Chapter 6

Behaviour in Organization

6.1 MANAGERIAL BEHAVIOUR

Human
the interaction of human beings.
Control in organization is exercised through
an control techniques
and not well understood. Hence,
behaviour is not simple, often complicated
are developed in view
of the normal human behaviour.
are as follows:
basic human behaviour which
There are five assumptions about
as such, are able to
reason,
Human beings are basically rational and
(a) Rationality.
make planand control behaviour.
is the desire to be creative.
(b) Creativity. A basic human instinct to be "in Contro!"
Human desire to manage. Therefore, the desire
beings
(c) Mastery.
is inherent.
instincts may
(d) Morality. Human have strong moral instinct, although these
beings
not always dominate behaviour.
Human have
beings needs and desire for human association.
strong
(e) Community.
are designed
to
Asorganizations pursue their goals and objectives, control systems
must understand
favourably influence human behaviour, and therefore, system designers
these five basic assumptions about human behaviour.

6.2 GOALS AND CONTROL

An organization's goals and objectives determine the standard of control. Top managemen
tne
determines the goals and issues directives or orders to operating managers who set
and execute them.
objectives
However, managers differ in their ability to carry out responsibilities assigned to them.
The ability of the manager depends on a number of factors such as inborn quality, trait o
as well as his education,
character of the person training, experience and suitability to the
46
 BEHAVIOUR IN ORGANIZATION
h All of these factors have 47
assig
assigned

imnossible a
great influence on their
there. impossible to
predict as to how exactly performance. It is,
the inceniives provided in the
an individual
Control System. shall react and
Acain, since
gain, since contro
controI is (Think of the motor car respond to
achieved through the action of
driver).
beings, Management Control System in an managers-who are human
DnsaS exist thermostat or human body
as exist in organization differs from mechanical or biological
syste
temperature, in the following
(a) Problem of Perception. Operating managers may not fully understand two ways:
management wants them to do. what the top
h) Problem of Motivation. Managers
may or may not react in the same the
top management wants them to react. way as

6.3 PERCEPTION

Operating managers receive information from the top Management or through the hierarchy
as to what they are supposed to do under certain circumstances. This information is
normally conveyed:
(a) by budget,
(6) by budget manualloperation manual,
(c) by written orders, rules or instructions,
(d) by some formal document,
(e) by conversation,
() by other informal means,
(8) by fax, e-mail and cell phone.
informal communications
free from ambiguity. But
Formal communications are clear and normally Information
mainly due to erroneous perception.
may lead to confusion and complication
for one or more of
the reasons given below.
Channels may conflict with one
another
indicated as reporting to
hierarchy, where a manager is
Organization chart indicates
the with other parallel
responsible. But, informally he reacts
tne Genéral to whom he is
Manager, or lower levels.
managers as well as those in the higher

A Case Study
to the
Manager reports
centres exist, an Accounts Finance
organization, where profít to the
viSional
functionally, he is also responsible
Division, but internal conflicts
of the was some
eneral Manager level. It so happened
that there
position,
since the
Dir at the Corporate reach the top
Director to
r Manager and the Finance that time, the
Managing Director
eWeen the General
shortly. At in the
Director was due lots of irregularities
reti Managing
m e n t of the
w e r e
Director that
there know about it,
Finance c a m e to
from General Manager into
V E a a complaint material. When
the
Manager to investigate
of a particular bulk Accounts
Manager and the
w i t h i n three
dse to him
Purchase submit report
called the and to
nmediately allegations
the find out the validity
of the
 48 MANAGEMENT CONTROL SYS TEMs

days. The Accounts Manager visited the market places with the Purchase Manager, enquired
about the prevailing practices, collected some data and documents, and submitted the joint
report which went against the allegations made by the Finance Director. The Account
Manager forwarded a copy of the report to the Finance Director in due course.
On the very next day, the Finance Director asked the Accounts Manager why the latter
had undertaken the investigation without checking with him. The Accounts Manager insisted
that he did not feel the need to check with him since the General Manager could always
ask him for such work. Yet, he had to suffer for the consequence. This is a clear case of
conflict in the perception, since the Accounts Manager was unaware of the Finance Director's
interest in the matter. Thus, a conflict can occur even in a formal communication.
The goals of a formal organization may be different from those of an informal organization.
The relationship that constitutes an informal organization is not shown in the organization
chart, but they are part of the formal management control systems.
ofperception of a manager differs from the other. As a result, the degree of
Strength
importance given to a course of action expected by
the top management depends on the
manager's own perception about it.
due to some strange reasons. Functional
Sometimes, erroneous perception may arise
advance idea in mind overruling actual
fixation is one such phenomenon. Fixation means
matter. It happened when one gets
fixed an idea in mind, which may have a second meaning
or interpretation, but he does
not care to check the actual one. For example, 'salary' may
as net or gross or take home,
but s o m e o n e may think always as gross salary
be expressed
and act upon it.

6.4 MOTIVATION
him/her.
how manager reacts to the
information or reports received by
Action depends on a
a
matter. Apart from perception,
Their reaction depends on their actual perception of the within the
on how much he is
motivated. Motivation occurs
manager's reaction depends be influenced
instinct of the human being. It can
individual, it is again the result of inner to the stimuli
some external stimuli also. Thus,
motivation reflects individual's reaction
by Motivation to engage in a given behaviour is determined by
and
belief about the likely outcome from that behaviour,
(a) the person's or expectancy
his needs.
the person attaches to those outcomes, which shall satisfy
(b) the importance

6.5 GOALS AND NEEDS

contribute to
organization personal goals. Their decision to
to fulfil their
Individuals join an
become member of it stems from heir
work of an organization once they
the productive such as career growth, financia
this will help achieve their personal goals
nerception that etc.
status in the society, needs are
stability, as needs. Some of the
An
personal goals can be expressed
individual's
 BEHAVIOUR IN ORGANIZATIONv
49
aterialistic, e.g. money, perks, etc. while others are
mate

oromotion, social staus, acceptance as an psychological, e.g. praise, recognition,

UCILIAN' or Britannia's important person or even identifying as an
can be
Manager and like that.
A person motivated by positive
incentives such as cash rewards,
aromotion, transfer with higher status. Incentives
could be negatives also such as out-of-turn
demotion, no change in salary, etc. Individuals are influenced by the positive aspunishment,
negative incentives. well as by

6.6 GOAL CONGRUENCE

When an organization's goal coincides with the

personal goal of the manager, it is called
congruence. Ideally, the system should be so goal
in accordance with their
designed
that action that it leads people to take
perceived self interest are actions that are also in the best interest
of the organizatioon.
Douglas Magregor writes, "The essential task of management is to
conditions and methods of operations, so that people can achieve arrange organizational
their own goals best by
directing their own efforts towards organizational objectives."
However, perfect congruence between individual goals and
exist. For example, individual organizational goals does not
employees expect as high salary as they can get, but the
organization cannot afford beyond certain limit. Again, a manager may reduce cost at the
expense of quality, but that will not be in the interest of the
organization. Similarly, a
manager can control expenses in his department to such an extent that it affects
the
subsequent person in another department, and thereby, affects the interest of the manager of
the other department as well as the
organization. Let us consider the example given below.
A Cost Accountant of a
Factory found out several weak areas within six months of his
appointment. He was rewarded by the company. In the budget review meetings, he used to
expose such weaknesses and demanded corrective measures. Some of his suggestions were
well appreciated by the
Management.
One day, the Industrial Engineer of the factory came to him and in a
friendly tone,
requested him to consider the reactions of the colleagues who are also a part of the
management and sometimes, suffer for his exposures. It is what he wanted? The Cost
Accountant realized his mistake, and thereafter, always consulted his colleagues and discussed
With them prior to
placing the case before the Management. All his colleagues appreciated
his gesture and became more
friendly with him, and the company also recognized him as
a successful manager.

6.7 COOPERATION AND CONFLICT

From the above example, it is clear that since more than one managers are involved in
n g out a given plan, the interactions between the managers also affect what happens.
y actions that a manager may want to take to achieve his personal goals have an adverse
C C t on other managers and may result in an overall profit, besides creating some conflict
 50
MANAGEMENT CONTROL SYSTEMS

among them. The objective of the organization will not be fulfilled unless managers work
together with certain amount of harmony and cooperation.
An organization, therefore, attempts
balance between the forces that create conflict
to
and those which create cooperation. Some conflicts are not only inevitable, but also desirable
Conflicts result partly from the competition among participants for promotion and partly
from need-satisfaction. Such competition, within limits, is healthy. Certain amount of cooperation
1s similarly essential.

6.8 ORGANIZATIONAL CLIMATE

The Management style of the Chief Executive normally influences the organizational climate.
Some chief executives rely heavily in formal reports and other documents, while others
prefer conversation and informal contacts.
One senior manager joined a new company at Calcutta (Kolkata), and found himself in
tight corners, when he realized that more decisions are taken at General Manager's residence
in the evening and not in the office. Even in the company parties, there is an inner group
which determines the destiny of the company. He, being head of Finance and Administration
had no alternative but to hold a glass of Whisky to associate himself as a member of the
inner party. That is the style and culture of the control process.
However, formal system must be consistent with the informal system and Top Management
preference. If a new Chief Executive takes over, the system naturally changes to some
extent.

6.9 CONTROL AND PEOPLE

Some significant changes have occurred recently in the measurement of managerial performance
and martagerial remuneration. Control is no longer viewed as a regulatory function. On the
contrary, it is considered as a "facilitator'. Control does not necessarily create restriction
rather, it assists in the successful performance of the task. Hence, suitable motivation and
adequate incentives can give amazing results. If for some reasons, someone has to be
punished, it must be ensured that a worthy person is equally rewarded.
Again, in the process of control, the focus should be on the activity and not on the
person doing the job. If any comment is made, the same should be pointed towards the
problem relating to the task or operation. Casting aspersion to an individual must be avoided.
During committee meetings, members should be very careful about this aspect.

SUMMARY
Human behaviour is very complicated and not well understood. Hence, control techniques
or rationality, creativity, mastery, morality and
are with five basic assumptions
developed
community.
 The standard of control is determined by the goals and objectives of the organization.
S ince the control
in
achieved through the action of managers who are human beings, the
ntrol system is an organization faces problems of perception and motivation.
contr

The system should be designed such that the personal goal of the manager coincides
with the goals of the organization, i.e. there should be goal congruence. Manager's action
achieve his/her personal goal can adversely affect other managers. Often there are
to
conflicts and lack of cooperation between the managers. Therefore, the organization must
attempt to create a balance between cooperation and conflict.

CASE STUDY 1: BRITANNIA BIScUIT CO. LTD.-THREAT AND

OPPORTUNITY

Around 1978-79, the Government of India changed its industrial policy and shifted "Biscuit
and Bread" to the list of "Small Scale Industries". As a result, future growth of the Company
was threatened, since
it will not obtain any new license to increase its installed capacity of
biscuit and bread production.
The Company had already three biscuit factories at Calcutta (Kolkata), Bombay (Mumbai)
Delhi and Madras (Chennai).
and Madras (Chennai) and bread plants at Calcutta (Kolkata),
The effect of the change of the government policy would limit
the growth of the company
installed in the first location.
to the extent of unutilized capacity already
with the expansion of Sea
The Company naturally had to look for new business along
its competence and strength in
foods division which was set up in 1971. Considering
the company examined the possibilities
production and distribution channels all over India, started
to 'Soya' and ultimately Soya unit
of investing in a number of projects from 'Shoe'
at Vidisha in 1986.
an opportunity to increase biscuit sales
However, in the year 1980, the company got
Director retired and proposed to set up a small
through outsourcing, when its Technical
assistance to build the plant and manufacturing
plant at Hyderabad. Britannia provided all the
own brand of biscuits. Britannia supplied
Britannia' brands along with the company's
materials and appointed one Quality
new unit all raw materials and packing
ingredients,
ofproducts as well as
Control Officer and one Stores Controller to safeguard the quality
branches and despatches to the
accounting of incoming materials from suppliers and other
authorized wholesellers, sales depots and C&F agents.
to expand
Once this unit started results, the company saw a new opportunity
giving it alsoo
scale sector. Besides volume-increase,
Discuit-sales by outsourcing to the small own plants
on expensive varieties in company's
Opened up the opportunity to concentrate
Chennai and getting cheaper varieties manufactured by the contract
at
Kolkata, Mumbai and which
cost is substantially lower in the latter, Bombay Branch,
packers. Since conversion
was showing negative returns for long years, started giving profit.
substantial control in its own
Besides increase in sale and profit, the company gained established a large
Since the company
Plants from the industrial relations point-of-view. of its four factories
u n b e r of contract packers all over the country,
the bargaining power
 AVAGEMENT CONTROL SYSTE
TEMS
was so much
became
improved that 'Gheraos' and 'strike' which were
a
thing of past. Industrial peace was restored in the so
frequent in 70s and
80s
company after long years.

CASE STUDY 2: GODFREY

PHILLIPS INDIA LIMITED
Appointment of a Chief Executive Officer having
Godfrey Phillips India Ltd. merged with its soledifferent
vision and perspective.
1971-72. Around the selling agent D. In Macropolo & Co.
time, Phillip Morris Asia Pacific purchased
same
Godfrey Phillips India Ltd. from its counterpart in U.K. The companycontrolling shares of
profit with its major brand Cavanders Magnum selling about 320 million
was
making good
monthly sales of 400 millions spread over nine or ten brands. pieces out of total

The new
management made a thorough reshuffling in production, marketing and finance
divisions and introduced Standard Costing and Budgetary Control System as per Philip
Morris model.
A new marketing Manager Mr. X joined from giant
a
product industry. He had
consumer
and
a
different vision perspective compared to the
existing marketing group. Mr. X soon
realized that the company was simply carrying on the business by fulfilling orders of the

wholesellerS, earning good profits, maintaining excellent machinery and equipments and
quality of the products. The sole selling agent used to receive orders through its sales force,
and deliver them after receiving supply for the company. The company's main business lies
in four states of Maharashtra, Gujerat, Rajasthan and Madhya Pradesh and two cities of
Delhi and Kolkata. Average monthly sales was about 400 million pieces per month, the
breakdown of which is given below:

S.No. Brand Pack Sales Quantity

Million Pcs

Plain
Cavenders Magnum 10 320 73.3
1.
Cavenders Standard 10 20 6.7
10 10 4.4
3 Red &White
10 3.3
Blue &White 92.5
10 15 3.3
Others (Small Brands)

Filter 5 2.2
10
Four square 4.0
6. 10 20
Red & White
2.8 7.5
1. North Pole-Menthol
10
100
8. 400 100
 From the above sales analysis and other information about the history of each brand,

Mr. X observed that:

(a) High margin in Cavenders Magnum and its strong 1iking by elderly smokers of
Rajasthan, Gujarat and Delhi contributed profit to the company. However, of late,
it was found that there was a gradual drop in the sales
volume.
(b) Cavenders Magnum was a unique product. Its diameter was more than Standard
and Filter Cigarettes. Its aroma was especially liked by the smokers. In fact no
marriage party or social gathering could be complete in those days without the
presence of Cavender Magnum cigarettes.
(c) Company tried to introduce other brands in plain cigarettes, but without much
success.

(d) There was gradual increase in volume of filter cigarettes.

trend
Mr. X appointed one market research manager to analyse the existing market and
brand managers were appointed to
for future demand of cigarettes. Simultaneously, two
One sales administrator took charge
look after the health of each of the brands thoroughly.
of relation, collection and credit.
customer
his new strategy that completely
In course of next six months, Mr. X presented
of a brand and declared
revolutionized the current marketing concept. He spoke of life cycle
With the gradual extinction of senior smokers
that Cavanders Magnum was on its decline.
volume will drop further, as young generation were
of Gujarat, Rajasthan and Delhi, sales
not interested in smoking plain cigarettes.
the young college-goers prefer to
On the other hand, the growing population especially
were less injurious to
health. Around that time the
smoke filter cigarettes, because, they to
Government made it compulsory to publish the
warning-"Cigarette smoking is injurious
as in all advertisements
for cigarettes. Hence, sales
health" in each and every packet as well
filter sector only.
growth was expected to be in the i.e., the King
area revealed a further opportunity,
Further, an analysis in the university has
students. Mr. X thought that Four Square
Size cigarettes was the craze for the young career and bright
of growing young person looking for a good
a modern upcoming image a
Wills Filter,
was soon introduced
at slightly lower price than
future. Four square King Size
came a good propaganda,
"Live Life
which was most popularthat time. Along with it,
at

King Size". 200 million cigarettes

the volume of Four Square King Size touched
Within four years, was the
at with Wills Filter. It was a great success! That
per month and the price was par
five years, the cigarette industry passed through a
year 1978-79. During the next twenty for five
of Mr. X, who left that organization after working
lot of struggles, but the foresight
900 million pieces per
that currently the company is selling around
years, was so correct, which is about
its volume around 300 million sticks,
nonth, but Cavenders Magnum figures total sales in 1972-73.
5% of its total sales as compared to 73% of with
the company sold 880 million pieces approximately
During the year 2002-03, compared to 92% Plain and
8% Filter
57% Filter cigarettes as
ne ratio of 43% Plain and to examine the following chart, which clearly indicates
the

n 1972-73. It will be interesting

Executive Officer while anticipating future trends thirty years
back!

Ioresight of the Chief

 54
MANAGEMENT CONTROL SYSTEMS

PLAIN
Cavenders Magnum 310
Cavenders Gold Leaf 20
Cavenders Standard 30
Red&White 20 380
Standard Filter
43%
Four Square Premium 200
Four Square Special 130
Red&White Select 20
Red&White Flake 20
King Size Filter
Four Square King 100
Others
Red &White King 20
Premium Filter:
Rothmans
Chesterfield 10
Jaiseimer
500 57%%
880 880 100%