Skip to main content
SpringerLink
Log in

How banks can shape their Management Control System to achieve more innovation: a case study

  • Chapter
  • First Online:
Banking & Innovation 2018/2019

Part of the book series: FOM-Edition ((FOMEDITION))

  • 10k Accesses

Abstract

New competitors from other industries increase the pressure on banks to offer more innovative solutions and services to their clients. In that context the design of bank’s Management Control System (MCS), seems to become more important as MCS provide the environment for managers and experts to create new ideas. As MCS in banks are almost without exceptions based on budgetary control, it seems reasonable to examine alternative MCS approaches that enable banks to become more competitive in terms of costumer relevant innovations. Thus, we ask how banks can redesign their MCS characteristics in order to enable more innovation and simultaneously ensure full compliance with regulations. To answer this question, we analyze case studies of a bank that applies a radical decentralized MCS and is perceived to be more responsive to its customers compared to its peers and at the same time fully compliant with European regulations. We find that banks may need to shape their MCS from a hierarchical centered command and control approach towards more social control. Moreover, our analysis suggests that putting more emphasis on social control mechanisms may enhance the efficiency of the remaining hierarchical control mechanisms.

This paper presents an extract of the author’s PhD thesis: “15 years of Beyond Budgeting – Chances and limitations of a Beyond Budgeting application in the cooperative banking group Volksbanken Raiffeisenbanken”.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 29.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 37.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    See (McGregor 1960) for a detailed presentation of Theory Y and Theory X.

References

  • Amabile, T. M. (1998). How to kill creativity. Harvard Business Review, 76(5), 77–87.

    Google Scholar 

  • Bisbe, J., & Otley, D. (2004). The effects of the interactive use of management control systems on product innovation. Accounting, Organizations and Society, 29(8), 709–737.

    Article  Google Scholar 

  • Bjørnenak, T. (2013). Management accounting tools in banks: are banks without budgets more profitable? In Kaarbøe, K., Gooderham, P.N., Nørreklit, H. and (Keine Angabe) (Ed.), Managing in dynamic business environments: between control and autonomy (pp. 51–68). Cheltenham: Edward Elgar Publishing.

    Google Scholar 

  • Bogsnes, B. (2009). Implementing beyond budgeting: unlocking the performance potential. Hoboken: John Wiley & Sons.

    Google Scholar 

  • Bogsnes, B. (2013). “Taking reality seriously – towards a more self-regulated management model at Statoil”. In K. Kaarbøe, P. N. Gooderham, H. Nørreklit & K. Angabe) (Eds.), Managing in dynamic business environments: between control and autonomy (pp. 11–33). Cheltenham: Edward Elgar Publishing.

    Google Scholar 

  • Bourmistrov, A., & Kaarbøe, K. (2013). From comfort to stretch zones: a field study of two multinational companies applying “beyond budgeting” ideas. Management accounting research, 24(3), 196–211.

    Article  Google Scholar 

  • Cabrera, Á., Collins, W. C., & Salgado, J. F. (2006). Determinants of individual engagement in knowledge sharing. The International Journal of Human Resource Management, 17(2), 245–264.

    Article  Google Scholar 

  • Cäker, M., & Siverbo, S. (2014). Strategic alignment in decentralized organizations – The case of Svenska Handelsbanken. Scandinavian Journal of Management, 30(2), 149–162.

    Article  Google Scholar 

  • Daum, J. H., & Francke, L. (2005). Ohne Budgets Managen bei Svenska Handelsbanken – Ein Interview mit Lennart Francke, CFO Svenska Handelsbanken, Stockholm. In J. H. Daum (Ed.), Beyond Budgeting: Impulse zur grundlegenden Neugestaltung der Unternehmensführung und -steuerung (pp. 127–138). München: Meidenbauer.

    Google Scholar 

  • Daum, J. H., & Hope, J. (2004). The Origins of Beyond Budgeting and of the Beyond Budgeting Round Table (BBRT) – An Interview with Jeremy Hope, co-founder and research director of the BBRT.

    Google Scholar 

  • Dunk, A. S. (2011). Product innovation, budgetary control, and the financial performance of firms. The British Accounting Review, 43(2), 102–111.

    Article  Google Scholar 

  • Gooderham, P. N., Sandvik, A. M., Terjesen, S., & Nordhaug, O. (2013). The autonomy-creativity orientation of elite business school students in US and Norway”. In K. Kaarbøe, P. N. Gooderham, H. Nørreklit & K. Angabe) (Eds.), Managing in dynamic business environments: between control and autonomy. Cheltenham: Edward Elgar Publishing.

    Google Scholar 

  • Handelsbanken (2015). Annual Report 2015. Stockholm: Handelsbanken.

    Google Scholar 

  • Hope, J., & Fraser, R. (1998). BBRT Company Report # 2: Svenska Handelsbanken

    Google Scholar 

  • Hope, J., Bunce, P., & Röösli, F. (2011). The Leaders’s dilemma: how to build an empowered and adaptive oragnization without losing control. Chichester: Jossey-Bass.

    Google Scholar 

  • Kaplan, R. S., & Norton, D. P. (1996). strategic learning & the balanced scorecard. Strategy & Leadership, 24(5), 18–24.

    Article  Google Scholar 

  • Kroner, N. (2011). A blueprint for better banking: Svenska Handelsbanken and a proven model for more stable and profitable banking. Petersfield, Hampshire: Harriman House.

    Google Scholar 

  • Libby, T., & Lindsay, R. M. (2010). Beyond budgeting or budgeting reconsidered? A survey of North-American budgeting practice. Management accounting research, 21(1), 56–75.

    Article  Google Scholar 

  • Lindsay, R. M., & Libby, T. (2007). Svenska Handelsbanken: controlling a radically decentralized organization without budgets. Issues in Accounting Education, 22(4), 625–640.

    Article  Google Scholar 

  • Marginson, D., & Ogden, S. (2005). Budgeting and innovation. Financial Management, 34(14719185), 29–31.

    Google Scholar 

  • Martin, R. L. (2010). The execution trap. Harvard Business Review, 88(7/8), 64–71.

    Google Scholar 

  • McGregor, D. (1960). The human side of enterprise. New York: McGraw-Hill.

    Google Scholar 

  • Merchant, K. A., & Van der Stede, W. A. (2012). Management control systems: performance measurement, evaluation and incentives (3rd edn.). Harlow: Pearson Education.

    Google Scholar 

  • Neilson, G. L., Martin, K. L., & Powers, E. (2008). The Secrets to Successful STRATEGY EXECUTION. Harvard Business Review, 86(6), 60–70.

    Google Scholar 

  • Olesen, A. (2013). Handelsbanken: consistency at its best

    Google Scholar 

  • Pfläging, N. (2006). Führen mit flexiblen Zielen: Beyond Budgeting in der Praxis. Frankfurt: Campus.

    Google Scholar 

  • Rocksness, H. O., & Shields, M. D. (1988). An empirical of the expenditure budget in research and development. Contemporary Accounting Research, 4(2), 568–581.

    Article  Google Scholar 

  • Schein, E. H. (1990). Organizational culture. American Psychologist, 45(2), 109–119.

    Article  Google Scholar 

  • Svenska Handelsbanken (2016). The Shareholders. https://www.handelsbanken.se/shb/INeT/IStartSv.nsf/FrameSet?OpenView&id=HandelsbankenSEEnglish&navid=Z3_Corporate&sa=/shb/Inet/ICentSv.nsf/Default/q5168599A3B405A07C125734800350089?opendocument&iddef=corporate. Accessed 18 Apr 2016.

    Google Scholar 

  • Wallander, J. (1999). Budgeting – an unnecessary evil. Scandinavian Journal of Management, 15(4), 405–421.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Hennef, Germany

    Sven Olaf Schmitz

  2. FOM Hochschule Essen, Essen, Germany

    Prof. Dr. Thomas Heupel

Authors
  1. Sven Olaf Schmitz
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Prof. Dr. Thomas Heupel
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. FOM Hochschule für Oekonomie & Management, Stuttgart, Germany

    Marcel Seidel

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Fachmedien Wiesbaden GmbH, ein Teil von Springer Nature

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Schmitz, S.O., Heupel, T. (2019). How banks can shape their Management Control System to achieve more innovation: a case study. In: Seidel, M. (eds) Banking & Innovation 2018/2019. FOM-Edition. Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-23041-8_14

Download citation

  • DOI: https://doi.org/10.1007/978-3-658-23041-8_14

  • Published:

  • Publisher Name: Springer Gabler, Wiesbaden

  • Print ISBN: 978-3-658-23040-1

  • Online ISBN: 978-3-658-23041-8

  • eBook Packages: Business and Economics (German Language)

Publish with us

Policies and ethics

Search

Navigation