The Role and Interplay of Management Control Systems and Company Performance

This dissertation addresses the topic Management Control Systems (MCS) as a Package. Many research studies investigate management and control systems individually, whereas fewer research studies take a holistic view and include a larger part of all the MCS managers use to guide and direct subordinates behaviour in the best interest of their companies. In the MCS literature, it is stressed that knowledge is particularly lacking about how managers design and use MCS as a package, and the effectiveness of using the MCS. This dissertation responds to this call by carrying out a large survey among executive managers in large companies, a survey that investigates the subject: Effective Management and Control Systems. The focus in the survey is to explore how executive management in large companies design and use their management control systems package. Further, this study is supplemented with archival data on the participating companies’ performance. The dissertation presents three papers, each of which introduces knowledge within studying managers’ use of MCS as a package. The first paper presents executive managers’ use of management control systems as a package in large companies. With basis in a conceptual MCS framework the paper explores executive managers’ focus and emphasis on using the different parts of an MCS package to guide and direct their subordinates to ensure high organisational performance and further success for their companies. The second paper is a literature review including a comparative analysis of MCS frameworks. The paper discusses the fundamental purpose of MCS frameworks to clarify the usability of MCS frameworks in research and in practice. The paper draws attention to research gaps and missing variables within the frameworks, and provides a guideline of issues that researchers and practitioners may benefit from when using the frameworks. The third paper investigates relationships between executive managers’ use of some MCS and companies’ financial performance. The MCS investigated are: strategy, evaluation of subordinates, rules and procedures and executive managers’ focus on customer relations when guiding and directing their subordinates. The paper finds both some positive and some negative relations between the use of MCS and companies’ development in financial performance. The findings in all three papers can be used by both researchers and practitioners who wish to expand and advance their existing knowledge about MCS’ impact on company performance and success

Senior Management Use of Management Control Systems in Large Companies

The use of management control systems in large companies remains relatively unexplored. Indeed, only a few studies of senior managers’ use of management control systems consider multiple controls in companies. This paper explores data from a comprehensive survey of the use of management control systems in 120 strategic business units at some of the largest companies in Denmark. The paper identifies how senior management guides and controls their subordinates to meet their companies’ objectives. The presentation and discussion of the results, including citations from executive managers, use Ferreira and Otley’s (2009) conceptual and holistic framework for performance management systems, supplemented by elements of contextual factors and organisational culture. Further, selected researchers’ perceptions of the purpose of using management control systems are related to practitioners’ ideas of the purpose of using such systems. Finally, the paper discusses the usability of the 12 questions in Ferreira and Otley’s framework for exploring empirical survey data.</jats:p

The impact of society on management control systems

© 2017 Elsevier Ltd 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

The use of management controls in different cultural regions

Funding Information: Open Access funding provided by Aalto University. Funding was provided by the Marcus Wallenberg Foundation. Publisher Copyright: © 2022, The Author(s).Most cross-cultural studies on management control have compared Anglo-Saxon firms to Asian firms, leaving us with limited understanding of potential variations between developed Western societies. This study addresses differences and similarities in a wide variety of management control practices in Anglo-Saxon (Australia, English Canada), Germanic (Austria, non-Walloon Belgium, Germany) and Nordic firms (Denmark, Finland, Norway, Sweden). Unique data is collected through structured interviews from 584 strategic business units (SBUs). We find that management control structures in Anglo-Saxon SBUs, relative to those from Germanic and Nordic regions, are more decentralized and participative and place greater emphasis on performance-based pay. Comparing Germanic SBUs to Nordic ones, we find Germanic SBUs to rely more on individual behaviour in performance evaluation, whereas Nordic SBUs rely more on quantitative measures and value alignment in employee selection. We also observe numerous similarities in MC practices between the three cultural regions. The implications of these findings for theory development are outlined.Peer reviewe