3. Behavior in Organizations.pdf

Behavior in Organizations

2Prof. Nitin BolinjkarProf. Nitin Bolinjkar

Goal Congruence

• Senior Management wants the organization to attain the organization's goals but the employees are interested in achieving their personal goals.

• Thus, the central purpose of the control system is to make sure that a high level of “Goal Congruence” to be implemented.

• In a Goal Congruent process, the actions people led to take in accordance with their perceived self-interest are also in the best interest of the organization.

• Although this situation is purely an utopian type, an adequate control system can at least ensure to encourage an individual to act for the organization.


Informal factors influencing Goal Congruence

• External Factors: work ethics – loyalty, diligence, pride on a job well done (enterprising

communities, Swiss banking). local or regional attitudes specific to area, city or country (E.g. Japan,

Singapore) other attitudes – industry specific (Technology industry).

• Internal Factors: Culture: beliefs, values, norms, assumptions, rituals. ‘We just don’t do that

here!” or “This is the way we do things here” (E.g. US Marines, J&J Tylenol callback). Most difficult to change.

Management Style: superior's attitude, leadership style (E.g. Cypress) The informal organization: formal/informal organization charts, group

dynamics. Perception and communication, goal conflicts (increase sales v/s keeping

down head-count)


Formal Control System

The formal factors have major impact on the effectiveness of an organization’s control. These can be classified into two major segment.1. Management Control System itself, and2. Rules: formal instructions including, job descriptions, SOP

etc. – Guidelines are circumstantially flexible & discretionary, subject to

approvals. (E.g. extending credit to prospects). – Policies are absolute & inflexible (E.g. Pilots cannot take-off without

ATC permission).


Formal Control System

There are four types of rules;1. Physical control: Security guards, vaults, video surveillance,

etc.2. Manuals: live documentation for policies, guidelines and

exceptions.3. System Safeguards: IT enabled systems to ensure

information accuracy and to prevent security breaches. Also includes processes such as cross-checks, authorizations, job separation, physical counts of assets, internal & external audits, etc.

4. Task control systems: Automatic built in control mechanisms.


The Formal Control Process

Communication

ResponsibilityCenter

Performance

Actual Vs Plan

Was PerformanceSatisfactory?

BudgetingStrategic Planning

Other Info.

RulesGoals &

Strategies

Yes

No

Corrective Action

Revise

Reward

Revise


Organizational Structures

• Organizational structure refers to the formalized arrangement of interaction between and responsibility for the tasks, people, and resources in an organization.

• It is most often seen as a chart, with positions or titles and roles in cascading fashion.


Old & New Organization Design

Old Organization Design New Organization DesignOne large corporation Mini business units and cooperative

relationships

Vertical Communication Horizontal Communication

Centralized Top Down Decision Making

Decentralized Participative Decision Making

Vertical Integration Outsourcing and Virtual Organizations

Work Quality Teams Autonomous Work Teams

Functional Work Teams Cross Functional Work Teams

Minimal Training Extensive Training

Specialized Job Design Focused on Individual

Value chain Team Focused Job Design


Span of Control

Wide Span: De-centralized, horizontally dispersed with fewer hierarchical levels

Narrow Span: Centralized, more hierarchical levels


Span of Control

The extent to which authority is delegated throughout an organization determines organizations degree of centralization.Advantages of Centralization Advantages of De-centralization

Easier to provide strong leadership in times of crisis

Fewer levels of management, faster decision making, better communication.

Easier to implement common policies and practices for the business as a whole

Reduces costs

Easier to co-ordinate and control from the centre

Decisions are made closer to the customer. Improved level of customer service

Economies of scale and overhead savings easier to achieve

Better able to respond to local circumstances

Greater use of specialisation Good way of training and developing junior management


Functional Organizational Structure

• A functional organizational structure is one on which the tasks, people, and technologies are divided into separate “functional” groups (such as marketing, operations, and finance).


Functional Organizational Structure


SBU / Divisional Structure

• A divisional organizational structure is one in which a set of relatively autonomous SBUs, or divisions, are governed by a central corporate office but where each operating division has its own functional specialists who provide products or services.


SBU / Divisional Structure

CEO

Manager

SBU1

Plant Manager

Marketing Manager

Staff

Manager

SBU2

Plant Manager

Marketing Manager

Staff

Manager

SBU3

Plant Manager

Marketing Manager

Staff

Staff


Matrix Organizational Structure

• The matrix organizational structure is one in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager, making best use of functional specialization and project specialization.


Matrix Organizational Structure


Organization Structure Characteristics

FUNCTIONAL BUSINESS UNIT MATRIXFocus is Effciency Focus is Effectiveness Combines

elements of both the functional and projectized structures to facilitate the responsive and effective participation of people from different parts of the organization.

There is no proper way to measure functional effectiveness as the performance of the whole organization is measured together.

Performance is measured in terms of profitability of the business unit.

Structural heads, may have disputes in terms of resource allocation, performance measurement, operational dependency.

Business unit managers are responsible for planning and coordinating the work of the BU functions. Important decisions like overall business strategy, funding, budgeting, branding, etc. is done by HQ.

Functional structures are inadequate for a firm with diversifies products and markets. E.g. Deere & Company

An advantage of the structure is it provides a training ground in general management.

Functional 'SILOS' can prevent crossfunctional co-ordination and synergy. E.g. Boing

Disadvantages of this type of structure is that, there may be duplication of work because the functional work is done at unit level as well as at top level. This can also lead to an increase in staff cost.


Types of Organizations – Implications on MCS Design

• Ease of Control: Because each business Unit has clearly demarcated profit responsibility and accountability, Ease of Control in Business Unit organization structure is the highest.

• Efficiency: The efficiency of Functional Unit organization structure is the highest because this structure enjoys economies of scale.

• Management: A Business Unit organization requires an ‘enterprising’ manager, whereas a Functional Unit organization requires ‘professional’ manager.


Designing MCS: The Pre-requisites

• An understanding of what the organization wants from each individual employee

• Role identification of each individual employee (at all levels) in achieving organizational goals

• Identification of key actions (KAs). KAs are firm-specific and person-specific.

• Specification of choice of controls (standards) for employees• Identification of possible causes of MC problems

1. lack of direction (lack of knowledge of what is desired), 2. motivational problems (self-interest, fraud and theft) and 3. personal limitations (lack of intelligence, training, experience,

stamina, knowledge of assigned tasks.


Choice of Controls

• Action controls: ensures employees perform / do not perform certain actions known to be beneficial / harmful to the organization; employee actions are the focus of control; most popular and direct form of controls.

• Results controls: encourages employee actions by focusing on their consequences; involves rewarding individuals / groups for generating good results / punishing them for poor results; employees empowered to take necessary action for desired results; encourages meritocracies, talent discovery and development.

• Personnel and culture controls: take steps to ensure employees will control their own behavior / each other’s behavior ; sometimes dominant form of control.


Action Controls (Prevention based)

• Behavioral constraints — Prevention-based controls making it impossible for people to do things that should not be done. Can be applied physically (locks, passwords, limits on access etc.) or administratively (restriction of decision-making authority, separation of duties)..

• Pre-action Reviews — involve formal (approval for expenditures, budget process) or informal (discussion to check project progress) scrutiny of action plans of individuals being controlled. Reviewers approve / disapprove proposed actions, ask for modifications before approval.

• Action accountability — Involves holding employees accountable for actions; rewarding acceptable (good) actions and punishing unacceptable actions.

• Redundancy — involves assigning more people or machines to a task than is theoretically necessary (have a back-up task force for security and computing facilities); expensive, conflicting, frustrating.


Factors influencing MCS Design

• Managerial style• Corporate culture• Organizational structure• Organizational slack• Stakeholders’ control and communication

structures• Perception of opportunities & threats.


CONTROL SYSTEMSTypes Of Control Systems


Types Of Control Systems

• Management By Objectives: Process whereby the superior and subordinate jointly identify common goals, define each individual's areas of responsibility in terms of the results expected, and use these measures as guides for operating the unit and assessing individual contribution. The essence of MBO is participative goal setting.

• Feedforward Controls : These ‘anticipatory’ are enforced before an activity begins. They make sure that proper directions are set and that the right resources are available to accomplish them.

• Concurrent Controls : Sometimes called steering controls, these ‘real time’ controls monitor ongoing operations and activities to make sure that things are being done correctly. Allows managers to correct problems as they arise

• Feedback Controls : Used to provide information at the output stage to ensure that results are up to desired standards. They focus on results, as opposed to inputs and activities.


The Cybernetic approach to management control

• Cybernetics is the science of communication and control, dealing with the self-regulating properties of a system.

• A cybernetic control system is a self-regulatory control system; once it is put into operation. it can automatically monitor, and take corrective action when necessary (thermostat, sprinkler system etc).

• Cybernetic control systems have built-in triggers/monitoring systems designed to alert if things are not progressing as intended. Cybernetic Systems are;• Goal-oriented—pre-determined goals “steer” the system• Mutual interaction—Mutually complementary sub-systems • Evolutionary—increase in size and complexity, resulting from

incremental improvements in existing attributes and development of new attributes


The Contingency approach to management control

• Based on the premise that MCS design must be adapted to (be contingent upon) the strategic context; interaction of organization with environment. That is, MCS process differs according to firm’s strategy selection.

• Contradicts the universalistic and mechanistic approach of an optimal design applicable to all settings.

• Major contingency variables:• Technology• Organizational structure• Unique external environment• Top management style• Culture


Functions of the Controller

The Controller is responsible for designing and operating the management control system in the organization. The controller usually performs the following functions: Designing the control systems. Preparing financial statements and financial reports for share holders

and other external parties. Preparing and analyzing performance reports, interpreting those

reports for managers an analyzing the program and budget proposals from various segments of the company.

Supervising internal audit and accounting control procedures to ensure the validity of information, establishing adequate safeguards against theft and fraud, and performing operational audits.


Management Ethics

• Ethics is the discipline that examines one’s moral standards, individual values in context to a group, society and human-kind.

• Ethics involves systematizing, defending, and recommending concepts of right and wrong conduct.

• Ethics refers to the moral principles that govern the actions of an individual or a group.

• Ethical standards reflect not a universally accepted code, but a person’s basis for differentiating right from wrong

• Code of Ethics is a guide to acceptable and ethical behavior as defined by an organization; it outlines uniform policies, standards, and punishments for violations.


Ethical Dilemmas

• The Samaritan Dilemma - beneficiaries of charity aid will become slothful or otherwise negligent members of society.

• Abortion, Suicide, Euthanasia: Pro-life, pro-choice?• Common Ethical Workplace Dilemmas

–Conducting Personal Business on Company Time–Taking Credit for Others' Work–Claiming Personal expenses as business expenses–Selling substandard, defective, objectionable company products –Gifts, commissions & kick-backs


Three Approaches to Ethics: Integrity, Outcomes and Duties

• There are essentially three Schools of Ethics, each vital but inadequate by itself. One can be ethical by applying all these approaches together:– Virtue Ethics: Focuses on the character of the agent. A

virtuous agent will act morally. – Consequentialist (or Teleological) Ethics: Focuses on

the consequences of an act to determine if the act is moral or immoral.

– Deontological Ethics: Focuses on the act. Certain acts are intrinsically right or wrong.


Ethical Dilemma: The Trolley Problem

Trolley Problem: There is a runaway trolley barreling down the railway tracks. Ahead, on the tracks, there are five people tied up and unable to move. The trolley is headed straight for them. You are standing at some distance, next to a lever. If you pull this lever, the trolley will switch to a different set of tracks. However, you notice that there is one person on the side track. You have two options: – Do nothing, and the trolley kills the five people on the main track. Moving to another track constitutes a participation in the existing status-

quo, making one partially responsible for the death when otherwise no one would be responsible.

– Pull the lever, diverting the trolley onto the side track where it will kill one person.

Being present in this situation and being able to influence its outcome constitutes an obligation to participate.


The Pyramid of Social Responsibility

VoluntaryResponsibilities

being a “good corporate citizen”;

contributing to thecommunity and quality of life

VoluntaryResponsibilities

being a “good corporate citizen”;

contributing to thecommunity and quality of life

Ethical Responsibilities; doing what is right, just,

and fair; avoiding harm

Ethical Responsibilities; doing what is right, just,

and fair; avoiding harm

Legal Responsibilitiesobeying the law (society’s codification of right

and wrong); playing by the rules

Legal Responsibilitiesobeying the law (society’s codification of right

and wrong); playing by the rules

Economic Responsibilitiesbeing profitable, being financially viable

Economic Responsibilitiesbeing profitable, being financially viable


Corporate Social Responsibility (CSR)

• Corporate social responsibility (CSR), also called corporate conscience, corporate citizenship (or responsible business) is a form of corporate self-regulation integrated into a business model.

• Corporate Social Responsibility integrates social and environmental concerns in their business operations and interactions with stakeholders.

• Corporate Social Responsibility specifies ways to exceed minimum obligations imposed by legislation/corporate governance.

• CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law."


Arguments FORIncreased Social Responsibility

Business is part of society and cannot ignore social issues.

By helping resolve social issues, business can create a more stable environment for long-term profitability.

Socially responsible decision making by firms can prevent increased government intervention, which could force businesses to do what they fail to do voluntarily.


Arguments AGAINSTIncreased Social Responsibility

Managers are responsible to stockholders, who want return on owners’ investment.

Higher ROI indirectly leads to healthier economy, which leads to less social issues & problems.

Corporate time, money, and talent should used to maximize profits, not solve society’s problems.

Social problems affect society, so business should not be expect to solve these problems.

Social issues are responsibility of elected officials who are accountable to voters.


The End

Documents

3. Behavior in Organizations.pdf