A conceptual development of Simons’ Levers of Control framework

The management control literature has been criticised for having concepts that are ill-defined. This causes mixed empirical results and makes it difficult to build a coherent body of knowledge. The paper addresses this issue by developing an important framework, that of Simons’ Levers of Control, which has been criticised in the past for its vague and ambiguous definitions. Using methods of concept analysis, the paper analyses prior literature to identify ambiguities with the different levers of control and uses examples from prior field studies to illustrate these ambiguities. The paper also analyses the positive and negative dimensions of controls, which, although part of Simons’ framework, have remained unexplored. For each ambiguity identified, the paper proposes a solution to improve concept definitions or to clarify the relationship between concepts. The result is a revised framework that explicitly separates managerial intentions for controls and employee perceptions of controls. Managerial intentions are comprised of three levels: 1) types of controls (social and technical) 2) which are organised as four control systems (strategic performance, operational performance, strategic boundaries and operational boundaries) and 3) which can be used diagnostically or interactively, have an enabling or constraining role and can lead to either reward or punishment. Finally, after defining the framework's concepts and explaining how they interact, the paper concludes by offering avenues for future research.     

Creating dynamic tensions through a balanced use of management control systems

This paper explores how organisations balance controlling and enabling uses of management control systems (MCS), and how this balance facilitates the creation of dynamic tensions and unique organisational capabilities. By employing Simons’ (1995) levers of control framework in a case study setting, the paper investigates the challenges faced by senior managers when they use MCS simultaneously to direct and empower. The findings indicate a number of factors – internal consistency, logical progression, historical tendency, dominance, and suppression – that impact the capacity of organisations to balance different uses of MCS. The interactive lever of control also plays a significant role in achieving and sustaining a balance between controlling and enabling uses of MCS, and its impact on the other levers is seen to constitute a unique organisational capability in its own right. The findings from this study offer an elaboration of how dynamic tensions are created through managers’ attempts to balance controlling and enabling uses of MCS.     

中国国有企业业绩评价制度:回顾与思考

业绩评价制度是股东对经营者、经营者对组织内部各层级进行管理控制的重要机制。本文以中国改革开放30年来国有企业业绩评价制度演变为主题,归纳分析了中国国有企业业绩评价制度在不同时期(承包经营责任制、现代企业制度初步建立、现代产权制度等)的基本特点及其演变路径;文章还着重讨论了在科学发展观指引下国有企业业绩评价需要解决的几个理论问题。本文认为,业绩评价制度不应被简单地理解或矮化为一种用于衡量组织各级经营者"奖金数"的制度安排,它应当是构建国有企业产权管理体系、完善国有企业内部管控制度的重要组成部分。     

Globalization discourses and performance measurement systems in a multinational firm

This paper examines the role of management control systems, in particular performance measurement systems (PMSs) such as the Balanced Scorecard and key performance indicators, in a multinational context. We begin by exploring how globalization discourses are engaged with, consumed, appropriated, re-produced, disseminated and promoted in a major multinational company. We link the adaptation and dissemination of global discourses of senior managers with Said’s (1975/1997) concepts of authority and molestation. We then examine how PMS are translated and customized within local manufacturing plants and sales units in the UK and China, the significance of benchmarking and the extent to which PMS render managerial discourses of globalization practical. We comment on the importance of discourse in understanding control systems in general and the way in which external discourses impact the internal practices of the organization. We also explore some of the sources that give rise to molestation (deviation of practice from global aspirations of senior managers). We conclude by stressing the potential for the globalizing effects of PMS through the interaction of the discourses of HQ and subunits, even in the absence of explicit statements about globalization.     

The design and use of performance management systems: An extended framework for analysis

Issues in the area of performance management and management control systems are typically complex and intertwined, but research tends to be based on simplified and partial settings. Simplification has made the work easier to carry out, but it has come at the price of increased ambiguity and conflicting findings from different studies. To help mitigate these issues, this paper puts forward the performance management systems framework as a research tool for describing the structure and operation of performance management systems (PMSs) in a more holistic manner. The framework was developed from the relevant literature and from our observations and experience. In particular, it elaborates the 5 questions of Otley's [Otley, D., 1999. Performance management: a framework for management control systems research. Management Accounting Research 10, 363–382] performance management framework into 12 questions and integrates aspects of Simons’ levers of control framework.Anecdotal evidence suggests that the extended framework provides a useful research tool for those wishing to study the design and operation of performance management systems by providing a template to help describe the key aspects of such systems. It allows an holistic overview to be taken while making this a feasible task. The paper uses material from two field studies to illustrate how the framework can be used to provide an overview of the major performance management issues within an organization.     

The effect of comprehensive performance measurement systems on role clarity,psychological empowerment and managerial performance

This study examines how comprehensive performance measurement systems (PMS) affect managerial performance. It is proposed that the effect of comprehensive PMS on managerial performance is indirect through the mediating variables of role clarity and psychological empowerment. Data collected from a survey of 83 strategic business unit managers are used to test the model. Results from a structural model tested using Partial Least Squares regression indicate that comprehensive PMS is indirectly related to managerial performance through the intervening variables of role clarity and psychological empowerment. This result highlights the role of cognitive and motivational mechanisms in explaining the effect of management accounting systems on managerial performance. In particular, the results indicate that comprehensive PMS influences managers’ cognition and motivation, which, in turn, influence managerial performance.     

An empirical analysis of the levers of control framework

The purpose of this paper is to use the levers of control framework to explore the antecedents of control systems – various facets of strategy that drive the use of controls; to explore the relations among control systems; and to explore the costs and benefits of control systems – costs in terms of consumption of a constrained resource (i.e., management attention) and benefits (i.e., learning). Using data from a survey of 122 Chief Financial Officers, this study tests a structural equation model that relates strategic risk and uncertainty to control systems (i.e., beliefs, boundary, diagnostic, and interactive control systems), which in turn are hypothesized to affect learning and attention, and ultimately firm performance. The evidence suggests that there are multiple inter-dependent and complementary relations among the control systems. I find that strategic risk and uncertainty drive both the importance and use of performance measures in diagnostic or interactive roles. Moreover, it appears that in certain strategic conditions information processing needs are such that firms use performance measures both interactively and diagnostically. Finally, I conclude that although there is a cost of control, there is a positive effect on firm performance.     

New development: Integrating risk management in management control systems—lessons for public sector managers

Exploring multiple dimensions of management control systems (MCS), this article proposes a new framework to integrate risk management with strategy, MCS and performance measurement systems (PMS). Considering the public sector as a focal point, the article points to some enterprise risk management (ERM) issues and argues that ERM-enabled MCS has potential to improve PMS and strategic decision-making, leading to a more proactive risk management framework and a culture that promotes performance driven accountability. Consequently, the article calls for further research towards solving the public sector’s risk management problems, motivating its managers to adopt best practices, and stimulating suitable policy developments.     

Top management adoption of a locally driven performance measurement and evaluation system: A social network perspective

This paper traces the adoption process by top management of a performance evaluation system initiated by the financial controllers at the Research And Development site of a leading multinational company. The research puts forward that the success of the change efforts depends on the nature of relationships among the organizational members involved in the process. Because performance measurement and evaluation systems have notoriety for being controversial, the notion of trust, operationalized through strong ties, emerged as pivotal to reduce uncertainty during the change process and facilitate the introduction of the performance evaluation system. The research also points out that the structural position of financial controllers within organizational networks is an important aspect in the success/failure of implementing such problematic control systems. Also, the social network analysis used in this paper has proved to be a useful methodology for studying the relational patterns that occurred during the change process.     

The role of organisational concern for workplace fairness in the choice of a performance measurement system

Prior studies linking performance management systems (PMS) and organisational justice have examined how PMS influence procedural fairness. Our investigation differs from these studies. First, it examines fairness as an antecedent (instead of as a consequence) of the choice of PMS. Second, instead of conceptualising organisational fairness as procedural fairness, it relies on the impression management interpretation of organisational fairness. Hence, the study investigates how the need of senior managers to cultivate an impression of being fair is related to the choice of PMS systems and employee outcomes. Based on a sample of 276 employees, the results indicate that the need of senior management to cultivate an impression of being fair is associated with employee performance. They also indicate that a substantial component of these effects is indirect through the choice of comprehensive performance measures (CPM) and employee job satisfaction. These findings highlight the importance of organisational concern for workplace fairness as an antecedent of choice of CPM. From a theoretical perspective, the adoption of the impression management interpretation of organisational fairness contributes by providing new insights into the relationship between fairness and choice of PMS from a perspective that is different from those used in prior management accounting research.     

Performance management systems: A conceptual model

This paper builds on the view that too much attention in the management, management control and management accounting literatures has been given to ex post performance measurement as distinct from ex ante performance management. The paper develops a conceptual model of Performance Management Systems (PMS) building on the work and insights of primarily Otley (1999) and Ferreira and Otley, 2005, Ferreira and Otley, 2009 who share similar concerns. Particular attention is given to analysing the underlying factors that influence the nature of any PMS, which Ferreira and Otley, 2005, Ferreira and Otley, 2009 address only to a limited extent in their model. This analysis into these factors leads to the development of Ferreira and Otley's conceptualisation into a ‘middle range’ (Laughlin, 1995, Laughlin, 2004, Broadbent and Laughlin, 1997) model of the alternative nature of PMS lying on a continuum from ‘transactional’ at one end to ‘relational’ at the other built on respectively underlying instrumental and communicative rationalities and guided by a range of contextual factors.     

Stakeholders’ influence on environmental strategy and performance indicators: A managerial perspective

This paper explores how managers perceive stakeholders’ influence for the choice of internal environmental performance indicators (EPI) that underlie strategic performance measurement systems. Drawing on the concept of levers of control, we conduct a field investigation within a large multinational firm operating in an environmentally sensitive industry. The firm pursues a proactive environmental strategy driven by a willingness to achieve corporate economic success while taking environmental issues into consideration. Our investigation encompasses interviews with key environmental executives and a review of corporate documents. We show that EPI are used as interactive and diagnostic controls, with stakeholders’ influences being integrated into the corporation through its beliefs system. We find that four distinct influence patterns emerge. These influence patterns range from being narrow and unidirectional to very broad and interactive, conditional upon the firm's environmental impact on specific stakeholders, and its need for legitimization. The study extends research on the relationships between stakeholders and corporate environmental management and reveals ways in which strategic performance measurement systems integrate environmental considerations.     

Performance measurement systems and their relation to strategic learning: A case study in a software-developing organization

Authors have often suggested that expert systems for measuring and assessing intangible and tangible resources fulfill strategic learning purposes. This role requires further theoretical discussion and empirical investigation since strategic learning does not automatically result from the implementation of performance measurement systems (PMS). PMS can be used for internal or external control purposes in addition their development and usage can lead to strategic learning processes. Depending on how PMS are conceptualized they can be related to different modes of learning. Thus, this article links different types of PMS enactment with specific modes of learning. Strategic learning is thereby defined as specific mode within the organizational learning approach by Bateson (1972) and Argyris and Schön (1978). Orlikowski's work on technologies (2000) provides a framework for the different types of PMS enactment. A strategic learning process initiated by the development of PMS is illustrated through a case study in the software development industry.     

Developing performance-measurement systems as enabling formalization: A longitudinal field study of a logistics department

This paper reports on a developmental approach to performance-measurement systems (PMS). In particular, we look at characteristics of a development process that result in the PMS being perceived by employees as enabling of their work, rather than as primarily a control device for use by senior management. We will refer to such a PMS as “enabling PMS”. The theoretical part of the study builds on ideas of enabling versus coercive formalization [Adler, P. S., & Borys, B. (1996). Two types of bureaucracy: Enabling and coercive. Administrative Science Quarterly 41 (March), 61–89]; on notions of organizational learning (e.g., [Zollo, M., & Winter, S. G. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization Science 13(3), 339–351]); and on awareness of the incompleteness of performance measures (e.g., [Chapman, C. S. (1997). Reflections on a contingent view of accounting. Accounting, Organizations and Society 22, 189–205; Lillis, A. M. (2002). Managing multiple dimensions of manufacturing performance—An exploratory study. Accounting, Organizations and Society 27, 497–529]). The empirical context entails a mixed-method, 3-year longitudinal study of the logistics department of a medium-sized company in the beverage manufacturing industry. Qualitative data were gathered through interviews, participation in meetings, action research, and review of company documents. We also analyzed two waves of quantitative survey data, gathered from a panel of 42 employees. We find that a development process that is experience-based contributes to the enabling nature of the PMS, as it builds on existing skills, local practices, and know-how on performance measurement to enrich the PMS step-by-step over time. Also, experimentation with specific performance measures was found to enhance the enabling nature of the PMS: testing, reviewing, and refinement of conceptualizations, definitions, data, and presentations of new performance measures. Professionalism was significantly related to positive attitude toward performance measures in our survey data. The results also illustrate that transparency of the PMS itself is key to enabling PMS.     

Organizational change in an Australian university: Responses to a research assessment exercise

The objective of this paper is to explore the way internal organizational control processes are changed in response to external demands. It does this by investigating the organizational change undertaken by an Australian university in anticipation of, and in response to, an externally imposed research assessment exercise (RAE), specifically focusing on the university's internal research-related performance management system (PMS) and its impact on academics. It adopts a case study method, using data from publicly available documents, interviews with senior management, and a survey administered to academics. The data is interpreted and analyzed using Broadbent and Laughlin's organizational change model. The findings reveal that RAE was anticipated with the appointment of new senior leadership, a new vision, restructure of faculties and departments, and changes to the research PMS. The changes to both the university's mission (significant and longlasting, second order change) and its internal systems (less significant, first order change) are evident. In the context of the global proliferation of PMSs in the higher education sector, this paper contributes to the literature on PMSs, indicating its relevance to universities. Its empirics provide useful insights for university managers and regulators and, more broadly, the paper contributes to our understanding of organizational change.     

Accounting for Research: Academic Responses to Research Performance Demands in an Australian University

This study examines the perceptions of individual academics about performance management systems (PMS) developed by an Australian university to meet government research assessment requirements. Using a case study method, the research examines the period 2006–2010 within a university, relying on academics’ responses to a survey on the effect of research PMS, contextualised with publicly available organisational documents. The case study university performed well in the Australian Government's first research assessment exercise, Excellence in Research for Australia (ERA) 2010. However, academics reported increasing levels of stress and decreasing job satisfaction, consistent with research that identifies the commodification of academic research. This process of commodification has occurred as a result of the implementation of PMS designed to assess academics’ research‐focused performance and thereby strengthen the university's performance under ERA. In investigating in detail the responses of individual academics to Australia's research assessment initiative, the paper reveals a disconnect between the macro‐institutional demands placed on the higher education sector, university changes made to accommodate these demands, and the ability of academics to meet these demands in a sustainable way.     

Impact of the interactive and diagnostic uses of performance measurement systems on procedural fairness perception,cooperation and performance in supply alliances

We examine the effects of interactive and diagnostic uses of performance measurement systems (PMSs) on two behavioural factors (procedural fairness perception and cooperation) in inter-firm alliances. We further investigate whether the two behavioural factors mediate the relationship between PMS uses and alliance performance. We find that both interactive and diagnostic uses of PMS are significantly related to procedural fairness perception but only the interactive use is significantly related to cooperation. The relationships between the two uses of PMS and alliance performance are serially mediated by procedural fairness perception and cooperation. These findings contribute to management accounting studies in inter-firm alliances.     

Management control systems and strategy: A resource-based perspective

The aim of this study is to examine, from a resource-based perspective, the relationships between the use of management control systems (MCS) and organizational capabilities. More specifically, the study focuses on the diagnostic and interactive uses of one important aspect of MCS, namely performance measurement systems (PMS), and four capabilities leading to strategic choices (i.e., market orientation, entrepreneurship, innovativeness, and organizational learning). Three research questions are investigated in this study: (i) to what extent do the diagnostic and interactive uses of MCS contribute specifically to the creation and maintenance of capabilities leading to strategic choices? (ii) To what extent do the diagnostic and interactive uses of MCS act in combination to produce dynamic tension which contributes to the creation and maintenance of these capabilities? (iii) To what extent does the use of MCS contribute to organizational performance? The results suggest that an interactive use of PMS fosters the four capabilities by focusing organizational attention on strategic priorities and stimulating dialogue. Also, by creating constraints to ensure compliance with orders, the diagnostic use of PMS exerts negative pressure on these capabilities. Furthermore, some evidence suggests the influence of dynamic tension resulting from the balanced use of PMS in a diagnostic and interactive fashion on capabilities and performance.     

Configuring management control systems: Theorizing the integration of strategy and sustainability

Although organizations have embraced the sustainability rhetoric in their discourse and external reporting, little is known about the processes whereby management control systems contribute to a deeper integration of sustainability within organizational strategy. This paper addresses this gap and mobilizes a configuration approach to theorize the roles and uses of management control systems (MCSs) and sustainability control systems (SCSs) in the integration of sustainability within organizational strategy. Building on Simons’ levers of control framework, we distinguish two possible uses of a MCS and a SCS—a diagnostic use and an interactive use—and we specify the modes of MCSs and SCSs integration. We rely on these two core dimensions to identify eight organizational configurations that reflect the various uses as well as their modes of integration of SCS and MCS. We characterize these ideal-type configurations, explain their impact on the triple bottom line, and describe which mechanisms allow organizations to move from one configuration to another. In so doing, we highlight various paths toward sustainability integration or marginalization within organizations. Finally, we explain how our framework can support future research on the role of MCS and SCSs in the integration of sustainability within strategy.     

PERSPECTIVES ON MANAGEMENT CONTROL IN A MULTIPLE AGENCY, COMMUNITY SERVICE

This paper reports on an interpretive study of organisational control in a developing, community based, psychogeriatric service. The service was characterised by its complexity comprising a diversity of interest groups and a multiplicity of agencies. There were distinct differences in performance as perceived by the various interest, or stakeholder, groups; resulting in multiple control systems. Performance as measured by the management control system was found to be, at best, only partial. It was, therefore, of limited use in controlling existing service provision and developing new services. A case is made for recognition of these complexities when designing organisational control systems in such environments.