Chapter 3

BEHAVIOUR IN
ORGANIZATION

Behavior in Organizations
Good MCS
Goal congruence manner
Individual actions taken to achieve personal goals
also help to achieve the organizations goals.

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.
The questions are:
1. What actions does it motivate people to take in their
own self-interest?
2. Are these actions in the best interest of the
organization?

Informal Factors That

Influence Goal Congruence

Formal control systems, ex:

Strategic plans, budgets, reports
Informal processes, ex:
Work ethics, management style, culture.
Informal processes

External

Internal

External Factors
External factors are norms of desirable behavior that
exist in the society of which the organization is a part.

Work ethic:
Locally
Industry specific
Nationally

Internal Factors

Culture: the common beliefs, shared values,

norms of behavior, and assumption that are
implicitly accepted and explicitly manifested
throughout the organization.
Management Style: superiors attitude
has the strongest impact on management
control.
The Informal Organization
Perception & Communication

Specific types of rules

Physical Controls: security guard, locked

storerooms, vaults, computer passwords,
television surveillance.
Manuals: guidelines, how much discretion should
be allowed, & a host of other consideration.
System Safeguards: cross-checking totals with
details, authorization, separating duties, counting
cash.
Task Control Systems: the process of assuring
that specific tasks are carried out efficiently &
effectively.

Formal Control Process

Goals
Goals
and
andstrategies
strategies

Other
Other
information
information

Rules
Rules

Reward (feedback)

Strategic
Strategic
planning
planning

Revise

Budgeting
Budgeting

Revise

Responsibility
Responsibility
center
center
performance
performance
Corrective
action

Report
Report
actual
actualvsvsplan
plan
Measurement
Feedback
Communication

Was
Was
performance
performance
satisfactory?
satisfactory?

Yes
No

Types of Organizations
1.

2.

3.

A functional structure, in which manager is

responsible for a specific function such as
production or marketing.
A business unit structure, in which business
unit managers are responsible for most of the
activities of their particular unit, & the business
unit functions as a semi-independent part of the
organization.
A matrix structure, in which functional units
have dual responsibilities.

Functional Organizations

Specialized knowledge
Advantage
efficiency
Disadvantage:

There is no unambiguous way of determining the

effectiveness of the separate functional managers.
A dispute between managers of different functions
can be resolved only at the top.
Functional structure are inadequate for a firm with
diversified products & market.
Functional organization tend to create silos for
each function

Business Units

A business unit (division) is responsible for all

the function involved in producing & marketing a
specified product line.
Performance measured
profitability
Advantages:

Provides a training ground in general

management.
Manager may make sounder production &
marketing decisions than headquarters might.
The unit as a whole can react to new threat &
opportunities more quickly.

Business Unit

Disadvantages:

The possibility that each business unit staff may

duplicate some work that in a functional
organization is done at headquarters.
Disputes between functional specialists in a
functional organization may be replaced by
disputes between business units in a business unit
organization.

Implications for System Design

The system designer must always fit the

system to the organization rather than
the other way around.
Once management has decided that a
given structure is best, all things
considered, then the system designer
must take the structure as given.

Function of the Controller

Controller:
the person who is responsible for
designing and operating the
management control system

Chief Financial Officer

(CFO)

Functions of the Controllers

Designing & operating information & control systems.

Preparing financial statements & financial reports (including
tax returns) for shareholders & other external parties.
Preparing & analyzing performance reports, interpreting
these reports for managers, & analyzing program & budget
proposals from various segments of the company &
consolidating them into an overall annual budget.
Supervising internal audit & accounting control procedures
to ensure the validity of information, establishing adequate.
Developing personnel in the controller organization &
participating in the education of management personnel in
the matters relating to the controller function.

Relation to Line Organization

The controllership function is a staff function.

Controller only collect and report information, the
use of this information is the responsibility of the
line management.
Controller does not make or enforce management
decisions.
Controllers play important role in the preparation
of strategic plans and budgets.

The Business Unit Controller

Alternative Controller Relationships:
Dotted Line

Solid Line

Corporate
Controller

Corporate
Controller

Business Unit
Manager

Business Unit
Manager

Business Unit
Controller

Business Unit
Controller