Cascading Control Changes, Incoherence, and Dialogue: Insights from a Longitudinal Case Study

Abstract

Environmental shifts regularly urge organizations to adapt, which may entail management control (MC) changes. Changes to an MC element such as a performance measurement system, however, may in turn create incoherence with other, non-changed elements, generating a need for more changes, and thus trigger a cascade effect. To date, however, we know little about how this sequential process unfolds and what managers can do to deal with incoherence. This paper contributes by enhancing the understanding of sequential changes, drawing on the organizational ecology literature, and we empirically inform our research with a five-year longitudinal case study. Our data illustrates in detail how initial MC changes, to cope with an environmental shift, trigger a cascade effect. This sequential process results in an extensive change period, during which various incoherent MC elements coexist. Our study acknowledges that incoherence among MC elements can decrease control effectiveness by creating intra-organizational frictions, yet we highlight the role of managers in mitigating such negative effects. Specifically, we show how managers can alleviate the unfavorable effects of incoherence by changing their use of performance measures in order to better facilitate organizational dialogue, learning and problem solving.

How managerial capabilities of cognitive and behavioural complexity enable dynamic tension between management controls

“…Coordination was managed through tight, short-term planning controls, while adaptability was cultivated through loose, long-term planning controls. We believe this finding extends previous research on managers’ role in designing and using countervailing MCs that create dynamic tension (Gurd and Helliar, 2017; Lövstål and Jontoft, 2017; Toldbod and Van der Kolk, 2022). Where previous research reaches abstract conclusions, such as “it requires purposeful intervention by managers” (Mundy, 2010, p. 515) or “managers must design complex combinations of MCs” (Bedford and Malmi, 2015, p. 17), our findings are much more specific: managers must be able to think with cognitive complexity and act with behavioural complexity to both understand the need for countervailing MCs and ultimately be able to design and use them to their advantage.…”

“…Cognitively complex managers understand that controlling organisations requires an "and" perspective towards MCs, where integrating countervailing MCs "take[s] into account the wholeness of organisational [control]" (Raisch et al, 2018(Raisch et al, , p. 1522. Hence, we propose that cognitive complexity is a concrete managerial capability that enables managers to understand that control requires countervailing MCs (Gurd and Helliar, 2017;Sundin et al, 2010;Toldbod and Van der Kolk, 2022). However, it is not enough to merely accept this cognitively and design countervailing MCs in kind; managers must also act accordingly.…”

“…It requires managers to design and use different control modes (Curtis and Sweeney, 2017; Gurd and Helliar, 2017; Willert et al , 2017). For instance, (Mundy 2010, p. 515) finds that dynamic tension requires “purposeful intervention” by managers because they hold the mandate to design and implement countervailing MCs (Gurd and Helliar, 2017; Malmi and Brown, 2008; Toldbod and Van der Kolk, 2022). Others argue that managers are essential to the “flexible” (Busco et al , 2008; Kolehmainen, 2010), “complex” (Bedford and Malmi, 2015) or “comprehensive” (Dekker et al , 2013; Lillis and Van Veen-Dirks, 2008) types of MCs that can create dynamic tension.…”

Numbers Speak for Themselves, or Do They? On Performance Measurement and Its Implications

“…When a performance measurement system is used as a platform to start dialogue about what matters, this can produce various positive outcomes. A recent study illustrates how employees, as a result of this dialogue, began cooperating beyond the boundaries of their local organizational units, while learning from each other and improving organizational performance (Toldbod & van der Kolk, 2020).…”

Management Control Systems and Performance: The Mediating Role of Organisational Capabilities in Malaysia

“…Simons ' (1995) Levers of Control (LOC) framework highlights "a complete range of possible controls" that includes the belief systems, boundary systems, diagnostic control systems and interactive control systems (Otley, 2003). The interactive use of MCS encourages frequent top manager-subordinate dialogues that often lead to new ideas and opportunity-seeking behaviours, and thereby facilitates formulation of innovative strategic initiatives to develop capabilities for competitive advantage (Toldbod & van der Kolk, 2020).…”