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The Strategy and Management Control Systems relationship as emerging dynamic process

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Abstract

In this paper we discuss the Management Control Systems (MCSs)–strategy relationship in the light of an empirical analysis. We debate the attention to the fit of MCS and strategy at given moments in time which is typical of a contingency approach, and we search for an understanding of the dynamic evolution of the company over a continuous span of time. We deploy a diachronic analysis which involves a vertical and a horizontal conception of dynamics. We show that instantaneous fit between formal MCS and deliberate strategy is not helpful in illustrating evolution, nor is able to explain success. Conversely, the fit is to be played continuously on MCS and strategies at the level of practices. We also show the role of misfit between MCS and strategy: ambiguity implies the definition of blurred constraints for action which is freed. In this sense, we conclude that in the design of the MCS or strategy, attention does not have to be focused on the reciprocal fit, but rather on the ability of both (MCS and strategy) to support the exploration of new directions of evolution. Our case offers the intuition that identities, beyond practices, account for success in this case, as they embed both practices but also a way of being that, as a set of basic principles, directs behaviour when practices are missing, i.e., in the face of the new.

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Notes

  1. North American A-level journals in accounting, which are considered to set “the” discourse in the discipline, display a narrow focus on the contingency approach and lack diversity of article topics and research methods (Merchant 2010; Scapens and Bromwich 2010).

  2. By emphasising the -ing form, we stress the transformation of nouns into verbs originally proposed by Weick (1969), which has become typical of the “the practice turn” (Whittington 2003, p. 118) to underline the ongoing nature of things.

  3. A management information system is “a centralized, and usually computerized, INFORMATION SYSTEM for use by the MANAGERS of an ORGANIZATION in making decisions” (Statt 2004).

  4. Alpha carries out its activities through four companies fully and directly controlled by Alpha. All companies share the same headquarters and board of directors. For this reason, we do not distinguish between Alpha and its subsidiaries and always refer to them as Alpha.

  5. All of them are directly employed by Alpha.

  6. Interview with the CEO (26 June 2009).

  7. For example, whereas each shop had been required to download the updated product database each day, starting in 2001, the data were entirely online.

  8. Interview with the national managing director of CO shops (7 November 2008).

  9. Source: Assinform, from Alpha’s annual report on operations, 2007. Data refer to the whole Italian market.

  10. When talking about the profitability of a distribution network, Mr. Alpha noted, “for Alpha, it is exactly the same to sell in franchises and CO stores since they are charged the same reseller price”. Mr. Alpha was perfectly aware that resellers gain a profit margin on that price and that CO shop profits belong to Alpha, whereas franchises’ profits did not. However, he required CO shops to break-even. If a CO shop did not break-even for two years in a row, that shop was closed and, when possible, replaced by a franchise. Interview with the CEO (26 June 2009).

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Acknowledgments

The authors thank Anne Huff, Lino Cinquini, and the participants of the seminar held at Università Ca’ Foscari in Venice on 24 October 2008 for their suggestions on a preliminary version of this work. The first version of this paper was presented at the 1st JMG Conference ‘‘Governing Strategy and Knowledge: Tools and Methodologies’’, held in Venice 8–10 October 2009. The authors thank participants from the conference for their helpful comments. We wish to acknowledge Mr. Alpha, Paolo Superti and Eleonora Broccardo for permitting the case-study analysis.

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  1. Department of Computer and Management Sciences, University of Trento, via Inama 5, 38122, Trento, Italy

    M. Laura Frigotto, Graziano Coller & Paolo Collini

  2. Scuola Superiore Sant’Anna, Piazza Martiri della Libertà 33, 56127, Pisa, Italy

    Graziano Coller

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  1. M. Laura Frigotto
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  2. Graziano Coller
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Correspondence to Graziano Coller.

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Frigotto, M.L., Coller, G. & Collini, P. The Strategy and Management Control Systems relationship as emerging dynamic process. J Manag Gov 17, 631–656 (2013). https://doi.org/10.1007/s10997-011-9198-x

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