Design Of Management Control Systems Research Articles

The impact of society on management control systems

The aim of this study is to investigate whether certain configurations of management controls dominate in certain societies (socio-cultural contexts) and whether the effectiveness of a given archetype of management control systems (MCSs) varies depending on the socio-cultural setting—the society—in which it operates. The study focuses on three socio-cultural groups and the corresponding institutional contexts (an Anglo-Saxon group, a Central European group, and a Northern European group) and three MCS archetypes (delegated bureaucratic control, delegated output control, and programmable output control). We use unique data from a cross-national, interview-based survey encompassing 610 strategic business units from nine countries (seven European countries plus Canada and Australia). The idea that firms tend to adapt MCSs to the socio-cultural context does not gain empirical support in this study. No significant differences in the distribution of MCSs between the three socio-cultural groups are noted. However, we do find that programmable output control has a more positive impact on effectiveness in Anglo-Saxon cultures, while delegated output control has a more positive impact on effectiveness in Northern Europe. Taken together these findings indicate that distinct differences between societies make a particular MCS design more appropriate in a given society, but where such differences are not dramatic (as in the present case), multiple MCS designs can be found in the same society.

Management control system design – the effect of tools in use on the information provided

Today’s organizations have a wide variety of tools at hand to provide relevant information to management that can be used later on for various purposes, including performance evaluation and decision making. This paper investigates the range of management control (MC) tools in use and its relationship to the scope and frequency of information made available to management. As the work of controllers in the 21st century is intensively supported by diverse IT solutions, the tools under analysis are not limited to MC instruments. IT systems as enablers of well-designed MCSs are also considered. Multivariate analysis of the 2013 questionnaire from the “Competing the world” Research Program revealed a significant positive correlation between the use of MC tools and diverse informational features of MC systems. However, only a limited effect for IT intensity on information provision was proved for the 181 Hungarian, mainly mid-size companies in the sample. The results of discussions with senior controllers about some unexpected findings are also reported.

Effects of management control systems and cognitive orientation on misreporting: an experiment

PurposeThe purpose of this paper is to analyze the simultaneous effect of management control system (MCS) designs (belief vs boundary) and cognitive orientations (individualism vs collectivism) on performance misreporting by combining accounting and psychology literature.Design/methodology/approachThis paper is based on a laboratory experiment with 67 postgraduate students.FindingsResults show that an individualist cognitive orientation increased performance misreporting. The results also showed that a boundary design of MCS intensified the relationship between individualist orientation and performance misreporting.Research limitations/implicationsThis paper shed some light about the role of non-pecuniary control system for reducing managerial performance misreporting. The findings support that the tendency of individuals to avoid misreporting depends not only on the MCS design but also on the match between it and individual’s cognitive orientations.Practical implicationsManagers in organizations should consider the predominant cognitive orientation of individuals when they design MCS. They should consider that control systems, which impose coercive constraints to individuals, may encourage feelings of psychological reactance and then increase performance misreporting.Originality/valueThis study is among the first to combine psychology and accounting literature to analyze how the design of MCS influences individuals’ motivation to misreport their performance. It provided evidence about the effect of non-monetary control systems on individual’s behavior in organizations.

Performance in new product development: a comprehensive framework, current trends, and research directions

New product development (NPD) is critical for a firm’s competitive advantage. Since the early 1980s, NPD research has steadily increased and has defined successful practices. However, owing to this research field’s fragmentedness, there is ambiguity about what successful NPD looks like. Evidence of the effective design of management control systems (MCS) concerning NPD performance is inconclusive and calls for comprehensive analysis. Yet, there is no holistic framework that covers promising practices and structures. Drawing on a body of 284 article publications, we inductively develop a framework with nine clusters that, taken together, make up NPD performance. These are grouped addressing firm-external and firm-internal phenomena, for instance, cooperation, expertise, and the NPD process. We populate each cluster with variables that are proposed to drive performance, and derive current research trends and paths for future research on NPD. The review makes two contributions to the literature and one to practice. First, the comprehensive framework of NPD performance drivers supports the adjustment of prior general MCS design implications to specific NPD settings. Second, the inductive approach sets this review apart from prior reviews of NPD performance by proposing a holistic framework that is neither biased in a domain, nor in a pre-defined structure. Third, firms will benefit from the framework, because it helps to customize the MCS such that firms can comprehensively evaluate their NPD activities and can enhance performance.

Breaking up from Within: Management Control System Design in Transforming Organization into a Platform-Oriented Strategy

Breaking up from Within: Management Control System Design in Transforming Organization into a Platform-Oriented Strategy

Identifying and Managing Control System Benefits and Costs

AbstractA well‐functioning management control system is essential to ensure the organization's strategy is executed as planned. While accounting students are provided many opportunities to master the design of management control systems, students are provided fewer opportunities to practice applying management control systems. This interactive role play allows students to experience the challenges managers face when applying organizational control systems. The role play fits best at the end of the unit where instructors have reviewed management control system design and application and is best suited for undergraduate and MBA students who have little or no supervisory experience. Students rated the role play as highly effective, as 97 percent (n = 38) of the students recommend that instructors at other institutions adopt this exercise.

Effect of transformational-leadership style and management control system on managerial performance

Our study adds perspective on research into choices in the design of management control systems by examining: (1) how transformational-leadership style influences the choice of the design of a comprehensive performance-measurement system (PMS) and reward system; (2) how subordinate managers' reliance on broad-scope accounting (BSA) information facilitates their managerial decision-making processes and managerial performance. Our results suggest that transformational-leadership style has a significant positive and direct effect on managerial performance. We find that it has a significant positive and direct effect on the use of BSA information and comprehensive PMS, but has no significant effect on reward systems. We also find that transformational-leadership style has a partial indirect effect on managerial performance via three mediators, namely, comprehensive PMS, reward systems, and BSA information. Our findings shed light on how such mediators intervene in the relationship between transformational-leadership style and managerial performance.

Managing Interdependence in Multi-business Organizations

Managing interdependence in multi-business organizations is a profound challenge for the design and use of management control systems. Results of a case study of a leading multinational telecommunications provider suggest that the composition of control systems varies significantly with the type of interdependence. This is further substantiated by six qualitative sub-cases of the case study firm. Specifically, we find that management control systems are significantly more complex in cases of cooperative forms of interdependence than in cases of transactional forms. Contrary to expectations, this also applies to pooled interdependence which occurs when separate units share some common resources.

Management control systems and student performance in Norwegian primary education: an exploratory case study

The management control literature has devoted limited attention to the design and use of management control systems (MCSs) in schools and by local school authorities (LEAs) and to their role with respect to student performance. This study aimed to narrow this knowledge gap by exploring the design and use of MCSs in schools and by LEAs and the relationships between the design and use of MCSs and student performance. A case study approach was applied, building on interviews with headmasters and other employees in six schools and three LEAs, in addition to plans, reports, student performance measures and other types of public information. The case studies provide insight into the design and use of MCSs on the school and LEA levels and how MCSs might substitute for and complement each other. The findings suggest that learning-focused design and use of MCSs and flexible organization of students and teaching are factors that are positively related to student performance. This study also suggests that clan control based in a learning focus instilled in teachers during their professional education and training, and facilitated by a flexible and transparent school organization, may moderate or substitute for the role of learning-focused MCSs. Finally, it proposes that a learning focus on the LEA level in small and unified LEAs might substitute for a school-level learning focus.

The Role of Management Control Systems and Top Teams in Implementing Environmental Sustainability Policies

This paper simultaneously examines how the design of management control systems and top management team composition help organizations to implement environmental sustainability policies successfully. It also analyzes the effect of those policies on both short-term and long-term performance. A questionnaire was sent to every member of top management teams in 231 public hospitals in Spain. It obtained 457 useful responses from TMT members, allowing us to collect data on 81 full top management teams (35.06%). The partial least squares statistical technique was used to test the causal research model. It was found that the implementation of environmental sustainability policies has a negative effect on short-term organizational performance and a positive effect on long-term performance. The results show that management control systems and top management team diversity have a complementary effect on implementing policies focused on environmental sustainability. A broad design of management control systems helps organizations adopt sustainability policies to achieve long-term performance. It was also found that top management team diversity mitigates the negative effect of adopting environmental sustainability policies on short-term organizational performance.

The Ethics of Metrics: Overcoming the Dysfunctional Effects of Performance Measurements Through Justice

The last two decades have seen a great deal of scandals in the business world. Many of them have to do with accounting and management control, but in substantially different ways. This paper focuses on the dysfunctional effects of systems of measurement and incentives, and the possible ways to overcome those dysfunctional effects, achieving a stable state of goal congruence through the introduction of justice in the design and use of management control systems, by contributing to the ethical development within the organization. We first analyze how the discipline of control systems came into being, and show how, in the last decades, both in theory and practice, has gone in a direction of becoming more ‘automatic,’ and then, we provide some case studies of how they are at the origin of many of the scandals. Borrowing from Rosanas and Velilla (J Bus Eth 57:83–96, 2005) and from Cuguero-Escofet and Rosanas (Manag Account Res 24:23–40, 2013), we develop a model of control systems based on justice, where we make the distinction between formal and informal justice. We are then able to show how informal justice is the key element in the dynamics of a control system: to preserve formal justice, or to evolve toward formal justice. In any case, it is a necessary condition to reach a state of maximum goal congruence, stable through time, as a consequence of the ethical development that this type of systems are able to generate.

The interplay between ideological control and formal management control systems – A case study of a non-governmental organisation

In this study we explore organisational ideology as an important dimension of management control systems (MCS). Through a case study of a health centre operating as an NGO we found that the ability of ‘ideological talk’ to emphasise the organisation's uniqueness and importance gave the manager a powerful instrument of control. Ideological control was also key to explaining the limited resistance to the implementation of financially oriented formal MCS. We contribute by detailing an important, yet still insufficiently explored, part of this implementation process, namely that the formal MCS, through the interplay with the predominant ideological control in place, became vested with symbolic significance. Thus, our findings show that the production of ‘concurrent visibility’ can be sought both through the design of formal MCS (as suggested by Chenhall, Hall, & Smith, 2013) and through the use of ideological control (as in our case). Our results also suggest the need to distinguish between professional and organisational identity when analysing MCS in health care organisations and NGOs.

The role of innovation in the evolution of management accounting and its integration into management control

This paper aims to show how the design of management control systems (MCS) has developed in response to the need for organizations to address the challenges of operating in uncertain settings by embracing innovation. We examine how management accounting has evolved from a traditional, cybernetic approach to control operating within a closed system with little attention to adaptive processes into MCS that encompass a more dynamic, complex, open approach to management control that has provided a basis to facilitate innovation. We examine how the design and use of these MCS, that incorporate traditional and new practices, have evolved in ways that can support innovation where this is critical to survival. Accounting Organizations and Society (AOS) has been quite instrumental in pioneering many developments in this field. We draw on AOS, and other publications, to identify significant contributions that have been efficacious in theorizing changes in MCS with a particular concern for the context of innovation within which this takes place.

Management Control System Design: An Interpretive Ethnography

This study is intended to explore the cultural values underlying the company's management control system design by using interpretive paradigm, an ethnographic method is carry out to explore the cultural meanings. The researcher chooses the X Padang Restaurant group (GRPXJ) as a research object. The GRPXJ management control system (MCS) is affected by the Minangkabau culture and modern values. Its MCS design is flexible, and it is not hierarchical organizational structure but more flat, decentralization patterned with large autonomy in every branch, accounting system are based on mato profit-sharing, and the management of restaurant is more like a self-organizing entity.

Management control system design, ownership, and performance in professional service organisations

The objective of this study is to investigate the implications for organisational performance of the interplay between ownership and management control system design in professional service organisations. Based on transaction cost economic (TCE) theory, we expect that low ownership by professionals working in a professional services organisation will be more efficiently managed with a boundary MCS archetype and high ownership by an exploratory MCS archetype. Of direct relevance, we predict that a failure to conform to these optimal archetypes will manifest in relatively poorer performance. The study was conducted based on a survey of 120 practice managers of primary healthcare organisations in Australia. These results provide empirical support for the stated prediction.

Management Control System Design: Conditional Interdependencies between Behavioral Constraints, Incentives and Employee Selection

My research contributes to the understanding of management control system design. Despite ongoing relevance and over 30 years of research there is still a limited understanding about the interdependence of management control. In this paper I analyze the interdependencies of behavioral constraints, incentives and employee selection under differing degrees of task uncertainty and output immeasurability. I find that in situations characterized by low task uncertainty and low output immeasurability employee selection and behavioral constraints act as substitutes. In a low task uncertainty/high output immeasurability context behavioral constraints and employee selection appear to act as substitutes. In a high task uncertainty/low output immeasurability setting there appear to be no significant interdependence effects between behavioral constraints, incentives and employee selection. Lastly, given a high task uncertainty/high output immeasurability background I find that incentives and employee selection act as complements and employee selection and behavioral constraints are substitutes. In addition to contextual factors managers have to take these interdependencies into account when designing optimal management control systems in order to achieve both external fit and internal consistency.

Logistics Costs Behavior and Management in the Auto Industry

ABSTRACT This case, based on a real-life situation of how logistics costs function in daily operations, aims to provide students with the opportunity to understand how logistics costs are calculated and how the inter-organizational nature of these costs affects the profitability of two companies. The case hinges on understanding cost behavior (fixed and variable) and on management control systems design. Although logistics costs represent a small fraction of total costs in manufacturing companies, they can negatively affect the bottom line if left unattended. Students are presented with data relating to a three-year project in the automotive industry that shows that the project has been experiencing a sustained increase in costs that has eroded its profit margin. While it appears that logistics costs are the problem, it cannot be verified until the contracts are studied. In addition, the financial- and contract-related data provided are sufficient to extend the profitability analysis to the provider of logistics services. This case is suitable for management accounting courses at the master's or advanced undergraduate level; it has been tested and well received by students who want to gain a greater understanding of logistics costs—their nature, behavior, possible containment strategies, and inter-organizational effects. Data Availability: Some of the data are from public sources, but the logistics contracts and cost schedules are private; the confidentiality agreement with the two companies requires masking certain details and modifying the numeric data.

A configuration approach to management control systems design in service organizations

Purpose The purpose of this study is to utilize a configuration approach to examine the relationships between multiple contingent variables and management control systems (MCS) in service organizations from various industries. The contingent variables include service process type, cost leadership and differentiation strategies, environmental unpredictability, change and complexity and organizational life cycle stage. Design/methodology/approach Questionnaires were administered to the financial controllers of service organizations operating in Australia. Cluster analysis is utilized to reveal the MCSs fit. Findings The data reveals that high-performing service organizations are those firms that place high emphasis on a differentiation strategy. The lower performers, on the other hand, are firms with a lack of emphasis on both cost leadership and differentiation strategies. Overall, the data demonstrates that strategic orientation plays an important role in high-performing organizations and the ability to incorporate various contingent situations determines the effectiveness of an organization. Practical implications The potentially broad framework offered in this study allows managers from various service industries to relate the variations in the combination of situations to those of their firms. The service managers’ experience with certain type of combinations can assist them to identify the strategic position of their respective organizations. Consequently, service managers can estimate the prospect for further development to enhance the firm performance. Originality/value This study offers a holistic view of the multiple and simultaneous relationships between contingent factors and MCS design in service organizations using a configuration approach. This paper contributes to the literature on organizational configurations in particular by studying the systematic nature of effective MCSs in service organizations when adapting to the contextual settings of the organizations.

Control in socio-economic organisations: a rationale for the design of management control systems (Section II)

The paper continues an intellectual theme initiated earlier by the authors (Lowe and McInnes, 1971). It traces the reciprocal interactions of the environment on a business enterprise through the complex, and in many aspects conflicting, organisational processes of strategic leadership, budgetary control, performance evaluation, accountability and their effects on intrinsic and extrinsic motivation of members of the organisation. Central to the theme is the essential process of organisational learning, enabling an organisation continually to adapt to its dynamic and uncertain substantial environment. Organisational learning, in turn, is founded on individual learning, fostered through processes of mentorship and accountability. Tensions between learning's requirement of a free flow of information, and the potential diminishment of communication that may arise when judgment of personal performance is entailed, are addressed. The paper is impersonal; it does not address the idiosyncratic and inspirational ch...

Risk management–control system interplay: case studies of two banks

Purpose This paper aims to explore the interplay between risk management and control systems in banks, specifically investigating the managerial intentions underlying the design of management control systems. Design/methodology/approach This study is based on 31 interviews with personnel of two banks in a European country. Findings The main finding is that belief systems drive the interplay between risk management and control systems in the studied banks. In several instances, belief systems and boundary systems were operating complementarily. Cross-case analyses of the two banks demonstrate that risk management (i.e. the Basel II Accord) replaced established operating procedures for loan origination and portfolio monitoring at the first bank, whereas senior managers suppressed Basel II to maintain established loan origination and portfolio monitoring procedures at the second one. Originality/value This is one of very few studies investigating the interplay between risk management and control systems in banks.