A STUDY OF IMPLEMENTATION OF MANAGEMENT
CONTROL SYSTEM IN MNC


  MANAGEMENT CONTROLSYTEMINMNC.doc (Size: 121 KB / Downloads: 4)
ABSTRACT

This paper attempts to examine the application of management control system in Nepalese commercial banks. The Nepalese commercial banking sector is very competitive. The commercial banks are competing mainly in service and many of them adapting differentiation strategy. The priority of the majority of commercial banks is customer retention. Commercial banks are encouraging employees to upgrade their knowledge and skill. The working environment is also congenial in Nepalese commercial banks and the informal organization and communication system also gradually exist in some of the commercial banks of Nepal. However, the future research needs to examine the relationship between management control system and effectiveness of the commercial banks of Nepal.

INTRODUCTION:

IN NEPAL, DURING 1990S AND later many organizations faced major changes in competitive business environment. Before 1990s organizations such as those operating in the airlines, utilities, and financial sectors were either government owned monopolies or operated in a highly regulated and non-competitive environment. These organizations were not subject to any great pressure to improve the quality and efficiency of their operations or by eliminating services that were making losses. Some public enterprises were getting direct subsidies from government for equalizing their operational losses.

Control system

It is a set of formal and informal systems that designed to asset management in steering the organization towards the achievement of its purpose by bringing unity out of the diverse efforts of subunits and. The formal system and informal system are independent but they are highly interrelated, indistinguishable, subdivision of control system.
Formal system makes possible the delegation of authority. Formal documentation of structure, policies, and procedures assist members of the organization in performing their duties (Wu 2003). An effective set of formal control includes three major mechanism operational plans, performance measurement systems, and feedback mechanism (Stewart, 2002)

Operational plans:

Operational plans include the firm's annual master budget and related supporting work plans. They provide the linkage between senior management's strategic plans and the day-to-day organizational activities of each employee.

Performance Measurement:

Performance measurement systems compile and report the result of the collective work activities on periodic basis. An effective performance measurement system presents both financial results and operating data on a responsibility basis.

Feedback Mechanism:

Feedback mechanism reports the variances between actual and planned performance. The variance is communicated to mangers and others within the organization periodically through various interim reports. Informal system requires management a mindset that differs from that required for formal controls. "Informally" refers to the flexibility to deal with any action beyond the documentary discipline and regulation. In this respect formally leads to a pattern of defined behaviors whereas informally leads to a pattern of interacting roles between two systems (Marciall and Kirby 1994). The informal control system consists of five components.