Formalization of management control system
Talja, Suvi (2016)
2016
Kauppatieteiden tutkinto-ohjelma - Degree Programme in Business Studies
Johtamiskorkeakoulu - School of Management
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Hyväksymispäivämäärä
2016-12-07
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:uta-201612082765
https://urn.fi/URN:NBN:fi:uta-201612082765
Tiivistelmä
Management control systems is a traditional research area where the rules and practices of management are examined on how they direct employee behavior. Currently, changes in the market are seen to affect companies' internal needs to modify their management control systems which different consultancy companies have recognized as well. The meaning of the management control system design and coordination should be studied more in organizations.
This study examines the relationship between management control system design and coordination and how they affect management control system functioning in a manufacturing company. The theoretical part adapts Tessier and Otley's (2012) research of the meaning of the design in the employee perception of the management control system. Management control system elements, the use of controls, and the role and objective of management control have been selected as factors affecting management control system design.
The coordination process of management control systems has been studied less and therefore Ghoshal and Nohria's (1989) theory of coordination mechanisms is used in this thesis. The focus is on the formalization of the management control system and its impact on internal transparency, global transparency, flexibility and repair. This study provides insights in the relationship between management control system design and coordination and brings forward success factors and main challenges in the management control systems formalization.
Practical constructivism was selected as an ontological approach to the study and it was conducted as a qualitative single case study. Semi-structured interview was selected as a data generation method. Research data consists of 12 interview for senior managers and other upper white collar employees in the organization. Analysis was conducted through content analysis which was directed by more abstract descriptive analysis strategy.
The most remarkable findings concluded that the MCS elements design, the objective of control and the use of controls are inter-related subjects in the MCS design, and without common coordination different controls do not work together harmoniously as a package and do not support common goal achievement. Several external and internal prohibiting factors of formalization, such as history, uncertainty and the lack of control mechanisms, were identified and development suggestions were given for the case company. The results gave interesting results for the management control system research and further research directions were presented.
This study examines the relationship between management control system design and coordination and how they affect management control system functioning in a manufacturing company. The theoretical part adapts Tessier and Otley's (2012) research of the meaning of the design in the employee perception of the management control system. Management control system elements, the use of controls, and the role and objective of management control have been selected as factors affecting management control system design.
The coordination process of management control systems has been studied less and therefore Ghoshal and Nohria's (1989) theory of coordination mechanisms is used in this thesis. The focus is on the formalization of the management control system and its impact on internal transparency, global transparency, flexibility and repair. This study provides insights in the relationship between management control system design and coordination and brings forward success factors and main challenges in the management control systems formalization.
Practical constructivism was selected as an ontological approach to the study and it was conducted as a qualitative single case study. Semi-structured interview was selected as a data generation method. Research data consists of 12 interview for senior managers and other upper white collar employees in the organization. Analysis was conducted through content analysis which was directed by more abstract descriptive analysis strategy.
The most remarkable findings concluded that the MCS elements design, the objective of control and the use of controls are inter-related subjects in the MCS design, and without common coordination different controls do not work together harmoniously as a package and do not support common goal achievement. Several external and internal prohibiting factors of formalization, such as history, uncertainty and the lack of control mechanisms, were identified and development suggestions were given for the case company. The results gave interesting results for the management control system research and further research directions were presented.