Page 34 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 3: Behavioural Considerations

The internal control style reduces dysfunctional “game playing” and encourages quick Notes
reporting of problems, since a more open atmosphere is created. On the other hand, this
style may lead to establishment of goals that can easily be met and therefore there is no
outward pressure for above average performance.

The internal control style leads to the following control system characteristics:
(a) Infrastructure: Responsibilities are pushed down the organisation to those closest to
problems and cuts “red tape” out of organisation. In this style there is no necessary
of centralized control but confidence is placed in the trustworthiness and motives of
the managers. This style also leads to development of profit center concept.
(b) Rewards: Bonuses are paid in relation to performance against plan and competition
is encouraged among executives.
(c) Communication and Integration: This style leads to extensive performance
communications and consultative approach to knit the organisation together.
Emphasised teamwork in problem solving and harmony in conflict resolution. Top
managers are rotated to eliminate boredom and provincial vision.

3. Mixed Control Style: Mixed Control Style includes a wide spectrum of styles consisting of
combination of the two extreme styles. It seeks participation without abandoning central
direction. The rewards are based on performance both objective and subjective measures.
The atmosphere is open but there is also insistence that performance attain certain levels.
This style has the following characteristics:
(a) Infrastructure: Normally analytical approach to decision-making and management
is used. In such a situation, this is considerable latitude given to the operating
divisions. But the top management possesses strong analytical power and chooses
subordinates with similar analytical and strategic skills. Normally, in such a situation,
there is relatively small staff at headquarters and therefore they don’t seek multiple
sources of inputs on operations.

(b) Rewards: In this case the best people are hired and promoted.
(c) Communication and integration: Numerous small meetings are used to obtain all the
information required by the top management and to solve problems.
(d) Control Process: Normally, financial plans are made yearly and updated monthly
and quarterly. Weekly performance reports against plan and cash flow statements
are also prepared. Some top management makes extensive use of return on
investment, as performance criteria but number of reports sought is less.

(e) Comments and conclusions: From the above, it can be seen each control style has a set
of mutually supportive systems that are consistent with it. Management must ensure
that it attains a certain level of internal consistency between its control styles and
the remainder of the control system.

Example: An external control style would be inconsistent with the use of loose or
unreliable performance measures.
Finally, managerial style should be adapted to the type of people who are being controlled. If
the employees show a high level of commitment, or if the task is very complex and difficult to
measure appropriately, it would probably be dysfunctional to use external style exclusively.

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