The two-way relationship between the Balanced Scorecard and Management Control Systems in organizations:Lessons from a Case Study

This paper reports a case study conducted in Quinta da Aveleda, one of
the three largest Portuguese wine companies. Our aim was to explore the
relationship established between a newly implemented Balanced Scorecard
(BSC) and the elements of the Management Control System (MCS) in the
organization. Thus, two specific objectives were pursued. Firstly, to identify
the influences (barriers, opportunities) of the existing MCS on the implementation
of the BSC. Secondly, to identify the impacts the BSC implementation
was able to exert on the configuration of the organization’s MCS.
We found that the budgeting process, the planning system, the information
infrastructure, and the organizational structure and culture were the elements
of the previous MCS that influenced the BSC implementation process.
Eventually, the BSC implementation led to important changes in the budgeting,
planning, reporting systems and processes. In order to explain these
findings, we briefly explored the main issues and factors accounting for the
scope and nature of the BSC’s impacts on Quinta da Aveleda. These issues
and factors were the mobilized organizational resources, the implementation
approach, the communication, and the organizational support.

Moderating effects of management control systems and innovation on performance. Simple methods for correcting the effects of measurement error for interaction effects in small samples

In the accounting literature, interaction or moderating effects are usually assessed by means of OLS regression and summated rating scales are constructed to reduce measurement error bias. Structural equation models and two-stage least squares regression could be used to completely eliminate this bias, but large samples are needed. Partial Least Squares are appropriate for small samples but do not correct measurement error bias. In this article, disattenuated regression is discussed as a small sample alternative and is illustrated on data of Bisbe and Otley (in press) that examine the interaction effect of innovation and style of use of budgets on performance. Sizeable differences emerge between OLS and disattenuated regression

Agency theory, national culture and management Control Systems

Management control system of an organization is the structured facet of management, the formal vehicle by which the management process is executed. In most organizations, systems exist for planning, organizing, directing, controlling and motivating. Depending on the level of appropriateness and quality of the management control systems, the task of management is either facilitated or hindered. The end goal of a management control system is achieving organizational objectives. Because employees (agents) do not always give their best efforts for achieving organizational objectives, management control systems need to strive for aligning goals of agents (e.g., employees, subordinates) with that of principals (e.g., senior management, owners). Agency theory and its extension, principal agent model, provide insights to the problem of goal congruence and suggest remedies, at least in the Western cultural context. Whether the agency theory presumptions, predictions and prescriptions are universally applicable is an important issue in management. Their validity in different cultural contexts is largely unknown. The available literature to date indicates the possibility that agency theory may not be valid in non-western cultures. However, further empirical research is needed in non-western cultures to shed more light to this issue.

Agency theory and culture : implications for research in management control systems

The objective of this paper is to encourage further research into the applicability of agency theory for the study of management control issues of organisations in Asian societies.

Management control systems and effectiveness of knowledge sharing

Numerous empirical studies on knowledge management have examined the relative effectiveness of various enablers, such as organizational structure (Bennett and Gabriel, 1999; Gold et aI., 2001), technology (Gold et aI., 2001; O'Dell and Grayson, 1998), culture (DeLong and Fahey, 2000; Gupta and Govindarajan, 2000), managerial system (Nonaka, 1994; Sveiby, 1997) and strategy (Bierly and Chakrabarti, 1996; Holsapple and Joshi, 2001) on knowledge creation and sharing in organizations. Little research has focused on the role of management control systems (MCS) in facilitating knowledge sharing in knowledge-intensive firms (Ditillo, 2004). This study examines how the interactive use of management control systems (MCS) could facilitate the different modes of knowledge sharing among accounting professionals in Malaysia. Based on Nonaka's (1994) knowledge sharing mode, this study found a highly significant relationship between an interactive use of MCS and knowledge sharing to suggest that a more open, less fmancial-oriented and more interactive type of MCS tends to interlink and underpin organizational social process which is the central part of the knowledge sharing process. While professional accountants are generally keen to gain access to knowledge databases to source for possible task solutions, they are generally hesitant to share their tacit knowledge by transforming that knowledge into explicit form. The fmding suggests that there may be cultural-related factors that inhibit sharing of one's tacit knowledge totally and completely.

Management control systems use, organisational capabilities and performance in universities: application of the resource-based view

Invoking the resource-based view (RBV), this study investigates relationships between management control systems (MCSs) use, including information use from performance measurement systems (PMSs), and organisational capabilities in the context of academic units of Australian universities. Increased competition and attention to distinctive capabilities amongst universities, particularly at their strategic operating unit level of Schools 1, provides the setting for application of this theoretic perspective. The objective of this study is to model various relationships between diagnostic and interactive use of MCSs, attention given to centrally-imposed and discretionary types of PMS information, the strength of capabilities of the academic unit and, in turn, performance of the academic units. This objective is investigated using a field survey in which a mail survey instrument is administered to a census of all Heads of Schools in all 39 universities in Australia. Valid responses were received from 166 Heads. Principal components factor analysis finds that Heads conceived capabilities of their unit in functional dimensions, not in generic dimensions as found in prior literature; Heads also considered performance measures in terms of their importance (critical or discretionary) rather than type (financial versus non-financial). Partial least-squares analysis is then used for path modelling, and several significant results are obtained. Highlights are that diagnostic MCS use and centrally-imposed performance measures, i.e., key performance indicators, but not interactive MCS use or discretionary performance measures, significantly relate to some or all of the strength of capabilities in the fields of teaching, research and networking, and in turn indirectly relate to performance of the academic units. The findings have practical implications for styles of control systems use; focus on selected key performance measures; and development of organisational capabilities for achievement of superior performance by academic schools in universities.

Use of management control systems in university faculties : evidence of diagnostic versus interactive approaches by the upper echelons

Drawing on upper echelon theory and focusing on the context of higher education reforms in Australia within new public management in university faculties/colleges, this study investigates the diagnostic versus interactive uses of management control systems by Deans/Pro-Vice Chancellors of Faculties/Colleges (hereafter called Faculty PVCs). It seeks to identify how the professional and experiential characteristics of these senior academic executives and the structure of their Faculty, impact on their managerial and collegial orientation as reflected in their approach to using management controls. A mail survey of Faculty PVCs is conducted amongst a census of all Faculties/Colleges of all universities in Australia. Supplementing this survey are semi-structured interviews with the PVC of the business and science Faculty at a large Australian university. Results reveal that PVCs who have had a longer career in higher education tend to use MCSs more interactively (or collegially). There is also evidence that as PVCs hold their current position for longer periods, they tend to move from an early diagnostic use of MCSs to a subsequent interactive use. Further, the higher the complexity of a Faculty the more a PVC will adopt an interactive approach to MCS use. Other PVC and Faculty characteristics did not reveal patterns of significant influence on the interactive or diagnostic use of MCSs. A key revelation from interviews is that PVCs will give over-riding importance to meeting centrally-set diagnostically-focused KPI, but still take a collegial approach within their Faculty to the broader use of MCSs. The findings lend limited support to upper echelons theory, but provide a grounding for further research into the impact that a managerial versus a collegial approach by PVCs/Deans may have on their Faculty’s growth in innovative capacities, teaching qualities or financial strength.

Management control systems and organisational learning: the effects of design and use

Purpose – The purpose of this paper is to present a study on relationships between the design of management control systems (MCS), the use of MCS and organisational learning (OL). Design/methodology/approach – This study adopted a survey method. A written questionnaire was prepared and mailed out to collect quantitative data. After analysis of the empirical results, follow-up interviews were conducted to develop a deeper understanding of the empirical results. Findings – Findings of the study show that both the design and use of MCS are significantly associated with levels of OL activities in organisations, and the use of MCS is found to be a more influential factor in OL. Originality/value – This paper contributes to the accounting literature by providing empirical evidence on the relative impacts of the design and use of MCS on OL activities in organisations and the interaction between the design and use of MCS in influencing OL.

Management control systems : subcomponents, optimal design and the role of time as a contingency

Management Control System (MCS) research is undergoing turbulent times. For a long time related to cybernetic instruments of management accounting only, MCS are increasingly seen as complex systems comprising not only formal accounting-driven instruments, but also informal mechanisms of control based on organizational culture. But not only have the means of MCS changed; researchers increasingly ap-ply MCS to organizational goals other than strategy implementation.rnrnTaking the question of "How do I design a well-performing MCS?" as a starting point, this dissertation aims at providing a comprehensive and integrated overview of the "current-state" of MCS research. Opting for a definition of MCS, broad in terms of means (all formal as well as informal MCS instruments), but focused in terms of objectives (behavioral control only), the dissertation contributes to MCS theory by, a) developing an integrated (contingency) model of MCS, describing its contingencies, as well as its subcomponents, b) refining the equifinality model of Gresov/Drazin (1997), c) synthesizing research findings from contingency and configuration research concerning MCS, taking into account case studies on research topics such as ambi-dexterity, equifinality and time as a contingency.