Goal congruence is the integration of managers' personal goals
or staff goals with that of organization and normally comes when the staff are
motivated to reach reasonable targets of their job whilst aligning that
achievement with their personal one
In cost
accounting, goal congruence is defined as
consistency or agreement of individual goals with company goals. Everyone in
the organization needs to be rowing in the same direction. That process gets
tough when you start to set up evaluation criteria for employees. Your staff
members have different jobs with different levels and kinds of responsibility.
As you set up goals for everyone, the company-wide goals can get lost.
Achieving Goal Congruence
Goal congruence can be achieved, and at the same time, the
‘agency problem’ can be dealt with, providing managers with incentives which
are related to profits or share price, or other factors such as:
- Pay or bonuses related to the size of profits termed as profit-related pay.
- Rewarding managers with shares, e.g.: when a private company ‘goes public’ and managers are invited to subscribe for shares in the company at an attractive offer price.
- Rewarding managers with share options. In a share option scheme, selected employees are given a number of share options, each of which gives the right (after a certain date) to subscribe for shares in the company at a fixed price. The value of an option will increase if the company is successful and its share price goes up.