Managerial Behavior

 Control in an organization is exercised through the

interaction of human beings. Human behavior is not
simple, often complicated and not well understood.
Hence, control techniques are developed in view of the
normal human behavior.
 There are five assumptions about basic human behavior
which are as follows:
 Rationality
 Creativity
 Mastery
 Morality
 Community
 As organizations pursue their goals and objectives,
control systems are designed to favorably influence
human behavior, and therefore, system designers must
understand these five basic assumptions about human
behavior.
Goals and Control
An organization‟s goals and objectives determine the
standard of control.
 Top management determines the goals and issues
directives or orders to operating managers who set the
objectives and execute them.
 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 or character of the
person as well as his education, training, experience and
suitability to the assigned jobs.
 All of these factors have a great influence on their
performance
 Again, since control is achieved through the action of
managers – who are human beings, Management
Control System in an organization differs from
mechanical or biological systems as exist in
thermostat or human body temperature, in the
following two ways:
1. Problem of Perception
2. Problem of Motivation
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:
 By budget,
 By budget manual/operation manual,
 By written orders, rules or instructions,
 By some formal document,
 By conversation,
 By other informal means,
 By fax, e-mail and cell phone.
 Formal communications are clear and normally free from
ambiguity. But formal communication may lead to
confusion and complication mainly due to erroneous
perception.
 Informal channels may conflict with one another for one
or more of the reasons given below.
 Organization chart indicates the hierarchy, where a
manager is indicated as reporting to the General Manager,
to whom he is responsible. But, informally he reacts with
other parallel managers as well as those in the higher or
lower levels.
Motivation
 Action depends on how a manager reacts to the
information or reports received by him/her.

 Their reaction depends on their actual perception of the

matter.

 Apart from perception, a manager‟s reaction depends

on how much he is motivated.

 Motivation occurs within the individual, it is again the

result of inner instinct of the human being.
 It can be influenced by some external stimuli also.
 Thus, motivation reflects individual‟s reaction to the
stimuli.
 Motivation to engage in a given behavior is
determined by
1. The person‟s belief or expectancy about the likely
outcome from that behavior, and

2. The importance the person attaches to those

outcomes, which shall satisfy his needs.
Goals and Needs
 Individuals join an organization to fulfill their personal
goals.

 Their decision to contribute to the productive work of

an organization once they become member of it seems
from their perception that this will help achieve their
personal goals such as career growth, financial
stability, status in the society, etc.
 An individual‟s personal goals can be expressed as
needs.

 Some of the needs are materialistic, e.g. money, perks,

etc. while others are psychological, e.g. praise,
recognition, promotion, social status, acceptance as an
important person.
 A person can be motivated by positive incentives such
as cash rewards, out-of-turn promotion, transfer with
higher status.

 Incentives could be negatives also such as

punishment, demotion, no change in salary, etc.

 Individuals are influenced by the positive as well as

by negative incentives
Goal Congruence
 When an organization‟s goal coincides with the personal

goal of the manager, it is called goal congruence.

 Ideally, the system should be so designed that action that

it leads people to take in accordance with their perceived

self interest are actions that are also in the best interest of

the organization.
 However, perfect congruence between individual
goals and organizational goals does not exist.
Cooperation and Conflict
 Many actions that a manager may want to take to

achieve his personal goals have an adverse effect on

other managers and may result in an overall profit,

besides creating some conflict 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 to balance
between the forces that create conflict 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 is similarly essential.
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.

 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.

Control and People
 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.
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”

Achieving organizational goals through achieving

personal goals in schedule time
Two questions should be asked:

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?
Factors affecting Goal congruence
Two types of factors:

1. Informal factors

2. Formal factors
Informal Factors
(A) External Factors:
1. Society
2. Work ethics
3. Locality

(B) Internal Factors:

1. Culture
2. Management Style
3. The informal organization
4. Perception & communication
Formal Factors
It can classify two ways:

1. MCS itself

2. Rules
Rules
 Rules can be described as all types of formal
instructions and controls. It includes standing
instructions, job descriptions, and standard
operations.
 Rules are enforced indefinitely.
 Some rules are guides.
 Some rules are positive requirements that certain
actions to be taken
Specific Types of Rules
1. Physical control

2. Manuals

3. System safeguards

4. Task Control Systems

Formal Control Process
It involves following steps:
1. Goals & Strategies
2. Strategic Planning
3. Budgeting
4. Responsibility Center performance
5. Evaluation of performance
6. Decision making
Different Organization
Structures
 The structure of any organization depends on the
nature of business, its size and complexity, inter-
functional relations and the extent of control needed.
Basically, there are three types of structures used in
big organizations, viz.
a) Functional
b) Divisional and
c) Matrix.
Functional Organization Structure

 In a functional organization, each manager is

responsible for a function such as Production, Sales,
Purchase, Personnel and Human Resource
Development, Finance and Management Accounting,
Secretarial and Legal, etc.
Advantages of Functional Structure
 Functional organizations have the potential of
operating with great efficiency and advantage.
 An advantage of a functional organizational
structure is that it offers a high level of
specialization.
 A worker who is an expert in his functional area can
perform tasks with a high level of speed and
efficiency, which enhances productivity.
 Each Functional specialists can contribute to the
overall profits of the organization.
Disadvantages of Functional
Structure
 Lack of Teamwork
While specialized units within the functional
structure often perform with a high level of
efficiency, they may have difficulty working well
with other units. If a project calls for several units
to work together, units may become territorial and
unwilling to cooperate with each other. In essence,
each unit may act in what it perceives to be its own
best interests instead of those of the organization
as a whole. Infighting may cause projects to fall
behind schedule.
 Difficult Management Control
Another potential disadvantage of the functional
organization structure is that it can pose a
challenge for top management to maintain control
as the organization expands. As organizations get
larger and top management needs to delegate more
decision-making responsibilities to each functional
area, the degree of autonomy may also increase,
making coordination of activities more difficult.
Divisional Organization Structure
 In a divisional organization, each division deals with a
particular product or product-line. A division is treated
almost like an independent entity, with all the
functions being controlled by the Divisional Manager
responsible for the result of the unit.
Advantages of Divisional
Structure
 Divisions work well because they allow a team to
focus upon a single product or service, with a
leadership structure that supports its major strategic
objectives. Having its own president or vice president
makes it more likely the division will receive the
resources it needs from the company. Also, a
division's focus allows it to build a common culture
and esprit de corps that contributes both to higher
morale and a better knowledge of the division's
portfolio. This is far preferable to having its product
or service dispersed among multiple departments
through the organization.
Disadvantages of Divisional
Structure
 A divisional structure also has weaknesses. A company
comprised of competing divisions may allow office
politics instead of sound strategic thinking to affect its
view on such matters as allocation of company
resources. Thus, one division will sometimes act to
undermine another. Also, divisions can bring
compartmentalization that can lead to
incompatibilities.
Matrix Organization Structure
 In a matrix organization, Project managers are
responsible for dealing with the customers, and
functional units provide resources to the projects.
 A project is any task or group of tasks involved in
reaching a specified end-objective. For example,
installation of a plant, new machine, setting a system,
organizing an advertising campaign, etc. Each project
is set up for a specific purpose.
 Responsibility centers, on the other hand, are arranged
by functions such as purchase and procurement.
 Organizations like consultancy firms, research and
development units, construction companies,
manufacturers of complicated plant and machinery are
examples of matrix structure.
 It is virtually a marriage between two types of
organization structures – one arranged by functions
and the other arranged by projects.
 There may be variations in the structure of a matrix
organization for planning, coordinating and controlling
complex projects.
Matrix Organization Structure
Advantages & Disadvantages of
Matrix Structure
 Matrix structure is appropriate for the management of
products when
 the number of products grows to be relatively large.
 Products require close coordination among many
specialized disciplines and
Management control in a matrix organization is
obviously more difficult than the other two types
because:
 Profitability is the joint responsibility of several
managers,
 Planning must harmonize the requirements of the
projects with the resources that are available at the
functional units and
 Perfect coordination is required in scheduling the
activities, so that the projects are completed in time,
but personnel are not idle at any time.
The Choice of the Best System
 Of the three systems discussed so far, which one is the
most suitable system to an organization? The choice is
really between the two- functional or divisional.
 It is easier to control a divisional organization, but
functional organization may be more efficient,
because large functional units give economies of
scale.
 A divisional organization requires managers with
broader outlook and total perspective of the business,
while a functional manager is a specialist in one or
more disciplines.
 A matrix organization requires personnel with the skill
of a specialist and thereafter, develop the skill for
general management.
 Lastly, the system must fit to the organization, not the
other way round.
Controller
“The person who is responsible for designing &
operating the MCS as a controller”
CFO…
Functions of Controller
1. Designing & operating information & control
system
2. Preparing reports
3. Analyzing & evaluating the programme
4. Budgeting
5. Internal audit & accounting control for validity of
information
6. Training & development