Behaviour in Organization

• Management Control Systems influence human

behaviour.
• Good management control systems influence
behaviour in a goal congruent manner; that is;
• They ensure that individual actions taken to
achieve personal goals also help to achieve the
organization’s goals.
• What are good for personal must also be good
for the organization.
 Questions to be Answered
• What actions does it motivate people to take in
their own own self-interest?
• Are these actions in the best interest of the
organization?
Informal Factors Influence Goal Congruence
• External Factors
▫ Are norms of desirable behaviour that exist in the
society of which the organization is a part.
▫ It could be a set of attitude such as work ethic
▫ Loyalty, diligence, pride in doing a good job, pride to
be the member in the organization.
• Internal Factors
▫ Corporate Culture
 The common beliefs, shared values, norms of behaviour,
and assumptions that are implicitly accepted and
explicitly manifested throughout the organization.
▫ Management Style
▫ The Informal Organization
▫ Perception and Communication
 The Formal Control System
• Rules
▫ All types of formal instructions and controls,
including: standing instructions, job descriptions,
standard operating procedures, manuals, and
ethical guidelines.
▫ Physical controls
▫ Manuals
▫ System Safeguards
▫ Task Control Systems
 The Formal Control Process

Other
Goals and Rules Information
Strategies

Reward (feedback)

Yes

Responsibility Report Was

Strategic
Budgeting Centre actual vs. performance
Planning Performance satisfactory?
plan
No

Corrective Measurement
Revise Revise
action

Feedback
Communication
 Types of organizations
• A functional structure,
▫ Each manager is responsible for a specific function
such as production or marketing decision.
• A business unit structure,
▫ Business unit managers are responsible for most
of the activities of their particular unit, and the
business unit function as a semi-independent part
of the company.
• A matrix structure,
▫ Functional units have dual responsibilities.
 Functional Organizations

Chief Executive Officer

Staff

Manufacturing Marketing
Manager Manager

Staff Staff

Manager Manager Manager Manager Manager Manager

Plant 1 Plant 2 Plant 3 Region A Region B Region C
 Business Unit Organizations

Chief Executive Officer

Staff

Manager Manager Manager

Business Unit X Business Unit Y Business Unit Z

Staff Staff Staff

Plant Marketing Plant Marketing Plant Marketing

Manager Manager Manager Manager Manager Manager
 Matrix Organization

Chief Executive Officer

Staff

Manufacturing Project A
Manager Manager

Marketing Project B
Manager Manager

Financing Project C
Manager Manager
 Functions of the Controller
• Controller,
▫ The person who is responsible for designing and operating the
management control system.
▫ CFO (chief financial officer)
• The Functions:
▫ Designing and operating information and control systems.
▫ Preparing financial statements and financial reports (incl. tax returns)
for share holders and external parties.
▫ Preparing and analysing performance reports, interpreting these reports
for managers, and analysing program and budget proposals from various
segments of the company and consolidating them into overall annual
budget.
▫ Supervising internal audit and accounting control procedures to ensure
the validity of information, establishing adequate safeguards against
theft and fraud, and performing operational audits.
▫ Developing personnel in the controller organization and participating in
the education of management personnel in matters relating to the
controller function.
Corporate vs. Business Unit Controller
Dotted Line Solid Line

Corporate Corporate
Controller Controller

Business Unit Business Unit

Manager Manager

Business Unit Business Unit

Controller Controller