CYBERNETICS

Systems Approach
To Control
Prof. GURU PRASAD
FACULTY MEMBER
INC GUNTUR
pgp4149@gmail.com
Define.....
 A Greek word ‘Kybernetes’ meaning..
steersman.
 A steersman is a person who directs the
movement of the ship along the planned
course or direction.
 Cybernetics is the study of ‘the entire field
of control and communication theory ‘.
 Industrial Dynamics and Management
control
 It refers to key role of information in an
organization.
 An industrial organization is a complex
network of information channels.
 These channels emerge at various levels to
control physical processes such as hiring
employees, producing goods,etc.
Organization Disasters and
Management control
 It is almost impossible for organization to
predict disaster. But some steps can be
taken to minimize the chance of
occurrence.
 Disasters can be of internal factors like
resignation of managers, strikes, etc. and
external factors such as environmental
factors.
Accounting Data Base for Control
The accounting systems in an organization
provide an important database for
management and operational controls.
It is broadly divided into
 Financial Accounting
 Cost Accounting
 Decision Accounting
 Control Accounting
 Responsibility Accounting
Key Variable As Control Indicators
 A key variable is a significant indicator of
business activity, whose sudden and
unpredictable change warrants immediate
action by management.
 It is also a key success factor which helps
in success and failure of an organization.
Sources of key variables
 Industry Characteristics:- There are some
general requirement for success. It
depends upon the kind of industry.
Eg:-Occupancy rate in case of Hotel
industry.
 Environmental Factors:- The economic and
the political climate consist of
environmental factors which determine key
variables.
Eg:-transportation charges.
contd.....
 Competitive Strategy:-An organization that
follows a low cost strategy will require an
analysis of the product cost structure.
 Stakeholders:-They are also be taken into
consideration.
 Significant Function:- In an organization
managers should identify variables related
to the functions of the unit. Eg:- A variable
for operations is like quality of goods
produced.
Key variables
 Input Variables
 Production variables
 Marketing Variables
 Asset Management Variables.
 Identification of Key Variables
Input Variables:-
 Raw material Availability:- Its absence leads

to lower capacity utilization. It should be

readily available.
 Raw material quality:- It determines the

quality of end product. It is important as it

leads to maintenance of quality.
 Raw material cost:-A close watch on this

variable is essential particularly when it

constitutes a large percentage of total cost..
Production Variables
 Capacity Utilization
 Losses- Spoilage and wastage etc.
 Quality Control
 Maintenance
 Cost
 Delivery
Marketing Variables
Order book position:-It is important for
organization that undertake manufacturing
based on orders. It helps the marketing dept
to decide the planning schedules to
marketing and distribution.
 Market Share:-It indicates the performance
and its competitive strengths.
 Institutional Sales:-It is important of total
sales and number of orders received from
institutional buyers is a key variable.
Asset Management Variable
 Asset Turnover:- It denotes the relationship
between the total assets in an organization
and sales volume.
 Working capital turnover:- The efficiency of

management of working capital is indicated

by the working capital turnover
 Types of Variables
 Strategy Variables:- It refers to the long term
choices concerning the programs, goals,
policies and action plan made by an
organization.
 Structural Variables:-centralized or
decentralized, authority and relationships etc.
 Process Variables:- It refers to processes that
influence the behavior of employees towards
the achievement or organizational goals
 eg:-participation, motivation, etc.
contd......
 Decision Variables:-It is for decision making.
It directly influence the goals and objectives of
an organization.

 Environmental Variables:- It helps in

understanding the diversity and uncertainty
relating to an organization. Diversity in case of
different commodities and uncertainty relating
to an organization.
Multivariate Analysis and Key
Variables
 It helps in identifying the critical control
variables. For this readymade computer
programs are available.
 In order to confirm the accuracy of the
key variables and the collection of the
data required to identify them.
 Comprehensive Performance Indicator
 :-Every Organization needs to identify
the variables that influence the success at each
level. Monitoring the performance of key
variables at each level is to push them to
desired level.
Limitation of Indicator:-These are used to
understand organization’s status and to initiate
Correct action.
Limitations

 Absence of consensus among managers.

 Problems encountered during the
measurement of indicators.
 Lack of clear specifications.
 Lack of consistent information.
Key Variables in selected industry
 Insurance:-
No of claims settled
No of policies processed
Growth rate
 Hotel:-

Room occupancy rate,

Amount of food wasted
No of complaints
Management trg Inst.
 No of students
 No of research projects
 Time spent by faculty on teaching
Impact of corporate culture on control
system

The strength of corporate culture depends

upon
 The assumption made by an organization.
 Clarity of assumptions
 How it is communicated among employees.