Description
The purpose of this paper is to develop a proposal for a new conceptual framework for
management control systems (MCS) in R&D units
Accounting Research Journal
Management control systems: a model for R&D units
Parulian Silaen Robert Williams
Article information:
To cite this document:
Parulian Silaen Robert Williams, (2009),"Management control systems: a model for R&D units", Accounting
Research J ournal, Vol. 22 Iss 3 pp. 262 - 274
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Siriyama Kanthi Herath, (2007),"A framework for management control research", J ournal of Management
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Management control systems:
a model for R&D units
Parulian Silaen and Robert Williams
University of Wollongong, Wollongong, Australia
Abstract
Purpose – The purpose of this paper is to develop a proposal for a new conceptual framework for
management control systems (MCS) in R&D units.
Design/methodology/approach – The paper is a descriptive study that reviews the control
literature and proposes an MCS framework in the light of four key elements: desired ends, actors,
control implementation, and control tools.
Findings – The study found two sub-elements of desired ends (directional and yardstick) to be
complementary in a low level of uncertainty, while directional should be emphasized more in a high
level of uncertainty. Five sub-elements of actors are used differently along the levels of uncertainty.
The timing and use of formal and informal control types are found to be different regarding the level of
uncertainty. Finally, the dimension and the value of control tools are used differently in those two
distinctive situations.
Research limitations/implications – The paper is limited to a descriptive study that may have
further implication for research by using the framework to investigate the MCS applied by R&D units.
Practical implications – The four key elements of MCS may be used in practice by developing a
detail measure of each element to suit the condition of the unit.
Originality/value – The paper is a new way of looking at MCS, broadening the comprehension, and
introducing new MCS key elements.
Keywords Control, Management accounting, Uncertainty management, United States of America
Paper type Research paper
Introduction
The purpose of research and development (R&D) activities is to contribute new
knowledge, whether or not these activities have speci?c commercial objectives (Place,
1977). This may include creating new or improved devices, products, process systems,
and concepts (Nason, 1981). Since the task is characterised by non-repetitive activities,
the causal relationships may be poorly understood in advance and thus creates
uncertainty (Duncan, 1972).
Environmental uncertainty may in?uence the effectiveness of goal setting, planning
and control systems simultaneously. Since goals and planning have a close
relationship with the control function, (Euske, 1984; McCaskey, 1974), the different
characteristics of goals and planning (McCaskey, 1974) may in?uence the choice of
control systems (Chenhall, 2003; Abernethy and Brownell, 1997; Hartmann, 2000). This
study proposes a management control systems (MCS) framework for a R&D
organisation in the light of four key elements of a MCS, namely desired ends, actors,
control implementation, and control tools. The paper presents a discussion on the
signi?cance of the roles of each element in different stages of control strategy as well as
some examples of how they are used in practice. Finally, the paper will close with a
conclusion including suggestion for further research.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1030-9616.htm
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Accounting Research Journal
Vol. 22 No. 3, 2009
pp. 262-274
qEmerald Group Publishing Limited
1030-9616
DOI 10.1108/10309610911005581
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Research and development organisations
R&D activities are described differently among authorities. The US National Science
Foundation (NSF) devided the R&D task into three categories: Basic research, applied
research, and development (Rockness and Shields, 1984, p. 169).
Place (1977) held a view that the output of R&D activities is knowledge that
involves a learning process. Place (1977) classi?ed two types of learning process; Type
I and Type II learning. Type I learning is the extension of present areas of knowledge,
it is more certain and predictable. It can be scheduled and budgeted for even if it
requires a longer time and larger investment, and it may be found in applied research
but more likely in product development (Place, 1977).
Type II learning requires an intuitive leap away from the present areas of
knowledge, and result in brand new knowledge. It cannot be kept on schedule and
budget. The program is exciting and rapid, and demands a relatively small investment.
Though it is dif?cult to place a clear boundary between basic and applied research
(Nason, 1981), the Type II learning process is likely to occur during the basic research
up to applied research activities.
The R&D operation is clearly a learning process to transform the unknown to the
known, which needs innovative scientists and management to translate it into viable
business projects. The behaviour of the scientists may be different from those assumed
by administrative behaviour that tends to be bounded by rigid rules and procedures.
The scientists might require a fair degree of autonomy (Abernethy and Stoelwinder,
1991) to give them a space for innovation.
Organisational environment and goals
Thompson (1967, p. 127) referred to goals as “. . . some imagined state of affairs which
may conceivably be attained or approached (if not ?nite) at some future time”. Latham
and Yukl (1975, p. 824) used a simple de?nition of goals, being “. . . what the individual
is consciously trying to do”. If goals were de?ned as a psychological trait, then the goal
characteristics will depend on individual perception that affects the goal setting
process. The organisational goals are not without problems either. March (cited in
Cooper et al., 1981, p. 181) suggested that it appeared to him to be:
. . . perfectly obvious that a description that assumes goals come ?rst and action comes later
is frequently radically wrong. Human choice behaviour is at least as much a process for
discovering goals as for acting on them.
Chenhall (2003, p. 135) also supports this view by saying:
Distinguishing of?cial and operative goals would seem an essential aspect of management
control systems (MCS) research that includes consideration of goals, mainly as it ?ags that
the issue of organisational goals is far from unproblematic.
Some authorities proposed different approaches than economic rationality in goal
setting (Cohen et al., 1972; Cooper et al., 1981; March and Simon, 1958; March, 1978;
Lindblom, 1959). Cohen et al. (1972) characterised intangible goals as organised
anarchies where problematic preferences, unclear technology, and ?uid participation
exist. March and Simon (1958) suggested a bounded rationality model to replace
economic rationality. March (1978) proposed the technology of foolishness as the basis
for action. Lindblom (1959) proposed the science of muddling through, while Gouldner
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(1959, cited in Georgiou, 1973, p. 293) proposed a natural system model that viewed an
organisation as an organism and its primary concern is to survive. Those alternative
views direct the choice to a position, which emphasises learning and adaptive
behaviour. The choice of the directions is based on their priorities in relation to the
announced goals and is bounded by the constraints dealt with by the organisation.
However, once the directions are perceived to be inappropriate, then, other directions
may be chosen to replace the old direction. This is a continual process of action during
the organisation’s life in which the R&D organisations may deal with this type of
situation.
Organisational environment and control
Environmental uncertainty has been seen to require different control systems
(Chenhall, 2003; Abernethy and Brownell, 1997; Hartmann, 2000). Amigoni (1978)
conducted a literature review on management control systems (MCS) and suggested
that effective control systems should match appropriate combinations among three
important elements: independent variables, distinctive features of the management
control systems, and control tools. However, the study by Amigoni (1978) tied the
in?uence of environmental characteristics to the choice of control systems, and ignored
the qualities of goals and planning that would probably have had more effect on the
choice of MCS. When goals are ambiguous and technologies uncertain by nature, the
applicability of the control concepts, which pretend that goals come before action, will
be problematical (Euske, 1984; Otley and Berry, 1980). Similarly, Chenhall (2003,
pp. 137-8) concluded that:
. . . it can be seen that a consistent stream of research over the past 20 years has con?rmed
that uncertainty has been associated with a need for more open, externally focused, non
?nancial styles of MCS. However, hostile and turbulent conditions appear, in the main, to be
best served by a reliance on formal controls and an emphasis on budgets. The question may
be posed, what is the appropriate MCS for organisations operating in conditions of
uncertainty, turbulence and hostility?
Ouchi (1977) examined the appropriateness of two types of control: behaviour control
and output control in 78 retail department store companies in the USA. Behaviour
control refers to control of behaviour of subordinates by watching and guiding their
behaviour toward the expected behaviour preferred by the supervisors. Output control
refers to the measurement of output in which knowledge of the transformation process
is not compulsory. Ouchi (1977) indicated that better knowledge of the transformation
processes is associated with less emphasis on output control, except for sales person
groups. For this group it was indicated that output control was predominantly used.
These ?ndings led him to conclude that the availability of an output measure would
in?uence the emphasis on output control.
In the case of a R&D organisation, it is plausible to suggest that there may be dif?culty
in measuring the output, and so there should not be an emphasis on output control.
Some studies that investigated the behavioural aspect of control systems indicated that
the failure to match appropriate control systems with goal characteristics caused
undesirable results such as job related tension (Hopwood, 1972) and manipulative
behaviour (Birnberg et al., 1983).
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In R&D organisations, the creativity of an individual plays an important part
(Gibson, 1981). The tension and/or pressure resulting from the control system that may
reduce creativity and innovation (Gerstenfeld, 1970) such as to emphasise the ?nancial
dimension alone should be avoided and shifted to other dimensions (Govindarajan,
1984).
Management control systems (MCS) framework
Giglioni and Bedeian (1974) reviewed the literature on the evolution of the management
control concept from 1900 to 1972. Their historical study identi?ed some de?nitions of
management control in the early literature. Newman (1951, cited in Giglioni and
Bedeian, 1974, p. 298) wrote of three control elements as; standards or plans,
motivation, and corrective action. Brech (1965) assumed that objectives and targets are
measurable quantitatively and/or in monetary terms and to be used to measure
performance. Ouchi (1977, pp. 96-7) also held a similar position by saying that:
. . . the control system itself consists primarily of a process for monitoring and evaluating
performance, while the preconditions specify the reliability and validity with which such
comparisons can be made.
The previous still contain the notions of the control concept de?ned in the earlier
literature by making the standard criteria central to the function of the control
mechanism and presume that the environment is certain. Birnberg and Snodgrass
(1988) hold the view that organisational control is a mechanism designed to modify the
behaviour of performers through delimiting the decision space. Flamholtz (1983)
viewed the control function as a behavioural modi?cation process. Chua et al. (1989,
p. 4) extended the control literature by pointing out three meanings of control:
. . . one, as a means of steering or regulation, which is the classical cybernetic meaning: a
second as a means of domination of one or more people or groups of people by other people or
groups, which has more sociological and political overtones: and a third, as a process of the
management of control and power.
From the previous discussion, four broad core elements of MCS can be identi?ed. They
are desired ends, actors, control implementation, and control tools.
Desired ends
The desired ends refer to the expected ends or the ?nal destination of an action at the
end of an operational cycle. These ends, if tangible and physically quanti?able, are
used as measurement criteria where the comparison process can take place. The
desired ends may have two aspects; the direction of an action to describe where to go,
rather than what to achieve and the yardstick to measure the progress of an action or
the result of an action.
When the organisation deals with environmental certainty and the desired ends can
be translated into precise and reliable quantitative ?gures, then the emphasis would be
on the yardstick. In a situation of uncertainty as dealt with by a R&D unit however, the
means-ends relationships are unclear, the prediction of future events and consequences
cannot be made relatively accurately, and the desired ends cannot be translated
reliably into quantitative features. Therefore, the desired ends may only contain the
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direction to guide the action and cannot be used accurately to measure the performance
quantitatively.
The use of these elements may be seen as applied by the 3M Company, which is a
well-known innovation base company. The 3M Company has various policies and
philosophies that support the use of direction as its desired end (Anthony and
Govindarajan, 2007, p. 596) such as the Dual-Ladder Career Path, Genesis Grants and
the Carlton Award. The Dual-Ladder Career Path is a policy that allows the employees
to be promoted without sacri?cing their research or professional interests. Genesis
Grants is a policy to provide internal funds up to $50,000 for researchers to develop and
market test prototypes, and the Carlton Award is given to employees as recognition of
outstanding and technical contribution within the company (Collins and Porras, 1997,
p. 156).
3M encourages its employees toward innovative behaviour as a direction by
allowing 15 percent of their workload to be used on individual projects of their choice,
and combined with the dual-ladder career path to allow them to stay focused on their
research or professional interests. Considering that the desired ends are dominated by
a directional characteristic that is dif?cult to measure quantitatively, 3M may adopt a
policy that has a tolerance for failure (Anthony and Govindarajan, 2007, p. 596).
Actors
The element of actors refers to individuals or groups of individuals within a system as
the objects being controlled. Five aspects are embodied in the element of actors, they
are; behavioural, domination, power, decision space and motivation. The behavioural
aspect refers to behaviour that is preferred by the system where the actors operate,
such as the achievement of the desired ends that may or may not be objectively
measurable. The use of preferred behaviour particularly for researchers is also applied
by 3M as indicated by its policy of the Genesis Grant and the Carlton Award (Anthony
and Govindarajan, 2007, p. 596).
Domination refers to the ability to in?uence others in making decisions, and power
refers to the degree of strength of the in?uencing capacity. Though it is dif?cult to
distinguish domination from power, this study considers them distinct. An individual
within the organisation may have an ability to dominate others, however, the strength
of the dominating ability will relate to the degree of power the individual has in hand.
Keeping these two aspects distinct may allow a more detailed analysis of the MCS. The
existence of these aspects seems to be considered by the 3M Company in the use of the
Dual Ladder Career policy (Anthony and Govindarajan, 2007, p. 596) that separates the
technical and bureaucratic authority, so domination between the two can be avoided.
Decision space refers to the degree of autonomy given to an individual to act within
the system such as job description or job speci?cation, and amount of time or funds
allocated. An example of the use of this aspect can also be seen implemented by 3M in
its “15 percent option” policy (Anthony and Govindarajan, 2007, p. 596). Motivation is
another important aspect in the element of actors. The MCS should be able to identify
potential factors to motivate the actor being controlled to remain within a preferred
behaviour such as monetary reward or bonus and hierarchical promotion. However,
when the actors prefer to place their reputation ahead of monetary and hierarchical
promotion (Luecke, 1973), other potential motivational factors are needed. This can be
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seen in the Carlton Award policy of 3M Company (Anthony and Govindarajan, 2007, p.
596).
As the operation of a R&D facility depends greatly on the individual abilities and
dedication of its personnel, the actor dimension is a very important part of the MCS.
Without the abilities and dedication of the personnel the facility will not function.
Control implementation
Control implementation consists of two main aspects; control types and control
implementation stages. Regarding the types, this study suggests two types of control
may be applied; formal and informal control. The formal control type is an explicit
process that is carried out to in?uence actors in making a decision. The formal control
type will be carried out with regard to written norms such as accounting reports, job
description, employee appraisal system, budget, rules, standards, statistical reports,
and diagrams such as PERT and CPM.
The informal control type is an implicit process to in?uence actors in making
decisions and will be implemented with regard to norms and values that form a belief
among individuals within an organisation. The accumulation of norms and values may
emerge from two sources that construct two types of informal control: surveillance and
cultural control. Surveillance control may come from written norms and values that
have been internalised by the actors, and applied to the actors who perform the tasks
by watching and guiding them toward the proper way of performing the tasks.
Cultural control is the accumulation of norms and values that are originated from
common norms, beliefs, and shared values among the actors in a group without having
any relationship with written norms. The use of cultural control can be seen in the use
of a Technology forum by 3M (Anthony and Govindarajan, 2007, p. 596). This forum
allows technical people to present papers and exchange ideas and ?ndings (Collins and
Porras, 1997, p. 157). Cultural control is very relevant to a R&D situation where the
scientists and engineers are linked by shared values relating to research and
innovation.
This study proposes three stages of control implementation. First, input control,
which is carried out during the selection and the provision of input that will be used for
an operation. The second stage is process control that is performed during the
operation to monitor how tasks are performed, and the third is output control that is
carried out to measure the outputs achieved.
Control tools
The control tools refer to instruments that are used in performing the control function
concerning the desired ends. For example, control tools that include the concept of key
performance indicators (KPI) can be found in the control literature. However, the
desired ends are commonly multiple and vague, and therefore they need agents to
represent the value embodied in the desired ends. The fundamental role of the control
tools is to represent both the value of the desired ends and the effort, so the control
function can monitor, compare and evaluate how far the effort is performed. This study
proposes two elements of control tools: dimensions and values of representation.
The dimension refers to solid characteristics that are used by the control tools
regarding the desired ends. Four groups of the dimensions are proposed: directional,
bureaucratic, scienti?c and ?nancial. The directional dimension refers to control tools
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that contain qualitative characteristics that represent the general directions to be
followed by the action such as system goals and general policy guidelines. The
bureaucratic dimension refers to either quantitative or qualitative characteristics,
which represent the technical tasks, such as standard operating procedures, quality
control, inventory control, and scheduling including PERT, CPM, and production
scheduling. The scienti?c dimension contains the control tools that are used
particularly in a R&D organisation to measure ideas and innovations such as new or
improved processes, products or techniques, patents and patent applications, scienti?c
publications, and membership of professional organisations. The ?nancial dimension
refers to the control tools that contain monetary measurement and includes budgets,
cost effectiveness report, standard costs, and return on investment.
Three values of representation are proposed: external values, internal values, and
social values. External value refers to values that are developed by an external party
such as a market mechanism to de?ne a fair price for transfers (Ouchi, 1979; Lebas and
Weigenstein, 1986) and scienti?c publications in the case of R&D. Internal values refer
to values that are developed by an internal party by reference to the internal
conditions. The internal values can be seen in the bureaucratic control (Ouchi, 1979,
Lebas and Weigenstein, 1986) that is commonly labelled by setting rules, standard
operating procedures and policies, and standard costs. This value setting process may
be done by force by the dominant party within the organisation. Therefore, it would
have a greater chance for dysfunctional behaviour if it is used in a highly uncertain and
low goal congruence situation as in the case of R&D units.
Social values are values that result from social interaction among the members of a
group of individuals, and may be re?ected by the organisational culture. This value is
not done by force; rather, it is accepted by the members willingly. The social values are
not disturbed by clear or unclear boundaries of desired ends, because they are set by
the social interactions that have a chance to change over time. Therefore, the use of
social values in the control system will have less chance for dysfunctional behaviour
than the internal values. These values are obviously displayed by a R&D unit through
seminars and scienti?c publications. Though this study divided the values represented
by the control tools into three types, it should be kept in mind that in exercising the
control tools there would be a combination among these values embodied in the set of
control tools applied.
The relationship among core elements of MCS
Desired ends and control tools
The relationship among core elements of control is suggested as depicted in Figure 1.
The relationship between the desired ends and the control tools occurs during the three
important functions of the MCS: monitoring, evaluation, and performance
measurement. The MCS will use the control tools to monitor, measure, and evaluate
the action by reference to the desired ends. With regard to the yardstick, the MCS will
measure and evaluate how far the action has achieved the expected outputs. Whereas,
with respect to the directional dimension, the MCS will function to ensure that the
actions are in the correct directions for achieving the desired ends.
When dealing with environmental certainty, the control tools may emphasise the
yardstick dimension. As it is envisaged by that perfect situation, the expected output
may be relatively complete and accurate in representing the characteristics of the
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desired ends while the direction will still be used to indicate where to go. This will
encourage the use of internal values of control tools, which commonly involve
quantitative attributes such as; standard cost, budget, ?nancial ratios, and statistical
quality control. In contrast, under environmental uncertainty as in a R&D unit the MCS
may focus on the directional dimension and use either external or social values
(Abernethy and Brownell, 1997; Chenhall, 2003).
Desired ends and actor
The relationship between desired ends and actor essentially relies on the behavioural
dimension, that is, how preferred behaviour is de?ned in regard to the desired ends.
Under a perfect situation, preferred behaviour is clear, that is, the achievement of a
clear and certain desired end. The motivational element may be based on monetary and
other hierarchical promotions. Moreover, the delegation of authorities along the
hierarchy will be clear and then the decision space can be de?ned precisely. In turn, the
capacity to dominate others may come from the formal network, and the power to
in?uence others will be dominated by the formal source rather than the informal
(Abernethy and Brownell, 1997; Chenhall, 2003).
In a situation dealt with by a R&D unit, the behaviour is guided toward the desired
ends which are dominated, by the directional dimension rather than the yardstick.
Motivation may need to be extended to cover individual satisfaction such as reputation
Figure 1.
The relationship among
core elements of
management control
systems
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and professional acknowledgment. Moreover, as it is caused by unclear and less
quanti?able goals, the delegation of authority among individuals would not be clear
and the decision space for every individual cannot then be de?ned precisely. The
domination and the source of power may not only come from the formal but also from
the informal network including seniority and professional norms as indicated by
research awards.
Desired ends and control implementation
The relationship between the desired ends and control implementation is related to the
implementation of the predominant control type between the two dimensions of desired
ends. Many studies have examined this relationship (Hopwood, 1972; Govindarajan,
1984; Hirst, 1983; Abernethy and Stoelwinder, 1991, Abernethy and Brownell, 1997;
Tatikonda and Rosenthal, 2000; Ditillo, 2004; Bonner et al., 2002). Most of those studies,
indicated that, when the desired ends are dominated by the yardstick, the MCS uses
formal and the surveillance type of control. In contrast, when the directional dimension
dominates the desired ends as in a R&D unit, informal control (particularly cultural
control) may play an important role in the MCS.
Actors and control tools
The relationship between the actors and control tools traditionally rests on the function
to measure behaviour. Output is commonly measured as a surrogate for behaviour.
However, at an extreme point where the appropriate outputs cannot be taken for
granted as in a R&D unit, the behaviours cannot be measured with regard to the output
resulting from behaviour. In this situation, the control system cannot precisely monitor
and evaluate the output, which is derived from the behaviour. Moreover, to monitor
and to evaluate an action does not necessarily mean to measure it quantitatively. The
action can be monitored and evaluated with regard to the direction. Therefore, this
study does not view the control function as limiting the measuring process, rather as
consisting also of the process of in?uencing behaviour. The in?uencing process may be
carried out through the other four actors’ elements.
Domination, power and decision space may be in?uenced by four dimensions of
control tools. For example, directional and bureaucratic dimensions may limit the
decision space of the actor, therefore making a decision possible only within a
particular area. In turn, those dimensions will also reduce the power and domination of
the actor in in?uencing his or her peers in making a decision. The reduction of power
and domination may result from delimiting the decision space. The scienti?c and
?nancial dimensions may also have the same effect on decision space. As in the case of
a R&D unit, when the independent panel or expert rating can evaluate the
appropriateness of the scienti?c quality proposed, the actors’ decision space would be
bound by that quality. Similarly, the budget availability would also limit the actors in
making a ?nancial decision.
Actors and control implementation
The relationship between the actors and the control implementation refers to the use of
the control type to in?uence the actor. In a situation of certainty, the formal and
surveillance control type may be applied by the MCS. In addition, it can also be used to
monitor and evaluate whether the actors operate within the decision space that is
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given. However, for a R&D unit, the cultural control would be preferred more than the
formal and surveillance control that may lead to dysfunctional behaviour.
Control tools and control implementation
The relationship between control tools and control implementation refers to when and
how the tools will be used. As the instruments of the control function, the control tools
may be used by the formal and informal control type. However, most of the control
tools in the literature seem to have quantitative expression, although some of the
control tools may have qualitative characteristics such as bureaucratic evaluation,
political public affairs, directional constraint and general policy guidelines. Obviously,
the control tools are used by the formal control rather than the informal control.
Though it is dif?cult to place a clear boundary on the use of control tools between the
two, in some ways the use of the control tools may be distinct, and needs to be de?ned
by reference to those two control types.
The control tools used by the formal control type are clearly de?ned in the literature
as written norms and may use any or a combination of the four dimensions of control
tools. Accordingly, there are some tools used by informal control and these include
shared values (Hopwood, 1974), personal objectives (Jaworsky, 1988), mutual
commitments among employees toward objectives (Hopwood, 1974; Ouchi, 1979;
Jaworsky, 1988), and norms (Jaworsky, 1988; Lebas and Weigenstein, 1986). In turn, as
the informal control contains surveillance and cultural control, the control tools that are
used by the surveillance control type may only consist of the bureaucratic dimension,
while the cultural control type as it is applied to a R&D unit may contain the
directional and/or the scienti?c dimension.
Findings and conclusion
The previous discussion has indicated the appropriate use of the core elements of the
MCS by a R&D unit that is involved in non-repetitive work; with a low-level knowledge
of the transformation process, and unpredictable and unmeasurable desired ends.
Table I summarises the use of control elements by a R&D organisation.
In the case of a R&D unit, the yardstick dimension seems to be less useful, and the
directional element becomes signi?cant. This can be seen by the use of the 15 percent
option policy by the 3M Company (Anthony and Govindarajan, 2007, p. 596). For this
situation, the appropriateness of the actors’ elements in a R&D unit would also be
Core elements Environmental uncertainty as dealt with by R&D unit
Desired ends More to direction than yardstick
Actors Behaviour through culture
Motivation: monetary, rank and professional accreditation
Domination through formal and informal
Decision space through formal and informal
Power source from formal and informal
Implementation Control types: more to informal (cultural) than formal
Implementation: input, process, and output
Control tools Dimensions: directional, bureaucratic, scienti?c, and ?nancial
Values of representation: internal, external and social values
Table I.
The choice of control
elements under
environmental
uncertainty
Management
control systems
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affected. The cultural aspect may be signi?cant in motivating behaviour. Motivation
may not be limited to monetary reweards and rank, but also professional accreditation
such as the Carlton award used by 3M (Anthony and Govindarajan, 2007, p. 596) as
well as recognition by outside professional and scienti?c bodies. Domination may be
extended to informal sources such as seniority and professionalism. Decision space
may not be able to be clearly de?ned by the formal system, therefore informal
mechanisms such as self-control as used by 3M in its Technology Forum (Anthony and
Govindarajan, 2007, p. 596) may operate. In addition, the power source may also come
from informal sources such as professional accreditation and research awards or
grants rather than a bureaucratic source alone. In an uncertain situation as dealt with
by a R&D unit, the control tools that contain external and social values such as
directional and scienti?c dimensions may play important roles in the execution of the
control function. The scienti?c dimension such as publication, research grant and
patent achievement may be used to provide key performance indicators (KPI).
Similarly, in an uncertain situation dealt with by a R&D organisation, the cultural
control type that contains the directional and scienti?c dimension and is applied trough
a scienti?c seminar may play a signi?cant role in the control function.
Though this study is limited to descriptive study, acknowledging the presence of
these four control elements will broaden the comprehension of the control concept.
Further study is needed to describe the use of these dimensions by R&D organisations.
In exercising control, the dimensions may be complementary, and it is possible that one
dimension will be more dominant than other dimensions in different situations being
dealt with by the R&D organisation. In addition, the emphasis of control types, control
dimension and values may differ along different types of R&D activities (basic, applied
or development) and control implementation stage (input, process, and output).
Though the relationship among the dimensions seems to be conspicuous from the
previous discussion, the degree of combination between certain and uncertain
situations may occur in a practical situation and need to be explored for further
research.
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Corresponding author
Parulian Silaen can be contacted at: [email protected]
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doc_884944289.pdf
The purpose of this paper is to develop a proposal for a new conceptual framework for
management control systems (MCS) in R&D units
Accounting Research Journal
Management control systems: a model for R&D units
Parulian Silaen Robert Williams
Article information:
To cite this document:
Parulian Silaen Robert Williams, (2009),"Management control systems: a model for R&D units", Accounting
Research J ournal, Vol. 22 Iss 3 pp. 262 - 274
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Management control systems:
a model for R&D units
Parulian Silaen and Robert Williams
University of Wollongong, Wollongong, Australia
Abstract
Purpose – The purpose of this paper is to develop a proposal for a new conceptual framework for
management control systems (MCS) in R&D units.
Design/methodology/approach – The paper is a descriptive study that reviews the control
literature and proposes an MCS framework in the light of four key elements: desired ends, actors,
control implementation, and control tools.
Findings – The study found two sub-elements of desired ends (directional and yardstick) to be
complementary in a low level of uncertainty, while directional should be emphasized more in a high
level of uncertainty. Five sub-elements of actors are used differently along the levels of uncertainty.
The timing and use of formal and informal control types are found to be different regarding the level of
uncertainty. Finally, the dimension and the value of control tools are used differently in those two
distinctive situations.
Research limitations/implications – The paper is limited to a descriptive study that may have
further implication for research by using the framework to investigate the MCS applied by R&D units.
Practical implications – The four key elements of MCS may be used in practice by developing a
detail measure of each element to suit the condition of the unit.
Originality/value – The paper is a new way of looking at MCS, broadening the comprehension, and
introducing new MCS key elements.
Keywords Control, Management accounting, Uncertainty management, United States of America
Paper type Research paper
Introduction
The purpose of research and development (R&D) activities is to contribute new
knowledge, whether or not these activities have speci?c commercial objectives (Place,
1977). This may include creating new or improved devices, products, process systems,
and concepts (Nason, 1981). Since the task is characterised by non-repetitive activities,
the causal relationships may be poorly understood in advance and thus creates
uncertainty (Duncan, 1972).
Environmental uncertainty may in?uence the effectiveness of goal setting, planning
and control systems simultaneously. Since goals and planning have a close
relationship with the control function, (Euske, 1984; McCaskey, 1974), the different
characteristics of goals and planning (McCaskey, 1974) may in?uence the choice of
control systems (Chenhall, 2003; Abernethy and Brownell, 1997; Hartmann, 2000). This
study proposes a management control systems (MCS) framework for a R&D
organisation in the light of four key elements of a MCS, namely desired ends, actors,
control implementation, and control tools. The paper presents a discussion on the
signi?cance of the roles of each element in different stages of control strategy as well as
some examples of how they are used in practice. Finally, the paper will close with a
conclusion including suggestion for further research.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1030-9616.htm
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Accounting Research Journal
Vol. 22 No. 3, 2009
pp. 262-274
qEmerald Group Publishing Limited
1030-9616
DOI 10.1108/10309610911005581
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Research and development organisations
R&D activities are described differently among authorities. The US National Science
Foundation (NSF) devided the R&D task into three categories: Basic research, applied
research, and development (Rockness and Shields, 1984, p. 169).
Place (1977) held a view that the output of R&D activities is knowledge that
involves a learning process. Place (1977) classi?ed two types of learning process; Type
I and Type II learning. Type I learning is the extension of present areas of knowledge,
it is more certain and predictable. It can be scheduled and budgeted for even if it
requires a longer time and larger investment, and it may be found in applied research
but more likely in product development (Place, 1977).
Type II learning requires an intuitive leap away from the present areas of
knowledge, and result in brand new knowledge. It cannot be kept on schedule and
budget. The program is exciting and rapid, and demands a relatively small investment.
Though it is dif?cult to place a clear boundary between basic and applied research
(Nason, 1981), the Type II learning process is likely to occur during the basic research
up to applied research activities.
The R&D operation is clearly a learning process to transform the unknown to the
known, which needs innovative scientists and management to translate it into viable
business projects. The behaviour of the scientists may be different from those assumed
by administrative behaviour that tends to be bounded by rigid rules and procedures.
The scientists might require a fair degree of autonomy (Abernethy and Stoelwinder,
1991) to give them a space for innovation.
Organisational environment and goals
Thompson (1967, p. 127) referred to goals as “. . . some imagined state of affairs which
may conceivably be attained or approached (if not ?nite) at some future time”. Latham
and Yukl (1975, p. 824) used a simple de?nition of goals, being “. . . what the individual
is consciously trying to do”. If goals were de?ned as a psychological trait, then the goal
characteristics will depend on individual perception that affects the goal setting
process. The organisational goals are not without problems either. March (cited in
Cooper et al., 1981, p. 181) suggested that it appeared to him to be:
. . . perfectly obvious that a description that assumes goals come ?rst and action comes later
is frequently radically wrong. Human choice behaviour is at least as much a process for
discovering goals as for acting on them.
Chenhall (2003, p. 135) also supports this view by saying:
Distinguishing of?cial and operative goals would seem an essential aspect of management
control systems (MCS) research that includes consideration of goals, mainly as it ?ags that
the issue of organisational goals is far from unproblematic.
Some authorities proposed different approaches than economic rationality in goal
setting (Cohen et al., 1972; Cooper et al., 1981; March and Simon, 1958; March, 1978;
Lindblom, 1959). Cohen et al. (1972) characterised intangible goals as organised
anarchies where problematic preferences, unclear technology, and ?uid participation
exist. March and Simon (1958) suggested a bounded rationality model to replace
economic rationality. March (1978) proposed the technology of foolishness as the basis
for action. Lindblom (1959) proposed the science of muddling through, while Gouldner
Management
control systems
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(1959, cited in Georgiou, 1973, p. 293) proposed a natural system model that viewed an
organisation as an organism and its primary concern is to survive. Those alternative
views direct the choice to a position, which emphasises learning and adaptive
behaviour. The choice of the directions is based on their priorities in relation to the
announced goals and is bounded by the constraints dealt with by the organisation.
However, once the directions are perceived to be inappropriate, then, other directions
may be chosen to replace the old direction. This is a continual process of action during
the organisation’s life in which the R&D organisations may deal with this type of
situation.
Organisational environment and control
Environmental uncertainty has been seen to require different control systems
(Chenhall, 2003; Abernethy and Brownell, 1997; Hartmann, 2000). Amigoni (1978)
conducted a literature review on management control systems (MCS) and suggested
that effective control systems should match appropriate combinations among three
important elements: independent variables, distinctive features of the management
control systems, and control tools. However, the study by Amigoni (1978) tied the
in?uence of environmental characteristics to the choice of control systems, and ignored
the qualities of goals and planning that would probably have had more effect on the
choice of MCS. When goals are ambiguous and technologies uncertain by nature, the
applicability of the control concepts, which pretend that goals come before action, will
be problematical (Euske, 1984; Otley and Berry, 1980). Similarly, Chenhall (2003,
pp. 137-8) concluded that:
. . . it can be seen that a consistent stream of research over the past 20 years has con?rmed
that uncertainty has been associated with a need for more open, externally focused, non
?nancial styles of MCS. However, hostile and turbulent conditions appear, in the main, to be
best served by a reliance on formal controls and an emphasis on budgets. The question may
be posed, what is the appropriate MCS for organisations operating in conditions of
uncertainty, turbulence and hostility?
Ouchi (1977) examined the appropriateness of two types of control: behaviour control
and output control in 78 retail department store companies in the USA. Behaviour
control refers to control of behaviour of subordinates by watching and guiding their
behaviour toward the expected behaviour preferred by the supervisors. Output control
refers to the measurement of output in which knowledge of the transformation process
is not compulsory. Ouchi (1977) indicated that better knowledge of the transformation
processes is associated with less emphasis on output control, except for sales person
groups. For this group it was indicated that output control was predominantly used.
These ?ndings led him to conclude that the availability of an output measure would
in?uence the emphasis on output control.
In the case of a R&D organisation, it is plausible to suggest that there may be dif?culty
in measuring the output, and so there should not be an emphasis on output control.
Some studies that investigated the behavioural aspect of control systems indicated that
the failure to match appropriate control systems with goal characteristics caused
undesirable results such as job related tension (Hopwood, 1972) and manipulative
behaviour (Birnberg et al., 1983).
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In R&D organisations, the creativity of an individual plays an important part
(Gibson, 1981). The tension and/or pressure resulting from the control system that may
reduce creativity and innovation (Gerstenfeld, 1970) such as to emphasise the ?nancial
dimension alone should be avoided and shifted to other dimensions (Govindarajan,
1984).
Management control systems (MCS) framework
Giglioni and Bedeian (1974) reviewed the literature on the evolution of the management
control concept from 1900 to 1972. Their historical study identi?ed some de?nitions of
management control in the early literature. Newman (1951, cited in Giglioni and
Bedeian, 1974, p. 298) wrote of three control elements as; standards or plans,
motivation, and corrective action. Brech (1965) assumed that objectives and targets are
measurable quantitatively and/or in monetary terms and to be used to measure
performance. Ouchi (1977, pp. 96-7) also held a similar position by saying that:
. . . the control system itself consists primarily of a process for monitoring and evaluating
performance, while the preconditions specify the reliability and validity with which such
comparisons can be made.
The previous still contain the notions of the control concept de?ned in the earlier
literature by making the standard criteria central to the function of the control
mechanism and presume that the environment is certain. Birnberg and Snodgrass
(1988) hold the view that organisational control is a mechanism designed to modify the
behaviour of performers through delimiting the decision space. Flamholtz (1983)
viewed the control function as a behavioural modi?cation process. Chua et al. (1989,
p. 4) extended the control literature by pointing out three meanings of control:
. . . one, as a means of steering or regulation, which is the classical cybernetic meaning: a
second as a means of domination of one or more people or groups of people by other people or
groups, which has more sociological and political overtones: and a third, as a process of the
management of control and power.
From the previous discussion, four broad core elements of MCS can be identi?ed. They
are desired ends, actors, control implementation, and control tools.
Desired ends
The desired ends refer to the expected ends or the ?nal destination of an action at the
end of an operational cycle. These ends, if tangible and physically quanti?able, are
used as measurement criteria where the comparison process can take place. The
desired ends may have two aspects; the direction of an action to describe where to go,
rather than what to achieve and the yardstick to measure the progress of an action or
the result of an action.
When the organisation deals with environmental certainty and the desired ends can
be translated into precise and reliable quantitative ?gures, then the emphasis would be
on the yardstick. In a situation of uncertainty as dealt with by a R&D unit however, the
means-ends relationships are unclear, the prediction of future events and consequences
cannot be made relatively accurately, and the desired ends cannot be translated
reliably into quantitative features. Therefore, the desired ends may only contain the
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direction to guide the action and cannot be used accurately to measure the performance
quantitatively.
The use of these elements may be seen as applied by the 3M Company, which is a
well-known innovation base company. The 3M Company has various policies and
philosophies that support the use of direction as its desired end (Anthony and
Govindarajan, 2007, p. 596) such as the Dual-Ladder Career Path, Genesis Grants and
the Carlton Award. The Dual-Ladder Career Path is a policy that allows the employees
to be promoted without sacri?cing their research or professional interests. Genesis
Grants is a policy to provide internal funds up to $50,000 for researchers to develop and
market test prototypes, and the Carlton Award is given to employees as recognition of
outstanding and technical contribution within the company (Collins and Porras, 1997,
p. 156).
3M encourages its employees toward innovative behaviour as a direction by
allowing 15 percent of their workload to be used on individual projects of their choice,
and combined with the dual-ladder career path to allow them to stay focused on their
research or professional interests. Considering that the desired ends are dominated by
a directional characteristic that is dif?cult to measure quantitatively, 3M may adopt a
policy that has a tolerance for failure (Anthony and Govindarajan, 2007, p. 596).
Actors
The element of actors refers to individuals or groups of individuals within a system as
the objects being controlled. Five aspects are embodied in the element of actors, they
are; behavioural, domination, power, decision space and motivation. The behavioural
aspect refers to behaviour that is preferred by the system where the actors operate,
such as the achievement of the desired ends that may or may not be objectively
measurable. The use of preferred behaviour particularly for researchers is also applied
by 3M as indicated by its policy of the Genesis Grant and the Carlton Award (Anthony
and Govindarajan, 2007, p. 596).
Domination refers to the ability to in?uence others in making decisions, and power
refers to the degree of strength of the in?uencing capacity. Though it is dif?cult to
distinguish domination from power, this study considers them distinct. An individual
within the organisation may have an ability to dominate others, however, the strength
of the dominating ability will relate to the degree of power the individual has in hand.
Keeping these two aspects distinct may allow a more detailed analysis of the MCS. The
existence of these aspects seems to be considered by the 3M Company in the use of the
Dual Ladder Career policy (Anthony and Govindarajan, 2007, p. 596) that separates the
technical and bureaucratic authority, so domination between the two can be avoided.
Decision space refers to the degree of autonomy given to an individual to act within
the system such as job description or job speci?cation, and amount of time or funds
allocated. An example of the use of this aspect can also be seen implemented by 3M in
its “15 percent option” policy (Anthony and Govindarajan, 2007, p. 596). Motivation is
another important aspect in the element of actors. The MCS should be able to identify
potential factors to motivate the actor being controlled to remain within a preferred
behaviour such as monetary reward or bonus and hierarchical promotion. However,
when the actors prefer to place their reputation ahead of monetary and hierarchical
promotion (Luecke, 1973), other potential motivational factors are needed. This can be
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seen in the Carlton Award policy of 3M Company (Anthony and Govindarajan, 2007, p.
596).
As the operation of a R&D facility depends greatly on the individual abilities and
dedication of its personnel, the actor dimension is a very important part of the MCS.
Without the abilities and dedication of the personnel the facility will not function.
Control implementation
Control implementation consists of two main aspects; control types and control
implementation stages. Regarding the types, this study suggests two types of control
may be applied; formal and informal control. The formal control type is an explicit
process that is carried out to in?uence actors in making a decision. The formal control
type will be carried out with regard to written norms such as accounting reports, job
description, employee appraisal system, budget, rules, standards, statistical reports,
and diagrams such as PERT and CPM.
The informal control type is an implicit process to in?uence actors in making
decisions and will be implemented with regard to norms and values that form a belief
among individuals within an organisation. The accumulation of norms and values may
emerge from two sources that construct two types of informal control: surveillance and
cultural control. Surveillance control may come from written norms and values that
have been internalised by the actors, and applied to the actors who perform the tasks
by watching and guiding them toward the proper way of performing the tasks.
Cultural control is the accumulation of norms and values that are originated from
common norms, beliefs, and shared values among the actors in a group without having
any relationship with written norms. The use of cultural control can be seen in the use
of a Technology forum by 3M (Anthony and Govindarajan, 2007, p. 596). This forum
allows technical people to present papers and exchange ideas and ?ndings (Collins and
Porras, 1997, p. 157). Cultural control is very relevant to a R&D situation where the
scientists and engineers are linked by shared values relating to research and
innovation.
This study proposes three stages of control implementation. First, input control,
which is carried out during the selection and the provision of input that will be used for
an operation. The second stage is process control that is performed during the
operation to monitor how tasks are performed, and the third is output control that is
carried out to measure the outputs achieved.
Control tools
The control tools refer to instruments that are used in performing the control function
concerning the desired ends. For example, control tools that include the concept of key
performance indicators (KPI) can be found in the control literature. However, the
desired ends are commonly multiple and vague, and therefore they need agents to
represent the value embodied in the desired ends. The fundamental role of the control
tools is to represent both the value of the desired ends and the effort, so the control
function can monitor, compare and evaluate how far the effort is performed. This study
proposes two elements of control tools: dimensions and values of representation.
The dimension refers to solid characteristics that are used by the control tools
regarding the desired ends. Four groups of the dimensions are proposed: directional,
bureaucratic, scienti?c and ?nancial. The directional dimension refers to control tools
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that contain qualitative characteristics that represent the general directions to be
followed by the action such as system goals and general policy guidelines. The
bureaucratic dimension refers to either quantitative or qualitative characteristics,
which represent the technical tasks, such as standard operating procedures, quality
control, inventory control, and scheduling including PERT, CPM, and production
scheduling. The scienti?c dimension contains the control tools that are used
particularly in a R&D organisation to measure ideas and innovations such as new or
improved processes, products or techniques, patents and patent applications, scienti?c
publications, and membership of professional organisations. The ?nancial dimension
refers to the control tools that contain monetary measurement and includes budgets,
cost effectiveness report, standard costs, and return on investment.
Three values of representation are proposed: external values, internal values, and
social values. External value refers to values that are developed by an external party
such as a market mechanism to de?ne a fair price for transfers (Ouchi, 1979; Lebas and
Weigenstein, 1986) and scienti?c publications in the case of R&D. Internal values refer
to values that are developed by an internal party by reference to the internal
conditions. The internal values can be seen in the bureaucratic control (Ouchi, 1979,
Lebas and Weigenstein, 1986) that is commonly labelled by setting rules, standard
operating procedures and policies, and standard costs. This value setting process may
be done by force by the dominant party within the organisation. Therefore, it would
have a greater chance for dysfunctional behaviour if it is used in a highly uncertain and
low goal congruence situation as in the case of R&D units.
Social values are values that result from social interaction among the members of a
group of individuals, and may be re?ected by the organisational culture. This value is
not done by force; rather, it is accepted by the members willingly. The social values are
not disturbed by clear or unclear boundaries of desired ends, because they are set by
the social interactions that have a chance to change over time. Therefore, the use of
social values in the control system will have less chance for dysfunctional behaviour
than the internal values. These values are obviously displayed by a R&D unit through
seminars and scienti?c publications. Though this study divided the values represented
by the control tools into three types, it should be kept in mind that in exercising the
control tools there would be a combination among these values embodied in the set of
control tools applied.
The relationship among core elements of MCS
Desired ends and control tools
The relationship among core elements of control is suggested as depicted in Figure 1.
The relationship between the desired ends and the control tools occurs during the three
important functions of the MCS: monitoring, evaluation, and performance
measurement. The MCS will use the control tools to monitor, measure, and evaluate
the action by reference to the desired ends. With regard to the yardstick, the MCS will
measure and evaluate how far the action has achieved the expected outputs. Whereas,
with respect to the directional dimension, the MCS will function to ensure that the
actions are in the correct directions for achieving the desired ends.
When dealing with environmental certainty, the control tools may emphasise the
yardstick dimension. As it is envisaged by that perfect situation, the expected output
may be relatively complete and accurate in representing the characteristics of the
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desired ends while the direction will still be used to indicate where to go. This will
encourage the use of internal values of control tools, which commonly involve
quantitative attributes such as; standard cost, budget, ?nancial ratios, and statistical
quality control. In contrast, under environmental uncertainty as in a R&D unit the MCS
may focus on the directional dimension and use either external or social values
(Abernethy and Brownell, 1997; Chenhall, 2003).
Desired ends and actor
The relationship between desired ends and actor essentially relies on the behavioural
dimension, that is, how preferred behaviour is de?ned in regard to the desired ends.
Under a perfect situation, preferred behaviour is clear, that is, the achievement of a
clear and certain desired end. The motivational element may be based on monetary and
other hierarchical promotions. Moreover, the delegation of authorities along the
hierarchy will be clear and then the decision space can be de?ned precisely. In turn, the
capacity to dominate others may come from the formal network, and the power to
in?uence others will be dominated by the formal source rather than the informal
(Abernethy and Brownell, 1997; Chenhall, 2003).
In a situation dealt with by a R&D unit, the behaviour is guided toward the desired
ends which are dominated, by the directional dimension rather than the yardstick.
Motivation may need to be extended to cover individual satisfaction such as reputation
Figure 1.
The relationship among
core elements of
management control
systems
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and professional acknowledgment. Moreover, as it is caused by unclear and less
quanti?able goals, the delegation of authority among individuals would not be clear
and the decision space for every individual cannot then be de?ned precisely. The
domination and the source of power may not only come from the formal but also from
the informal network including seniority and professional norms as indicated by
research awards.
Desired ends and control implementation
The relationship between the desired ends and control implementation is related to the
implementation of the predominant control type between the two dimensions of desired
ends. Many studies have examined this relationship (Hopwood, 1972; Govindarajan,
1984; Hirst, 1983; Abernethy and Stoelwinder, 1991, Abernethy and Brownell, 1997;
Tatikonda and Rosenthal, 2000; Ditillo, 2004; Bonner et al., 2002). Most of those studies,
indicated that, when the desired ends are dominated by the yardstick, the MCS uses
formal and the surveillance type of control. In contrast, when the directional dimension
dominates the desired ends as in a R&D unit, informal control (particularly cultural
control) may play an important role in the MCS.
Actors and control tools
The relationship between the actors and control tools traditionally rests on the function
to measure behaviour. Output is commonly measured as a surrogate for behaviour.
However, at an extreme point where the appropriate outputs cannot be taken for
granted as in a R&D unit, the behaviours cannot be measured with regard to the output
resulting from behaviour. In this situation, the control system cannot precisely monitor
and evaluate the output, which is derived from the behaviour. Moreover, to monitor
and to evaluate an action does not necessarily mean to measure it quantitatively. The
action can be monitored and evaluated with regard to the direction. Therefore, this
study does not view the control function as limiting the measuring process, rather as
consisting also of the process of in?uencing behaviour. The in?uencing process may be
carried out through the other four actors’ elements.
Domination, power and decision space may be in?uenced by four dimensions of
control tools. For example, directional and bureaucratic dimensions may limit the
decision space of the actor, therefore making a decision possible only within a
particular area. In turn, those dimensions will also reduce the power and domination of
the actor in in?uencing his or her peers in making a decision. The reduction of power
and domination may result from delimiting the decision space. The scienti?c and
?nancial dimensions may also have the same effect on decision space. As in the case of
a R&D unit, when the independent panel or expert rating can evaluate the
appropriateness of the scienti?c quality proposed, the actors’ decision space would be
bound by that quality. Similarly, the budget availability would also limit the actors in
making a ?nancial decision.
Actors and control implementation
The relationship between the actors and the control implementation refers to the use of
the control type to in?uence the actor. In a situation of certainty, the formal and
surveillance control type may be applied by the MCS. In addition, it can also be used to
monitor and evaluate whether the actors operate within the decision space that is
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given. However, for a R&D unit, the cultural control would be preferred more than the
formal and surveillance control that may lead to dysfunctional behaviour.
Control tools and control implementation
The relationship between control tools and control implementation refers to when and
how the tools will be used. As the instruments of the control function, the control tools
may be used by the formal and informal control type. However, most of the control
tools in the literature seem to have quantitative expression, although some of the
control tools may have qualitative characteristics such as bureaucratic evaluation,
political public affairs, directional constraint and general policy guidelines. Obviously,
the control tools are used by the formal control rather than the informal control.
Though it is dif?cult to place a clear boundary on the use of control tools between the
two, in some ways the use of the control tools may be distinct, and needs to be de?ned
by reference to those two control types.
The control tools used by the formal control type are clearly de?ned in the literature
as written norms and may use any or a combination of the four dimensions of control
tools. Accordingly, there are some tools used by informal control and these include
shared values (Hopwood, 1974), personal objectives (Jaworsky, 1988), mutual
commitments among employees toward objectives (Hopwood, 1974; Ouchi, 1979;
Jaworsky, 1988), and norms (Jaworsky, 1988; Lebas and Weigenstein, 1986). In turn, as
the informal control contains surveillance and cultural control, the control tools that are
used by the surveillance control type may only consist of the bureaucratic dimension,
while the cultural control type as it is applied to a R&D unit may contain the
directional and/or the scienti?c dimension.
Findings and conclusion
The previous discussion has indicated the appropriate use of the core elements of the
MCS by a R&D unit that is involved in non-repetitive work; with a low-level knowledge
of the transformation process, and unpredictable and unmeasurable desired ends.
Table I summarises the use of control elements by a R&D organisation.
In the case of a R&D unit, the yardstick dimension seems to be less useful, and the
directional element becomes signi?cant. This can be seen by the use of the 15 percent
option policy by the 3M Company (Anthony and Govindarajan, 2007, p. 596). For this
situation, the appropriateness of the actors’ elements in a R&D unit would also be
Core elements Environmental uncertainty as dealt with by R&D unit
Desired ends More to direction than yardstick
Actors Behaviour through culture
Motivation: monetary, rank and professional accreditation
Domination through formal and informal
Decision space through formal and informal
Power source from formal and informal
Implementation Control types: more to informal (cultural) than formal
Implementation: input, process, and output
Control tools Dimensions: directional, bureaucratic, scienti?c, and ?nancial
Values of representation: internal, external and social values
Table I.
The choice of control
elements under
environmental
uncertainty
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affected. The cultural aspect may be signi?cant in motivating behaviour. Motivation
may not be limited to monetary reweards and rank, but also professional accreditation
such as the Carlton award used by 3M (Anthony and Govindarajan, 2007, p. 596) as
well as recognition by outside professional and scienti?c bodies. Domination may be
extended to informal sources such as seniority and professionalism. Decision space
may not be able to be clearly de?ned by the formal system, therefore informal
mechanisms such as self-control as used by 3M in its Technology Forum (Anthony and
Govindarajan, 2007, p. 596) may operate. In addition, the power source may also come
from informal sources such as professional accreditation and research awards or
grants rather than a bureaucratic source alone. In an uncertain situation as dealt with
by a R&D unit, the control tools that contain external and social values such as
directional and scienti?c dimensions may play important roles in the execution of the
control function. The scienti?c dimension such as publication, research grant and
patent achievement may be used to provide key performance indicators (KPI).
Similarly, in an uncertain situation dealt with by a R&D organisation, the cultural
control type that contains the directional and scienti?c dimension and is applied trough
a scienti?c seminar may play a signi?cant role in the control function.
Though this study is limited to descriptive study, acknowledging the presence of
these four control elements will broaden the comprehension of the control concept.
Further study is needed to describe the use of these dimensions by R&D organisations.
In exercising control, the dimensions may be complementary, and it is possible that one
dimension will be more dominant than other dimensions in different situations being
dealt with by the R&D organisation. In addition, the emphasis of control types, control
dimension and values may differ along different types of R&D activities (basic, applied
or development) and control implementation stage (input, process, and output).
Though the relationship among the dimensions seems to be conspicuous from the
previous discussion, the degree of combination between certain and uncertain
situations may occur in a practical situation and need to be explored for further
research.
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Corresponding author
Parulian Silaen can be contacted at: [email protected]
ARJ
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