Chapter 3
Behavior In Organizations
3.1 Goal Congruence: The actions
people are led to take in accordance wi
th their perceived self-interest are also
in the best interest of the organization.
In evaluating any management control pr
actice, the two important questions to a
sk are:
1.What actions does it motivate people t
o take their own self-interest
2. Are these actions in the best interest o
f the organization.
3.2 Informal factors that influence
goal congruence
•External factors
• General societal conditions, cultural values and
norms, legal and political situations.
• Work ethic –loyalty to the organization, diligence,
spirit, pride in doing good job.
•Internal Factors
• Culture
• Management style
• Informal organization
• Perception and communication
3.3 Formal Control System
•Rules: rules are shorthand for all typ
es of formal instructions and controls, in
cluding standing instructions, job descri
ptions, standard operating procedures,
manuals, and ethical guidelines. Some s
pecific types of rules are as follows:
•Physical Controls: security guards, lo
cked storerooms, vaults, computer p
asswords, television surveillance, an
d other physical controls may be par
t of the control structure.
•Manuals: written guidelines for acco
mplishing any task.
•System Safeguards: various safeguards are bu
ild into the information processing system to
ensure that the information flowing the syste
m is accurate, and to prevent or at least mini
mizing fraud of every sort.
•Task Control Systems: the process of ensuring
that specific tasks are carried out efficiently a
nd effectively. Many of these tasks are contro
lled by rules.
Formal Control Process
•Goals and Strategies
•Strategic planning
•Budgeting
•Responsibility center performance
•Report actual versus plan
•Is performance satisfactory
•Reward or corrective action and revision
Formal MCS
Goals &
strategies
Other
Information
Rules
Reward (feedback)
Yes
Strategic
Planning
Revise
Budgeting
Revise
Responsibility
Center
performance
Corrective
action
Report
Actual v/s
Plan
Was
Performance
Satisfactory?
No
Measurement
Feedback
Communication
8
3.4 Types of Organizations
•Functional Organization: each manager is re
sponsible for a specified function such as pr
oduction or marketing.
•Business Unit Structure: business unit mana
gers are responsible for most of the activitie
s of their particular unit, and the business u
nit functions as semi-independent part of th
e company.
•Matrix Structure : functional units have dual
responsibility.
Implication for System Design
• For ease of control, companies should organize int
o business units whenever feasible.
• A functional unit may be more efficient if the orga
nization wants to achieve the benefits of economi
es of scale.
• Once management has decided that a given struct
ure is best, all things considered, then system desi
gner must take that structure as given.
3.5 Functions of the Controller
•Controller is the person who is responsible fo
r designing and operating the management c
ontrol system. In many organizations, the titl
e of this person is chief financial officer (CFO)
. The controller usually performs the followin
g functions:
• Designing and operating information and control sys
tems
• Preparing financial statements and financial reports
(including tax returns) for shareholders and other ex
ternal parties.
• Preparing and analyzing performance reports, inter
preting these reports for managers, and analyzing p
rogram and budget proposals form various segment
s of the company and consolidating them into an ov
erall annual budget.
• Supervising internal audit and accounting control pr
ocedures to ensure the validity of information.
• Developing personnel in the controller organization
and participating in the education of management p
ersonnel in matters relating to the controller functio
n.
• Providing valuable services to the line authority in st
rategy making and internal controls