Management Control System (MCS) at Infosys Technologies Ltd. – A Case Study

Management Control System is a set of formal & informal systems to assist the management in steering the organization towards its goals. Controls help in guiding employees towards achieving such goals. However,
establishment of a control system in the environment of distributed accountability, re-engineered processes, and local autonomy and empowerment is a challenging task. This study on Infosys Technologies Limited is based on the analysis of control parameters such as Organization Structure; Management Style and Culture; Control Processes; Rewards; and Coordination & Communication.

  • Introduction
    1.1 Management Control System (MCS) is a system which is an aggregate of machines and people that
    work toward a common objective. A system can be described as a series of steps or phases consisting of an input
    phase, a processing phase, and an output phase. A control system adds measurement, analysis and reporting
    phases to the system. Output is measured, compared against a plan, analyzed and then reported back to the
    appropriate earlier phases of the system in the form of positive or negative reinforcement. In MCS,
    data/information is typically fed back to managers of the various system phases. Responsible managers will then
    take appropriate action based on the data/information provided.
    The criteria are organized into five categories that correspond to the generic MCS components. The five
    categories are:
  • Organization
  • Planning and Budgeting
  • Accounting
  • Analysis
  • Revisions/Access
    Figure 1: Generic MCS Components
    International Conference on Technology and Business Management March 18-20, 2013
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    1.2 Important Features of MCS
    (1) Nature of Decisions: Management control decisions are based on the framework established by the
    organization’s strategies. They also take into consideration the quantity and quality of resources
    available. Within these constraints a manager should be able to implement activities that are best suited
    for a particular business unit.
    (2) Strategy Implementation Tool: MCS helps an organization to move towards its strategic objectives. It
    is an important vehicle for the execution of strategy. Fig. 2 given below depicts the Framework for
    Strategy Implementation.
    Figure 2: Strategy Implementation Framework
    (3) Management Process: MCS process involves three interrelated activities – Communication, Motivation
    and Evaluation. Communication helps the subordinates understand the goals of the organization. The
    superiors should make sure that the subordinates understand what the organization expects of them.
    Subordinates should be motivated to put in their best efforts to achieve organizational goals. For
    effective performance the superiors should evaluate the work of the subordinates and give them their
    feedback periodically.
    1.3 Types of Management Control Systems: Formal and Informal
    Control systems in an organization fall under two broad areas: Formal and Informal. Formal controls are laid out
    in writing by the management, whereas informal controls arise as a result of employees’ behavior and culture.
    Examples of formal controls are planning, budgeting, fixing quotas, and passing rules and regulations. Informal
    controls are based on the behavior, culture, style and norms of the organization. Formal controls are framed by
    the management and informal controls begin with employees influenced by socio-economic factors.
  • Need and Importance (Significance) of the Study
    Enron Corp, Tyco International, World Com and Satyam Computers are some of the examples which illustrate
    the absence or malfunctioning of control systems which led to huge losses, and even to corporate bankruptcy.
    Defective products and poor coordination between departments also arise due to weak control systems. Hence
    there is a need and importance to focus on control systems and understand the working of a successful
    Multinational company like Infosys Technologies Limited (Infosys).
  • Objectives of study
  • To understand what are the factors which are essential for management control systems to be
    successful.
  • To study the management control systems being adopted by Infosys based on the analysis of control
    parameters such as Organization Structure; Management Style and Culture; Control Processes;
    Rewards; and Coordination & Communication.
  • To examine the challenges faced by Infosys and the benefits derived by it by implementing both formal
    and informal control processes.
  • Methodology
    The study is based mainly on secondary data, particularly different websites of Infosys on engineering services,
    supply chain management, products and platforms, market research, etc., Indiainfoline, Infosys’ annual reports
    and some standard text books on management control systems.

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