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Describe and illustrate significance of human behavior patterns in management

control system.
2. What is goal congruence? List the formal and informal factors influencing goal
Ans. Management control systems influence human behavior. Good management control
systems influence behavior 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. The concept
of goal congruence, describing how it is affected both by informal actions and by formal
Senior management wants the organization to attain the organization's goals. But the individual
members of the organization have their own personal goals, and they are not necessarily
consistent with those of the organization. The central purpose of a management control system,
then, is to ensure a high level of what is called "goal congruence." In a goal congruent process,
the actions people are led to take in accordance with their perceived self interest are also in the
best interest of the organization.
Individuals work in different hierarchies and handle different responsibilities & may have
different goals. But they must come together as far as Companys Goal is concerned (there action
must speak Cos language.)

Goal Congruence
Example 1 The HR manager has devised a HR training program to enhance the skills of its
sales personnel, with an objective to enhance their productivity But if company is in strategic
need of attaining a certain sales volume in a given quarter, it can not do so on account of non
availability of personnel.
Example 2 The marketing department has planned an impressive advertising campaign, which
promises good returns, But say due to cash crunch Companys current financial position may not
let to lose the strings
Example 3 Production Manager may get a good applause for reducing cycle time; But at what
cost? Building up the high inventory i.e. higher investment in current assets. While doing so he
just overlooked the financial interest of the company. After completing the given activity in
more efficient manner the concerned manager scores the point/s on his score card. Whether his

actions are leading to scoring of points on the organizations score card too? if it is so then only
one can say the organization is marching towards a common goal.
Every individual working in an organization has got his own motive to do the work. Individuals
act in their own interest, based on their own motivations. And it is always not necessarily
consistent with the Cos goal. In a goal congruence process, the actions the people are led to take
in accordance with their perceived self interest are also in the best interest of the organization i.e.
Goal congruence ensures that the action of manager taken in their best interest is also in the best
interest of the organization.
The significance of human behavior patterns in management control system can be explained
with the help of Informal Factors that influence Goal Congruence. In the informal forces both
internal and external factors play a key role.
External Factors
External factors are norms of desirable behavior that exist in the society of which the
organization is a part. These norms include a set of attitudes, often collectively referred to as the
work ethic, which is manifested in employees' loyalty to the organization, their diligence, their
spirit, and their pride in doing a good job (rather than just putting in time). Some of these
attitudes are local that is, specific to the city or region in which the organization does its work. In
encouraging companies to locate in their city or state, chambers of commerce and other
promotional organizations often claim that their locality has a loyal, diligent workforce. Other
attitudes and norms are industry-specific. Still others are national; some countries, such as Japan
and Singapore, have a reputation for excellent work ethics.
Internal Factors
The most important internal factor is the organization's own culture-the common beliefs, shared
values, norms of behavior and assumptions that are implicitly and explicitly manifested
throughout the organization. Cultural norms are extremely important since they explain why two
organizations with identical formal management control systems, may vary in terms of actual
control. A company's culture usually exists unchanged for many years. Certain practices become
rituals, carried on almost automatically because "this is the way things are done here." Others are
taboo ("we just don't do that here"), although no one may remember why. Organizational culture
is also influenced strongly by the personality and policies of the CEO, and by those of lowerlevel managers with respect to the areas they control. If the organization is unionized, the rules
and norms accepted by the union also have a major influence on the organization's culture.

Attempts to change practices almost always meet with resistance, and the larger and more mature
the organization, the greater the resistance is.

Management Style
The internal factor that probably has the strongest impact on management control is management
style. Usually, subordinates' attitudes reflect what they perceive their superiors' attitudes to be,
and their superiors' attitudes ultimately stem from the CEO.
Managers come in all shapes and sizes. Some are charismatic and outgoing; others are less
ebullient. Some spend much time looking and talking to people (management by walking
around); others rely more heavily on written reports.
The Informal Organization
The lines on an organization chart depict the formal relationships-that is, the official authority
and responsibilities-of each manager. The chart may show, for example, that the production
manager of Division A reports to the general manager of Division A. But in the course of
fulfilling his or her responsibilities, the production manager of Division A actually
communicates with many other people in the organization, as well as with other managers,
support units, the headquarters staff, and people who are simply friends and acquaintances. In
extreme situations, the production manager, with all these other communication sources
available, may not pay adequate attention to messages received from the general manager; this is
especially likely to occur when the production manager is evaluated on production efficiency
rather than on overall performance. The realities of the management control process cannot be
understood without recognizing the importance of the relationships that constitute the informal
Perception and Communication
In working toward the goals of the organization, operating managers must know what these goals
are and what actions they are supposed to take in order to achieve them. They receive this
information through various channels, both formal (e.g., budgets and other official documents)
and informal (e.g., conversations). Despite this range of channels, it is not always clear what
senior management wants done. An organization is a complicated entity, and the actions that
should be taken by anyone part to further the common goals cannot be stated with absolute
clarity even in the best of circumstances.
Moreover, the messages received from different sources may conflict with one another, or be
subject to differing interpretations. For example, the budget mechanism may convey the
impression that managers are supposed to aim for the highest profits possible in a given year,
whereas senior management does not actually want them to skimp on maintenance or employee
training since such actions, although increasing current profits, might reduce future profitability.
The informal factors discussed above have a major influence on the effectiveness of an

organizations management control. The other major influence is the formal systems. These
systems can be classified into two types: (1) the management control system itself and (2) rules,
which are described in this section.
The Formal Control System
We use the word rules as shorthand for all types of formal instructions and controls, including:
standing instructions, job descriptions, standard operating procedures, manuals, and ethical
guidelines. Rules range from the most trivial (e.g., paper clips will be issued only on the basis of
a signed requisition) to the most important):e.g., capital expenditures of over $5 million must be
approved by the board' of directors).
Some rules are guides; that is, organization members are permitted, and indeed expected, to
depart from them, either under specified circumstances or when their own best judgment
indicates that a departure would be in the best interests of the organization.
Some rules are positive requirements that certain actions be taken (e.g., fire drills at prescribed
intervals). Others are prohibitions against unethical, illegal, or other undesirable actions. Finally,
there are rules that should never be broken under any circumstances: a rule prohibiting the
payment of bribes, for example, or a rule that airline pilots must never take off without
permission from the air traffic controller.
Some specific types of rules are listed below:
Physical Controls
Security guards, locked storerooms, vaults, computer passwords, television surveillance, and
other physical controls may be part of the control structure.
Much judgment is involved in deciding which rules should be written into a manual, which
should be considered to be guidelines rather than fiats, how much discretion should be
allowed, and a host of other considerations. Manuals in bureaucratic organizations are more
detailed than are those in other organizations; large organizations have more manuals and
rules than small ones; centralized organizations have more than decentralized ones; and organizations with geographically dispersed units performing similar functions (such as fastfood restaurant chains) have more than do single-site organizations
System Safeguards
Various safeguards are built into the information processing system to ensure that the
information flowing through the system is accurate, and to prevent (or at least minimize)
fraud of every sort. These include: cross-checking totals with details, requiring signatures and
other evidence that a transaction has been authorized, separating duties, counting cash and
other portable assets frequently, and a number of other procedures described in texts on
Task Control Systems

Task control is the process of assuring that specific tasks are carried out efficiently and
effectively. Many of these tasks are controlled by rules. If a task is automated, the automated
system itself provides the control.
Q. What is the impact of management style on management controls:
Ans: The internal factor that probably has the strongest impact on management control is
management style. Usually, subordinates attitude reflects that what they perceive their superiors
attitude ultimately stem them from the CEO. Managers come in all shapes and sizes. Some are
charismatic and outgoing, others are less ebullient. Some spend much time looking and talking to
people, others rely more heavily on written reports. Examples: when Reginald Jones was
appointed CEO of GE in the early 1970s, the company was a large, multi-industry company that
performed fairly well in a number of mature markets. But the company did have its problems;
price fixing scandals that sent several executive in jail, coupled with GEs sound defeat in, and
subsequent retreat from, the mainframe company. Jones management style was well suited to
bring more discipline to the company. Jones was formal, dignified, refined, bright, and both
willing and able to delegate enormous amounts of authority. He instituted formal strategist
planning and built up one of the first strategic planning unit in Major Corporation.
After Jones, Jack Welch, outspoken, impatient, informal, entrepreneur. These qualities were well
suited in the era of 80s & 90s. In 2001, when jack Welch after 20 years at the helm, Jeff Immelt
was chosen as new chairman and CEO, Immelts plan to focus on GEs customer orientation,
business mix, management diversity & technology.
GE has well-deserved reputation for producing sterling business managers who have very
different styles but a common ability to lead successfully.
Q. Management Control in matrix structures
Matrix organizational structure assigns multiple responsibilities to the functional heads.
Evaluation of performance of such organizational entities is very difficult. Though they offer
economies of using scares functional staff, it poses problems of casting the individual
responsibility. This form of organization is very complex, from the point of view of management
control system.
At the end we must not forget that the management control system is for the organization and not
the organization exists for management control system. One has to mould and remould the
management control system to suit the given organization structure
Usually in an advertisement agency, account supervisors are shifted from one account to another
on periodic basis, this practice allows the agency to look at the account from the perspectives of
different executives. However taking in to consideration the time lag of result realization in such
services is quite large. And this may pose problem of performance assessment of a particular

executive. This does not mean a control system designer should insist on abandoning the rotation
system of the executives.
Matrix structure offers advantages such as faster decision making process, efficiency and
effectiveness but simultaneously it may pose problems such as added complexity in control
function, assignment of responsibility and authority etc.