Page 213 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes Co-ordination and Integration Mechanisms

Two management committees with overlapping membership strategy committee and operating
management committee, one for strategy and the other for operations, are helpful for resource
allocation, decision-making and conflict resolving. Formal meetings of the key managers of the
organization including those at the profit centre level are held periodically to formalize the
results of the planning process, to enhance communication, and each manager makes a
commitment of what is proposed.

10.4.3 Informal Control Process

The informal control process consists of activities engaged in by members of the organization
outside the formal control process while encountering non-routine decisions such as: realignment
of goals or when seeking new information to increase their understanding of the problem area.

Informal Organization Structure and Emergent Roles

The informal dimensions of structures arising out of interactions among people are difficult to
define; yet all organizations have them. These interactions include person-to-person contacts,
networks, ad hoc teams and available expert resources.

Informal Control Process

Management decisions are based upon experience, intuition and feeling. Successful decision-
making involves sensing the whole and impact of the decision on the whole.
Informal Recognition and Rewards

Informal rewards are stature-oriented. These rewards are bestowed upon the key team members
within the informal system. They are, usually, more intrinsic in nature. Individuals are shown
respect for their ability to operate within the informal control system and the team itself shares
in the recognition. Informal teams and networks also tend to bestow respect upon their own
members.

Informal Co-ordinating Mechanism

These evolve as people develop working relationships. They depend upon interpersonal
relationships and as such are quite adaptable, growing and changing to meet the perceived
needs of the organizational rewards. Communications tend to be less guarded during informal
communications, leading to discussion of more sensitive issues. They are exceptionally helpful
in supporting key values of the organization.

Current environment change, expanded competition and the need for associated technical
innovation have all increased the uncertainties to which today’s organizations must adapt.
Management gains the necessary flexibility by ‘backing away’ from formal controls in order to
explore alternative actions. In this way, management shortens communication channels.
The exhibit below presents the activities and actions taken within the formal control system.
These actions may be observed directly as the organization performs its tasks. Informal actions
include assuming responsibilities in addition to formal ones, searching for and gathering
information, showing appreciation and members checking with others in another
organizational unit.

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