Definition of Behavioural Aspect of Management Control

Human behaviour is influenced heavily when controlled. What matters is a ‘good’ control systems pulls positive influence, and sometimes a ‘very good’ control system breaks the rule. Control systems’ thus, should assure that the actions taken to achieve individual performance goals are aligned with the achievement of organizational goals

Top management is focused with the vision and mission of the organization. But the individual employees will have their own personal growth to look after and not more often consistently loyal to the organization. Hence, the main purpose of any Management control system is to match the highest level possible with the individual goal to the organizational goal.

But unfortunately, in the present imperfect world of business, it is a tough task to do so. What we do in the formal control system is imposing rules to avoid deviation from the performance march past. We can say rules are forms of formal instructions. It is a major equipment to control the management system. For example, to control wastage of raw material in work shop floor, we impose a rule of minimum wastage and maximum wage, where deviation will result in a cut in the pay. Or we make a rule that any purchase expenditure more that 10 lakh rupees to be approved by the Board of Directors to control financial flow.

Factors that Influence Behaviour

Both formal and informal systems influence human behaviour in organizations. This in turn affects the alignment of individual goal and organization goal achievement. Even though the organization is in formal system, still we have to take in to consideration the informal processes like Ethic, Management styles, culture and climate of the organization in order to implement organization strategies.

External factors

External factors are norms of desirable behaviour that exists in the society of which the organization is a part. These norms include a set of attitudes, often collectively referred to as the work ethics, which is manifested in employee’s loyalty to the organization. These may vary from area to area, nation to nation. It depends on the culture of the society, Education system; background of the person, parental style and so on.

Some countries like Singapore and Japan are extra ordinary in work ethics when compared to other countries.

Internal factors

Culture

The most important internal factor is the organization’s culture. The values and beliefs, Norms and behaviourplays an important role in the behaviour of an individual. A company’s culture usually exists unchanged for many years. Certain practices become automatic habits because it is carried out for years.

Management Style

The management style also has a strong influence over the behaviour in a control system. Normally what one gets from the superior is given to the subordinates, and the subordinate gives more or less the same to his subordinates and it goes on.

Informal Organization

The importance of an informal organization is well understood when practicality is observed. Even though the chart says whom you should report to and whom you should communicate to, in reality you may be communicating and informally reporting to many departments in an organization. A control system when allows space for this informal organization and flexible enough to accept this succeeds easily.

Perception and Communication

In working towards the goal congruence, the personnel who are real performers in the field should know what to be done and what is expected from them. The channels of communication are often wide and complex leading to misunderstandings and misperceptions. Moreover, the communications received may conflict with each other. Hence a control system should deal with information control with sufficient importance attached to it.

In working towards the goal congruence, the personnel who are real performers in the field should know what to be done and what is expected from them. The channels of communication are often wide and complex leading to misunderstandings and misperceptions. Moreover, the communications received may conflict with each other. Hence a control system should deal with information control with sufficient importance attached to it.

Motivation

Motivation plays the central role in shaping one’s behaviour, especially influencing work performance in organizations. Motivation is made up of three distinct components. First one is Direction which refers to what an individual chooses to do when presented with a number of possible alternative courses of action. The second one is intensity, which refers to the strength of the individuals responses once this choice is made. Finally, persistence refers to the staying power of behaviour, or how long a person will continue to devote effort. Further, the determinants of performance can be explained through the below diagram

As seen from the diagram job performance may be viewed as the combination of the three functions – Willingness to perform, opportunity to perform and capacity to perform These are generated from within a individual and often stimulated by external forces.

The capacity to perform relates to the degree to which an individual possesses what is supposed to be done and how to do it. Opportunity to perform is often viewed as a critical factor. One may fail in this not only because of lack of capacity but nay be failing to identify or failing to make right decisions.

Willingness to perform relates to the degree to which an individual both desires and is willing to exert effort towards attaining job performances. It is in other words, motivation and it is what really counts. No combination of capacity and opportunity will result in high performance if the willingness or motivation is missing.

The performance of employees is can be influenced by the motivation given by the managers. If managers intervene and help creating an atmosphere that encourages, supports and sustains improvement, certainly the performance level raises.

The needs, abilities and individual goal of the employees must be considered by the mangers while considering differences in preferences.

Agency Theory

Agency theory explores how contracts and incentives can be used as motivation tools to achieve goal congruence. An agency relationship exists whenever one party (the principal) hires another party (The agent) to perform some service and in so doing, delegates decision making authority to the agent. In an organization share holders are the principal and the Top –level Manager, say a CEO is the agent. At the other level, the CEO is the principal and the unit managers are the agents. The challenge is how to motivate the agents’ so that they will be productive as they would be if they are the owners.

Agency theory conceptualise that the principals and agents have divergent preferences or objectives. The theory assumes that all individuals act in their own self-interest. Agents are assumed to receive satisfaction not only from financial compensation but also from the perks involved in an agency relationship, such as leisure time, good environment, club memberships etc.

Principals on the other hand are interested only in the financial returns from the investments.

The agents and principals differ in the risk preference also. When agents depend on their wealth tied up with the fortune of the company, the principals reduce their risk by investing in various companies.

Control Mechanisms

Monitoring and Incentive contracting are the two control mechanisms suggested by the agency theory.

Monitoring

The principal can design control systems that monitors that agent’s actions. For example, financial reports and performance appraisal are tools of monitoring. Agency theory has attempted to explain why different agency relationships involve different levels of monitoring. If the task is not well defined or easily monitored, then incentive contracting becomes more appealing as a control device. Monitoring and incentives are not mutually exclusive alternatives. In most firms, the CEO has an incentive contract along with financial statements that acts as a monitoring device.

Incentive contracting

A principal may attempt to limit divergent preferences by establishing an appropriate incentive contracts. The more an agent’s reward depends on a performance measure; the more incentive there is for the agent to improve the measure. Therefore, the principal should define the performance measure to that it furthers the employee’s interest. The ability to accomplish this is referred to as goal congruence.

When the contract given to the agent motivates the agent to work in the principal’s best interest, the contract is considered goal congruent.

Morale

The attitude differs for each individual. The environment the employees work in greatly influences the behaviour and attitude. Managers at all levels are highly concerned about the Morale.

Morale is generally considered as a group phenomenon and in some cases it is viewed as an individual phenomenon. It may be described as a feeling of the employee towards his work, organization more often related to his personality.

Guion describes morale from the point of view of an individual worker and defines it as the degree to which an individual needs are satisfied and the degree to which the individual desires satisfaction from his total job situation.

Some researchers have the contrast view - that Social or group factor influences morale. They emphasis social reaction and concentrate on attitudes towards group value rather than towards individual values. They place less emphasis on working conditions and more feelings of cohesiveness, group interest and identification with the mission of the group, the optimism about the success of the whole.

McFarland defines morale as follows:

“Morale is basically a group phenomenon. It is a concept that describes the level of favourable or unfavourable attitudes of the employees’ collectively to all aspects of their work- the job, the company, their tasks, working conditions, fellow workers, superiors’ and so on.

Morale and control

Morale is viewed as an important component for increase in productivity. In the same line of thought, the level of morale also induces the level of control.

In any organization the rules and regulations are imposed in a expectation that it is followed even when supervision is not available. At the end of the day, any manager can understand that self control is more important than any other form of control- say supervision, punishments, pay-cuts, demotions etc.

When as a group, workers unionise or collectively decide to deviate from the control system; it would be the bigger problem the top level management will face more big than any finance problem.

The productivity lies in the hands of employees and the morale decides their mental state in their worksites as a group.

Let us see how the control system is linked with Morale and attitudes thru the below diagram.

Management View

Morale is contagious. The reason being, people learn from one another through various communication channels. Hence, to implement an effective management control system, the cultivation of favourable attitudes with morale building objectives is one of the important characteristics of management process. Further, the centre of the process of managing attitudes is for the superior to become the master of his own attitudes because a manager’s attitudes are in a large part likely to reappear as attitudes of those who are near him in the organization. The first line supervisor is a key factor in morale because his morale has huge effects on his subordinates.

Control and morale are interrelated. On one hand, the high morale level improves self control in the organization, which helps in effective implementation of management control system. On the other hand, an effective control system like control of absenteeism and tardiness will improve morale. It is a continuous process and a miss in the link may develop a serious trouble for the system. It is explained thru the following diagram.

Even though we emphasise on the efficiency of the control system, there should be a human relations approach to the design of the system to make it acceptable among the employees. When every individual is treated with respect and due care, there would be a trust building which will lead to morale building and thus resulting in efficient control.

Participative Management

Participative Management Advantage

Participative management is a method, which gives employees responsibility, accountability, and authority over their work. The method provides simple tools for employees to improve their work performance and positively impact the bottom line. The process provides an environment to make employee needs known and creates a vehicle for improved communication between all areas of the organization. What differentiates this work is that people’s recommendations are actually implemented and acted upon.

We can say that participative management indirectly induces the ‘self-control’ mechanism, which is rather more powerful than any other control mechanisms.

People solve their own issues and feel empowered within the process of doing so. Executives and employees learn to redesign their workplace to be participative and self-managing. This does not mean you do away with management. People are not asked to do things that they are not capable of accomplishing. There may be training involved to improve skill sets. This does not resemble laissez-faire management in any way. Managers and employees look at a piece of work and ask what roles and responsibilities need to be placed within the boundaries of the work in order to achieve individual and organization goals?

The idea is to allow as much responsibility, accountability and reasonable authority to people actually doing the work. Participative management addresses the criteria for superior performance. These criteria have been researched, field-tested, around the world and their validity has been proven in many work settings. Participative management creates a workforce that is committed to obtaining positive results for the organization such as increased productivity and improved quality.

People are engaged and motivated and are willing to put forth energy to improve work performance. Participative management works best when the organization has a clear and compelling mission and vision. Employees then can align their personal mission and vision to the organization.

Participative management has clear goals and does not turn over the organization to employees. There is still a hierarchy but it is not a dominant hierarchy, which dictates everything to employees. A non-dominant hierarchy has as many levels as are necessary to do the work of the organization. People have clear roles and responsibilities and manage themselves as much as possible.

Management tells people what the strategy is and what is expected in terms of results and then allows people to figure out the how to deliver on management expectations. Top management still decides strategy and front line employees still focus on their primary tasks. The difference is that the criteria for superior performance are utilized and leveraged for the success of the organization. The criteria for superior performance are drivers of behaviour, reasons why people get up in the morning and are enthusiastic about their work. Pay is considered a satisfier all things being equal.

The criteria for superior performance are:

Control

Learning

Variety

Mutual Support and Respect

A Promising Future

Engage one or several of their preferred life interests

Challenges that match and stretch individual skills

Concentration and Focus

Fun

When the criteria for superior performance are leveraged in an organization the performance will dramatically improve. This has been demonstrated over and over again in thousands of organizations all over the world.

Management in most organizations is constantly attempting to get people more involved in improving the organization. People run up against a brick wall because of the bureaucratic structures that still exist in their organizations. This occurs even after many attempts at improvement. Management has not made it to people’s advantage to participate, communicate, and share what they know with team-mates.

Why participate and give ideas for improvement when they are disregarded and not rewarded. People will always do what is in their best interest. If the stated culture of the organization is one thing and the actual behaviour of management is not congruent with how management behaves, then people do not trust what is communicated by management. People are very resourceful and learn to survive in any culture.

Management can attempt to dictate results and people will do what is required of them to meet the very minimum of expectations in this kind of environment. They will rarely do excellent work. The majority of people want to do good work yet the work structures they find themselves in do not reward good work. When you are competing within an organization to get a raise or a promotion and you have to impress your supervisor you will not share important information with your team members. It is not to your advantage to do this because you are not paid and rewarded to do so. So how we structure work, pay for work and appraise work has to change. Participative management makes it to people’s advantage to share their knowledge because when their team is successful they are successful. The group excels because the criteria for superior performance are being applied and top management sees the benefit of all employees contributing to the organization. They want to acknowledge a resource they already pay for their people.

Participative management enables organizations to improve performance through a fast, an economical method called the participative design workshop. It clearly states that the design principle underlying the work is a participative method that has clear goals and simple tools for work process improvement.

It can be utilized to improve the structure of the organization or just for work process improvement. This will depend on the needs of the organization. The workshop begins with the assessment phase, which begins with briefing one. Briefing one is a short presentation of the bureaucratic design principles and its inverse relationship to the criteria for superior performance.

Participants fill out the criteria for superior performance and the skills assessment matrix. The design phase begins with briefing two which is an introduction to the participative design principle and why it leverages the criteria for superior performance. It explains why organizations perform better using these methods. Groups chart their current work process or work flow and flag areas for improvement. They are given clear boundaries in which to work by management. Next, they design improvements for the areas that are deficient and negotiate with management on what is possible to change within the work process. If management wants structure addressed then the group can tackle this issue as well. The workshop gets excellent results even without addressing the issue of organizational structure.

Resistance to the Participative Management Process

Whenever there is change we can expect resistance to the process. Many people do not welcome change even if it is in their best interests. People do not want to lose power and control. It is the fear of the unknown that causes problems for people. Wilfred Bion’s work on group process, or what he calls fight or flight behaviours, or dependency is constantly at play in most bureaucratic organizations. Most organizations are still in part bureaucratic. People will either fight or run away and these behaviours can be very subtle in nature. A question to ask is what does the person acting out perceive they have to lose if a new initiative takes root?

An effective method for managing this type of situation is to reassure the person or group that the change is for the best interest of the organization. From our facilitation experience, all stakeholders are likely to reap tangible and intangible rewards. A top manager that is interested in having a successful Participative Management initiative will be on the constant look out for sabotaging behaviours from threatened individuals. Another behaviour to be on the lookout for is pairing. Threatened individuals will want to pair up with another individual or one who he/she perceives has power and attempt to inhibit the new participative initiative.

Learning Curves

The term learning curve refers to a graphical representation of the “average” rate of learning for an activity or tool. It can represent at a glance the initial difficulty of learning something and, to an extent, how much there is to learn after initial familiarity. Initially introduced in educational and behavioural psychology, the term has acquired a broader interpretation over time, and expressions such as “experience curve”, improvement curve”, progress curve” and efficiency curve are often used. Most tasks get faster with practice.

This is not surprising because we have all seen this and perhaps know it in some intuitive sense. What is surprising is that the rate and shape of improvement is fairly common tasks. The pattern is a rapid improvement followed by ever lesser improvements with further practice. Learning is often said to follow the power law of practice.

At one point of time there is a decrease in variance in performance as the behaviour reaches an apparent plateau. The learning curve has implications for learning in education and everyday life. It suggests that practice always helps improve performance, but that the most dramatic

improvements happen first. Another implication is that with sufficient practice people can achieve comparable levels of performance.