This document discusses factors that influence goal congruence between individuals and organizations. It describes informal factors like external social norms, organizational culture, management style, and informal communication channels. Formal control systems involve rules, budgets, and performance evaluations. The document also outlines different types of organizational structures like functional, business unit, and implications for control system design. Controller functions are defined as designing control systems, financial reporting, performance analysis, internal audits, and developing accounting personnel. The controller's dual reporting relationship to business units and corporate is also discussed.

1. Goal Congruence
• In a goal congruent process actions people take in
accordance with their perceived self-interest are
also in best interest for the organization.
• In this imperfect world, perfect congruence does
not exist between individual and organisation.
• An adequate control system will motivate
individuals to act in best interests of organisation.
• In evaluating any management control system,
two important questions are: what action does it
motivate people to take , in their own self interest?
Are these actions in the best interest of the
organization?

2. Informal Factors For Goal Congruence
• External Factors:
 external factors are norms of desirable behaviour that exist in the society in
which the organization is a part.
These norms of desirable behavior including set nofattitudes referred to as
‘work ethic’.
For example the employee loyalty, their diligence, their spirit of work etc.
 Local attitude e.g. specific to place
 industry-specific norms and attitudes
• Internal Factors: Culture:
The common beliefs, shared values, norms of behaviour are implicity
and explicity manifested in people behaviour throughout the
organization.
It brings about the’this is the way things are done here” & ‘we don’t
do that here’ in the practices of the company.
 influenced by personality and policies of CEO

3. Informal Factors For Goal
Congruence…
Management Style:
different managerial styles exist which
influence behaviour and goal congruence.
For example: Strict disciplinarian vs
charismatic and outgoing style vs
entrepreneurial and quick goal
accomplishment style.
MBWA v/s written reports

4. Informal Factors For Goal Congruence
 Informal Organisation:
• reporting relationships
•
•
official authority and responsibilities of each
manager
managerial performance evaluation
 Perception and Communication:
•In working towards goals operating managers must know what these goals
mean and what actions they are supposed to take to achieve them.
•They receive information from formal and informal channels . Despite the
range of channels complete clarity on intention of senior management is not
possible.
•Messages from different sources may conflict with one another or may subject
to different interpretations.

5. Formal Control System
• Rules:
 All types of formal instructions and controls
including standing instructions, job descriptions,
SOPs, manuals, guidelines etc.
 Some rules are positive requirements/guides and
some which are negative in nature.
 Specific types of rules are as under:
Physical controls
Manuals
System safeguards
Task Control Systems

6. Formal Control System
• Formal Control Process:
 A strategic plan implements organisation’s
goals and strategies
 Strategic plan is converted into an annual
budget to focus on planned revenues & expenses
for individual responsibility centers.
 Responsibility centers are guided by rules &
other formal information.
 Actual results are compared with the budget to
determine deviations and if required, corrective
actions are taken.

7. Types of Organisations
• Functional Organization:
 Here, Manager brings specialized knowledge
to take decisions related to a specific function
like production, marketing, finance etc.
 Efficiency is an important advantage
 Disadvantages include:
1. There is no ambiguous way of determining
effectiveness of separate functional managers
2. Disputes between managers of different
functions can be resolved only at the top, even
if it has originated at much lower level

8. Types of Organisations
3. Functional structures are inadequate for a firm
with diversified products and markets
4. Such organisations tend to create “silos” for
each function, preventing cross-functional
coordination in areas like new product
development
Such problem can be solved by
supplementing vertical functional structure
with lateral cross-functional processes such as
cross-functional job rotation and team-based
rewards

9. Types of Organisations
• Business Unit Organisation:
 It is responsible for all the functions involved
in producing and marketing a specified product
line
 Managers handle units as separate companies
 Performance of managers is measured by
profitability of the unit
 Headquarters reserve certain key prerogatives
e.g. obtaining and allocating funds
 Headquarters establish company-wide policies

10. Types of Organisations
 Advantages of Business units:
It provides training in general management
Manager may make sound production and
marketing decisions than headquarters might
Unit can react to new threats or opportunities
more quickly
 Disadvantages of Business units:
Each staff may duplicate some work
Disputes between business units, their personnel
and headquarters staff

11. Types of Organisations
• Implications for System Design:
 Along with ease of control, business organizations
have other criteria also to run their businesses.
 Once management has decided that a given
structure is best, all things considered, system
designer must take that structure as given.
 Business units require broader type of managers
and functional organizations provide benefit of
economies of scale.
 System designer should exist to serve the system.

12. Functions of Controller
• Controller or CFO is responsible for designing
and operating management control system
• Functions of a controller are:
 designing & operating information and control
 preparing financial statements and reports for
shareholders and other parties.
 preparing and analysing performance reports
 supervising internal audit and accounting
control procedures
 developing personnel in controller
organisation.

13. Controller – Line Organisation
• He may be responsible for developing and
analysing control measurements
• He may monitor adherence to spending
limitations given by Chief Executive
• He may control integrity of accounting system
• He may safeguard company assets from theft
and fraud
• He plays an important role in preparation of
strategic plans and budgets
• He implements policies that are decided by line
management

14. Controller – Business units
• He owes some allegiance to corporate controller
and also to the managers of their own units, for
whom they provide staff assistance
• In some companies, controller reports to
business unit manager and in other companies, to
the corporate controller, but there are problems in
both these relationships
• It is expected that controller will not condone or
participate in the transmission of misleading
information or in concealment of unfavorable
information