A Research agenda for management control in the developing world

1. Management control: Unsolved
Problems and Research
Opportunities
Introduction:
 Little work was done on management control until the late 80’s when
authors like Koontz, 1958; Ciglioni and Bedeian, 1974; Otiey and Berry,
1980; Eisenhardt, 1985) carried research in this domain.
 Despite their numerous publications the concept of management control
was still not clear.
 This is the main problem for management control theory because it requires
researchers and practitioners to speak the same language
 According to Flamholtz et al. (1985), practitioners need to develop a better
control system.
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2. Causes of lack of clarity in
management control concepts
 The main cause for the lack of clarity about
management control concepts is the diversity of
theoretical approaches.
 In fact, Koontz,( 1958) came out with the principles of
management as one of the first approaches.
 The main focus of this principle has decline over time.
 However its cybernetic approach to control is still very
important.
 The approach of Otley and Berry (1980) criticized this
approach because of its simplicity and inability to
capture the complexity of higher level systems
(organizations).
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3.  Jensen & Meckling (1976) trying to minimize the agency cost introduced the ideal of
efficiency in control processes.
 This theory received several objections because it had a negative impact on organizational
behavior (Mintzberg et al., 2002)
 Nowadays many researchers like Fisher, (1990); Archer & Otley, (1991); Fisher (1998)
are recognizing the contingent nature of management control.
 This has enhanced the development of management control theory since it provides new
ideas related to the use of control concept and tools.
 Cooper & Kaplan (1991) propose control mechanisms that cover a wide spectrum such as
activity base cost. Also Fullen-Love & Scapens (1997) and other authors have made
several contributions toward management control theory.
 However the lack of a common language has a negative effect since there are no common
organizational problems.
 It should be noted that while some contributions have been positive for the understanding
of the complex phenomena of management control, other contributions have blurred the
complex boundary that management control systems holds with other areas of knowledge
such as strategic formation and organizational structure.
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4. • According to Otley (1991) the concept of management control is
not always correctly specified nor correctly separated from the
concept of management control systems
• . Following the ideas of management control as a package, even
the business strategy, the organizational structure and
organizational culture may be considered as a part of
management control.
• In general all the contributions share the main objective of
ensuring that workers act based on the organizational interest.
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5. Management Control Problems
 Fayol (1916) came out with the first approach to management control
which is a process of monitoring or evaluating actions.
 Anthony (1965) proposed another concept on management relating to
effective and efficient allocation and use of resources adding value
the practice of management accounting.
 Flamholtz, (1979); Merchant,(1985), proposes that management
control influences the behavior of members in an organization.
 Jensen & Meckling (1976) stated that management control help
organization to solve problems about the impact of contradictory
goals among individuals and organization.
 They said that if individuals act in line with organizational goals,
there will be no need for management control.
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6. Different ideas of management
control problem
There are two different ideas about management control
problem:
 Idea of management control for strategic top
management decision making (Otler (2004) and
 The idea of management control for influencing
employees behavior (Zimmerman 2001)
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7.  According to Fisher (1995) management control is control over mid-level management aligning their
behavior to achieve organizational goals.
 Operational control is control over employees of a lower level and corporate control is control
related to CEOs, board of directors and shareholders.
 According to Otler and Berri (1980) there are three types of behaviors which are expected to align
with organizational goals and strategy.
 Seek goal achievement
 Coordinate efforts and actions and
 Adapt to internal and external changes
According to Otler and Berri (19800 each of these three types of behavior represent a combination of the
following four individual actions
i. Adapting input
ii. Adapting goals
iii. Adapting processes and
iv. Adapting strategy.
Therefore in order to act according organisational interest, lowest level employee must decide important
things in terms of adapting their activities and top level management must also behave according to the
organisation interest such as adapting processes and strategy in response to external and internal changes
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8. Management Control
Mechanisms
Definition of control mechanisms
• Control mechanisms can be defined as management practice that influences all or some of
the members of an organization to act or make decisions for its best interest, collaborating
with at least one of the problems of direction, motivation and personal limitations.
• According to Galbraith (1973) the concept of mechanical management control mechanism
is related to existence of rules, procedures, objectives and goals
• Meanwhile inorganic management control mechanism refers to relational and social
aspects of labor life.
• Landfield-Smith (1997) states that informal mechanisms are those that are not consciously
design or with a clear purpose of solving the control problem
• According to Galbraith (1973) we could find spontaneous control mechanisms that are not
written and are informal.
• In general it is evident that the concept of management control mechanism is
misspecified.
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9. Management Control Systems
Boundaries
Definition of management control system
 Oxford dictionary (2011) states that a system is a set of things working together as part of
a mechanism
 Management control systems can be defined as a system that should align all behavior
behind general and shared objectives regardless of the responsibility held in the
organization.
 It implies a conscious design of every control mechanism and also the interaction of the
role of each part of the whole
 Researchers defined management control systems based on their interest at a particular
time
 There are therefore definitions that the system should align all behaviors behind general
and share objectives regardless the responsibility held in the organization while others
focus on top management or lower managers or even operative level
 There are also definitions regarding the types of control mechanisms like: bureaucratic or
social mechanisms, or consciously design or spontaneous. Inn general there are some
management mechanisms that may be at the same time part of organizational structure or
culture and a control mechanism or organizational structure and culture are just portions of
the overall control system.
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10. Conclusion
• There need to be a higher degree of agreement in management
control theory because as a concept it works as a common language
for researchers and practitioners. This can improve collaboration
• In general there are three fundamental issues that harms the
development of management control theory because of
misspecification
i. The first is that the definition of control problem presents some
unclear areas
ii. The second issue is that the description of control mechanism is
confusing and contradictory.
iii. Finally there is an issue related to lack of clarity in the boundaries
of management control systems and other managerial concepts
such as strategic planning, organizational culture and
organizational structure.
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11. References
• Abernethy, M.A., & Brownell, P. (1997). Management control systems in
research and development organizations: The role of accounting, behavior
and personnel controls. Accounting, Organizations and Society, 22(3-4),
233-248.
• Anthony, R. (1965). Planning and Control Systems: A Framework for
Analysis. Plarvard Business School Division of Research: Harvard
University Press.
• Anthony, R., & Vijay C. (2004). Management control systems. 11th ed.
Boston: McGraw-Hill / Irwin.
• Archer, S., & Otley, D. (1991). Strategy, structure, planning and control
systems and performance evaluation- Rumenco Ltd. Management
Accounting Research, 2(4), 263-303.
• Argyris, C. (1964). Integrating the individual and the organization. New
York: Wiley.
• Barnard, C. (1938). The Functions of the Executive. Cambridge, Mass,
USA: Harvard University Press.
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