MCS IN SERVICE ORGANIZATIONS, NON PROFIT ORGANIZATIONS AND PROFESSIONAL ORGANIZATIONS

SERVICE ORGANIZATIONS

Service sector accounts for 57.2% of India’s GDP.

Service sector includes hotels, hospitals, airlines, financial services, banks, insurance companies, university etc.

Software and entertainment are also included as service organizations

CHARACTERISTICS OF SERVICE ORGANIZATIONS

Labour intensive: Most service organizations are labour intensive. Hospitals add equipment not to reduce costs, but to provide better treatment, and this increases costs.

Absence of inventory buffer: Manufacturing organizations maintain goods as an inventory against fluctuations in the volume of sales. Services cannot be stored. The plane seat, hotel room , hours of lawyers , if not used today are gone forever.

CHARACTERISTICS OF SERVICE ORGANIZATIONS

Matching capacity with demand: Stimulate demand during off-peak periods. Adjust the size of the workforce to the anticipated demand.

Multi-unit organizations: Operate different units in various locations eg., fast food restaurants, petrol pumps. Similarity provides a common basis for analyzing budgets and evaluating performance.

CHARACTERISTICS OF SERVICE ORGANIZATIONS

Quality control: Products can be inspected for quality , whereas service quality cannot be judged until the service is rendered.

PROFESSIONAL SERVICE ORGANIZATIONS Provide quality service to their customers. Principal asset is the skill of its professional staff,

which doesn’t appear in the Balance Sheet. Include R&D firms, law firms, accounting firms,

architectural firms, consulting firms and advertising agencies.

Output cannot be measured in physical form. Work done is non-repetitive. Professionals are reluctant to keep track of how

they spend their time and therefore there are complications in measuring their performance.

MCS IN PROFESSIONAL ORGANIZATIONS Strategic planning: Formal strategic

planning should focus on the human resources especially , long range staffing plan.

Budgeting: Budget is prepared for each responsibility centre, reviewed and negotiated.

Pricing: Fees are generally based on the time spent. Fixed prices in terms of certain services.

MCS IN PROFESSIONAL ORGANIZATIONS Operational control: Not possible to establish

norms and standards in task performance. Written plan for each project and timely reports in order to compare actual performance with planned performance in terms of cost, schedule and quality of service.

Performance measurement: Skill of a surgeon based on the success ratio of operations; investment analysts’ performance based on market behaviour; engineer’s performance based on the quality of construction.

MCS IN PROFESSIONAL ORGANIZATIONS In case of matrix organization, head of

the functional unit and his project leader evaluates the performance.

Budgets are also used as a measure of performance evaluation.

HEALTH CARE ORGANIZATIONS

Include nursing homes, hospitals, medical laboratories.

Cost control is one of the neglected areas in these organizations.

FINANCIAL SERVICE ORGANIZATIONS

Contributes to nearly 21% to the GDP of India.

Includes banks, insurance companies, securities firms, mutual funds.

Are in the business of managing money. Need for controls in the financial services

sector is important Risk reward relationship is very

prominent.

CHARACTERISTICS OF FINANCIAL SERVICE ORGANIZATIONS

Monetary Assets : Current value of assets can be easily measured. Assets can be transferred from one owner to another easily and quickly.

Time period: Success or failure of a bond issue, loan to an individual or a life insurance policy may not be known in a short time period.

IT revolution has resulted in innovations in products and new methods of trading.

PROFESSIONAL SERVICE ORGANIZATIONS No clear dividing line between

marketing and production activities. Ethical code of conduct in medical and

accounting professions limits the amount and character of marketing efforts.

NON PROFIT ORGANIZATIONS

Established for a specific purpose. Contributed capital: Receives contributions

from their members which are considered as their capital. Two types – endowment and plant.

Objectives are not to make profit , but to render services to the members and the society.

Non-profit organizations include schools, colleges , hospitals, religious organizations

Are exempt from the payment of income tax under the Income tax Act, 1961.

NON PROFIT ORGANIZATIONS

Fund accounting: Accounts are kept separately for different funds. These could be endowment fund, capital fund, general fund and special fund.

Financial accounting: A single set of financial statements are prepared for the organizations. They follow the guidelines as laid down by the Government.

Governance: Governed by the Trustees.

MCS IN NON PROFIT ORGANIZATIONS Product pricing: Pricing of products at full

cost is desirable. Pricing of peripheral activities can be based on market prices.

Strategic planning: Important for non-profit organizations. Absence of profit measure makes the decision making process more subjective.

Budgeting: Prepare budgets every year well in advance. Revenues and costs are related to their resources and objectives.

MCS IN NON PROFIT ORGANIZATIONS Performance evaluation: No way of

knowing their operating costs because services rendered by these organizations differ from each other. Managers cannot make expenses which are not included in the budget.

Performance of NPO’s depend upon their surplus. If an organization earns surplus, the performance is better.