Financial Daily from THE HINDU group of publications
Monday, Dec 30, 2002
Columns - Browser's Corner
Where the fittest survive...
We witness earth-shaking changes due to globalisation, privatisation, liberalisation and aggressive competition in the industrial sphere today. Global competitive forces at work could weed out inefficient units or units which are unable to survive. Darwin's theory of survival has become a stark reality when we look at the way the big MNCs had to painfully face the phase of extinction.
To survive in a highly competitive global environment, business entities need to focus more and more attention on implementing sound management control systems and techniques. Further, there is a dire need to review such control systems in existence, more frequently than even before, to survive in an ever-changing dynamic and highly competitive business environment.
The book, under review, authored by Mohinder N. Kaura highlights the importance of management control systems through appropriate reporting mechanism.
According to the author, management control and reporting systems deal with measurement, control, review and redirection of performance evaluation of a business entity and its units. Normally in any business entity, top management is concerned with policy formulation while the executive management will concern with policy implementation as well as its performance evaluation.
Many organizations have come to grief due to inadequate or inappropriate performance evaluation measures. Many a times, performance evaluation is not done in a discreet way as to warrant a systematic and scientific approach towards performance evaluation through well thought out and well designed control system taking in to account both financial and non-financial parameters. Though every management is concerned with accomplishment of organisational objectives, enough attention is not bestowed towards exercising rights checks and controls at the appropriate time. Viewed in such a backdrop, evaluation/control system need to be properly designed and effectively executed.
It is the duty of the top management to conceive, design and implement sound management controls and reporting systems. No doubt even the mere existence of such a system along cannot ensure good performance. What needs to be done is to undertake a systematic review and effective evaluation of the control systems in vogue at periodic intervals so as to go in for necessary course correction measures in the right perspective. Such a system of management control has become a dire necessity in the wake of intense competition, wide spread phenomenon of slow down and worldwide bankruptcies.
The management control system is essentially a strategic tool for holding managers accountable and responsible for their performance. Existence of such a system also provides a feedback for managers to know how they perform, in which direction the organisations are heading for and what type of course correction would be desired to stay on course.
The book deals with three subsystems strategic control systems; business unit/divisional control systems; operational control systems. The book elaborates on the basic steps in management control processes such as:
The book is divided into five parts Part I dealing with structure of management control systems; Part II focussing on the process of management control system; Part III dealing with management reporting systems; Part IV detailing on management control systems as applicable for banks/financial institutions, research organisations, export-oriented units and Part V covering issues of consequences for management control and reporting systems. The entire subject area is covered in 16 chapters.
The author has furnished caselets under most of the chapters followed by references for further study. The book provides formats for reporting systems for adoption by different business entities.
Though control systems, as applicable for banks, are presented in one of the chapters, it does require greater elaboration in the wake of introduction of asset-liability management concepts and risk-based supervision systems etc.
On the whole, the book is a timely and welcome publication in the subject area. The author has presented the subject in a simple and readable form. The author's efforts deserve appreciation due to the lucid presentation of the subject matter. Practising managers and students of management science will find the book to be quite useful. The printing, layout and design are quite good. The book is moderately priced.
(The author is Principal, Staff Training College, Karur Vysya Bank Ltd., Karur.)
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