Goal Congruence

In a goal congruent process actions people take in accordance with their perceived self-interest are also in best interest for the organization. In this imperfect world, perfect congruence does not exist between individual and organisation. An adequate control system will motivate individuals to act in best interests of organisation. In evaluating any management control system, two important questions are: what action does it motivate people to take , in their own self interest? Are these actions in the best interest of the organization?

Informal Factors For Goal Congruence

External Factors:
external factors are norms of desirable behaviour that exist in the society in
which the organization is a part. These norms of desirable behavior including set nofattitudes referred to as work ethic. For example the employee loyalty, their diligence, their spirit of work etc. Local attitude e.g. specific to place industry-specific norms and attitudes

Internal Factors: Culture: The common beliefs, shared values, norms of behaviour are implicity and explicity manifested in people behaviour throughout the organization. It brings about thethis is the way things are done here & we dont do that here in the practices of the company. influenced by personality and policies of CEO

Informal Factors For Goal Congruence

Management Style: different managerial styles exist which influence behaviour and goal congruence. For example: Strict disciplinarian vs charismatic and outgoing style vs entrepreneurial and quick goal accomplishment style. MBWA v/s written reports

Informal Factors For Goal Congruence

Informal Organisation:
reporting relationships
official authority and responsibilities of each manager managerial performance evaluation

Perception and Communication:

In working towards goals operating managers must know what these goals mean and what actions they are supposed to take to achieve them. They receive information from formal and informal channels . Despite the range of channels complete clarity on intention of senior management is not possible. Messages from different sources may conflict with one another or may subject to different interpretations.

Formal Control System

Rules: All types of formal instructions and controls including standing instructions, job descriptions, SOPs, manuals, guidelines etc. Some rules are positive requirements/guides and some which are negative in nature. Specific types of rules are as under: Physical controls Manuals System safeguards Task Control Systems

Formal Control System

Formal Control Process: A strategic plan implements organisations goals and strategies Strategic plan is converted into an annual budget to focus on planned revenues & expenses for individual responsibility centers. Responsibility centers are guided by rules & other formal information. Actual results are compared with the budget to determine deviations and if required, corrective actions are taken.

Types of Organisations
Functional Organization: Here, Manager brings specialized knowledge to take decisions related to a specific function like production, marketing, finance etc. Efficiency is an important advantage Disadvantages include: 1. There is no ambiguous way of determining effectiveness of separate functional managers 2. Disputes between managers of different functions can be resolved only at the top, even if it has originated at much lower level

Types of Organisations
3. Functional structures are inadequate for a firm with diversified products and markets 4. Such organisations tend to create silos for each function, preventing cross-functional coordination in areas like new product development Such problem can be solved by supplementing vertical functional structure with lateral crossfunctional processes such as cross-functional job rotation and team-based rewards

Types of Organisations
Business Unit Organisation: It is responsible for all the functions involved in producing and marketing a specified product line Managers handle units as separate companies Performance of managers is measured by profitability of the unit Headquarters reserve certain key prerogatives e.g. obtaining and allocating funds Headquarters establish company-wide policies

Types of Organisations
Advantages of Business units: It provides training in general management Manager may make sound production and marketing decisions than headquarters might Unit can react to new threats or opportunities more quickly Disadvantages of Business units: Each staff may duplicate some work Disputes between business units, their personnel and headquarters staff

Types of Organisations
Implications for System Design: Along with ease of control, business organizations
have other criteria also to run their businesses. Once management has decided that a given structure is best, all things considered, system designer must take that structure as given.
Business units require broader type of managers and functional organizations provide benefit of economies of scale. System designer should exist to serve the system.

Functions of Controller
Controller or CFO is responsible for designing and operating management control system Functions of a controller are: designing & operating information and control preparing financial statements and reports for shareholders and other parties. preparing and analysing performance reports supervising internal audit and accounting control procedures developing personnel in controller organisation.

Controller Line Organisation

He may be responsible for developing and analysing control measurements He may monitor adherence to spending limitations given by Chief Executive He may control integrity of accounting system He may safeguard company assets from theft and fraud He plays an important role in preparation of strategic plans and budgets He implements policies that are decided by line management

Controller Business units

He owes some allegiance to corporate controller and also to the managers of their own units, for whom they provide staff assistance In some companies, controller reports to business unit manager and in other companies, to the corporate controller, but there are problems in both these relationships It is expected that controller will not condone or participate in the transmission of misleading information or in concealment of unfavorable information