1. Behavior in Organizations
Management Control Systems
Chapter 3
July 2014
Iwan Pudjanegara SE., MM.

2. Goal Congruence MCS/SPM influence human behavior.
Good MCS influence behavior in a goal congruent manner.
Goal Congruence means that the goals of an organization’s individual members should be consistent with the goals of the organization itself.
July 2014
Iwan Pudjanegara SE., MM.

3. Informal Factors That Influence Goal Congruence
External Factors (EF)
EF are norms of desirable behavior that exist in the society of which the organization is a part.
These norms = a set of of attitudes = the work ethic.
July 2014
Iwan Pudjanegara SE., MM.

4. Informal Factors That Influence Goal Congruence
The Work Ethic : employees’ loyalty to the organization, their diligence, their spirit, and their pride in doing a good job.
Some of Attitudes are local, industry-specific, national.
Ex. Silicon Valley
July 2014
Iwan Pudjanegara SE., MM.

5. Informal Factors That Influence Goal Congruence
Internal Factors (IF)
Culture
The organization’s own culture is the most important IF.
Common beliefs, shared values, norms of behavior, etc., that are implicitly accepted and explicitly manifested throughout organizations.
July 2014
Iwan Pudjanegara SE., MM.

6. Informal Factors That Influence Goal Congruence
Management Style
The IF that probably has the strongest impact on mgt control is management style.
CEO attitude  Superiors attitudes  Subordinates’attitudes.
Management By Walking Around
July 2014
Iwan Pudjanegara SE., MM.

7. Informal Factors That Influence Goal Congruence
The Informal Organization
July 2014
Iwan Pudjanegara SE., MM.

8. Informal Factors That Influence Goal Congruence
Perception and Communication
Managers must know what the goals of organization are and what actions they are supposed to take to achieve them.
July 2014
Iwan Pudjanegara SE., MM.

9. The Formal Control System
Rules
Shorthand for all types of formal instructions and controls, incl. Standing instructions, job descriptions, SOP, manuals, and ethical guidelines.
From trivial (= sepele) to the most important.
July 2014
Iwan Pudjanegara SE., MM.

10. The Formal Control System
Types of Rules :
Physical Controls
Ex. Security guards, locked storerooms, computer passwords, vaults(=ruang besi), television/camera surveillance, etc.
July 2014
Iwan Pudjanegara SE., MM.

11. The Formal Control System
Manuals
Manuals = written rules.
Should be considered to be guidelines rather than fiats(=perintah)
Should be reexamined periodically to ensure that they are still consistent with the wishes of current senior management.
July 2014
Iwan Pudjanegara SE., MM.

12. The Formal Control System
System Safeguards
Safeguards are built into the information processing system to ensure that the information is accurate and to prevent fraud.
Incl. Cross-checking totals with details, requiring signatures, separating duties, etc.
July 2014
Iwan Pudjanegara SE., MM.

13. The Formal Control System
Task Control Systems
Task control : the process of ensuring that specific tasks are carried out efficiently and effectively.
July 2014
Iwan Pudjanegara SE., MM.

14. The Formal Control System
Formal Control Process
A strategic plan implements the organization’s goals and strategies
The strategic plan is converted to an annual budget that focuses on the planned revenues and expenses for individual responsibility centers.
Responsibility centers are also guided by rules and other formal information.
July 2014
Iwan Pudjanegara SE., MM.

15. The Formal Control System
Actual results are compared with budget to determine whether performance was satisfactory.
If it was, the responsibility center receive feedback (praise or reward).
If it was not, do corrective action in the responsibility center and possible plan revision.
July 2014
Iwan Pudjanegara SE., MM.

16. July 2014
Iwan Pudjanegara SE., MM.

17. Types of Organizations
A Functional Structure
Each manager is responsible for a specified function.
A Business Unit (BU) Structure
BU managers are responsible for most of the activities of their particular unit.
A Matrix Structure
Functional units have dual responsibilities.
July 2014
Iwan Pudjanegara SE., MM.

18. July 2014
Iwan Pudjanegara SE., MM.

19. Functional Structure of Organizations
An important advantage of a functional structure is efficiency.
Disadvantages of a functional structure :
No unambigous way of determining the effectiveness of the separate functional managers. (unambigous=jelas)
July 2014
Iwan Pudjanegara SE., MM.

20. Functional Structure of Organizations
If the organization consists of managers in one function who report to higher-level managers in the same function, then a dispute between managers of different functions can be resolved only at the top.
Functional structures are inadequate for a firm with diversified products and markets. (inadequate=tidak cukup)
July 2014
Iwan Pudjanegara SE., MM.

21. Functional Structure of Organizations
Functional organizations tend to create soil for each functions.
(soil=noda) (lateral=sisi,cabang)
This problem can be mitigated by supplementing the vertical functional structure with lateral cross-functional prosesses such as cross-functional job rotation and team-based rewards.
July 2014
Iwan Pudjanegara SE., MM.

22. Business Units (BU)
BU is designed to solve problems inherent in the functional structure. (inherent=melekat)
a BU = a Division
BU is responsible for all the functions involved in producing and marketing a specified product line.
July 2014
Iwan Pudjanegara SE., MM.

23. Business Units (BU)
The performance of BU is measured by the profitability of BU.
Advantages of BU:
It provides training ground in general management.
Because BU is closer to the market for its products than HO, BU can react to new threats & opportunities more quickly.
July 2014
Iwan Pudjanegara SE., MM.

24. July 2014
Iwan Pudjanegara SE., MM.

25. July 2014
Iwan Pudjanegara SE., MM.

26. Functions of the Controller
Designing and operating information and control systems.
Preparing financial statements and financial reports for shareholders and other external parties.
Preparing and analyzing performance reports, program and budget proporsals, then consolidating into annual budget.
July 2014
Iwan Pudjanegara SE., MM.

27. Functions of the Controller
Supervising internal audit and accounting control procedures to ensure the validity of information, establishing adequate safeguards against theft and fraud, and performing operational audits.
Developing personnel in the controller organization and participating in the education of management personnel.
July 2014
Iwan Pudjanegara SE., MM.

28. Alternative Controller Relationship
EXHIBIT 3.3
Alternative Controller Relationship
Dotted Line Solid Line
Corporate Controller
Corporate Controller
Business Unit Manager
Business Unit Manager
Business Unit Controller
Business Unit Controller
July 2014
Iwan Pudjanegara SE., MM.