The Promise of Management Control Systems for Innovation and Strategic Change
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The Promise of Management Control Systems for Innovation and Strategic Change
TONY DAVILA
M
anagement control systems (MCS) have traditionally been viewed as tools to reduce variety and implement standardization (Anthony 1965). They are associated with extrinsic motivation, command and control management styles, and hierarchical structures. Because their objective is to minimize deviations from pre-established objectives, they are designed to block change for the sake of efficiency. Learning comes from planning ahead of time, not from adapting to surprises. The functioning of a thermostat, in which a control mechanism intervenes when the temperature deviates from the preset standard, has been a frequent metaphor for this model (see Figure 10.1). Not surprisingly, MCS are frequently perceived as stifling innovation. Therefore, their relevance to innovation—where uncertainty, experimentation, flexibility, intrinsic motivation, and freedom are paramount—appears to be limited. Innovation is to be managed through informal processes such as culture, communication patterns, or leadership. Uniformity and predictability—the hallmarks of traditional systems—are at odds with the need for the rich informational environment required for ideas to spark, grow, and create value. Coordination and control based on shared values substitute the ‘‘rules and procedures’’ of MCS (Walton 1985). Over the last decade, increasing evidence has questioned the validity of these views. Intense use of MCS has been found in complex and uncertain settings (Chapman 1998). Budgets are key elements during episodes of strategic change ‘‘as a dialogue, learning and idea creation machine’’ (Abernethy
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THE CREATIVE ENTERPRISE
FIGURE 10.1. Feedback Mechanism Underlying Traditional Models of Management Control Systems
and Brownell 1997). The concept of enabling bureaucracy (Adler and Borys 1996) ‘‘enhances the users’ capabilities and leverages their skills and
The Promise of Management Control Systems for Innovation and Strategic Change
TONY DAVILA
M
anagement control systems (MCS) have traditionally been viewed as tools to reduce variety and implement standardization (Anthony 1965). They are associated with extrinsic motivation, command and control management styles, and hierarchical structures. Because their objective is to minimize deviations from pre-established objectives, they are designed to block change for the sake of efficiency. Learning comes from planning ahead of time, not from adapting to surprises. The functioning of a thermostat, in which a control mechanism intervenes when the temperature deviates from the preset standard, has been a frequent metaphor for this model (see Figure 10.1). Not surprisingly, MCS are frequently perceived as stifling innovation. Therefore, their relevance to innovation—where uncertainty, experimentation, flexibility, intrinsic motivation, and freedom are paramount—appears to be limited. Innovation is to be managed through informal processes such as culture, communication patterns, or leadership. Uniformity and predictability—the hallmarks of traditional systems—are at odds with the need for the rich informational environment required for ideas to spark, grow, and create value. Coordination and control based on shared values substitute the ‘‘rules and procedures’’ of MCS (Walton 1985). Over the last decade, increasing evidence has questioned the validity of these views. Intense use of MCS has been found in complex and uncertain settings (Chapman 1998). Budgets are key elements during episodes of strategic change ‘‘as a dialogue, learning and idea creation machine’’ (Abernethy
181
182
THE CREATIVE ENTERPRISE
FIGURE 10.1. Feedback Mechanism Underlying Traditional Models of Management Control Systems
and Brownell 1997). The concept of enabling bureaucracy (Adler and Borys 1996) ‘‘enhances the users’ capabilities and leverages their skills and
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