Goal Congruence Approach Under Advnced Strategic Planning

ADVANCED PLANNING ANALYSIS UNDER STRATEGIC RISK MANAGEMENT: AN EMERGENCE OF GOAL CONGRUENCE APPROACH Author – Sarbesh Mishra, Ph.D Organization – National Institute of Construction Management and Research (NICMAR) Address – NICMAR’s CISC, NAC Campus, P.O – Kondapur, At – Hyderabad, PIN – 500 084. INDIA. Tel - +91 – 40 – 23111 286 (Telefax), +91 – 40 – 64510 763 (DID), +91 – 93968 44687 (Mob) E.mail – [email protected], [email protected] ABSTRACT The present paper is a part of larger research on a quantitative expression of plan of action prepared in advance of the period to which it relates and a means of translating the overall objectives of the organization into detailed plans of action. The macro theme requires details of changes in law, economy and business in different fields. Towards creating a new area of strategic risk management, its micro details, this paper takes up the goals of individuals and groups should coincide with the goals and objectives of the organisation as a whole which is the behavioral aspects of budgeting. KEYWORDS Tunnel vision, planning, cost accounting, management, efficient working, control system, goals, goal congruence, internal factors, external factors, informal factors, formal factors. There are different models of organizational styles of management exists. Among the possible style of management, the ones most likely to create problems are the “fire fighting” and “tunnel vision” approaches. Fire fighting consists of reacting to the events and crises when they appear; tunnel vision is a selective perception of what constitutes the organization’s concern. Planning is an effective mechanism to counter both the fire fighting and tunnel vision management styles. It allows the organisation to define its relationship with the environment and is “a method of guiding managers so that their decisions and actions are set to the future of the organization in a consistent and rational manner and in a way desired by the top management”. Planning has also been defined as a process which begins with objectives; defines strategies, policies and detailed plan to achieve them; which establishes an organization to implement decisions and feedback to introduce new planning cycle.” The above definitions describe planning as the process of collecting information on objectives and making decisions on the way to achieve them. Planning is vital to an organization’s future success. Stanley Thune and Robert House analyzed the planning function in 36 similar firms in six industries. This has led to the conclusion that (i) those firms that rely on formal planning department were more successful than those rely on informal planning, (ii) those firms that rely on a formal planning department perform more successfully after the system is instituted than previously. Planning prepares firm to operate in dynamic world and to adapt to the ensuing changes in the technology, finance, resource availability, economic conditions, and so forth. Because of the benefits of planning, it is not surprising that most firms of all sizes and industries rely on some formal planning system Cost accounting, also known as management control systems or control systems, consist of rules and procedures aimed at accumulation and communication of relevant cost information for internal decision making. These control systems formalize the objective of the organization and express them operationally as performance criteria to be met by the individuals in the organization. Central to the efficient working of the control systems is goal congruence, that is, the harmonization of individual and group objectives within the organization and the

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objectives of the organization as a whole. Robert N. Anthony was perhaps the first to stress the importance of goal congruence. Goal congruence is achieved when individuals in the organization strive or are induced to strive towards the company goals. This assumes, of course, individuals are aware of company goals and the derivative performance criteria. The essence of company’s goals is conveyed by planning process, which expresses these goals in terms of budgets, standards and other formal measures of performance. Management must tailor the planning activities to encourage goal congruence at various levels of management. To achieve goal congruence the following ideas are important – §

The firm should be viewed as pluralist entity where coalitions of individual seek to express their own aspirations within the structure of the firm. Personnel cannot be viewed as people sharing the same goal, but also as people striving for such rewards such as power, security, survival, and autonomy.

§

While profit maximization has long been considered the single goal of the firm, in reality, corporations pursue range of goals. For example a reputed firm may emphasize multiple goals by stressing that organizational performance be measured in the following areas i.e. (i) profitability, (ii) market position, (iii) productivity, (iv) product leadership, (v) personnel development (vi) employee attitude, (vii) public responsibility, and (viii) a balance between short-range and long-range goals. The goals of the firm may also conflict with one another, with individuals and group objectives. A bargaining process may be necessary to reduce these conflicts in the goal setting process. In fact the budget may be considered as the key mechanism for stabilization of that process, that is, a bargaining medium through which individuals and groups try to further their own goals. Individuals work in different hierarchies and handle different responsibilities & may have different goals. But they must come together as far as Company’s Goal is concerned, (the action must speak Company’s language). This term is used when the same goals are shared by top managers and their subordinates. This is one of the many criteria used to judge the performance of an accounting system. The system can achieve its goal more effectively and perform better when organizational goals can be well aligned with the personal and group goals of subordinates and superiors. The goals of the company should be the same as the goals of the individual business segments. Corporate goals can be communicated by budgets, organization charts, and job descriptions. Significance of Goal Congruence § § § § § § §

Ensures frictionless working. Ensures achievement of organization’s goal/strategic objective Ensures coordination & motivation of all concerned Ensures consistency in the working of all concerned. Gives fair chance to its employees to achieve their personal goals. Enhances the loyalty towards the company. Satisfies prime requirement of Management Control System (MCS)

Factors those influence the Goal Congruence Informal Factors I. II.

External factors – set of attitudes of the society, work ethics of the society Internal factors (Factors within the organization) § Culture- “Common beliefs, shared values, norms of behavior & assumptions” implicitly accepted and explicitly built into. § Mgt. Style – Informal/Formal

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§ §

The Communication Channels Perception and Communication – e.g. Budget (meaning): A strict profit control plan, Budget: A tentative guiding profit plan

Formal Factors § §

Management Control System – A Strategy itself Rules – Instructions, manuals and circulars, Physical controls, system safeguards, task control system.

Figure – 1 (Schematic representation of Goal congruence in an organisation)

Company’s Goals & Strategies

Revise the Goals /Policies (Interactive MCS)

Revise

Prepare Strategic Plans for Implementation

Revise

Prepare Annual Programs/ Budgets Measure Responsibility Center’s Performance

Report Actual & Budgeted

Reward Feedback

Compare A V/s B Corrective Action Satisfactory

Non-Satisfactory

Feedback Note - Everything percolates from the Company’s strategic goal. Anything loosing the sight of goal will be immediately taken note of and a corrective action is initiated to bring back the activity on the track.

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References: 1. Blocher, Edward J., Chen, and Lin. (1998). Cost Management: A Strategic Emphasis. Boston, MA: McGraw-Hill. 2. Horngren, Charles T., Foster, and Datar. (1999). Cost Accounting: A Managerial Emphasis, 10th ed. Upper Saddle River, NJ: Prentice Hall. 3. Raiborn, Cecily A., Barfield, and Kinney. (1966). Insights: Readings in Managerial Accounting, 2nd ed. St. Paul, MN: West. 4. Schick, Allen, ed. (1980). Perspectives on Budgeting. Washington, DC: American Society for Public Administration. 5. Harrington, Scott E., Niehus, Gregory R. (2007). Risk Management and insurance, 2nd. Ed. New York: McGraw-Hill. 6. Willson, James D. (1995). Budgeting and Profit Planning Manual. Boston, MA: Warren, Gorham, Lamont.

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