Strategy and management control systems: A study of the design and use of management control systems following takeover

This paper describes and analyses the approach taken by four well-known Swedish companies to management control following takeover. The findings suggest two factors which can explain how the management control systems were designed and used after an acquisition: the corporate strategy of the acquirer and the business strategy of the acquired company. The case studies show how these forces could impose mutually inconsistent requirements on the management control system of the acquired firm, and also how these inconsistencies were resolved.     

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 use of management control systems to manage CSR strategy: A levers of control perspective

Little is known about the role of management control systems (MCS) in managing the strategic processes that underpin Corporate Social Responsibility (CSR). To enhance our understanding of this phenomenon, this study employs Simons’ (1995) levers of control framework to explore how organizations leverage MCS in different ways in order to drive strategic renewal and trigger organizational change while simultaneously supporting society's broader sustainability agenda. Drawing on data gathered from France's largest listed companies – members of the CAC 40 – we provide insights into the structures and processes that companies employ to design, implement and monitor their CSR strategy. In doing so, we provide evidence of the way that organizations seek to attain their CSR objectives, and of the relationship between the management of CSR and other business processes. Of particular interest is the role of the levers of control in enabling managers to identify and manage threats and opportunities associated with CSR strategy, thus forming risk management processes that support organizations in their attainment of strategic objectives. Furthermore, the study provides evidence suggesting the use of MCS has the potential to contribute to society's broader sustainability agenda through processes that enable innovation, communication, reporting, and the identification of threats and opportunities.     

The social construction of management control systems

The management accounting literature borrows heavily and uncritically from neo-classical economics and its intellectual affiliates in organization theory. We review this theoretical legacy and offer an alternative, dialectical approach. This alternative theoretical structure addresses many of the deficiencies found in the existing literature by incorporating inter-organizational and social conflict, and by recognizing the social origins and social consequences of corporate control systems. A socio-historical study of General Motors' strategies of internationalization — spanning some 60 years — is used to illustrate the implications of the alternative approach for management accounting and organization theory.     

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.     

Performance management: a framework for management control systems research

This paper proposes a framework for analysing the operation of management control systems structured around five central issues. These issues relate to objectives, strategies and plans for their attainment, target-setting, incentive and reward structures and information feedback loops. Their central focus is on the management of organizational performance. Because the framework has been inductively developed, its application is `tested' against three major systems of organizational control, namely budgeting, economic value added and the balanced scorecard. In each case, neglected areas of development are exposed and fruitful topics for research identified. It is believed that the framework can usefully be developed further by its use in analysing other instances of management control systems practice, and that case-based, longitudinal studies provide the best route to this end.     

Cross-cultural research in management control systems design: a review of the current state

This paper reviews cross-cultural research in management control systems (MCS) appearing in English-language journals over the past 15 years. The objectives are to examine these studies for their convergence or otherwise with respect to the state of our understanding of cultural effects on MCS design, and to analyse their theoretical and methodological strengths and weaknesses to guide future research. The review identifies four major weaknesses seen to apply collectively to this research: (i) a failure to consider the totality of the cultural domain in theoretical exposition; (ii) a tendency to not consider explicitly the differential intensity of cultural norms and values across nations; (iii) a tendency to treat culture simplistically both in the form of its representation as a limited set of aggregate dimensions, and in the assumption of a uniformity and unidimensionality of those dimensions; and (iv) an excessive reliance on the value dimensional conceptualization of culture, which has produced a highly restricted conception and focus on culture, and placed critical limits on the extent of understanding derived from the research to date. ©     

Enablers of top management team support for integrated management control systems innovations

Top management team (TMT) support has been identified as one of the most important critical factors to the success of management control systems (MCS) innovations. However, prior studies have taken TMT support for MCS innovations as a given rather than considering the factors that determine whether that support will actually exist and the extent thereof. Prior studies also follow a monolithic approach and treat TMT support for MCS innovations as a black box rather than a combination of processes and stages that develop sequentially over time. We conceptualise TMT support for MCS innovations as consisting of two stages (TMT belief and participation in MCS innovations). We draw on Upper Echelon and knowledge creation theories to motivate and test four enablers of TMT support for an integrated MCS innovation. We theorize the four enablers as TMT's strategic IT knowledge, TMT knowledge creation processes, CIO's strategic business and IT knowledge, and the interaction between TMT and the CIO. We test the research model using survey data that was collected from 347 Australian organisations. The results from the data analyses confirm the hypothesised relationships, supporting the theorized synergies among the four antecedents to TMT support. There are several implications for theory and practice that should be considered in future studies examining the role of TMT in supporting new MCS innovations.     

Effects of the use of control systems

This research explored the moderating effects of subordinate participation in decision making and subordinate job difficulty on their responses to different uses of control systems by their superiors. In a sample of managers from a moderately large U.S. organization, both of these factors were found to moderate the ways subordinates responded to the perceptions that their superiors used control systems for goal setting, evaluation, problem solving, and contingent reward allocations.The results of the study indicated that the use of control systems for contingent reward allocation produced defensive subordinate responses under all conditions, but also produced the functional response of effort when subordinate participation was low and job difficulty high. The use for goal setting appeared to result in functional responses when subordinate participation was high, and in dysfunctional responses when participation was low. The use for evaluation and the use for problem solving both seemed to be aspects of a collaborative developmental use of the control systems. This use pattern appeared to have primarily functional effects, although the results were more functional when the subordinate jobs were not difficult, and when they participated in decision making. Based on the results several propositions are formulated for future testing.     

Environmental management control systems: The role of contextual and strategic factors

This study examines the role of contextual and strategic factors in the development of environmental management control systems in manufacturing companies. In particular, the authors test the roles of perceived ecological environmental uncertainty, perceived stakeholder pressures, and the degree of corporate environmental proactivity on the development of environmental management control systems. The main results from a survey of 256 manufacturing companies suggest that companies that perceive greater ecological environmental uncertainty are less inclined to develop a proactive environmental strategy, environmental information system, or formal environmental management control system. Market, community, and organizational stakeholders motivate environmental proactivity, as well as the development of different environmental management control systems. Regulatory stakeholders only encourage the development of an environmental information system.     

The enactment of management control systems: A critique of Simons

Simon proposes a contingency relationship between a firm's strategy and its management control systems. However, his model underspecifies the relationship between strategic uncertainties and management controls, underplays the recursive impact of management controls on strategy formulation, and ignores the potential influence of managerial characteristics on control system design.     

Eco-control: The influence of management control systems on environmental and economic performance

Eco-control is the application of financial and strategic control methods to environmental management. In this study, we investigate to what extent eco-control influences environmental and economic performance. Using survey-data from a sample of Canadian manufacturing firms, the results suggest that eco-control has no direct effect on economic performance. A mediating effect of environmental performance on the link between eco-control and economic performance is observed in different contexts. More specifically, eco-control indirectly influences economic performance in the context of (i) higher environmental exposure, (ii) higher public visibility, (iii) higher environmental concern, and (iv) larger size. This study contributes to the management accounting literature by providing insight into the roles and contributions of management accounting in the context of sustainable development.     

Enterprise resource planning systems, management control and the quest for integration

This paper analyses how two companies pursued integration of management and control through enterprise resource planning (ERP) systems. We illustrate how the quest for integration is an unending process and it is produced concurrently and episodically. Integration is not only about ‘mere’ visibility and control at a distance. ERP systems do not define what integration is and how it is to be developed, but they incur a techno-logic that conditions how control can be performed through financial and non-financial representations because they distinguish between an accounting mode and a logistics mode. A primary lesson from our cases is that control cannot be studied apart from technology and context because one will never get to understand the underlying ‘infrastructure’—the meeting point of many technologies and many types of controls. ERP systems are particularly interesting for what they make impossible, and our cases illustrate how the two organizations in the quest for integration mobilized a number of ‘boundary objects’ to overcome systems-based ‘blind spots’ and ‘trading zones’. The paper points out that management control in an ERP-environment is not a property of the accounting function but a collective affair were local control issues in different parts of the organization are used to create notions of global management.     

The illusion of no control: management control systems facilitating autonomous motivation in university research

Autonomous motivation, a fundamental factor influencing research success, can be undermined when people feel pressured, managed or controlled. So how do universities – which are under increasing external pressure to manage research activities to produce outcomes – exert management control without threatening the autonomous motivation of their researchers? We address this question through an exploratory case study of the management control systems used in two university faculties. Our results confirm the importance of autonomous motivation in driving researchers’ activity and show how incentives, performance evaluation and cultural–administrative structures can be designed to not only preserve, but also enhance and leverage this motivation.     

The relationship between business strategy, management control systems and performance: Evidence from China

Over the past two decades, China has emerged as a global economic power, ranking behind only the USA, Japan and Germany. China's continuous global economic power has therefore prompted a surge in interest in understanding Chinese business practices. This paper reports on the results of a survey on the contingent relationship between business strategy, management control systems (MCS) and performance in Chinese Enterprises. The analysis is based on data gathered from 215 enterprises operating within the Xinjiang autonomous region of China. For those firms that were classified as pursuing differentiation strategy, the use of more non-financial based MCS has a positive effect on performance and this finding is consistent with the literature. We also found that for those firms classified as pursuing a low cost strategy, the use of more financial based MCS had a positive effective on performance as suggested in the literature. Our research has implications for understanding management accounting practices in Chinese enterprises.     

A mean-variance framework for analyzing reserve requirements and monetary control

This paper analyzes an ‘almost’ contemporaneous reserve accounting system (ACRA) in which reserve computation and maintenance periods only partially overlap. As a result, banks acquire knowledge of their required reserve obligations prior to the settling period when such reserve requirements become legally binding. Our analysis suggests that the money stock behaves similarly under both ACRA and purely contemporaneous reserve accounting systems as long as banks are risk averse. When banks no longer exhibit risk aversion, the ACRA money stock tends to mimic the behavior of the money stock under a lagged reserve accounting system.     

Reasons for management control systems adoption: Insights from product development systems choice by early-stage entrepreneurial companies

Recent theoretical and empirical work indicates that management control systems (MCS) are an important element in enhancing innovation. We extend this research thrust examining the adoption of MCS in product development, arguably one of the business processes where innovation plays a major role. Using a sample of 69 early-stage entrepreneurial companies, data are collected from questionnaires and interviews with each of the CEO, financial officer, and business development managers pertaining to product development MCS. We examine seven different systems: project milestones, reports comparing actual progress to plan, budget for development projects, project selection process, product portfolio roadmap, product concept testing process, and project team composition guidelines. We address three distinct questions: (1) What are the reasons-for-adoption of these systems? The nature of our sample allows us to trace back to the adoption point and develop a set of reasons-for-adoption from the analysis of the data. While MCS fulfill certain roles as described in the literature, these reasons-for-adoption are distinct from these roles. Results indicate that certain events lead managers to adopt these systems and address the challenges that they face. They include contracting and legitimizing the process with external parties and internal reasons-for-adoption such as managers’ background, learning by doing, need to focus the organization, or reaction to problems. (2) Are these reasons-for-adoption associated with differences across companies in the time from their founding date until these systems are adopted (time-to-adoption)? Prior research has looked at the covariance of various organizational variables with this timing; this study goes a step further by looking at the effect of different reasons-for-adoption on this timing. Our evidence finds an association between these two variables. (3) Are these reasons-for-adoption relevant to performance? We find that the reason-for-adoption is associated with the on-time dimension of product development performance.     

DNA Mining and genealogical information systems: Not just for finding family ethnicity

The primary expected use of DNA and genealogy sites has been their ability to help users find their family, find their ethnicity and to help them connect with distant relatives. In so doing such sites help users to “learn more about themselves.” Such systems have also been proposed to have the broader goals of helping connect mankind and show people how their similarities are greater than their differences. However, the use of DNA and genealogy information recently turned away from just finding family connections, ethnicity and origins. Recently it was announced that the “Golden State Killer” had been caught using information generated from using DNA and consumer genealogical websites. This paper investigates some of the questions and unanticipated consequences raised by this alternative use of these technologies and their impact on individuals, organizations and society. As part of that analysis we analyze some of the immediate consequences on the firm from which the DNA information was gathered, the new emerging approach used by law enforcement, some privacy concerns and provide a network game formulation as a means to model user behavior. Finally, we examine some potential emerging research issues.