control system. As we see in the case of Xerox, before the application of management control system the company wasn’t performing well but after the application of MCS the face of the Xerox get totally changed. But also we have to keep one more thing in our mind that the Management Control System changes with time, which means MCS is also dynamic in nature.