Management Control and Organizational Behavior
There is a close relationship between organization behavior and management control system. A management control system seek to evaluate and regulate the performance of responsibility centers. The manager in charge of a responsible center is rewarded for good performance. At the same time when the performance of a responsibility center is dismal, the manager in charge is punished. Thus, a management control system acts as a double-edged sword. That is why manager are afraid of a control system and, may resist it. In order to make a control system successful, it is necessary to understand the factors that motivate, managers to achieve the results. Behavioral sciences have given several concepts that are relevant to management control. Some of these concepts at described below.
1. Perception. Whether a management control system is accepted and implemented successfully does not depend on the system. It depends largely on how the members of the organization view the system. In other words, the viability of a control system depends upon the manager’s perception of the surrounding. Perception is the psychological process whereby people select, organize and interpret sensory stimulation’s into meaningful information about their work environment. Perception is at the base of every individual behavior. People may view the same world differently depending upon their needs, personalities, experience, status, etc. Managers judge a system by, how it is implemented. For example, when a manager gets credit by manipulating performance, other managers may feel that the system is unjust and unfair. Moreover, a control system involves interactions among managers at different performance, etc. To be effective, a management control system must contain the necessary means of motivation for satisfying the needs of managers.
2. Goal Congruence. People join organizations to attain their persona] goals. These goals include monetary rewards, job security, opportunities for advancement, status, recognition, etc. Similarly, an organization employs people to achieve its own goals, e.g., survival, profits, growth, etc. Both personal goals and organizational goals can be achieved simultaneously through goal congruence. Goal congruence implies integrating the personal goals with organizational goals so as to achieve a balance.
A sound control system monitors the goal congruence in the organization. It should ensure that the decisions and actions taken by employees are not against the interests of the organization. The control system should discourage employees from pursuing their own goals at the cost of the organization. For instance, quality should not be sacrificed for the sake of reducing costs. The control system should also reward and motivate employees when they contribute to organizational goals so that their personal goals are also served. Thus, goal congruence should be considered while designing and implementing a management control system.
3. Organizational Conflict and Co-operation. A management control system can be more effective when there is mutual co-operation between different responsibility centers in the organization. In actual practice, however conflicts are common. Conflicts are more when there is high degree of interdependence between the responsibility centers or when their functions are highly specialized. When the differences in the goals of various units of the organization. In actual practice, however, conflicts are common. Conflicts are more when there is a high degree of interdependence or the means for achieving the goals are contradictory, organizational conflicts are frequent. For example, the marketing department wants to increase advertising expenditure whereas. The finance department advises to reduce advertising expenditure. The conflict arises because each department tries to optimize its profits. Too management may take several steps, e.g., transfer price to resolve the conflict
Management control system should provide necessary inputs for resolving behavioral implications of management control conflicts and at the same time to create healthy competition among responsibility centers. For example, a committee of in charges of different responsibility centers may be constituted to maintain co-operation and coordination and between them.
4. Leadership-Styles. Every organization marks to achieve certain target. The control process determines the targets and the means for achieving them. The nature of control exercised in an organization to some extent depends upon the management leadership style. Broadly speaking there are two types of leadership styles, namely autocratic and democratic.
An autocratic leader sets the standards without consulting others and assigns the autocratic leader sets the standards without consulting others and assigns the work each individual unilaterally. He simply tells the people what are to be the subordinates for failures. On the contrary, a democratic leader sets standards in consultation with his subordinates. He explains the objectives of a task and then allows the people to exercise discretion and judgment. While evaluating performance, he tolerates reasonable mistakes and suggests measures to avoid failures in future. His approach to control is constructive (a) social systems, and (b) they are formed en the basis of mutual interest. The laws and norms of the society govern the activities and behavior of people in an organization because an organization a social system. Mutuality of interest is the fundamental factor in every form of human relationship. Organizational behavior is based on the principle of mutuality of interest. Individuals will not form a group unless the interests of both the individual as well as the group as a whole are sufficiently served. An individual joins an organization only when he feels that this will serve his interest. The organization also admits him when feels that he will serve its own interests.
Credit: Management Control Systems-MGU