Enabling and Coercive types of management control systems
“The Influence of internal and external factors on the type of MCS used by
organizations”
By Stefan Jan Koppers
University of Groningen
Faculty of Economics and Business
June 2015
Brugstraat 20B 9714 HZ Groningen
[email protected] 2591219
Abstract
This research examines which internal and external factors are of influence on enabling and coercive
management control systems (MCS) used by organizations, and how these influences are exerted.
The framework of Adler and Borys (1996) is used which describes enabling and coercive types of
formalization and is linked to MCS by Ahrens and Chapman (2004). An extensive case study analysis
with semi-structured interviews is executed on two organizations. This research identifies strong
arguments about how the internal factors organizational culture, organizational structure and
strategy of the organization influence the MCS in an enabling way. These results are useful for
managers as it provides them insights into which factors needs to be reconsidered when they want
to change their type of MCS. For scientific relevance a more comprehensive picture is obtained about
which and how internal and external factors influence the type of MCS.
Keywords: Management control systems, enabling, coercive, internal factors, external factors Supervisor: Dr. W. Kaufmann Co-assessor: Dr. A. R. Abbasi Amount of words: excl. appendices 14.179, incl. appendices 14.840
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1. Introduction Management control systems (MCS) are considered to be important for organizations as it is used by
the management to align the goals and risk preferences of their employees with the organization.
MCS thus serve the purpose of ensuring organizational performance, driven from an internal
perspective (Merchant, 2006). It is already recognized in the literature that there are factors which
affects the MCS used in organizations. For example, Langfield and Smith (1997) addressed the
relationship between MCS and strategy. Chenhall (2003) identified several contextual variables which
are potentially implicated in the design of an effective MCS. Reheul and Jorissen (2007) researched
the role of performance on the choice of MCS.
Because an MCS is designed to align the activities of the employees with the organizational
objectives, which vary by company, different types of MCS need to exist. Adler and Borys (1996)
made a distinction between enabling types of formalization and coercive types, whereas Ahrens and
Chapman (2004) directly linked this distinction to the study of MCS. According to Ahrens and
Chapman (2004) this framework of Adler and Borys (1996) aids in identifying how and why MCS
might be used to support rather than constrain operational management by highlighting four system
design characteristics. These system characteristics are repair, internal transparency, global
transparency and flexibility. Repair may be a differentiated function or it may be integrated with
routine operational processes. If it is a differentiated function, routine operational roles can be
distinguished from non-routine ones. Internal transparency is concerned with the visibility of internal
processes for organizational members. Global transparency is concerned with the visibility of the
overall context in which organizational members perform their specific duties. Flexibility refers to the
organizational member’s discretion over the use of control systems.
Other research investigated the role which these two different types of MCS, enabling and
coercive have in organizations. Free (2007) investigated whether the concepts of coercive and
enabling uses of accounting are also useful in understanding inter-organizational relationships such
as buyer-supplier dyads. Wouters and Wilderom (2008) investigated which characteristics of a
performance measurement system development process enhance the enabling nature of the PMS.
Jordan and Messner (2012) highlighted potential tensions that may arise between operational
managers’ concern with an enabling use of performance measures, and top management
requirements for control at a distance.
Currently there is no comprehensive picture that identifies which factors are influencing the
type of MCS (enabling or coercive) used and how these factors are influencing the type of MCS used
in organizations. To investigate this, internal and external factors are identified which affects the
MCS.
Internal factors which are recognized in the literature as affecting the MCS are strategy,
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organizational culture, organizational structure, organizational life cycle and size of the organization.
According to Reheul and Jorissen (2007) there are two different views about how strategy affects the
MCS, namely that organizations striving for growth and innovation have great information need and
therefore adopt or a more formal MCS or need a flexible and informal MCS to encourage innovation.
Herath (2007) considers the organizational culture as a factor which affects the MCS by stating that
the organizational culture has a profound influence on employee’s behavior. Chenhall (2003) argues
that the design of the MCS should be consistent with the intent of the organizational structure. It is
therefore important to consider the degree to which MCS are mechanistic or organic. Brignall (1997)
argues that the MCS need to change throughout the life cycle stages to fit in with changes in the
competitive environment, business mission and generic strategy. Organizational size is also affecting
the MCS (Chenhall, 2003). Large firms tend to have more administrative forms of control where
smaller firms tend to use more personal controls (Bruns, 1975). Thus, these internal factors are
recognized as factors affecting the MCS, where this research aims to examine if and how these
factors influence the type of MCS used.
External factors affecting the MCS according to the literature are environmental uncertainty,
technology, national culture and dependency on external financial resource providers. Environmental
uncertainty decreases the reliance on accounting performance measures (RAPM) and increases the
preference of organizations to use the MCS interactively instead of diagnostically (Reheul, 2007).
Herath (2007) recognizes the influence of technology on the MCS when stating that many accounting
information systems have become computerized. Harrison and McKinnon (1999) argue that national
culture affects the MCS in the sense that national culture interacts with the MCS independently from
other factors. The extent to which organizations depend on external providers of financial resources
is affecting the MCS. This, because the more organizations rely on external financial resource
providers, the more information these financial resource providers will demand (Reheul, 2007). Thus,
these external factors are recognized as factors affecting the MCS, where this research aims to
examine if and how these factors influence the type of MCS used.
To examine if and how internal and external factors influence the type of MCS, this research
uses the distinction of Adler and Borys (1996) between enabling types of formalization and coercive
types of formalization. Ahrens and Chapman (2004) directly linked this distinction to the study of
MCS. Currently there is no comprehensive picture that identifies which factors are influencing the
type of MCS (enabling or coercive) used and how these factors are influencing this. This is interesting
to investigate, because when knowing what these factors are and how these factors influence the
type of MCS, it becomes possible to get a better understanding of why a certain type of MCS is used
by an organization. Therefore the research question in this paper is:
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“How do internal and external factors influence the type of MCS (coercive or enabling) used by
organizations?”
Thus, this research aims at contributing to the literature by providing a comprehensive picture of
which and how internal and external factors influence the type of MCS (coercive or enabling) used by
organizations. The practical contribution of this research is to provide managers insight in the factors
influencing their type of MCS. This will help them to consider if their MCS is suitable for their
organization. Also when they want to change their type of MCS, they have a better insight into which
factors need to be reconsidered.
A case study is used to answer this research question. Two case organizations are included in
this research, where one case organization is one of the biggest trading companies in the world while
the other case organization is a technical knowledge-intensive organization. Size in terms of
employees was an important criterion on which these case organizations are selected, because the
need for a more highly sophisticated MCS increases when the size of the organization increases
(Fauzi, 2011). Both case organizations are medium-sized organizations as they employed 208 and 91
employees in 2014 (Russo, 2009). Qualitative data is obtained by conducting semi-structured
interviews as this provides the opportunity to prepare questions beforehand and also allows the
interviewees the freedom to express their views in own terms (Cohen, 2006). Besides this, managers
and lower-level employees might not appraise the MCS in the same way (Tessier, 2012). To be able
to grasp the perceptions of both the managers and the lower-level employees, six interviews are held
with managers and six with lower-level employees. To look for similarities and differences between
the arguing from the interviewees about which and how the factors influence the type of MCS, the
data is analyzed.
In the next section a brief overview of management control systems is described. After that
the distinction between enabling and coercive formalization based on the four generic features
proposed by Adler and Borys (1996) is explained and this is linked with the concept of MCS. Then
internal and external factors affecting the MCS are described. In the methods section, the case study
design and the methods for collecting and analyzing the data are elaborated on. In the results section
the types of MCS used by the examined organizations are shown together with the internal and
external factors that influence the type of MCS. In the discussion the limitations of the results are
discussed and results of earlier research are compared. Finally, the conclusion will answer the
research question posed and recommendations for future research are given.
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2. Literature Review First a brief overview of the MCS literature is provided in this section. Then, the distinction between
the enabling and coercive formalization (Adler, 1996) is examined. After that, the internal and
external factors which are recognized in the literature as affecting the MCS are outlined.
2.1. A brief overview of the management control systems literature
Management control systems (MCS) are defined in various ways. For example, MCS are the formal
and informal systems which are meant to help individuals to control the things they do with
themselves and other resources (Machin, 1983). MCS has a paramount importance as integration,
coordination and monitoring mechanism (Jones, 1985). MCS is used by the management to align the
goals and risk preferences of their employees with the organization and thus serve the purpose of
ensuring organizational performance, driven from an internal perspective (Merchant, 2006). MCS
include all the devices and systems managers use to ensure that the behaviors and decisions of their
employees are consistent with the organization’s objectives and strategies (Malmi, 2008).
MCS are more than devices of constraint and monitoring, as MCS are the formalized
procedures and systems that use information to maintain or modify patterns in the organizational
activities (Simons, 1990). When task uncertainty is high the reliance on personnel forms of controls
has a positive effect on performance (Abernethty, 1997). MCS are the set of procedures and
processes that are used by managers in order to help employees ensure the achievement of their
personnel and organizational goals and encompassed formal, informal and social control systems
(Bisbe, 2004). Thus, in the literature it is widely recognized that MCS are primarily designed to align
the activities of the employees with the organizational objectives.
Transparency about organizational activities to stakeholders is also a feature of MCS (Jensen,
1993). The definition of MCS which is used in this paper is “control mechanisms to enhance
employee’s goal and risk alignment with the organization to ensure organizational performance and
to provide stakeholders transparency about the organizational activities”. A particular relevant
framework for this research is the distinction between enabling and coercive types of formalization
by Adler and Borys (1996). This framework is outlined in the next section.
2.2. Coercive and enabling formalization
Adler and Borys (1996) made a distinction between enabling types of formalization and coercive
types of formalization. Four generic features are revealed to distinguish deskilling from usability
approaches. These generic features are repair, internal transparency, global transparency and
flexibility.
Repair may be a differentiated function or it may be integrated with routine operational
processes. If it is a differentiated function, routine operational roles can be distinguished from non-
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routine ones. The coercive logic is appropriate when managers fear the opportunism of employee
more than they value their potential contribution to deal with unexpected breakdowns and
identifying opportunities for improvement. In case of a breakdown employees are expected to call
for a specialist to solve the problem (Adler, 1996). The premise of an enabling logic here is that
operations are not totally programmable (Ahrens, 2004). Users are allowed to repair a formal system
in case of a breakdown or problem by themselves (Jordan, 2012).
Internal transparency is concerned with the visibility of internal processes for organizational
members. Management control processes can be made accessible to organizational members to
enhance their internal transparency (Ahrens, 2004). A coercive logic is appropriate when there is
little reason to provide users with any visibility into its internal workings. Procedures are formulated
as lists of flat assertions of duties and the employees are expected to just implement these work
instructions (Adler, 1996). The enabling logic is appropriate when users need to have a good
understanding of the logic of a system’s internal function and they need information on its status.
Users are provided with a clear understanding of the underlying rationale for why certain control
mechanisms are in place (Wouters, 2008).
Global transparency refers to the visibility of the overall context in which organizational
members perform their specific duties (Free, 2007). In the coercive logic, tasks are partitioned and
employees are not expected to move beyond their specific realms. Employees have access to
information only on specific areas which they are responsible for supporting. Broader knowledge is
given to these employees only on a restrictive need-to-know basis (Adler, 1996). In an enabling logic,
controls are designed to afford employees an understanding of where their own task fits into the
whole. Information from beyond ones specific domain is available (Wouters, 2008).
Flexibility refers to the organizational member’s discretion over the use of control systems.
Flexibility means that users can make controlling decisions after enabling systems have provided
information (Ahrens, 2004). In a coercive logic, a manual defines in detail the specific sequence of
steps to be followed and employees are forced to ask a supervisor for approval when they want to
skip unnecessary process steps (Adler, 1996). In an enabling logic flexible systems encourage users to
modify the interface and add functionality to suit their specific work demands. (Wouters, 2008).
Ahrens and Chapman (2004) directly linked this distinction of enabling and coercive types of
formalization to the MCS. The distinction between an enabling MCS and coercive MCS is nowadays
widely recognized in the literature. The main distinction is that a coercive MCS only serves higher-
management needs and controls employees’ behavior where an enabling MCS support employees to
do their work better (Wouters, 2008). According to Free (2007) MCS can be drawn on in enabling
ways to open up opportunities for learning and jointly expanding activities or in coercive ways when
the organization is more aggressively setting the rules. Whether a MCS is enabling or coercive
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depends on how the control system is designed and on how the design and implementation process
is organized (Jordan, 2012). A coercive use of MCS is a one-sided relationship between management
and subordinates, where an enabling use of MCS stimulates control in the interactions between the
management and subordinates (Meer-Kooistra, 2008). The coercive use of MCS is involved with
extensive centralization, preplanning and top-down control. The enabling use of MCS is involved with
empowerment for employees, because operations are not totally programmable (Cools, 2008) Thus,
the main difference is that with a coercive approach employees are solely expected to follow explicit
instructions and with an enabling approach employees are expected to think along the process
(Adler, 1996). Employees controlled based on a coercive approach can thus be seen more as
executors, while employees controlled based on an enabling approach can be seen more as thinking
employees. Based on the four generic features mentioned by Adler and Borys (1996) the main
differences between a coercive approach and an enabling approach are summarized in table 1
below.
Table 1: Differences between the coercive and enabling approach based on the four generic features
Now MCS is defined and the main differences between the coercive and the enabling approach are
outlined. From here on internal and external factors which could influence the type of MCS (enabling
or coercive) used by organizations are outlined in the next sections.
2.3. Internal factors affecting the management control systems
Internal factors affecting the MCS are strategy, organizational culture, organizational structure,
organizational life cycle and size of the organization (Brignall, 1997; Chenhall, 2003, Reheul 2007;
Herath, 2007). How and why these factors affect the MCS is outlined below.
2.3.1. Strategy
Strategy is not an element of context but it is more the means whereby managers can influence the
MCS (Chenhall, 2003). The type of strategy of an organization should influence the design of the MCS
(Gosselin, 2005). There is a need for consistency between the MCS and the strategy of an
organization (Hoque, 2004). The MCS of an organization should be aligned in order to support the
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strategy of the organization, which could lead to superior performance (Auzair, 2005). Two different
views about how strategy influences the MCS exist (Reheul, 2007). Organizations striving for growth
and innovation have great information need and therefore adopt or a more formal MCS or adopt a
flexible and informal MCS to encourage innovation.
Different strategies are recognized in the literature. For example, Miles and Snow (1978)
identified defender, analyzer, prospector and reactor strategies. Organizations with a defender
strategy operate in stable environments, have a narrow product focus and are focusing on cost
control. Organizations focusing on product-market innovation with flexible structures use a
prospector strategy. Hybrid organizations which focus on traditional core products and enters new
markets after the viability is established use an analyzer strategy. The reactor strategy is used by
organizations which lacks a coherent strategy (Miles, 1978). The expectation is that a defender
strategy will influence the MCS in a more coercive way and due to the opposing view of Reheul and
Jorissen (2007) a prospector and analyzer strategy could influence the MCS both in an enabling and
coercive way.
2.3.2. Organizational culture
The organizational culture has had an important effect on MCS, but has had not enough attention in
the MCS literature (Henri, 2006). The culture of an organization is having a profound influence on
employee’s behavior and therefore the MCS (Herath, 2007). Organizational culture represents
relationships and interactions among the human actors of the organization which comes from
beliefs, values, morals, customs and knowledge and can be applied in understanding the behavior of
employees in the organizations.
The terms organic and mechanistic describe culture as well as organizational structure and
five elements are used to measure how organic or mechanistic the culture is (Reigle, 2001). An
organic culture can be described as informal with an open-door policy and where employees have
self-initiation. In a mechanistic culture jargon and negative metaphors are used, symbols enforce
segregation and employees need to be coerced to work. Therefore it could be assumed that an
organic culture will influence the MCS in a more enabling way where a mechanistic culture will
influence the MCS in a more coercive way.
2.3.3. Organizational structure
The design of the MCS should be consistent with the intent of the organizational structure and
therefore the degree to which MCS are mechanistic or organic needs to be considered (Chenhall,
2003). Centralization plays a key role in the design of MCS, where organizations that are more
centralized tend to use more financial measures, while decentralized firms tend to use more non-
financial measures to measure the organizations performance (Gosselin, 2005). Organizational
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structure is considered as a way of coordination and control through which organizational actors’
behavior can be directed towards organizational effectiveness (Herath, 2007). The distinction
between mechanistic and organic structures is made by Burns and Stalker (1961) and is based on the
way the structure is involved with rules, procedures, openness of communication and decision
processes (Chenhall, 2003).
Mechanistic structures are involved with top-down rules and procedures setting, while in
organic structures are involved with openness of communication and empowerment of employees
for decision making. Overall, the expectation is that an organic structure influences the MCS in an
enabling way, where a mechanistic structure influences the MCS in a coercive way.
2.3.4. Organizational life cycle
There is a potential influence from the life cycle stage on the MCS (Auzair, 2005) and the life cycle
stage of organizations need to be matched with the MCS of organizations (Miller, 1984). The MCS
need to change throughout the life cycle to fit in with changes in the competitive environment,
business mission and generic strategy (Brignall, 1997). A failure in taking the life cycle of an
organization into account with budgetary policies results in inefficiencies in resource allocations
(Czyzewski, 1991).
The organizational life cycle can be classified in five stages, namely birth, growth, maturity,
revival and decline (Moores, 2001). In the birth stage the organization is just started where the
product-market scope is narrow, in the growth stage organizations have an aggressive build strategy
with product innovation and a broad product-market scope and in the maturity stage organizations
have a hold/harvest strategy with low product innovation and a consolidated product-market scope.
In the revival stage organizations have an aggressive build strategy, considerable levels of product
innovations and a diversified product-market scope to recover, where in the decline stage low
product innovations and a consolidated product-market scope exist. Expected is that the MCS
becomes more enabling at the stages involved with higher levels of product innovations and the goal
to growth. Expected is also that in the maturity and decline stage the MCS becomes more coercive,
due to the lack of growth intentions and low levels of innovation.
2.3.5. Size of the organization
A few MCS studies have explicitly considered size as a contextual variable which affects the MCS
(Chenhall, 2003). Two forms of control associated with size are identified. Large organizations tend to
have more administrative forms of control, where smaller organizations tend to use more personal
controls (Bruns, 1975). An increasing number of employee’s is causing coordination and control
issues and due to the substitution of capital for labor, reduced size have also implications for MCS
(Chenhall, 2003).
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Size can be measured in several ways, namely in terms of revenues, number of employees or
in percentage of the market share. The size of the organization is measured in number of employees,
because this is directly linked with the definition of MCS in this research. A distinction is made
between micro organizations (max. 9 employees), small organizations (max. 49 employees), medium-
sized organization (max. 249 employees) and large organizations (Russo, 2009). It is interesting to
examine if the assumption that an increasing organization in terms of size influences the MCS in a
more enabling way is correct.
2.3.6. Summary of internal factors
Summarized in table 2 below are which and how the internal factors are affecting the MCS.
Table 2: internal factors affecting the MCS
2.4. External factors affecting the management control systems
External factors affecting the MCS are environmental uncertainty, technology, national culture and
dependency on external financial resource providers (Harrison, 1999; Chenhall, 2003, Reheul, 2007;
Herath, 2007). How and why these factors affect the MCS is outlined below.
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2.4.1. Environmental uncertainty
Uncertainty is one of the most widely researched aspects of the environment (Chenhall, 2003).
Combinations of traditional budgetary and interpersonal controls are preferred to be used in
organizations with an increasing environmental uncertainty. High environmental uncertainty is
associated with an emphasis on budgets for evaluation and required explanation of variances, but
also with high participation and interpersonal interactions between superiors and subordinates
(Ezzamel, 1990). The MCS of an organization tend to use more non-financial measures in
organizations which are facing higher levels of environmental uncertainty (Gosselin, 2005). Managers
from organizations operating in uncertain environments place more importance on relevant
information for decision making instead of pure coordinating and controlling purposes. Perceived
environmental uncertainty (PEU) affects the MCS as it is positively associated with a bureaucratic
form of MCS (Auzair, 2011). Environmental uncertainty decreases the reliance on accounting
performance measures (RAPM) and increases the preference of organizations to use the MCS
interactively instead of diagnostically (Reheul, 2007). Thus, different opinions about how
environmental uncertainty affects the MCS exist, where this research tries to identify if the MCS
becomes more coercive or more enabling due to an increasingly uncertain environment.
2.4.2. Technology
There is a need to consider technological changes within the organizational context (Young, 1991).
Understanding the appropriate fit between MCS and advanced technologies is considered by
reflecting on the basic, generic notions of technology (Chenhall, 2003). Many accounting information
systems have become computerized. Managers should make sure that these systems are designed
and operated to meet the requirements of the organizations (Herath, 2007). Therefore expected
could be that technology makes the MCS more enabling, because employees have more insights for
being empowered. Or technology makes the MCS more coercive, because technology is used to
coerce employees to execute their activities according to top management demands.
2.4.3. National culture
National culture affects or interacts with the MCS independently from other factors (Harisson, 1999).
National culture has become important in the design of MCS, since an increasing amount of
organizations have developed multi-national operations. Therefore organizations need to consider
whether they transfer their domestic MCS overseas, or if they need to redesign their MCS to fit with
the cultural characteristics of the foreign subsidiaries (Chenhall, 2003). National culture is considered
as an important topic in the current era of global operations, because there is an increasing need for
organizations towards knowing which MCS are effective in the different national settings (Chow,
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1999). Expected is that the more a national culture is involved with hierarchy the more coercive the
MCS becomes.
2.4.4. Dependency on external financial resource providers
The extent to which organizations depends on external providers of financial resources affects the
MCS (Reheul, 2007). Low performing organizations are more dependent from external financial
resources than well performing organizations, because these organizations generate less financial
resources internally. Therefore these organizations will feel more pressure towards the expectations
of their financial resource providers. They will require detailed information about the financial
situation and the progress which is made by the organization. In this line of reasoning it can be
expected that the greater the dependency of organizations from external financial resource
providers is, the more coercive the MCS becomes.
2.4.5. Summary of external factors
Summarized in table 3 below are which and how the external factors are affecting the MCS.
Table 3: External factors affecting the MCS
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3. Methodology In the first part of this section, the research design is described together with the selection of the
case organizations. Then, the data collection is explained and finally, the process of data analysis is
described.
3.1. Research design and selection of case organizations
Based on the distinction between enabling and coercive types of MCS by Ahrens and Chapman
(2004), this paper tried to provide a contribution to the literature by providing a more
comprehensive picture that identifies which factors are influencing the type of MCS used and how
these factors are influencing the type of MCS used in organizations. According to Eisenhardt (1989)
theory development from case study research is particularly appropriate when little is known about a
phenomenon. For the reason that this research tried to provide a more comprehensive picture, the
best way to explore this new knowledge is by “theory development”.
The first case organization in this research is one of the biggest trading companies in the
world and is divided into three business units, namely Perfumes & Cosmetics, Liquors and Health &
Beauty. Their annual report of 2014 presents revenues of 660 million euros for 2014 with 208
employees. This organization is called Trade from here on. The second case organization is a
technical knowledge-intensive organization which is divided into five business units. These business
units are engineering, inspection, maintenance, contracting and production. The revenues over 2014
were 18.5 million euros with 91 employees. This organization is called Technique from here on.
Findings in theory development often rest on a very limited number of cases (Eisenhardt,
1989). Selecting two instead of one case organization provided the possibility to look for similarities
and differences between these case organizations. Arguments become stronger when a particular
reasoning is given by interviewees from both case organizations. Besides this, the findings can be
weakened when interviewees from both case organizations give contradicting arguments. This
increased the reliability of this research (Yin, 2003).
The issues underlying the choices of MCS differ in early-stage organizations from mature
organizations. The main reason is that mature organizations have an extensive amount of formal
systems already in place and are therefore less concerned about running out of control than early-
stage organizations (Sandino, 2007). For this reason mature organizations are better suitable for this
research than early-stage organizations. The need for a more highly sophisticated MCS increases
when the size of the organization increases (Fauzi, 2011). Therefore the selected case organizations
need to be of considerable size such as medium-sized organizations (50-249 employees) and large
organizations (min. 250 employees) (Russo, 2009). Besides these criteria, it is important that the
organizations were willing to participate and to have an entrance in these organizations. Trade was
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willing to participate, because of friendly relationships from the author within this organization. Due
to a former internship from the author at Technique participation from this organization was easily
obtained. Both selected case organizations met the abovementioned criteria and were therefore
suitable for this research.
3.2. Data collection
During this research notes have been taken about the research process and the way that this
research was conducted to make this research controllable and replicable (Aken, 2012). Data is
collected by doing semi-structured interviews with six managers and with six lower-level employees.
The distinction between managers and lower-level employees in this research is that managers are
defined as employees who are directing a group of lower-level employees within the organization,
where lower-level employees are defined as employees who just execute their own tasks without
directing other employees. Examples of lower-level employees in this research are Area Managers of
Trade and an engineer of Technique.
It was interesting to examine the perceptions of both the managers and the lower-level
employees, because they might not appraise the MCS in the same way (Tessier, 2012). Managerial
intentions of the MCS refers to what managers are trying to achieve by implementing a control and is
a design attribute of the MCS, where employees perceptions refers to the interpretation they have
from the intentions from the MCS.
Semi-structured interviews were used, because this provided the opportunity of preparing
questions beforehand and allowed the interviewees freedom to express their views in their own
terms (Cohen, 2006). To increase the quality of the interview questions, the interview guide was
composed and critically assessed by two master students and the mentor who are doing research in
the same field. The interview guide is presented in Appendix A and consists of three parts. Questions
in the first part determined the type of MCS used by the case organizations. Questions in the second
part are intended to examine if and how the identified factors influence the type of MCS. In the last
part interviewees were provided the opportunity to raise factors of influence on the type of MCS by
themselves. Where possible, formal documentation such as an annual report, business information
guide and business objectives goals were used to support findings from the interviews. These
documents are analyzed and served as complementary data to the interviews.
3.3. Data analysis
Analyzing data is the heart of building theory from case studies, but it is also the most difficult and
least codified part of the process (Eisenhardt, 1989). A key step in this process is within-case analysis.
All interviews are transcribed and from these interview transcripts relevant quotes are gathered. To
provide a better overview relevant quotes from every factor are marked. To help building theory
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form the conducted data, cross case analysis is done to search for within group similarities and
intergroup differences. For this, all relevant quotes were provided with a code to structure quotes
per factor and type of employees. As presented in Appendix B, two different coding schemes were
used, where one coding scheme was used to structure quotes related to the type of MCS used. The
first number determined the case organization, where the second number distinguished between
managers and lower-level employees. The generic feature is specified with the third number and the
fourth number concluded if the arguing is related with a coercive or enabling type of MCS. The
second coding scheme was to determine the factors of influence on the type of MCS. The first two
numbers were similar with the first coding scheme, where the third number indicated which factor
the quote is about. The fourth number appointed the specific elements of the factors, where the fifth
number specified if the interviewee agreed that there is an influence on the type of MCS used or not.
A quote from an Area Manager of Trade is used as an example:
“If you are expected to constantly grow and the trade is fast you need to have a lot of freedom to act.
If you are not released it will cost you more time and greater effort to grow. Therefore you do not need to be
restricted on too much rules from the management.”
This quote was coded with the number 1.2.1.5.2. and is established as follows. This quote
came from an interviewee of Trade (1), which is a lower-level employee (2), which went about the
factor strategy (1) and if and how it influenced the type of MCS (5) and that the interviewee argued
that this factor influenced the type of MCS (2).
After conducted all the relevant coded quotes, it became possible to analyze per factor how
many interviewees recognized particular factors as of influence on the type of MCS used by the
organization. From this point it became possible to look for similarities and differences in the line of
reasoning from the interviewees about if and how these factors influence the type of MCS.
16
4. Results In this section the results of this case study will be presented. First, the type of MCS used by
both organizations will be described and explained. After that, it is explained which and how the
factors influence the type of MCS used by the organizations.
4.1 Type of MCS used by case organizations
The four generic features repair, internal transparency, global transparency and flexibility
(Adler, 1996) are used to measure whether the type of MCS is coercive or enabling. In terms of repair
all managers and employees of Trade recognize enabling characteristics. The Managing Director of
Trade argues:
If someone faces an operational problem, for example with a customer or supplier, than they are expected to solve these problems by themselves.
One manager and all employees of Trade recognize also coercive characteristics in terms of repair.
An Area Manager notices:
It is possible that you face problems which you never dealt with before. It is an easy step to ask a colleague or manager for help in that case.
According to all managers and two employees of Technique the MCS contains enabling
characteristics. A Business Unit Manager formulates:
When someone in our department faces a problem than this person feels responsible for solving this problem his self.
Two employees of Technique recognize coercive characteristics as one employee formulates: You are not supported to solve problems by yourself. You are encouraged to use the knowledge of
your colleagues to solve the operational problems you face.
Thus, there is a difference in perception between managers and employees at both case
organizations, where managers almost only recognize enabling characteristics and employees
recognize enabling and coercive characteristics in terms of repair. Looking at internal transparency all
managers and all employees of Trade recognize enabling characteristics. The Managing Director of
Trade formulates:
If you really understand the logistics and all the processes behind, you will be able to generate a faster throughput time and bring in more orders. Than you are really going to perform and you will really run a business.
All managers and employees of Technique recognize solely enabling characteristics in terms of
internal transparency. An employee mentions:
17
Of course I know the reasons for executing my tasks and an underlying reason exists for all tasks I execute. It is important to understand why I execute my tasks.
Thus, the intentions and the perceptions of the managers and employees of both case organizations
are in line (Tessier, 2012) and in terms of internal transparency the characteristics are predominantly
enabling. In terms of global transparency all managers and all employees of Trade recognize solely
enabling characteristics. An Area Manager of Trade argues:
Yes, sure. From all departments within this organization we get information about how it works for example with the customs, transport, but also how things go financially. This is to make sure that you have this knowledge in case that you need this information when talking to your customers.
All managers and all employee of Technique consider global transparency as solely enabling. A
Business Unit Manager of Technique mentions:
We are giving the kick-off of projects nowadays more importance. This to make sure that everybody
who is involved in the project gets the right information and also to make sure that everybody knows from
each other what he or she is doing during the project.
Thus, the intentions and the perceptions of the managers and employees within both case
organizations are in line and in terms of global transparency both case organization use a
predominantly enabling type of MCS. In terms of flexibility all interviewees of Trade recognize only
enabling characteristics. The Sales Director notices:
We start working now with a new ICT system. We first compile some key users to create support for this new system. Additionally we add groups of employees to gradually making more and more employees involved with this new system.
All interviewees of Technique recognize solely enabling characteristics in terms of flexibility. An
employee argues:
Actually, most process changes are initiated by employees themselves. They just sometimes have a
need for another structure or process.
Concluded, both case organizations are using a predominantly enabling MCS when looking at the
four generic features.
4.2. Internal factors of influence on the type of MCS
Internal factors identified as affecting the MCS are strategy, organizational culture,
organizational structure, organizational life cycle stage and size of the organization. The interviewees
are asked specific question about these topics and if and how they think that these factors influence
the type of MCS. Besides this, the interviewees came up with level of education, type of product and
vision of the CEO as additional factors.
18
4.2.1. Strategy
All interviewees of Trade mention the growth goal of Trade with 10-15% each year.
Therefore the organization continuously develops existing markets and looks for new markets. The
annual report of Trade from 2014 states: “growth is the lifeblood of Trade and the premier pillar of
our strategy. We firmly believe that growth is based on innovation and quality, fuelled by entering
into new markets and by continuously making use of new business opportunities”. Thus, Trade is
having a prospector strategy (Miles, 1978).
All managers and employees of Trade argue that strategy is influencing the type of MCS,
where their line of reasoning is similar. The Managing Director reasons:
I truly belief that you need to let people do the things they are best in. […] I could push people to perform in a certain way, but this just will not work. Then my employees will never excel. I give my employees therefore a lot of autonomy. […] In my opinion this will benefit our trading.
An Area Manager of Trade argues that employees need freedom to act in order to grow. He
mentions that growing will cost more time and effort when employees are not empowered.
The managers of Technique and their business goals guide name the pillars maintenance,
standardized traffic guidance systems and water management on which their strategy is based,
where the employees are less clear about this. Technique seeks for new markets and enters these
new markets after the viability of the market is established and therefore Technique has an analyzer
strategy (Miles, 1978).
The reasoning about how strategy influences the MCS corresponds between the managers
and employees of Technique. A Business Unit Manager of Technique argues that a more coercive
MCS actually better suits their standardized traffic guidance system products and for their project
based products employees need empowerment to be creative and innovative and therefore a more
enabling type of MCS is used. An employee of Technique formulates:
I think that it is a prerequisite that our employees are able to see the right opportunities and are
empowered to utilize these opportunities. Therefore we need a more enabling MCS. […]. Our organization
wants to be flexible in order to be able to react on markets and to see opportunities and utilize these.
Thus, Trade uses a prospector strategy, where Technique uses an analyzer strategy. All
managers and employees of Trade are fully aware of their strategy, where the managers and only
one employee of Technique are aware of their strategy. All managers and employees from both case
organizations consider strategy as of influencing the type of MCS. Trade is using an enabling MCS,
because it is striving each year for significance growth and Technique is using an enabling MCS,
because they mostly work on project basis. The view of Reheul and Jorissen (2007) that organizations
striving for growth and innovation need a flexible and informal MCS is supported by these findings.
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4.2.2. Organizational culture
All managers and employees of Trade recognize organic elements on all aspects of the organizational
culture (Reigle, 2001). One manager recognizes mechanistic elements for artifacts and symbols and
one employee recognizes mechanistic elements for espoused values. The annual report of Trade
states: “The company is a responsive organization with client-driven flexibility. The company and its
team are used to deal with unusual problems, challenges or unanticipated opportunities and always
put the clients first”. Thus, the culture of Trade is predominantly organic.
All managers and employees of Trade mention that the organizational culture influences the
type of MCS. They argue that an organic culture makes the MCS more enabling. An employee of
Trade states:
You determine the type of organization and then you develop a matching MCS. Our culture here is
that everybody has his own business within this organization. Communication is informal and you need to
achieve by yourself, independently. Therefore we need an enabling MCS.
All managers of Technique recognize organic elements in terms of language, patterns of behavior and
opinions and underlying assumptions, where two managers recognize organic elements for artifacts
and symbols and one manager recognizes organic elements for espoused values. One manager of
Technique recognizes mechanistic elements for patterns of behavior and opinions and underlying
assumptions, where all managers recognize mechanistic elements for espoused values. All
employees of Technique recognize organic elements on all aspects, except for espoused values
where one employee recognizes organic elements. For patterns of behavior and espoused values
mechanistic elements are recognized by two employees of Technique. The business goals guide of
Technique states: “communication within Technique is stimulated by walking around by the
management and every quarter a personnel meeting focused on policy, realization, goals and other
important company matters”. Thus, the culture of Technique is predominantly organic.
All managers and employees of Technique use similar argumentation and reason that an
organic culture makes the MCS more enabling. An employee of Technique formulates:
The culture here is always to unburden the customer and to go far to help and solve problems for
them. […] If something goes wrong it needs to be solved directly. Sometimes we go far to prevent problems,
even if this costs us money.
Thus, both Trade and Technique have a predominantly organic culture. The interviewees of both case
organizations argue that an organic culture makes the MCS more enabling.
4.2.3. Organizational structure
To measure organizational structure specific questions about centralization, formalization
and differentiation are asked to the interviewees (Sathe, 1975). All managers of Trade recognize
20
organic elements for centralization, where for formalization one manager recognizes organic
elements and one manager recognizes mechanistic elements. All employees recognize organic
elements for centralization and two employees recognize organic elements for formalization, where
one employee recognizes mechanistic elements for formalization. All managers and employees of
Trade argue that there are four hierarchical levels. Thus, Trade is having a predominantly organic
structure.
One manager and all employees of Trade argue that their structure influences the type of
MCS, where two managers are not clear about this. Their reasoning is similar, namely that an organic
structure influences the MCS in an enabling way. An Area Manager of Trade mentions:
It is very hard to have an enabling MCS in a mechanistic structure. When you look at the warehouse,
they have a more mechanistic structure and they therefore use another MCS. They just need to execute their
tasks and they are empowered and supported to have input in the processes. This is contradicting with our
structure.
All managers and employees of Technique recognize organic elements for centralization and
formalization. Two managers and two employees also recognize mechanistic elements for
formalization. Four hierarchical levels are recognized for the Business Unit Maintenance and
Engineering. The business goals guide from Technique mentions that the organization is divided in
2012 to keep the organization controllable and flat. Thus, Technique is having a predominantly
organic structure. All managers and employees of Technique mention that the more organic the
structure the more enabling the MCS becomes. An employee of Technique notices:
The basis of our structure is that the organization wants to be flexible and that the organization is able
to adapt to the environment. If the employees are not allowed to accomplish their work by themselves they
will not be able to adapt to the environment quick enough.
Thus, a predominantly organic structure is used at both case organizations. All interviewed managers
and employees, except two managers of Trade, recognize the influence of organization structure on
the type of MCS. The reasoning is similar about how the structure influences the MCS, namely that
an organic structure influences the MCS in an enabling way. These findings are in line with the
literature (Chenhall, 2003).
4.2.4. Organizational life cycle stage
All managers and employees of Trade notify that Trade is in the growth stage, where their
annual report mentions that Trade won five times the Gazelle award from the Daily Financial
Newspaper as fastest growing Dutch company. Thus, Trade is in the growth stage (Moores, 2001). All
managers and two employees argue that the life cycle stage of the organization influences the type
of MCS. The Managing Director states:
21
When you constantly grow external parties are placing more demands at a certain point. You can do a
lot within your head, but at one point you become too big. Therefore we developed a lot of systems, especially
for logistics and expedition. This facilitates us to grow. Without these systems we should not have reached this
amount of grow.
One employee thinks that the influence of the life cycle stage on the type of MCS could be the other
way around, in the sense that because Trade has an enabling MCS they stay in the growth stage.
All managers and employees of Technique argue that Technique is now stable after a
considerable growth and a recent repercussion. Thus, Technique is in the maturity stage (Moores,
2001). All managers and employees argue that the organizational life cycle stage influences the type
of MCS with the same reasoning. An employee of Technique notices:
If an organization is in the birth stage then there will be a very informal MCS. Now we are in the maturity stage we need more regulation. We now should need to steer more then we should do in the birth stage.
Trade and Technique are both in a different stage of the life cycle, where Trade is in the growth stage
and Technique is in the maturity stage. Except for one employee of Trade, all interviewees argue that
the further the organization comes in the life cycle stage, the more coercive the MCS becomes.
4.2.5. Size of the organization
Trade employed 208 people in 2014 and is therefore a medium-sized organization (Russo,
2009). All managers and employees of Trade argue that the bigger an organization becomes the
more coercive the MCS becomes. A Business Unit Manager of Trade mentions:
The bigger you become, the more hierarchy you need. Because the bigger the organization, the more
managers and layers you need to control your people. This means directly more steering towards your
employees.
Technique employed 91 people in 2014 and is therefore a medium-sized organization (Russo, 2009).
All managers and employees of Technique reason that the bigger an organization becomes the more
coercive the MCS becomes. An employee of Technique formulates:
Due to the fact that we have only a few layers it is possible to see what happens here. If the
organization would grow you should need incentive-contracts. Because then you need to make sure that your
employees have other incentives to take the correct decisions.
Thus, Trade and Technique are medium-size organizations, where all interviewees consider the
organizational size as of influencing the type of MCS. They use similar argumentation, namely that
the bigger the organization becomes the more coercive the MCS becomes, which is in line with the
literature (Burns, 1975).
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4.2.6. Level of education
All managers and one employee of Trade consider the level of education from the employees
as of influence on the type of MCS. These respondents all argue that the higher the level of education
from employees the more enabling the MCS becomes. The Managing Director of Trade argues:
The responsibility that our employees receive is quite high […]. Employees with a higher education level are more capable of handling responsibilities […]. Employees with a lower education level tend to take decisions which are less thought through and less in line from what we expect from them.
One manager of Technique also considers the level of education from the employees as
influencing the type of MCS and states:
You should not underestimate the education level from employees. Employees with a higher
education level are more capable of acting on their own and they are more capable of handling the
empowerment they receive in an enabling type of MCS.
The level of education from employees is considered as a factor influencing the type of MCS at both
case organizations. The argumentation among the respondents is similar, namely that the higher the
level of education from employees the more enabling the MCS becomes.
4.2.7. Type of product
One manager of Trade considers the type of product as influencing the type of MCS.
According to this manager, the way of empowering employees at Trade would never be suitable in a
fabric where they work with for example 100 employees at a production line. One manager of
Technique and two employees argue that the type of product is influencing the type of MCS. Their
argumentation is similar, where one employee of Technique commented:
I think the type of MCS is also dependent on the type of products you produce. For example when you
produce ping-pong balls it becomes important to standardize the process to make it as cheap as possible. In
our organization nothing is standard and therefore we need creativity and innovativeness from our employees.
This will result in a more enabling MCS.
Thus, respondents from both organizations argue that customized products influence the type of
MCS in an enabling way and standardized products influence the type of MCS in a coercive way.
4.2.8. Vision of the CEO
The way of leading by CEO is applied by his followers according to one manager of Trade. The
former CEO of Technique was a very directive man with a directive way of dividing the tasks and
therefore selected followers. The current CEO believes in empowerment of employees with own
responsibilities according to a Business Unit Manager of Technique. An employee of Technique
argues that a transformational CEO will make use of a more enabling MCS where a transactional
leader will make use of a more coercive MCS, because a transformational CEO beliefs in the strength
23
of employees where a transactional CEO is having a more compelling way of directing. Thus, the
more the CEO believes in empowerment of employees the more enabling the MCS becomes.
4.3. External factors of influence on the type of MCS
The external factors affecting the MCS are identified as environmental uncertainty,
technology, national culture and dependency on external financial resource providers. In the
interviews the interviewees are asked specific questions about these topics and if and how they think
that these factors influence the type of MCS. Besides this, the interviewees came up by themselves
with cultural differences within the Netherlands as influencing the type of MCS.
4.3.1. Environmental uncertainty
All managers and employees of Trade consider the individual markets in which they operate
as uncertain. Two managers and one employee remark that their total market is stable due to
product diversification and globalization. Two managers and all employees of Trade consider
environmental uncertainty as influencing the type of MCS, where their arguing differs. One manager
and two employees reason that more environmental uncertainty causes a more enabling MCS,
where one manager and one employee argue that more environmental uncertainty causes a more
coercive MCS. An Area Manager of Trade formulates:
You need to be able to react quickly in a changing environment. If you need permission to act from to many people you are too late. Therefore you need a great extent of freedom and responsibility and you should not be restricted on to much rules and procedures.
A Business Unit Manager of Trade mentions:
If the future is uncertain you cannot empower employees that much anymore. Therefore employees need more steering and they need to be told that where their focus needs to be.
All managers and employees of Technique consider their market as uncertain. They argue that
contracts are changing in a way that more risks are put at contractor organizations like Technique. All
managers and two employees argue different about how they consider environmental uncertainty
influencing the type of MCS. One manager and one employee reason that an increasing
environmental uncertainty causes a more enabling MCS, where two managers and one employee
argue that this makes the MCS more coercive. An employee of Technique states:
Because we need to deal with changing circumstances, we want our organization to be flexible and able to adapt quickly. Therefore employees need to be empowered.
A Business Unit Manager of Technique notices:
Due to the uncertainty of the environment we need to enroll sharper on the tenders. Therefore we need more project control, because we cannot handle setbacks every time […]. We become sharper and try to build in more control.
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Ten out of twelve interviewees recognize environmental uncertainty as of influence on the type of
MCS. The interviewees have opposing views about the way environmental uncertainty influences the
type of MCS within both case organizations. One view is that an increasing environmental
uncertainty influences the MCS in a more enabling way, where the opposing view is that in this case
the MCS is influenced in a more coercive way. Both views are in line with the literature (Reheul,
2007).
4.3.2. Technology
All managers and employees of Trade recognize technological changes within the
organization. Interestingly, all managers argue that technology influences the type of MCS and all
employees do not recognize this. All managers of Trade state that technological developments
influence the MCS in an enabling way. The Managing Director formulates:
Because of these technological changes we are able to almost fully empower our employees. They have a complete overview of what they are doing because of our systems. This causes less risk on mistakes and this enables employees to perform.
All managers and employees of Technique recognize technological changes within the organization.
Their business goals guide considers technology as an important factor for keeping the organization
controllable. All managers and one employee argue that these technological changes influence the
type of MCS, but their line of reasoning differs. Two managers reason that the technological
developments influence the MCS in a coercive way, where one manager and one employee argue
that the MCS actually becomes more enabling. A Business Unit Manager of Technique notices:
These technological developments provide us with more means of control. Where you had gut feeling
in the past you are now able to steer on facts due to these technological developments. […]. This causes that
the MCS becomes more coercive. You use the information to make your employees aware.
The contradicting reasoning according to an employee:
The new ERP system makes us able to create self-control. People should be made clear what is
expected from them and then they can check in the system, do I meet these requirements?
Thus, all managers and only one employee at both case organizations consider technology as
influencing the type of MCS. The managers of Trade and one manager and one employee of
Technique argue that technological developments makes the MCS more enabling, where two
managers of Technique reason that it makes the MCS actually more coercive.
4.3.3. National culture
Only Trade has foreign subsidiaries where one employee had been actively involved in a
foreign subsidiary. This employee argues that national culture does not influence the type of MCS. He
reasons that when Trade takes over another organization, Trade is very dominant in the way they
25
want these organizations to operate. Thus, national culture does not influence the type of MCS
according to this research. This is contradicting with the literature (Chow, 1999). Perhaps at
organizations which are more involved with different cultures, national culture has more influence
on the type of MCS.
4.3.4. Dependency on external financial resource providers
All managers and employees of Trade argue that the bank finances their operations, despite
their wealthy financial position and therefore Trade is dependent from the bank. All interviewees of
Trade, except one employee, argue with similar reasoning that this influences the type of MCS. They
reason that the greater this dependency is the more coercive the MCS becomes. A Business Unit
Manager argues:
When a bank invests in your organization they will get a voice about how to deal with stocks for example. Finance receives reports and they see that certain products are not selling good and fast enough. They provide us with this information and our task is to attend our employees on this. The bank demands that products are no longer in stock then 180 days. Then we are forced to sell this stock, even if it goes with a loss.
Two managers and two employees of Technique mention that Technique is dependent from the
bank, where one employee even states that Technique operates under the supervision of the banks
special management. One manager and one employee do not want to react on this topic. The
interviewees use similar argumentation, namely that the greater this dependency is the more
coercive the MCS becomes. The CEO argues:
In the short run the bank does have influence on the type of MCS, because they could be compelling.
The demand insights and reports about our activities. But in the end as a company you would like to have these
insights by yourself as well.
Thus, both case organizations are dependent from the bank, where Technique is more dependent
from the bank than Trade. The arguing is similar between the interviewees of Trade and Technique
as they all state that the greater the dependency on external financial resource providers is the more
coercive the MCS becomes. This is also in line with the literature (Reheul, 2007).
4.3.5. Cultural differences within the Netherlands
Two managers of Trade consider cultural differences within the Netherlands as an influencing
factor on the type of MCS, where they use similar argumentation. The Managing Director notices:
We work with people from the North which consciously choose to stay here. In my opinion the loyalty of our people is higher than in the West of the Netherlands. People from the West are more often changing jobs for example. Also the motivation and the drive are higher from our people. They are therefore more capable of handling a more enabling type of MCS than people in the West.
26
One manager and one employee of Technique consider cultural differences within the Netherlands
as influencing the type of MCS. They both use similar argumentation. A Business Unit Manager
mentions:
In general the mentality of people from the East is that they are not really outspoken. This causes that they are less initiating the freedom to take actions by themselves. We try to improve this, but this is difficult. Therefore an enabling type of MCS is sometimes difficult for people from this area.
Thus, the interviewees of Trade argue that people from the North are more capable of being
empowered than people in the West, because of a higher loyalty, motivation and drive. The
interviewees from Technique argue differently and reason that people from the East are less capable
of being empowered, because they are more closed and less mouthed compared with people from
the West.
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5. Discussion In order to examine what the influence of internal and external factors is on the type of MCS
used by organizations, it is first important to determine which type of MCS is used by the studied
case organizations. The interviews reveal that, according to the four generic features of Adler and
Borys (1996) both case organizations have predominantly enabling characteristics. As a consequence,
argumentation about how factors influence the MCS in an enabling way is based on experience of
the interviewees, whereas argumentation about how factors influence the MCS in a coercive way is
solely based on assumptions of the interviewees. Organizations with predominantly coercive
characteristics should be investigated to increase the validity of the argumentation about how
internal and external factors influence the MCS in a coercive way. After determining the type of MCS
used at the case organizations, the discussion about if and how the internal and external factors
influence the type of MCS is described below.
The results show that organizational culture and organizational structure influence the MCS
in an enabling way. According to the data, both case organizations have predominantly organic
cultures. In terms of organizational structure, respondents of both case organizations emphasized on
organic structures, especially in terms of centralization which is considered as the most important
structural element (Gosselin, 2005). According to Chenhall (2003), organic structures are involved
with openness of communication and empowerment of employees for decision making. Therefore it
can be expected that organic structures influence the MCS in an enabling way, which is supported by
the findings at both case organizations. Organizations with predominantly mechanistic cultures and
structures should be investigated to test properly if the hypothesis that mechanistic cultures and
structures influence the MCS in a coercive way can be confirmed.
The results show how the internal factor strategy influences the MCS in an enabling way.
According to the data, Trade develops existing markets and looks for new markets. Trade is
successfully doing this as they won five consecutive awards for fastest growing Dutch organization.
Thus, Trade can be considered as having a prospector strategy (Miles, 1978). The managers of
Technique are clear about their strategy, whereas the employees are less aware of this. This can be
caused by ineffective communication about their strategy from top management to the employees.
These managers argue that Technique seeks for new markets and enters these new markets after the
viability of the market is established. Thus, Technique can be considered as having an analyzer
strategy (Miles, 1978). The findings show that Trade strives for growth and Technique for innovation
within their customized projects, which influences the MCS in an enabling way. This is in line with
findings of Reheul and Jorissen (2007), who stated that organizations that strive for growth and
innovation need a flexible and informal MCS to encourage innovation. However, the opposing view
28
of Reheul and Jorissen (2007) that these organizations have great information need and therefore
adopt a more formal MCS indicates that these organizations tend to use more coercive MCS.
Organizations with a predominantly coercive MCS should be investigated to examine if this opposing
view can be confirmed.
According to the interviewees, the internal factors organizational life cycle stage and
organizational size influences the MCS in a more coercive way. This research situates Trade in the
growth stage, which is characterized by having an aggressive build strategy with a broad product-
market scope (Moores, 2001). Technique however, is stable after a considerable growth and a recent
repercussion and is therefore is situated in the maturity stage (Moores, 2001). In this research it
seems that the MCS becomes more coercive when organizations develop throughout the
organizational life cycle. However, both case organizations are unexperienced with the revival and
decline stages and it is therefore hard to draw conclusions about how these stages influence the type
of MCS.
According to Russo (2009), both case organizations are medium-sized organizations as Trade
employed 208 people and Technique employed 91 people in 2014. The interviewees argue that the
MCS becomes more coercive when organizations become bigger. This is in line with the literature as
it is stated that large organizations tend to have more administrative forms of control, where smaller
organizations tend to use more personal controls (Bruns, 1975). Small and large sized organizations
should be investigated to increase the validity of these results. Thus, concluding this research reveals
how the internal factors organizational culture, organizational structure and strategy of organizations
influence the MCS in an enabling way and findings in this research also show how the internal factors
organizational life cycle stage and size of the organizations influence the MCS in a coercive way.
In this paragraph it is discussed how the external factors dependency on external financial
resource providers, environmental uncertainty, technology and national culture have mixed
influences on the type of MCS. Both case organizations are dependent on the bank. The interviewees
argue that when organizations become more dependent on external financial resource providers, the
MCS becomes more coercive. This supports the literature, where it is stated that external financial
resource providers will require detailed information from organizations which they finance (Reheul,
2007). To get a more comprehensive picture about how this factor influences the type of MCS, more
research is needed at organizations dependent from other external financial resource providers and
at financial independent organizations.
According to the data, both case organizations are operating in quite uncertain
environments. Contradicting views about how environmental uncertainty influences the type of MCS
exist within both case organizations. Some interviewees argue that an increasing environmental
29
uncertainty influences the MCS in an enabling way, while others argue that this actually results in a
more coercive MCS. The literature indicates that environmental uncertainty results in a more
enabling MCS, as it is stated that organizations tend to use more non-financial measures in case of
environmental uncertainty (Gosselin, 2005). In contrast, the literature also indicates that
environmental uncertainty causes a more coercive MCS, as it is stated that high environmental
uncertainty is associated with an emphasis on budgets for evaluation (Ezzamel, 1990). Because both
contradicting views are supported within both case organizations, apparently the personnel
preference about how to deal with environmental uncertainty is more important than the
organizational context. Organizations operating in stable environments need to be investigated to
get a more comprehensive picture about how environmental uncertainty influences the type of MCS.
Technological developments take place within both case organizations. At both case
organizations all managers consider technology as a factor of influence on the type of MCS, while 5
out of 6 employees do not recognize this. This is in line with research of Tessier and Otley (2012),
who stated that the managerial intentions and the employees’ perceptions of the MCS can differ.
Perhaps employees can be more short-term focused compared with managers and are therefore less
aware of the influence technology has on the type of MCS. At Trade all managers argue that
technology influences the MCS in an enabling way. Looking at Technique, the results are
contradicting as one manager and one employee consider technological developments as resulting in
a more enabling MCS, whereas two managers argue that this actually results in a more coercive MCS.
Perhaps not all managers of Technique are actively involved in the composition of technological
developments, which causes contradicting findings as opposed to the managers of Trade. Both case
organizations confirm that technology has influence on MCS in general, but it remains unclear
whether this leads to more enabling or more coercive MCS. More research is needed to determine
this.
Only one employee of Trade has been actively involved in a foreign subsidiary and he does
not consider national culture as of influence on the type of MCS. In the literature national culture is
considered as important, because there is an increasing need for organizations towards knowing
which MCS are effective in different national settings (Chow, 1999). It is possible that Trade uses a
specific success formula and is dominant when taking over organizations and therefore within Trade,
national culture does not seem to influence the type of MCS. Employees more involved with different
national cultures should be interviewed to test properly if and how national culture influences the
type of MCS. Concluding, the findings in this research show how dependency on external financial
resource providers influences the MCS in a coercive way, where contradicting argumentation exists
about how environmental uncertainty and technology influences the type of MCS.
30
In the last part of the interviews the interviewees have the opportunity to come up with
additional factors of influence on the type of MCS. They came up with level of education from
employees, type of product, vision of the CEO and cultural differences within the Netherlands. Level
of education from employees can be seen as an additional factor, because it cannot easily be linked
to existing factors affecting the MCS. The argumentation seems assumable that the higher the level
of education, the better employees are capable of handling an enabling MCS, because they faced
also a lot of empowerment during their education. It is possible that due to the relatively young
research field of enabling and coercive MCS, this factor is currently not considered in the literature.
The factors type of product and vision of the CEO can be part of an organizations strategy and are
therefore not separately considered in the literature as affecting the MCS. It is possible that cultural
differences within the Netherlands is currently not considered in the literature as affecting the MCS,
because of the questionability about if this factor can be made generalizable. More research is
needed to examine if and how these additional factors influence the type of MCS.
In this paragraph a short discussion about the reflection on the methods is provided
consisting of operational issues, validity and reliability limitations. The relatively small time frame of
this research limited the amount of case organizations which could be investigated. However, access
to the case organizations was obtained, due to friendly relationships from the author within both
case organizations. Semi-structured interviews offered the potential to address exploratory and
explanatory research. The additional factors that were found proved the added value of using semi-
structured interviews. The conclusions from this study can be generalized to other people and other
contexts. However, this generalization is limited by the selected industries and the organizational
size. More empirical data is necessary to make the findings generalizable to other industries and
larger organizations. The reliability of this research is affected by participant and observer bias during
the interviews. Reliability was increased by informing the interviewees upfront about the duration of
the interview in order to let them reserve enough time in their schedule. This enabled the
interviewee to expand upon some interview questions. The answers provided by the interviewees
may have been guided by the semi-structured interview or by the interviewers’ attitude. It is
attempted to reduce this bias by the involvement of both managers and lower-level employees,
reducing the chance of mentioning only top-down or bottom-up views.
31
6. Conclusion
MCS are considered to be important for organizations as it is used by the management to
align the goals and risk preferences of their employees with the organization and thus serve the
purpose of ensuring organizational performance, driven from an internal perspective (Merchant,
2006). Ahrens and Chapman (2004) directly linked the distinction from enabling and coercive
formalization (Adler, 1996) to MCS. A comprehensive picture about which and how internal and
external factors influence the type of MCS is provided by this research.
Several internal factors influence the MCS in an enabling way. A strategy which strives for
growth or is based on customized projects influences the MCS in an enabling way. This supports the
literature which states that organizations striving for growth and innovation need a flexible and
informal MCS to encourage innovation (Reheul, 2007). Also an organic organizational culture and
structure causes a more enabling MCS. This supports the literature where organic structures are
considered to be more involved with empowerment of employees (Chenhall, 2003). This research
identifies several additional internal factors affecting the MCS and influencing the type of MCS, which
are level of education, type of product and vision of the CEO. According to this research a higher level
of education from employees makes the MCS more enabling, when an organization produces
customized products the MCS becomes more enabling and when the CEO beliefs in empowerment of
employees the MCS becomes more enabling as well.
Several external factors influence the MCS in an enabling way. An increasing environmental
uncertainty causes a more enabling MCS. This supports the literature which states that increasing
environmental uncertainty decreases the reliance on accounting performance measures (Reheul,
2007). Technological developments make the MCS also more enabling, where the literature currently
only recognizes that technology influences the MCS, but does not provide insights in how. This
research identifies one additional external factor affecting the MCS and influencing the type of MCS,
namely cultural differences within the Netherlands. This is causing a more enabling MCS in the sense
that people from the North have a high level of loyalty, motivation and drive and are therefore
capable of being empowered. This factor is currently not recognized in the literature.
This research also identifies internal and external factors as of influence on the type of MCS
in a coercive way. The further the organization comes into the life cycle, the more coercive the MCS
becomes. The literature currently does not provide insights in this. Also the bigger the organization in
terms of employees the more coercive the MCS becomes. This is in line with the literature which
states that large firms tend to have more administrative forms of control (Bruns, 1975). Also this
research finds that when organizations produce standardized products and when the CEO does not
believe in empowerment than in both cases the MCS becomes more coercive. These findings are not
32
recognized in the literature yet. Looking at external factors influencing the MCS in a coercive way this
research identifies that increasing environmental uncertainty causes a more coercive MCS. This
supports the literature as it states that environmental uncertainty is positively associated with a
bureaucratic form of MCS (Auzair, 2011). Technological developments make the MCS more coercive,
where currently the literature does not provide insights in this. An increasing dependency on
external financial resource providers causes a more coercive MCS as well. This supports the literature
where is mentioned that financial resource providers will require detailed information about the
financial situation and the progress which is made by the organization (Reheul, 2007). This research
identifies one additional external factor affecting the MCS and influencing the MCS in a coercive way,
namely cultural differences within the Netherlands are causing a more coercive MCS. This, because
people from the East are less capable of being empowered, because they are more closed and less
mouthed compared with people from the West. This factor is currently not recognized in the
literature.
6.1. Managerial and theoretical implications
When considering the managerial implications, this research provides managers insight in the
factors influencing their type of MCS. This will help them to consider if their current MCS is suitable
for their organization. Also when they want to change their type of MCS, they have a better insight
into which factors need to be reconsidered. Managers are in the position to influence the strategy,
organizational culture and structure, technology and type of product of the organization and
therefore they should focus on these factors when they want to change their type of MCS.
Theoretically this research provides evidence about the already recognized internal and
external factors influencing the MCS and adds to this by providing insights in how these factors
influence the type of MCS. Also a more comprehensive picture is gained as the interviewees came up
with some interesting additional factors which influence the type of MCS.
6.2. Limitations and future research
Like in all research, this research does have some limitations as well. One limitation is that at
both case organizations the MCS have predominantly enabling characteristics. Findings about how
interviewees argue that the MCS becomes more coercive are based on assumptions and these
findings could be more reliable when respondents actually work in an organization with a
predominantly coercive MCS. Future research can be done in case organizations which use a
predominantly coercive MCS to validate the results in this research. Another limitation is that only
one interviewee had been actually involved in foreign subsidiaries. Therefore the factor national
culture could not be properly tested. Future research should be done at organizations and with
interviewees that have more experiences with foreign subsidiaries to get a better understanding
33
about if and how national culture influences the type of MCS. A limitation of this research is also the
qualitative character of this research as this research is not free of interpretation from the author.
Subjectivity is minimized by staying in close contact with two master students and a mentor during
this research and by discussing the progression of this research. As this research is meant to develop
theory it is a good starting point for future research to test the findings from this research. As the
interviewees came up with some interesting factors of influence on the type of MCS future research
can test if these factors, level of education, type of product, vision of the CEO and cultural differences
within the Netherlands are indeed influencing the type of MCS
34
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8. Appendices
8.1. Appendix A: Interview guide
Introduction
- Thank interviewee for cooperation.
- Introduce myself
- Mention the goal of this interview
- Ask for permission to record the interview and tell interviewee that he/she could stay
anonymous.
- Ask interviewee if he/she has questions beforehand.
General questions
- Could you tell something about yourself, in terms of your function in this organization?
- What is the main purpose of the MCS in this organization?
- Have you been involved in composing the MCS?
Characteristics of the MCS used
- When faced with operational problems, are employees encouraged to solve these by
themselves? In which stage become colleagues involved in solving these problems?
- To what extent do employees need to understand the underlying reasons for tasks they
execute?
- Are employees provided with information to help them interact with the broader
organization and external environment ant to what extent?
- Are employees involved at changing processes and to what extent?
Factors influencing the type of MCS (enabling or coercive) used
- What is the strategy of this organization/department?
- Is this strategy influencing the type of MCS used (enabling/coercive) according to you and if
yes, how?
- Do you want to add something?
- How is language used to communicate the organizational culture?
- For what purpose are artifacts and symbols used?
- To what extent are achievements celebrated and to what extent are employees empowered
to search for ways of doing their jobs better?
- What is more important, praise for good performance or quality of work?
38
- To what extent are employees directed to start working and directed with performing their
tasks?
- Is the organizational culture influencing the type of MCS (enabling/coercive) and if yes, how?
- Do you want to add something?
- How centralized is the hierarchy within this organization/department and how many
hierarchical levels are there?
- To what extent are employees tied to rules and procedures?
- How many discrete functions which are executed by at least one specialist have the
organization/department and how many different job titles?
- Does the organizational structure influence the type of MCS (enabling/coercive) and if yes,
how?
- Do you want to add something?
- Is the organization growing, stable or declining and to what extent?
- Does the organizational life cycle stage influences the type of MCS (enabling/coercive) and if
yes, how?
- Does the size of the organization influences the type of MCS (enabling/coercive) and if yes,
how?
- Do you want to add something?
- How uncertain is the external environment of this organization/department?
- Is (un)certainty of the external environment influencing the type of MCS (coercive/enabling)
and if yes, how?
- Do you want to add something?
- Which technological developments have been occurred?
- Do these technological developments influence the type of MCS (enabling/coercive) and if
yes, how?
- Does this organization have foreign subsidiaries or is this organization a foreign subsidiary?
- If yes, differs the MCS from foreign subsidiaries from the MCS here?
- Do you think that national culture influences the type of MCS (enabling/coercive) and if yes,
how?
39
- Do you want to add something?
- To what extent is this organization dependent from external financial resource providers, like
banks, external shareholders and investors?
- Do you think that dependency on external financial resource providers influences the type of
MCS (enabling/coercive) and if yes, how?
- Do you want to add something?
- Are there other factors which influence the type of MCS (enabling/coercive) according to
you? If yes, what are these factors and how do these factors influence the type of MCS
(enabling/coercive)?
Concluding
- Do you have any questions left?
- Do you want to add something on the topics discussed?
- Finish and thank interviewee for cooperation.
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8.2. Appendix B: Coding scheme
Coding scheme A: Type of MCS used
Coding scheme B: Internal factors
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Coding scheme B: External factors
Coding scheme B: Additional factors
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