This study contributes to the literature on management control systems as a package by examining the interrelationships among the control components. Furthermore, the research aims to explain the control configuration present at a Finnish technical wholesaler and identify what kind of relationships exist between the controls and which relationships seem more important than others. The theoretical references of this study include journal articles and books discussing MCS as a package, with a specific focus on research into the interrelationships of the components.
Complementary relationships were distinguished as those between the core control components of the suite, with matched behavioral control effect. In addition, this study argues for an alternative option to strict cybernetics-based control configurations.
INTRODUCTION
Despite the advances each of the existing theoretical frameworks has brought to our understanding of MCS, none of them really provide any specific tools to analyze these interrelationships. This empirical case study attempts to answer these requirements by providing a detailed description of an MCS package at a Finnish technical wholesale company with the aim of identifying the nature of the relationships between its control elements. The case company has been chosen as a research site because its rather simple control configuration appears significantly different from the company's main competitors.
The next section deals with our existing knowledge of MCS as a package, mainly from the point of view of the interrelationship between control systems. The third section presents the research method used as well as a brief description of the research site and data collection processes.
MCS INTERRELATIONSHIPS
However, from the perspective of MCS component relationships, this definition only shows the mathematical relationships of. variables investigated and does not consider the goals of MCS or the relative importance of control elements. However, this type of inference of complementarity based on positive statistical interdependence does not really help in assessing the importance of the relationships of an MCS package, since simply increasing the use of two components is interpreted as complementarity. To summarize, we seem to lack consistent concepts to describe and understand the variety of relationships between MCS components.
More specifically, this article is based on analyzing the interrelationships of MCS elements from the point of view of the purpose of a control activity and the signal it mediates to the organizational actors. While the choices about the MCS features are intended to describe what purpose the MCS serves, the interactions of the purposes should reveal whether a set of MCS are mutually reinforcing in the pursuit of aligned behavior.
RESEARCH METHOD AND DESIGN
For the purpose of maintaining the anonymity of the company, the local offices (profit centers) included in the interviews have been renamed Alpha, Bravo, Charlie, Delta and Echo for this study. In addition to the interviews, regular informal discussions were conducted by the interviewer around the research topic. The recognized control elements were grouped together according to each of these frameworks and these groupings were compared with each other to find the most suitable one to assist in the analysis of the interrelationships of the components.
Although all of the frameworks discussed provide important insights for this study, none of them addresses the nature of the interrelationships among control components. Therefore, they cannot be expected to be able to explain the empirical findings in themselves with regard to the main objective of the study. This is why the empirical description does not strictly follow any of the existing frameworks, but rather draws on the information obtained from them in an attempt to recognize how the MCS elements present in the case company relate to each other.
A MCS PACKAGE DESCRIPTION
The vision statement is not so much about setting targets or direction, but about establishing the internal mindset - the culture of the company. Two of the four business managers are also profit center managers, but respectively have smaller regions to coordinate. I think one of the best features of how the CEO has run the company is that decision making is placed in the customer interface where the real work is also done.
The autonomy of the local offices is also reflected in the role of the head office and the management team. At TWS, the CEO and CFO prepare them without the involvement of the rest of the organization. Similarly, the board's role is to support local offices.
The controller explained that they are very conscious of the costs: they call quickly. However, this seems more like compliance with the group's practice than an actual control component. Action plans, on the other hand, are created in the heads of the profit center managers or operations managers and.
More precisely, 10 percent of EVA after tax is the bonus pool to be distributed to staff. Entrepreneurship is facilitated by the phrase "it's easier to apologize than to ask permission", the slogan that reflects the opportunity for trial-and-error behavior and a focus on action rather than planning. We have used internal marketing slogans such as: 'The salesperson has the authority of a marketing director when making a deal'.".
The CEO has a personal, if not an entrepreneurial touch to the business, even though the ownership of the company is largely in the hands of the European parent group. The buyer continued: "Even if we didn't win the prize, we certainly tried our best to get it." The design of the reward system focuses on the profit center.
DISCUSSION
The impression given by TWS's vision suggests that the main purpose of control seems to be to create an entrepreneurial mindset, based on which the employees' behavior should be aligned. An element of uncertainty – a fundamental characteristic of entrepreneurship – is introduced into the incentive system, with subjective assessment forming the basis for a third of the annual bonus. From this behavioral perspective, the MCS choices described above appear to be coherently aimed at encouraging values-based behavior and thus the strategic objectives of the company.
This basic structure of the MCS suite simultaneously serves two management control purposes: motivation and direction. Therefore, we claim that these controls complement each other in coordinating the behavior of organizational actors. As the many descriptive frameworks of MCS packages show, the variety of MCS present in a company can often be large.
At TWS this is also seen: besides the above control components there are a number of other elements that fall into the classifications of the types of MCS. Therefore, this study proposes a hierarchy between the complementary relationships of the control choices in an organization. The core level of controls identified in this case appears to be consistent with the findings of Widener et al. 2008) on the complementarities of the three core components of organizational design.
However, it is found that cultural controls are an essential part of the core control system, and significantly complement the design components in promoting aligned behavior. Moreover, these secondary choices are not directly aimed at aligning employee behavior with entrepreneurship, but rather at self-control and support. The design of the MCS package at TWS thus appears to somewhat replace a more closely coupled formal cybernetic system.
CONCLUSIONS
Finally, the findings at TWS demonstrate how a rigorous cyber-based system is not necessarily the only way to build a well-functioning control system package. However, despite the nature of control in TWS being more self-regulatory than rules and procedures dictated by top management, objectives and desired responses are still communicated to people through various control and decision support systems, so entirely cybernetic thinking can not to be thrown away. Instead, cybernetic principles probably reside more subtly in the control system package, and the basic idea of setting targets and eventually receiving feedback is ultimately realized, but through means of self-control.
First, it is argued that those controls with consistent signals towards a desired type of behavior form the core of the company's control system. These control elements are defined as complements to each other, since it can be speculated that if any of the controls were changed, the signal would be affected with the change. Finally, this study argues for an alternative option to prescriptive cybernetics-based target plan feedback thinking in management control research by exercising a responsive mode of management control.
The large number of interviews conducted, as well as the secondary empirical data available, give a significant boost to the reliability of the data, because over time the same answers were repeated from different parts and organizational levels of the case organization. Furthermore, the size and fairly simple structure of the case company provided an excellent basis for investigating MCS as a package, because specifying and analyzing all possible interrelationships in a complex and multiple organization would be challenging. This is why some empirical studies are needed to gather knowledge about the different possibilities in the configuration of MCS packages.
We encourage future studies to pay attention to the signals and roles played by MCS together and alone, because we believe that understanding their nature and purpose is a prerequisite to understanding their meaning in the context of the entire suite of controls. A more specific intriguing line of research would be to examine the MCS suite over time to see whether some controls are more likely to remain in place over time than others and how potential changes in the control mix affect potentially in the mutual control effect of the entire control package. A review of quantitative research in management control systems and strategy, in Chapman et al Handbook of management accounting research, vol.
