Page 48 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 3: Behavioural Considerations

Notes

Notes In this type of control, the management expects the employee to perform in a
result-oriented way, as it believes that the employee has the requisite knowledge to
undertake the activities required, in a suitable manner, and to complete the assigned task
without management intervention.
Informal Control System: These are unwritten, typically worker-initiated mechanisms that
influence the behavior of individuals or groups in business units. There are three types of
informal controls. They are:
1. Self-control: It deals with the establishment of the personal objectives by the individual,
monitoring their attainment and adjusting the behavior in the organization to attain the
goals. Self-control can be beneficial to an organization if the organization’s goals are in
congruence with the individual’s goals. But if the goals do not match then the performance
of the employee can suffer.

2. Social controls: Social control refers to the prevailing social perspectives and patterns of
interpersonal interactions within subgroups in the firm. In this type of control, an
organization establishes certain standards, monitors conformity with the standard and
takes action when deviations occur. Social control arises out of the internalization of
values and mutual commitment towards some common goals.
3. Cultural controls: According to William G Ouchi, culture is “the broader values and
normative patterns that guide worker behavior within the entire organization.” Cultural
control can be realized by norms of social interaction, and stories, rituals and legends
relating to the organization.

3.9.1 Subsystems and Components of Management Control Systems

The subsystems and components of control systems can be discussed on the basis of formal and
informal processes.

Formal Control Process

The formal control process has two dimensions – formal planning and formal reporting.
1. Formal planning process: The formal planning process has two dimensions: strategic
planning and operations planning. In most organizations there are two budgets- one for
operations and one for strategy; and, there are two sets of reports - one for strategic
projects and one for operating activities. The formal planning and control process should
support the style and culture of the organization, and should be supported by the
infrastructure, the rewards, and the communication systems in the organization.
A strategic planning system is necessary to assist the organization in the planning and
control of projects. It helps the organization to decide its goals and objectives, and key
strategies. An operational planning system undertakes activities that are short term in
nature.
2. Formal reporting process: Detailed reports help the organization to assess the progress of
its strategic and operational planning. Monthly, quarterly or yearly reports help the
organization to analyze its performance periodically, and to decide on the next set of
programs to be undertaken.

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