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Behavior in Organizations

Felix Deo Gratias Eliezer

Goal Congruence
 MCS/SPM influence human behavior.
 Good MCS influence behavior in a goal congruent manner.
 In a goal congruent process actions people take in accordance with
their perceived self-interest are also in best interest for the
 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
Informal Factors That Influence
Goal Congruence
 External Factors (EF)
 EF are norms of desirable behavior that exist in
the society of which the organization is a part.
 These norms = a set of of attitudes = the work
 The Work Ethic : employees’ loyalty to the
organization, their diligence, their spirit, and
their pride in doing a good job.
 Some of Attitudes are local, industry-specific,
 Ex. Silicon Valley
Informal Factors That Influence
Goal Congruence
 Internal Factors (IF)
 Culture
 The organization’s own culture is the most
important IF.
 Common beliefs, shared values, norms of behavior,
etc., that are implicitly accepted and explicitly
manifested throughout organizations.
 Management Style
 The IF that probably has the strongest impact on
mgt control is management style.
 CEO attitude  Superiors attitudes 
Informal Factors That Influence
Goal Congruence
Perception and Communication
 Managers must know what the
goals of organization are and what
actions they are supposed to take
to achieve them.
The Formal Control System

Shorthand for all types of formal
instructions and controls, incl.
Standing instructions, job
descriptions, SOP, manuals, and
ethical guidelines.
From trivial to the most important.
The Formal Control System
 Types of Rules :
 Physical Controls
Ex. Security guards, locked storerooms,
computer passwords, vaults, television/camera
surveillance, etc.
 Manuals
Manuals = written rules.
Should be considered to be guidelines rather
than fiats Should be reexamined periodically
to ensure that they are still consistent with
the wishes of current senior management.
The Formal Control System
 System Safeguards
 Safeguards are built into the information
processing system to ensure that the information
is accurate and to prevent fraud.
 Incl. Cross-checking totals with details, requiring
signatures, separating duties, etc.
 Task Control Systems
Task control : the process of ensuring that specific
tasks are carried out efficiently and effectively.
The Formal Control System
2) Formal Control Process
 A strategic plan implements the organization’s
goals and strategies
 The strategic plan is converted to an annual
budget that focuses on the planned revenues and
expenses for individual responsibility centers.
 Responsibility centers are also guided by rules
and other formal information.
The Formal Control System
 Actual results are compared with budget to
determine whether performance was
 If it was, the responsibility center receive
feedback (praise or reward).
 If it was not, do corrective action in the
responsibility center and possible plan
Formal Control Process
Types of Organizations
1) A Functional Structure
Each manager is responsible for a specified
2) A Business Unit (BU) Structure
BU managers are responsible for most of
the activities of their particular unit.
3) A Matrix Structure
Functional units have dual responsibilities.
Functional Structure
of Organizations
Functional Structure
of Organizations
An important advantage of a functional
structure is efficiency.
Disadvantages of a functional structure :
a) No unambiguous way of determining the
effectiveness of the separate functional
b) If the organization consists of managers in one
function who report to higher-level managers in
the same function, then a dispute between
managers of different functions can be
resolved only at the top.
Functional Structure
of Organizations
C) Functional structures are inadequate
for a firm with diversified products and
D) Functional organizations tend to create
silos for each functions.
Business Units (BU)
 BU is designed to solve problems inherent in the functional
 a BU = a Division
 BU is responsible for all the functions involved in producing
and marketing a specified product line.
 The performance of BU is measured by the profitability of
 Advantages of BU:
• It provides training ground in general management.
• Because BU is closer to the market for its products than
HO, BU can react to new threats & opportunities more
Business Units (BU)
Matrix Structure

• Advantages of a Matrix Structure

Proponents of matrix management suggest that this
structure allows team members to share information
more readily across task boundaries, countering the
“silo” critique of functional management. Matrix
structures also allow for specialization that can both
increase depth of knowledge and assign individuals
according to project needs.
• Disadvantages of a Matrix Structure
A disadvantage of the matrix structure is the
increased complexity in the chain of command when
employees are assigned to both functional and project
Matrix Structure
Functions of the Controller
• Designing and operating information and
control systems.
• Preparing financial statements and financial
reports for shareholders and other external
• Preparing and analyzing performance reports,
program and budget proporsals, then
consolidating into annual budget.
Functions of the Controller
• 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.
Controller – Line Organisation
• responsible for developing and analyzing control
• monitor adherence to spending limitations given
by Chief Executive
• control integrity of accounting system
• safeguard company assets from theft and
• plays an important role in preparation of
strategic plans and budgets
• implements policies that are decided by line
Controller – Business units
• 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
Relationship Dotted Line Solid Line

Corporate Corporate
Controller Controller

Business Business
Unit Unit
Manager Manager

Business Business
Unit Unit
Controller Controller

July 2014 Iwan Pudjanegara SE., MM. 24