Project topics and materials
Get Complete Project Material File(s) Now! »
Evolution of Management control before and after Kaplan and Johnson (1987)
Management Control is often considered as “young” in comparison with other disciplines of management sciences (Zimnovitch, 1999; Malo & Teller, 1999; Hoper, 2001) even though “historians have demonstrated that accounting reports have been prepared for thousands of years”5 (Johnson & Kaplan, 1987:6). After a brief definition of management control, the reasons of emergence of “new” control systems will be discussed as a reaction towards the decline of pure accounting systems. This synthesis of the evolution of management control provides an overview of our research motivation. ”R.N.Anthony conceptualized Management Control Systems in 1965. His intention is to “broaden the scope of information being considered beyond just accounting information” and to bring “issues of managerial motivation and behaviour into view” (Otley, 1999:364-365). “The management control process is the process by which managers of all levels ensure that the people they supervise implement their intended strategies” (Anthony & Govindarajan, 2004:4). This definition, according to Berry et al. (2005), reflects Anthony’s current views on management control systems, which have some continuity with his original approach, but abandon some elements like: “Management control is primarily a process for motivating and inspiring people to perform organization activities that will further the organization’s goal. It is also a process for detecting and correcting unintentional performance errors and intentional irregularities, such as theft or misuse of resources” (Anthony et al., 1989). Strategy formulation, management control and task control have a distinct and hierarchical relationship.
“Management control fits between strategy formulation and task control in several respects… Strategy formulation focuses on the long run, task control focuses on short-run operating activities, and management control is in between” (Anthony, 1998:6). Management control, hence, “rests very firmly in the domain of accounting” (Berry et al., 2005). The dynamic interplay between planning and control processes is ignored (Lowe & Puxty, 1989). Until 1985, the research on management control systems had been widely developed in financial accounting, particularly conventional cost accounting and in behavioural and organizational accounting (Otley, 2001).
Roles of top managers and middle managers in strategic change
Either in strategic change literature or management accounting one, omnipresent is the research on top management as a key stimulus in strategic change18. Much less attention is on the key role of middle managers in strategic change (Huy, 2001a, 2002b) or a negative perception on their role (Biggart, 1977; Tushman & Romanelli, 1985; Noer, 1993). The role of top management in strategic change is undeniable, but middle management also plays a crucial role. After a brief analysis on frequent problems faced by newly-appointed CEO, we introduce the essential roles of middle managers in strategic change. Challenges for newly-appointed CEOs The mandate for change perceived by newly-appointed managers defines two main clusters of change. The first one is strategic turnaround: the managers, under the significant pressure to improve performance, perceived their roles as driving force for fundamental, revolutionary change. The failure of past strategy provoked such a mandate. The second one is strategic renewal: the mandate of the managers was to continue a trajectory of profitable growth. Simons (1994) expected that the managers hired from outside organization had a tendency to implement strategic turnaround, and the Insiders to implement strategic renewal. But this expectation was not supported by the results of his study on 10 newly-appointed managers.
The newly-appointed CEOs often face four common challenges as follows (Porter et al., 2004). Firstly, the CEOs were trained to run the internal business, now have to deal with external pressures (e.g. shareholders, analysts, politicians, industry groups). They must simultaneously manage the dual roles of Mr. Inside and Mr. Outside. The CEOs cannot be personally involved in all decisions or oversee every facet of complex and large organization. Some feel as if they loss of control. But they need to resist the illusion of self-importance, omnipotence, and omniscience. Their greatest influence transfers from direct to indirect means. For instance, they need to communicate a clear strategy, to institutionalize an appropriately designed structure and a process to guide, inform, and reward. The second challenge is the side effects of the CEO’s orders. “Ironically, by exercising his power to give orders, the CEO actually reduces his real power, saps his energy and his organization’s, and slows down progress” (p.65). Only by empowering others, the CEO can expand his power. The CEO’s signals, already subject to misinterpretation or distortion, are often differently responded by different audiences. A simple, clear message illustrated by stories is often recommended to the new CEO. Ex: Threat of embarrassment caused by a direct order and then an over-intensive involvement of the CEO The newly-appointed CEO was asked to approve a marketing campaign which had been prepared for a year by a division manager and his team. The latter assumed that the CEO’s approval was largely a formality. But the CEO, despite his positive impression on the quality of the campaign, felt that the advertising lacked of originality, thus required a new advertising plan. He hoped to send a clear message on the changes he intended to introduce. He did not well forecast the consequences of his order at that moment.
His calendar came to bottleneck: all executives losing confidence on their comprehension of the CEO’s expectations rushed to get his approval before proceeding on anything. The organization progress slowed down. The new CEO was present in all meetings and saw it as an opportunity to communicate his new strategy. He only recognized the negative impact of his intensive involvement when the division manager responsible for marketing campaign decided to leave. Although the CEO tried his best to persuade the division manager to stay, the latter felt too demoralized, overruled, and undermined to continue to work with the CEO.
The CEO openly admitted his precipitations on the marketing campaign in the meetings of all his top managers. He identified the areas of strategic changes and the issues on which he wanted to be consulted. A task force was created to review the issues requiring the early involvement of the CEO input such as budgeting, planning, performance evaluation, recruiting key employees, and so on. He confirmed his willingness to share power and trust his subordinates.
Relation between Management control systems and strategic change
Atkinson et al. (1997) highlight the interrelationship between Management accounting change, organizational change, structure change, environmental change and decision-making change: “[H]ow management accounting information can help an organization identify the need for, and the way to, change, and how exogenous changes in the environment affect the nature of information required for effective management (Armitage et al. 1994)… Organizations alter their structure as part of their change [of] management strategy. Changing structures imply changes in the information needed, and the way information is used to measure and motivate performance… Both environmental and organizational changes imply changes in the type of information and the use of information for decision making” (p. 80-81). Burns & Vaivio (2001) introduced an overview of the evolving role of management control ssytems including its potential to drive organizational transformations (Chenhall & Euske, 2007). Three perspectives on management accounting change are:
– Perspective 1: the epistemological nature of change,
– Perspective 2: the logic of change,
– Perspective 3: the management of change.
The first perspective concentrates on studying the definition of change, role of management accounting change on organization’s performance20, and the dichotomy between change and stability21. A debate underlines the question of whether change can be studied as a distinct, observable episode or an ongoing phenomenon22. Another debate studies whether management accounting change is a disruptive revolutionary phenomenon or an incremental evolutionary chain of development23. Regarding the second perspective, management accounting change is presented as a managed, formal and linear organizational event, or an unmanaged, informal, and nonlinear elements24.
Table of contents :
Table of contents
GENERAL INTRODUCTION
The research question
Main findings
Thesis structure
Bibliography
Chapter 1: REVIEW OF THE MANAGEMENT CONTROL LITERATURE
Introduction of the chapter
1. Evolution of Management control before and after Kaplan and Johnson (1987)
2. Strategic change
3. Simons’s typology
4. Outcomes of management control systems
5. Open questions
Concluding remarks
Bibliography
Chapter 2: REVISIT OF PROJECT MANAGEMENT LITERATURE
Introduction of the chapter 2
1. Challenges faced by the new management control approach as applied to a project oriented organization: a case study as a starting point
2. What can be learned from the management project literature Concluding remarks
Bibliography
Chapter 3: METHODOLOGY
– 1 – 11/06/2008
Framework
Methodology
INEO Suez
Bibliography
Chapter 4: CASE STUDIES
Section 1. Hi-Tech case
Section 2: Electra case
GENERAL CONCLUSION
General Bibliography
List of Figures and Tables
Figures
Tables
Detailed table of contents
Appendix .
