Behavior in Organizations Management Control Systems Chapter 3 July 2014Iwan Pudjanegara SE., MM.1.

Behavior in Organizations

Management Control Systems

Chapter 3

July 2014 Iwan Pudjanegara SE., MM. 1

Goal Congruence

MCS/SPM influence human behavior.Good MCS influence behavior in a

goal congruent manner.Goal Congruence means that the

goals of an organization’s individual members should be consistent with the goals of the organization itself.


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 ethic.



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, national.

Ex. Silicon ValleyJuly 2014 Iwan Pudjanegara SE., MM. 4


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 StyleThe IF that probably has the strongest impact on mgt control is management style.

CEO attitude Superiors attitudes Subordinates’attitudes.

Management By Walking Around



The Informal Organization



Perception and CommunicationManagers must know what the goals of organization are and what actions they are supposed to take to achieve them.


The Formal Control System

1. RulesShorthand for all types of formal

instructions and controls, incl. Standing instructions, job descriptions, SOP, manuals, and ethical guidelines.

From trivial (= sepele) to the most important.



Types of Rules :Physical Controls

Ex. Security guards, locked storerooms, computer passwords, vaults(=ruang besi), television/camera surveillance, etc.



ManualsManuals = written rules.Should be considered to be guidelines rather than fiats(=perintah)

Should be reexamined periodically to ensure that they are still consistent with the wishes of current senior management.



System SafeguardsSafeguards 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.



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.



Actual results are compared with budget to determine whether performance was satisfactory.

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 revision.


Types of Organizations

1) A Functional StructureEach manager is responsible for a specified function.

2) A Business Unit (BU) StructureBU managers are responsible for most of the activities of their particular unit.

3) A Matrix StructureFunctional units have dual responsibilities.


Functional Structure of Organizations

An important advantage of a functional structure is efficiency.

Disadvantages of a functional structure :a) No unambigous way of determining

the effectiveness of the separate functional managers. (unambigous=jelas)



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.

c) Functional structures are inadequate for a firm with diversified products and markets. (inadequate=tidak cukup)



d) Functional organizations tend to create soil for each functions.

(soil=noda) (lateral=sisi,cabang)

This problem can be mitigated by supplementing the vertical functional structure with lateral cross-functional prosesses such as cross-functional job rotation and team-based rewards.


Business Units (BU)

BU is designed to solve problems inherent in the functional structure. (inherent=melekat)

a BU = a DivisionBU is responsible for all the

functions involved in producing and marketing a specified product line.


Business Units (BU)

The performance of BU is measured by the profitability of BU.

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 quickly.


Functions of the Controller

• Designing and operating information and control systems.

• Preparing financial statements and financial reports for shareholders and other external parties.

• 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.


Corporate Controller

Business Unit

Manager

Business Unit

Controller

Corporate Controller

Business Unit

Manager

Business Unit

Controller

Dotted Line Solid Line

EXHIBIT 3.3

Alternative Controller Relationship


Behavior in Organizations Management Control Systems Chapter 3 July 2014Iwan Pudjanegara SE., MM.1.

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