Management Control System of a Bank

Topics: Bank, Savings account, Money market deposit account Pages: 7 (2108 words) Published: August 1, 2009

O S Mukundan

In an organization, a variable is considered as an ordinary indicator of any business activity, whose sudden and unpredictable change warrants immediate action by the management. The nature of task, the technology and the environment in which the organization operates are the factors which greatly influence the identification of variables. An important function of an variable is that they indicate to the management the necessity for prompt action. A manager should identify a few variables that are crucial to the attainment of strategy, goals and objectives of the organization. Once they have identified, the manager can rely on these variables to monitor business activities and alert the organization to the changes in business environment that could significantly affect the attainment of management goals. The top management should analyze the reasons for significant changes in the variables on a continuous basis. Some examples of variables include profitability, market position, productivity and employee attitude. Now, a key variable is a broader term in terms of the indicators of any significant business activity. Any change in its value is expected to have an impact on the performance of the organization. It is the responsibility of every organization to identify key variables as they are true indicators as to the likely success or failure of the business. The nature of key variables differs from organization to organization depending on the nature of the task, the technology and the environment of the organization. Key variables have certain characteristics that help the manager to identify them. However the actual selection of key variables requires a thorough understanding of the business, its operational environment and management goals. The management can identify key variables either for the whole organization or for the major centers of responsibility. Although key variables differ from business to business, they have certain characteristics in common: •They are important in explaining the success or failure of the business unit. A key variable can be identified by analyzing those strategic factors which directly influence the attainment of management goals. The questions to be asked are: “What is the organization trying to achieve, and what factors will cause the organization to achieve or not achieve these goals” •Key variables require examination and in depth evaluation. At the stage of in depth evaluation, the manager has to make a subjective judgment as to whether each factor identified is important in explaining the success or failure of attaining management goals. Sometimes it may be necessary to reassess the factors that affect the attainment of goals. For instance, a hospital may be particularly concerned about the quality of its services. Factors measuring the number of patients seen by the clinic staff per hour might indicate the staff is over or under utilized, but would provide no information in the quality of the services provided. A more appropriate factor may be the number of appointment cancellations. •They must be measureable, either directly or via a surrogate or substitute. For example, client satisfaction for a nonprofit counseling center cannot be measured directly, but a surrogate such as number of follow up appointments or cancellations can be selected as key variable. •Key variables are volatile; they can change rapidly for reasons often beyond the control of the manager. •Changes in the key variables are not easily predictable. The choice of key variables requires the manager to make a subjective judgment. A long and exacting test to determine the volatility of each factor is not necessary, but the factors selected for further consideration as key variables should be more volatile than those rejected. •Management action is required when a significant change occurs in any...
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