Design Of Management Control Systems Research Articles

Management Control System Design and Innovation: A Systematic Literature Review

AbstractThe purpose of this study is to examine through a systematic review the management accounting research that focuses on the role of management control systems (MCS) in enhancing innovation within organizations. For that purpose, a total of 19 articles from publications spanning from 2000 to 2022 were selected using the keywords of management control system and innovation. The findings indicate that the Levers of Control (LoC) is the most widely studied topic. The next popular topic being examined is formal and informal control mechanisms. The aspect of innovation in that literature mainly focuses on product innovation, management and organizational innovation, and environmental innovation and sustainability. Future research can explore more the role of the MCS in the combined mechanism of LoC to encourage innovation. This paper contributes to the MCS literature by examining the suitable mechanisms affecting the success of innovation in a rapidly changing environment. Keywords:Management Control System, Innovation, Review Literature, Levers Of Control, New Product Development

An Optimal Approach to Energy Management Control of a Fuel-Cell Vehicle

This paper presents the design of an energy management control system to improve powertrain efficiency and optimize the amount of fuel used by a hybrid fuel cell vehicle in a route-based scenario. To reach this goal, a complete tank-to-wheel model is developed under the assumption of a known scenario, the speed profile that best minimizes the energy required to complete the test is computed, and a controller able to handle the power request is designed. In particular, a Model Predictive Control architecture is used to split the power request between the primary and the secondary power source (fuel cell and supercapacitors). The effectiveness of the proposed approach is assessed through extensive simulation tests using a realistic model.

Investigating causality relationship of balanced scorecard, bonus, and managers’ time allocation: An experimental study

This study investigates the causal relationship between a comprehensive reporting system (balanced scorecard — BSC) and managerial time allocation when incentives are involved. The study examines whether managers adjust their time according to different performance areas when both financial and non-financial indicators are used for evaluation and reward. An experimental methodology was employed, involving managers from private and state-owned enterprises in Indonesia. The data were analyzed using analysis of variance (ANOVA). The findings indicate that managers do not spend more time on non-financial areas when a BSC is used, and do not spend less time on financial areas when bonuses are based on both financial and non-financial goals. These results challenge agency theory, which suggests that performance-based incentives align managerial behavior with organizational objectives. The study concludes that BSC and financial incentives do not significantly affect managerial time allocation as expected. Overall, the results of the research support Lipe and Salterio (2000), and Ullrich and Tuttle (2004), but the study also highlights that additional factors may need to be considered to fully understand how incentives and reporting systems influence managerial behavior. This paper contributes to the understanding of performance measurement and incentive systems in Indonesian enterprises by offering ideas for the design of effective management control systems.

External complexity and the design of management control systems: a case study

Increasing complexity and dynamism in technologies and markets are putting new demands on management control systems beyond those that these systems traditionally address. This longitudinal case study traces the experience of a real estate fund management company in addressing the need to make sense of increasing external complexity and its effort to design a management control system to support top management in this task. Our findings indicate that internally-focused systems used interactively fail to fulfill this role because of their paucity in terms of information on external complexity. As a result, the company experimented with various designs and developed a management control system that relied on information external to the organization and mostly qualitative. This system became the infrastructure for continual discussions on strategic but also tactical implications of external events. The system that the company developed relied on the wisdom of crowds, structured meetings, and information technology to gather and process qualitative information to enhance peripheral vision. Overall, the case study illustrates the challenges and potential responses to the design of management control systems for the strategic surveillance of external complexity.

Investigation of Cooling Systems Faults, Control and Management Models

With the rapid increase in population in the world, people's demands for chilled and frozen foods are also increasing. The healthy and energy efficient cold storage of foods has become an important issue. In this context, studies on the efficiency and performance of energy management models including automatic control techniques on cooling systems have been investigated in recent years. The purpose of this study is to give information about faults, traceable energy management models and control systems in the perspective of cooling systems.
 Maintenance of cooling systems, malfunctions and their late detection cause time and cost problems. The decrease in the performance of the cooling system or the occurrence of malfunctions cause economic costs as well as energy consumption. Controlling the changes in pressure, temperature and electricity consumption values ​​in cooling systems and comparing them with standard operating conditions is one of the methods used for fault detection. Faults that may occur in cooling systems; compressor, condenser, evaporator, expansion element and fan failures, thermal failures, phase protection relay failures, under/over refrigerant charge, probe failures, night curtain electric motor failure, condenser-evaporator surface pollution. Errors and malfunctions occurring in the cycle cause the parameters under normal operating conditions and accordingly the cooling performance coefficient to change. Traceable energy management models are needed to detect faults and prevent them in a short time. With the design and implementation of these models, long-term damage to the system is prevented by reducing energy, maintenance and repair costs.
 In the design of traceable energy management models and control systems for cooling systems; set point and management, alarm notification and management, designing algorithms with precise temperature control will provide energy efficiency.

Organizational life cycles and management control systems design

This paper explores the literature relating Organizational Life Cycle theory with Management Control Systems design. During the birth stage, much emphasis is put on cultural controls. In the growth stage, cultural controls remain important, but the degree of formalization increases with cybernetic controls and administrative controls. During the maturity stage, the most bureaucratic phase is reached with many planning and administrative controls. The revival stage shows a renewed focus on cultural controls and a reduction of administrative controls. Not many findings are available that discuss the decline stage. It is argued that each stage represents important challenges for the CFO.

Accountability logics in disability service NPOs – Incorporating the role of service user advocacy in accountability and management control systems

PurposeThe aim of this paper is to contribute to a greater understanding of non-profit organization (NPO) management control systems (MCS) and accountability in organizations providing support service for capacity constrained service users. Specifically, the paper examines the role of MCS and accountability in supporting mission realization in NPOs providing services to people with intellectual disabilities and reflects on this in the context of the COVID-19 pandemic.Design/methodology/approachThe research comprised a case study of four NPOs providing services to people with intellectual disabilities in Ireland conducted prior to the global COVID-19 pandemic. The study probed management's perceptions of stakeholders and examined the manner in which the design and use of MCS and accountability processes supported mission realization.FindingsService users were regarded as the least powerful stakeholder and consequently the least attended to in terms of MCS and accountability processes. The absence of relational and dialogical accountability with service users is not only central to maintaining this power asymmetry but also poses a threat to mission realization. These deficits can be addressed through the integration and monitoring of internal advocacy activities into MCS and accountability processes, which, on reflection, may also mitigate some of the negative consequences for service users of isolation from external support networks in times of crisis.Research limitations/implicationsThis research has opened up an area for enquiry – internal advocacy – heretofore not addressed in the management accounting literature, opening up a novel vein for future research. Such research could further examine the role of internal advocacy, drawing from and adding to the research in other support service domains. A number of objectives and questions might be considered: (1) probing the level of management recognition of the role of direct engagement in advocacy activities in supporting service user agency; (2) identifying with service users and management the nature and attributes of effective advocacy activities and practices; (3) questioning how such advocacy activities and practices might be reflected in MCS; (4) identifying what service user stakeholders regard as effective accountability to them in relation to their needs and objectives; and (5) assessing the impact on service user experience and on NPO mission realization of internal advocacy activities and the monitoring and review thereof through MCS. These suggestions for future research draw attention to aspects of support service delivery that have the potential to be profoundly influential on service outcomes.Practical implicationsA performance management model reflecting the identified need to incorporate internal advocacy mechanisms into organizational management control systems is proposed in an effort to increase accountability of NPOs to their core mission stakeholder – service users. This model may be of value to NPO management as they move from a medical-model of care to a rights-based model for service delivery in care settings.Social implicationsThe paper reflects the importance of listening to the voice of vulnerable service users in NPO care settings and proposes a mechanism for embedding internal advocacy in formal management control systems and accountability processes.Originality/valueIn proposing an “agency” supportive relational and dialogical accountability logic for such organizations, underpinned by “internal advocacy”, this research provides theoretical and practical insights for accountability processes and the design of MCS. The findings contribute empirically, not just to the NPO management and MCS literature but also to understanding the relational interaction of service users with service organizations, and what this means in supporting service user objectives and realization of organizational mission.

Why the type of information observable to peers matters: Peer monitoring and performance measure manipulation

We investigate whether and how perceived observability of two types of information to peers – effort and performance – affects an agent’s engagement in performance measure manipulation. We propose that the relation between performance observability to peers and manipulation of performance measures depends on effort observability to peers. Data from two field surveys of mid- and lower-level managers in the United Kingdom support our prediction. The results show that the lower effort observability to peers is, the more performance observability to peers heightens performance measure manipulation; and that the higher the performance observability to peers is, the more effort observability to peers lowers performance measure manipulation. Our results thus suggest that performance observability and effort observability to peers are complementary. Our findings have important implications for literature on the design of management control systems and peer monitoring. Moreover, they help firms make better use of transparency to minimize the manipulation of performance measures.

How do Managers use Management Control Systems in Response to Shareholder Activism?

We study how managers interactively use management control systems (MCS) in response to shareholder activism in a context of performance declines. We predict that broad-scope MCS design is a key factor that helps explain variation in the level of interactive use. In addition, we argue that the extent to which diagnostic use of MCS alleviates shareholder pressures depends on analysts’ recommendations. We empirically test our hypotheses with survey and archival data. Data on shareholder activism is hand-collected. The results provide support for our predictions, suggesting that managers use MCS interactively to assuage shareholder activism in the context of performance declines. This effect is less pronounced for managers equipped with broad-scope information from their MCS. Our findings indicate that in a setting of favorable analysts’ recommendations, managers use MCS diagnostically instead of interactively to cope with shareholder activism. Overall, the findings may help inform our understanding of how firms manage shareholder activism from a management control perspective.

Control systems and interorganizational identification in technology parks cooperation

ABSTRACT The aim of this study was to analyze the influence of the design of management control systems (MCSs) on interorganizational cooperation and the moderating role of companies’ identification with their technology park. The conditions that promote the emergence of interorganizational cooperation are indicated in the literature as an important research gap, as well as the little evidence about how MCS design influences cooperation, especially in relationships based on innovation. MCSs in interorganizational partnerships have been shown to be relevant for the coordination and maintenance of the relationship, and this study reveals that MCSs promotes cooperative behaviors among the companies associated with the technology parks. The interorganizational identification of the companies with their park was moderately present, thus prompting the inclusion of social and relational aspects in interorganizational studies, which remain scarcely explored in the literature. The MCSs of the parks are focused on stimulating the companies’ cooperation, which is one purpose of this partnership. By not confirming the moderating effect of identification, it was verified that this construct drives cooperation in a way that is dissociated from the MCSs. A survey was conducted in organizations associated with Porto Digital and with the São José dos Campos Technology Park, and it had the participation of 187 managers. To analyze the data the partial least squares structural equation modeling technique was applied and the differences between the two parks were further analyzed. The MCSs design and interorganizational identification act as antecedents of the companies’ cooperation with their technology park. On the other hand, the direct and positive effect of the MCS design on cooperation is not moderated by how much these companies identify with the interorganizational relationship established. The paper contributes by identifying ways of fostering cooperation, one of the purposes of interorganizational agreements, as well as by providing evidence in a context that is scarcely addressed in the literature.

TELAAH SISTEM PENGENDALIAN MANAJEMEN DALAM FAMILY BUSINESS

This study aims to examine the design of management control systems, in two business groups with different cultural backgrounds. The difference in cultural backgrounds is due to one of them from the company founders in the two companies who have different cultural life backgrounds, and in the end will be carried away by them in the formation of the organizational culture of each company. The research uses the literature study method by examining two research results, namely from the research of Efferin & Hartono (2015) on Management Control and leadership Styles in Family Business: An Indonesian Case Study and Hanif (2015) Management Control System Design: An Interpretive Ethnography. The results of the study strengthen the existence of contingency theory which states that companies will interact with their environment, with their ecosystems, and this will be seen in all aspects related to the management control system. The culture of society, in which the main actors from the founders to the managers of the company have lived, participate in coloring the organizational culture of the company, and in the end, in the design of the management control system.

Do enabling management control systems stimulate innovation?

PurposeThe paper aims to analyze the influence of the enabling design of management control systems (MCS) on the intensity of use of management controls (budgeting and reengineering and improvement) in innovation (of processes and marketing).Design/methodology/approachA survey was conducted with mid-level managers of the companies that are considered the most innovative in Brazil. Structural equation modeling was applied to analyze the data.FindingsThe enabling MCS design positively and directly influences the intensity of use of management controls (budgeting and reengineering and improvements) and innovation (of processes and marketing). Indirect effects are also observed in the relationship between the enabling MCS design and innovation, through the intensity of use of reengineering and improvements. Environmental uncertainties reflect negatively on the intensity of use of management controls and innovation. These results broaden the discussions on the factors that can affect innovation actions and highlight the importance of considering them in the MCS design.Originality/valueThe value of the study lies in contributing to minimize inconsistencies in research results concerning the effects of MCS on innovation and of factors that may act as intervening factors in such a relationship. It discusses the influence of internal organizational factors, related to MCS design, and of external factors, environmental uncertainties, on the intensity of use of specific management controls and on the promotion of innovations in companies imbued with this mission.

Enabling formal MCS design and use: a meta-synthesis of qualitative research

Purpose This study aims to synthesize qualitative research in the accounting and management literature that builds on the concept of enabling formalization. The framework for the meta-synthesis integrates formal management control system (MCS) design applying the package typology and two modes of MCS use, namely, diagnostic and interactive. Design/methodology/approach The meta-synthesis is based on 34 case studies gathered by a systematic literature search. Qualitative research mining software (Leximancer) was used to facilitate an initial analysis, upon which an in-depth manual analysis was conducted. Findings The findings indicate that the generic features of enabling formalization – specifically, flexibility and repair – help employees better deal with inevitable contingencies in their daily work through continuous self-improvement. In many circumstances, there is a need to change common organizational practices, which sometimes requires realignment to direct employee behavior toward goal congruence. The (temporary) coercion of employees does not seem to cause dysfunctional behavior or resistance as long as the broader MCS package follows the design features of enabling formalization – specifically, transparency. The interactive use of personnel/cultural controls appears to play a crucial role within the whole MCS package in balancing tensions between coercion and enabling formalization. Originality/value This study adds to the understanding of formal MCS design characteristics perceived by managers and employees as enabling. Furthermore, it shows how managers of these organizations use formal MCS under enabling formalization.

Bridging Organizational Resilience and Management Control Systems - A Systematic Review

Organizations have repeatedly faced challenges due to disasters such as pandemics, economic or financial crises, and other unexpected events. One reason why some organizations cope more efficiently than others with such unforeseen circumstances might be found in their resilience design. However, while this has long been the subject of research, there is still no consensus in the literature, and there is no common understanding regarding the definition of the term ‘resilience’, the conceptualizations at the organizational level, and its interaction with management control systems (MCS). This study bridges the MCS and organizational resilience literature and provides a broader understanding of the relationship between the organization and adverse events. To identify relationships between MCS and organizational resilience, we perform a systematic review of organizational resilience conceptualizations and definitions, supplemented by current empirical findings using a content analysis and a citation network analysis. We investigate different approaches to achieve organizational resilience objectives by using MCS (especially Simons’ levers of control framework) to show relationships, trade-offs, complementarities, and substitutes, and provide initial approaches for applying complementarity theory to explain the relationship between MCS design and use, and organizational resilience. We reveal gaps between organizational resilience and MCS literature, and provide avenues for future research, in particular a preliminary roadmap for empirical research. Our findings suggest that integrating organizational resilience measures into MCS might be beneficial for organizations to manage resilience at the organizational level and achieve complementary effects. In addition, organizations could increase their resilience capacity by building resilience-oriented management controls (ROMC).

Employees’ identification and management control systems: a case study of modern policing

PurposeThe authors examined how squad members within an Australian state police force perceived and attached enabling or coercive meanings to a suite of management control system (MCS) changes that were new public management (NPM) inspired.Design/methodology/approachThe authors conducted a longitudinal case study of a large Australian state police department utilizing an abductive research design.FindingsThe authors found that identification processes strongly conditioned the reception of the MCS changes introduced. Initially, the authors observed mixed interpretations of controls as both enabling and coercive. Over time, these changes were seen to be coercive because they threatened interpersonal relationships and the importance and efficacy of squads in combating serious and organized crime.Research limitations/implicationsThe authors contributed to MCSs literature by revealing the critical role that multifaceted relational and collective identification processes played in shaping interpretations of controls as enabling–coercive. The authors build on this to elaborate on the notion of employees’ centricity in the MCS design.Practical implicationsThis study suggests that, in complex organizational settings, the MCS design and change should reckon with pre-existing patterns of employees’ identification.Originality/valueThe authors suggested shifting the starting point for contemplating the MCS change: from looking at how what employees do is controlled to how the change impacts and how employees feel about who they are. When applied to the MCS design, employee centricity highlights the value of collaborative co-design, attentiveness to relational identification between employees, feedback and interaction in place of inferred management expectations and traditional mechanistic approaches.

Business as Usual: Working from Home During the Pandemic Did Not Lead to Large Changes in Employee-Level Management Control

We investigate whether the switch to working from home during the corona pandemic has affected employee-level management control system design and use in a sample of 227 employee-supervisor dyads in The Netherlands. Organizational theory suggests that more working from home will lead to more emphasis on outcomes, less emphasis on procedures, and more delegation. Contrary to expectations, we find very limited differences in how employees and supervisors experience the control system when working from home, with no evidence of a substantial shift towards outcome-based controls. The frequency of individual and team communication remained mostly similar through a shift towards online channels, although home workers report a small increase in total frequency. However, employees that work from home do report an increase in autonomy and higher performance, while supervisors working from home report lower performance. The results suggest that where working from home was implemented this happened within the existing control system, with supervisors incurring the transition costs.

The Impact of Accountability-Oriented Control Aspects of Variance Investigation on Budgetary Slack and Moderating Effect of Moral Development.

Variance investigation (VI) has been identified as an effective mechanism to reduce budgetary slack at the ex ante budgeting stage. This paper focuses on two further research questions: (1) the extent to which two different accountability-oriented control aspects (i.e., external investigation and self-reporting) of VI affect budgetary slack and (2) the extent of the moderating effect of moral development on the relationship between these two accountability-oriented control aspects and budgetary slack. Our experimental results show that both external investigation and self-reporting can reduce the propensity of creating slack at the ex ante budgeting stage. More specifically, the effect of external investigation on reducing the propensity of creating budgetary slack is greater than that of self-reporting. This study further reveals that moral development moderates the effect of external investigation on budgetary slack. When comparing subordinates with low moral development with those with high moral development, our results show that the effect of external investigation on budgetary slack is stronger among the former group than the latter group. This study does not find any moderating effect of moral development on the relationship between self-reporting and budgetary slack. Our study sheds some new light on varying effects of two accountability-oriented control aspects of VI on budgetary slack, which are also moderated by different levels of subordinates’ moral development. These results may be considered in the design and implementation of management control systems.

Effect of online hotel reviews on the relationship between defender and prospector strategies and management controls

Purpose This study aims to analyze the effect of online hotel reviews on the relationship between defender and prospector strategies and management control system (MCS) design. Design/methodology/approach To conduct the study, this paper administered a questionnaire to large Brazilian hotels and analyzed data from 204 hotels using structural equation modeling and fuzzy logic. Findings The main results show that online hotel reviews have a positive and significant effect on the relationship between prospector strategy and personnel and action control. In contrast, online reviews have a negative effect on the relationship between defender strategy and personnel, action and results controls. Thus, it is confirmed that online reviews change the relationship between strategy and MCS design. Practical implications The results show that online reviews play an important role in the decisions of hotel managers regarding MCS design. Customer demand evaluations, which are regularly available online on analysis websites, help managers adapt the MCS design, ensuring that their actions are aligned with the adopted strategy. This study adds to previous studies by showing that hotel managers use the information from customer evaluations to improve their performance. Originality/value The management literature based on the contingency theory indicates that strategy is a variable that affects MCS design. This study extends this discussion by indicating that online reviews, specifically in the hotel industry, can also be a determining factor in defining management controls. In addition, this paper points out that OHR impacts differently, depending on the strategy used and the type of management control.

An evolutionary approach to management control systems research: A prescription for future research

By reviewing the theory underlying the design and interdependency of management control systems, I highlight the important role firm dynamics plays in our understanding of these control systems. I provide both theoretical and empirical extensions encouraging authors to explore more longitudinal studies to better understand the path dependency of control system design, how control system elements vary over time within a firm, and how the interdependent nature of individual control elements might vary.

How Top Managers Use the Entrepreneurial Gap to Drive Strategic Change

Prior research provides strong evidence for the association between business strategy and the design and use of management control systems. We complement this research by examining the role of management control systems in situations of strategic change. We report the results of an in-depth longitudinal field study of Henkel, a German multinational company, from 2008 through 2013. During this period, the company declared a new strategy. To implement this strategy, senior management purposefully misaligned span of control and span of accountability – labeled the entrepreneurial gap – to stimulate individual initiative and higher levels of performance. Our description of how top managers enacted change suggests a strong relationship between management control systems, organizational structure, and cultural norms that together support desired outcomes. In addition, we provide evidence on the timing and sequencing of actions by top management. By the end of our study period, Henkel was a top performer in its various markets and was leading the German blue-chip index in stock returns.