Goal Congruence

What is Goal Congruence ?

When an organization's goal coincides with the personal goal of the manager, it is called goal congruence. Ideally, the system should be so designed that action that it leads people to take in accordance with their perceived self-interest are actions that are also in the best interest of the organization.

Definition of Goal Congruence

According to Douglas Magregor :
"The essential task of management is to arrange organizational conditions and methods of operations, so that people can achieve their own goals best by directing their own efforts towards organizational objectives".

However, perfect congruence between individual goals and organizational goals does not exist. 
Goal Congruence Example, individual employees expect as high salary as they can get, but the organization cannot afford beyond certain limit. Again, a manager may reduce cost at the expense of quality, but that will not be in the interest of the organization. Similarly, a manager can control expenses in his department to such an extent that it affects the subsequent person in another department and thereby, affects the interest of the manager of the other department as well as the organization.

Informal Factors that Affect Goal Congruence 

Informal forces consist of both external and internal factors that play a key role in achieving goal congruence. Following are the external and internal factors that affect the goal congruence :

Factors that Affect Goal Congruence

1) External Factors : 
External factors are norms of desirable behavior that exist in the society of which the organization is a part. These norms include a set of attitudes, often collectively referred to as the work ethic, which is manifested in employees loyalty to the organization, their diligence, their spirit and their pride in doing a good job (rather than just putting in time). Some of these attitudes are local, i.e., specific to the city or region in which the organization does its work. In encouraging companies to locate in their city or state, chambers of commerce and other promotional organizations often claim that their locality has a loyal, diligent workforce. Other attitudes and norms are industry-specific. The railroad industry, e.g., has norms different from those of the airline industry. Still others are national; some countries, such as India and China, have a reputation for excellent work ethics.

2) Internal Factors : 
Internal factors are those factors that exist within the organization and management has controlled over these factors. These factors are as follows : 

i) Culture : 
The most important internal factor is the organizations own culture the common beliefs, shared values, norms of behavior and assumptions that are implicitly accepted and explicitly manifested throughout the organization. Cultural norms are extremely important since they explain why two organizations, with identical formal management control systems, may vary in terms of actual control.
A company's culture usually exists unchanged for many years. Certain practices become rituals, carried on almost automatically because "this is the way things are done here". Organizational culture is also influenced strongly by the personality and policies of the CEO and by those of lower-level managers with respect to the areas they control. If the organization is unionized, the rules and norms accepted by the union also have a major influence on the organization's culture. Attempts to change practices almost always meet with resistance and the larger and more mature the organization, the greater the resistance is.

ii) Management Style : 
The internal factor that probably has the strongest impact on management control is Management Style. Usually, subordinates' attitudes reflect what they perceive their superiors' attitudes to be and their superiors' attitudes ultimately stem from the CEO. (This is another way of saying. "an institution is the lengthened shadow of a man"). Managers come in all shapes and sizes. Some are charismatic and outgoing; others are less ebullient. Some spend much time looking and talking to people (management by walking around) others rely more heavily on written reports.

iii) Informal Organization : 
The lines on an organization depict the formal relationships - i.e., the official authority and responsibilities of each manager. 
For example, the production manager of Division A reports to the general manager of Division A. But in the course of f fulfilling his responsibilities, the production manager of Division A actually communicates with many other people in the organization, as well as with other managers, support units, the headquarters staff and people who are simply friends and acquaintances. In extreme situations, the production manager, with all these other communication sources available, may not pay adequate attention to the messages received from the general manager, this i especially likely to occur when the production manager is evaluated on production efficiency rather than on overall performance. The realities of the management control process cannot be understood without recognizing the importance of the relationships that constitute the informal organization.

iv) Perception and Communication :
In working towards the goals of the organization, operating managers must know what these goals and what actions they are supposed to take to achieve them. They receive this information through various channels, both formal (e.g., budgets and other official documents) and informal (e.g., conversations). Despite this range of channels, it is not always clear what senior management wants to achieve. An organization is a complicated entity and the actions that should be taken by any one part to further the common goals cannot be stated with absolute clarity even in the best of circumstances.
Moreover, the messages received from different sources may conflict with one another or be subject, differing interpretations. 
For example, the budget mechanism may convey the impression t managers are supposed to aim for the highest profits possible in a given year, whereas senior management does not actually want them to skimp on maintenance or employee training since such actions, although increasing current profits might reduce future profitability.

Formal Control Systems

Formal control systems make explicit the structure, policies and procedures to be followed by members of the organization. The members of the organization can perform their duties efficiently when they are provided with formal documentation of these structures, policies and procedures. A systematic analysis of the structure, plant and procedures helps management in planning and maintaining strategies in order to meet organizational goals.

The informal factors discussed above have a major influence on the effectiveness of an organization's management control. The other major influence is the formal systems. These systems can be classified into two types : 

1) Management Control System : 
It uses information to evaluate the performance of organization resources.

2) Rules : 
Rules are guides, i.e., organization members are permitted, and indeed expected, to depart from them; either under specified circumstances or when their own best judgment indicates that a departure would be in the best interests of the organization. 
For example, even though a rule specifies the criteria for extending credit to customers, the credit manager may approve credit for a customer who does not currently meet these criteria, but who has been valuable to the company in the past and is likely to become so again. Such departures may require the approval of higher authority, however. 

Some rules are positive requirements that certain actions be taken (e.g., fire drills at prescribed intervals). Others are prohibitions against unethical, illegal, or other undesirable actions. Some specific types of rules are given below :

i) Physical Controls : 
Security guards, locked storerooms, vaults, computer passwords, television surveillance, and other physical controls may be part of the control structure.

ii) Manuals : 
Much judgment is involved in deciding which rules should be written into a manual, which should be considered to be guidelines rather than fiats, how much discretion should be allowed, and a host of other considerations. Manuals in bureaucratic organizations are more detailed than are those in other organizations; large organizations have more manuals and rules than small ones; centralized organizations have more than decentralized ones; and organizations with geographically dispersed units performing similar functions (such as fast-food restaurant chains) have more than do single-site organizations.

iii) System Safeguards : 
Various safeguards are built into the information processing system to ensure that the information flowing through the system accurate, and to prevent (or at-least minimize) fraud of every sort. These include :
  • Cross-checking totals with details.
  • Requiring signatures and other evidence that a transaction has been authorized.
  • Separating duties.
  • Counting cash and other portable assets frequently.
  • A number of other procedures described in texts on auditing.

iv) Task Control Systems :
We defined task control as the process of ensuring that specific tasks are carried out efficiently and effectively. Many of these tasks are controlled by rules. If a task is auto mated, the automated system itself provides the control.

Process / Subsystems of Formal Control System 

A formal control system consists of the following subsystems:

1) Management Style and Culture of the Organization :
Management styles may be summarized on continuum between highly directive or autocratic styles (external styles) and highly participative styles (internal styles). There is also one more management style which is the combination of external and internal style, known as Mixed Style. Style influences the design of management systems in that, these systems serve management and should fit the way management chooses in operate. The corporate culture consists of shared values, common perceptions and common decision premises applied by organization's participants to the activities and problems of the organization.

2) Formal Control Process :
Two distinct formal planning processes are strategic planning and operations planning. There are two budgets: one for operations and the other for strategy. There are two sets of reports : one for strategic reports and the other for operating activities. Monthly, quarterly and yearly to date comparisons are made and detailed operating variances are calculated to assess progress towards achieving operating plans. Reporting against strategic plans accompany action programme of projects that are monitored over time.

3) Infrastructure :
The infrastructure consists of organization structure and patterns of autonomy. The corporate structure needs to embody provisions for both the strategic and operational mode of operations. One for strategic business planning is to create Strategic Business Units (SBUs) at various levels of the organization. An SBU is defined for those parts of business that can relate to an established outside market, including competitors. Profit centers are then established at various levels below the SBU level. Each of the profit centers acts like a small business organization with profit responsibility.

4) Rewards : 
Rewards must match incentives to the value contribution of individuals in the organization. Incentives take the form of materialistic and non-materialistic inducements and include all forms of monetary compensation together with non-monetary forms. The reward system should emphasize individual and group performances as well as operating and strategic performance. Formal reward programmes are necessary to reward performance on all four dimensions.

5) Coordination and Integration Mechanisms : 
Two management committees with overlapping membership strategy committee and operating management committee, one for strategy and the other for operations, are helpful for resource allocation, decision-making and conflict resolving. Formal meetings of the key managers of the organization including those at the profit center level are held periodically to formalize the results of the planning process, to enhance communication and each manager makes a commitment of what is proposed.

Each of the above sub-systems is further sub-divided into their components as indicated below:

formal control systems

The formal control systems focus upon the needs of customers and markets. They should be consistent with and supportive of the informal systems of the organization. They help in managing the short-term goals of the organization and the innovations which help it (organization) to meet the challenges of the future. It is necessary for a designer to understand the structure, policies and procedures of the organization in order to develop a structure for a formal control system as this structure is a relatively permanent part of a control system.