Non-profit Organization and Management Control

Topics: Non-profit organization, Financial services, Cost accounting Pages: 24 (7744 words) Published: March 14, 2011
A Central University

Department Of Management Studies Assignment on Management Control System in Non-Profit Organization Management Control System MBA 3rd Semester


Submitted To:

Submitted By:

Dr.B.D.Mishra Akriti Gupta Reader Iti Shrivastava M.B.A.; Ph.D Shikha Sahu Financial Management, Business Policy Shobhna Jha Strategic Management

Service Organization in General 01


Professional Service Organization Financial Service Organization Health care Organization Non-profit Organization Conclusion

06 12 16 18 24

In this Assignment, we describe the management control process in service organizationsorganizations that produce and market intangible services. We first discuss the characteristics that distinguish service organizations in general from manufacturing organizations. We then discuss the special problems that arise in professional, financial service, health care, and nonprofit organizations.


Service Organizations in General
In the 18th and the early part of the 19th century, the workforce in the United States was predominantly in agriculture. After that, it was predominantly in manufacturing. Early in the 20th century, employment in the service sector overtook employment in the manufacturing sector. By 2003, service sector employment had grown to more than twice that of manufacturing. In this chapter we provide insights into management control systems for service organizations.

For several reasons, management control in service industries is somewhat different from management control in manufacturing companies. Some factors that have an impact on most service industries are discussed in this section. (Others, which are characteristics of particular service industries, are discussed later.) These factors apply also to the management control of legal, research and development, and other service departments in companies generally. 1. Essence of Inventory Buffer Goods can be held in inventory, which is a buffer that dampens the impact on production activity of fluctuations in sales volume. Services cannot be stored. The airplane seat, hotel room, hospital operating room, or the hours of lawyers, physicians, scientists, and other professionals that are not used today are gone forever. Thus, although a manufacturing company can earn revenue in the future from products that are on hand today, a service company cannot do so. It must try to minimize its unused capacity. Moreover, the costs of many service organizations are essentially fixed in the short run. In the short run, a hotel cannot reduce its costs substantially by closing off some of its rooms. Accounting firms, law firms, and other professional organizations are reluctant to lay off professional personnel in times of low sales volume because of the effect on morale and the costs of rehiring and training. A key variable in most service organizations, therefore, is the extent to which current capacity is matched with demand. Service organizations attempt this matching in two ways.. First, they try to stimulate demand in off- peak periods by marketing efforts and price concessions. Cruise lines and resort hotels offer low rates in off seasons; airlines and hotels offer low rates on weekends; public utilities offer low rates on slack periods during the day. Second, if feasible, service organizations adjust the size of the workforce to the anticipated demand by such measures as scheduling training activities in slack periods and compensating for long


hours in busy periods with time off later. The loss from unsold services is so important that occupancy rates, “sold hours,” load factors, student enrollment, hospital admissions, and similar indications of success in selling available services are normally key variables in service organizations. 2. Difficulty in Controlling Quality A manufacturing company can inspect its products before they are shipped to the...
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