The interrelationship between management control mechanisms and strategy

Abstract

This paper examines the interrelationship between management control system (MCS) mechanisms and strategy. The traditional view is that the MCS is shaped by organisational strategy. More contemporary viewpoints, however, suggest that there may be a two-way relationship between the two variables. That is, MCS shapes, and is shaped by, strategy.We develop two research questions that describe the interrelationship between MCS and strategy, and test them using a public sector entity that experienced a strategic change. A retrospective longitudinal study, spanning five years and involving archival data, interviews and a questionnaire, was adopted. The analysis confirms the existence of a two-way relationship between MCS and strategy. We find that the interactive use of MCS mechanisms helps to facilitate a change in strategy, and that MCS mechanisms change to match a change in strategy.

The Strategic Alignment of Management Accounting Information Systems, and Organizational Performance

“…Hence, to influence and support the formulation and implementation of a business strategy, MAIS must provide broad-scope, aggregated, and non-periodic types of information (Kober, Ng, and Paul, 2007). Tillema (2005) and Wiersma (2008) empirically confirmed the positive relationship between highly uncertain tasks and broad-scope, timely, and integrated types of information.…”

Strategic Risk Management

“…Thus, interactive control systems are arguably central to strategy formation as they may manage the emergence of strategy Simons, 1994aSimons, , 1994b. Nonetheless, the relationship between strategy-making practices and management control systems is largely an unexplored area of strategic management (Kober, Ng, and Paul, 2007;. 16 Furthermore, an increasing number of studies in management accounting have explored how enterprise risk management (ERM) can help firms to enhance their performance and create a sustained competitive advantage.…”

Interactive Control System, Intended Strategy, Implemented Strategy dan Emergent Strategy

“…Akan tetapi riset yang menekankan efek dari MCS terhadap strategi, konsep strategi paling banyak diteliti pada tingkatan pilihan strategi sedangkan pada proses pembentukan strategi masih sedikit (Kober et al, 2007).…”

“…Seperti dijelaskan oleh Ittner dan Larcker (2001) salah satu elemen kunci dalam mempelajari MCS dan strategi adalah dengan mengidentifikasi faktor spesifik yang mengarah pada terbentuknya strategi. Dan kedua, sedikitnya perhatian yang diberikan pada masalah proses pembentukan strategi yang muncul akibat penggunaan MCS (Kober et al, 2007).…”

“…Hanya ada dua riset yang menekankan pada efek dari penggunaan MCS terhadap strategi yang mengkonsepkan strategi sebagai pendekatan proses (Roberts, 1990;Kober et al, 2007). Roberts (1990) dan Kober et al, (2007) menemukan bahwa MCS akan memfasilitasi strategi yang terdapat pada perusahaan.…”