Management Control System and Leadership Behavior - Research Paper Example

Impact of management control system and leadership style on organizational performance Table of Contents Introduction 3 2.Research objectives 4 3.Literature Review 4 3.1. The impact of MCS on organizational performance 4 3.2. The impact of leaders and their leadership style on organizational performance 5 4.Data and Methodology 6 4.1. Data Collection 6 4.2. Research philosophy 6 4.3. Research Approach 7 5.Ethical considerations 7 6.Timeframe 7 Reference List 8 1. Introduction This research paper involves a study of management control system (MCS) and leadership behaviour and their impact on organizational performance from the stand point of contingency theory and leadership theories taking into account the ways in which multiple dimensions of control systems and leadership within an organization combine together to enhance performance (Chenhall and Langfield-Smith, 1998). According to Contingency theory the structure and utility of MCS is driven by certain factors which are both internal (organizational strategy) as well as external (environment) to the organization. The fundamental argument behind contingency theory is that neither an organization functions in complete segregation from its external environment nor does it stay static with respect to the internal environment (Otley, 1980). One example that justifies the above statement is that size of an organization and the technology that is used may change which in turn may affect the organizational performance. Management control will be studied in accordance with the ideas set forth by Simons (1995a; 2000). The author has suggested four separate levels of control framework which are diagnostic control systems, beliefs systems, boundary systems and interactive control systems. The levels of control framework mentioned above combine a focus on strategy with a broader analysis of the control process that can be used in order to implement strategies directed towards enhancing organizational performance. An effective MCS is not the only factor responsible for enhancing organizational performance, the individual or a group leading this mechanism is also equally responsible. This suggests the importance of leadership as a driving factor of organizational performance. Employee engagement has become a key determinant of efficient organizational performance over the years. This is precisely the reason behind the fact that organizations in the contemporary business environment allocate a significant proportion of their resources as well as strategies in order to ensure an enhance level of employee engagement. Organizational management perceives leadership strategies and behaviours to be a significant contributor towards enhancing organizational performance. A significant amount of academic studies have been done in this field however till date none of the empirical researches have been able provide conclusive evidences suggesting any specific management or leadership behaviours that can enhance organizational performance. Several authors have set forth their perspective about the perfect leadership style that can have a positive impact on organizational performance. For example Macey and Schneider (2008) suggested that transformational leadership style is a key stimulant of employee engagement, however no literatures provide enough evidence to confirm the ideas set forth by Macey and Schneider (2008). On the other hand Zeidan (2009) suggest that the leader following a team or sound style of leadership where equal importance is given to both people and productivity is a perfect leadership attribute that can enhance organizational performance. This is where the significance of this research lies where the researcher will mainly investigate the management control system and leadership strategies adopted within an organization and their resultant impact on organizational performance. This research is highly relevant as it will be taking a practical point of view by considering the opinions provided by senior management officials of a sample organization regarding the issue that is being discussed within the research. 2. Research objectives In order to be able to gain a thorough understanding of the research topic the following objective needs to be achieved: • To analyse the impact of management control system and leadership style on organizational performance. 3. Literature Review 3.1. The impact of MCS on organizational performance MCSs both affect as well as are affected by an organizational strategy process itself (Simons, 1995b). A lot of empirical researches have been done that investigate the effect of strategy on MCS and to a slight extent the effects of MCS on organizational strategy (Shields, 1997). The idea of strategy has been examined on the basis of strategic choice level such as differentiation strategy versus cost leadership strategy (Govindarajan, 1988) and defender versus prospector (Hoque, 2004). Majority of the authors stated above consider MCS to be the main strategy implantation mechanism and in a way the last step of the overall mechanism (Henry, 2006). These ideas regarding the MCS takes a methodical approach where the perspective is stagnant and attention is devoted on the technical aspects and designs of strategies aimed towards enhancing organizational performance. A second cluster of research laid emphasis on the impact of MCS on organizational strategy. While carrying out research in this field, the idea of strategy has been explored on a strategic-choice level (Chenhall, 2005; Marginson, 2002). The research conducted by these MCS as the key influencer of organizational strategies. These studies recognize the key significant contribution that MCS has in formulating strategies in order to enhance organizational performance. The empirical literatures also highlighted the incessant implication of MCS in the strategic management procedure. According to Langfield-Smith (1997), MCS within an organization have to be designed appropriately in order to compliment the strategy formulated by an organization aimed towards attaining competitive advantage and leading to superior quality performance. The fundamental idea propagated my majority of accounting research is that MCS has a substantial contribution that leads to smooth operation and increased profitability of the organization. Alongside that evidences provided by Peljhan and Tekavcic (2008), suggest that superior organizational performance is an end result of proper matching of an organizational strategy, environment as well as internal systems and structures. The author has stated that strategic choices made by an organization will always impact the MCS, which suggests that several organizational strategies and plans are more likely to modify the design of an organization’s internal control system. In addition, Whittington (1995) suggests that a significant link exists between an organization’s MCS and strategy and a harmonizing match between the two factors is very critical to organizational performance. 3.2. The impact of leaders and their leadership style on organizational performance According to Nohria, Groysberg and Lee (2008), leaders and managers have a substantial contribution towards enhancing the level of organizational performance. As mentioned above, employee engagement level is a key determinant of effective organizational performance that is why leaders and managers working in organizations throughout the world formulate effective strategies in order to enhance the level of employee engagement within their organization. There is no doubt regarding the fact that leadership style and behaviour plays a crucial role in influencing employee engagement levels which in turn leads to a superior quality organizational performance. The clarity with which goals are stated and directions are provided by the leaders to their subordinates is one of the most crucial determinants as identified by academic research scholars that can enhance the level of organizational performance significantly (Baum and Locke, 2004). This suggest that the degree to which employees working for an organization are engaged towards their work as well as towards the organization depends by and large on the style of leadership followed by leaders. Leadership styles can be defined as the approach taken by leaders in order to lead the way by stating goals and objectives clearly and making sure that the same is achieved accordingly. By ensuring the same, leaders adopting a perfect leadership style can bring success for the organizations by means of improved organizational performance. So it is clearly the requisite for the leaders and managers working for an organization to convey what is expected from their subordinates in terms of their performance and also to provide them with a holistic view of the organizational objective. Empirical researches done by Ardichvili (2001) and Apospori, Papalexandris and Galanaki (2005) suggests that employees are found to be more engaged to their work as well as the organization when they have a proper understand of the organization objectives and goals. It helps them to align their objectives with that of the organization and at the same time ensure that they are in harmony. These facts highlight the importance of an appropriate leadership style through which leaders can make sure that the organizational objectives and that of the employee is completely aligned (Ambrose and Kulik, 1999). By doing so, a leader can prove to be effective and thus play a significant role in enhancing organizational performance. Leaders as well as managers have a key responsibility of establishing a robust communication framework within the organization in order to ensure that information is shared freely within each and every individual working within an organization. This will enable the employees to attain all round development and thereafter contributes towards the development of the organization. A robust communication framework will also enable every single individual to state their opinions and views regarding a particular issue. Leaders must make it a point to take those views into consideration while making strategic decisions which in turn will enable them to build a relationship based on trust and respect with their subordinates. This factor is also very crucial that ensures the enhancement of organizational performance (Macey and Schneider, 2008). Thus this research paper will look into the various aspects of management control system as well as relevance of leadership styles and their resultant impact on the organizational performance by conducting semi-structured interviews and questionnaire surveys with senior management officials of an organization in order to gain a holistic view of the research issue that is being explored and henceforth fulfil the objective that has been mentioned above. 4. Data and Methodology 4.1. Data Collection Gathering data is one of the most pivotal activities of an investigative research. The major contribution of this activity lies in ensuring the validity, appropriateness and reliability of the research study. As far as extracting information for this research study is concerned, they will be done through primary as well as secondary sources. Primary data will be collected through a combination of semi-structured interview and questionnaire survey conducted with the senior level managers of the sample organization. On the other hand, secondary data will be retrieved from several information sources such as electronic and print books, peered reviewed journal articles, reliable websites and other authentic databases. By implementing a combination of two primary research mythologies alongside an in-depth secondary research, the researcher will be able to develop a critical understanding about the topic of research and the issue that is being explored. The researcher will also be able to create synergy by exploring the research problem conveniently (QAA, 2012). 4.2. Research philosophy This research study will be by and large based on analysis carried out on qualitative data that will be obtained through the help of semi-structured interviews as well as questionnaire surveys conducted with top level of managers of the sample organization. The above mentioned fact necessitates the application of interpretive research philosophy. The underlying rationale behind the implementation of interpretive philosophy as suggested by Mukherji and Albon (2009) is the fact that it will prove to be an efficient guidance tool for the researcher helping the individual assess the reality by subjective description of an intrusion in reality. Somekh and Lewin (2004) stated another reason that justifies the adoption of this research philosophy. According to the authors the adoption of a particular research philosophy is heavily dependent on type of research that is being carried out. Provided the fact that this research is micro-sociological in nature which involves the assessment of primary purpose behind a human beings behaviour regarding a specific issue, adopting an interpretive research philosophy is the most appropriate strategy (Spradley, 1979). According to Plummer (1683), the activities that are primarily conducted in an interpretive research include focus group interviews, personal interviews, questionnaire surveys, participant observation, action research and evaluation of a respondents behaviour. 4.3. Research Approach In order to be able to conduct this research study in an appropriate manner the researcher has considered the adoption of inductive research approach as a suitable strategy. According to Blaxter, Hughes and Tight (2006), the primary rationale behind the implementation of inductive research approach is the fact that this research involves the explanation of a generalized issue in the initial stage and thereafter the researcher will lay emphasis on the specific issues that are being discussed within the research. Besides that, according to Saunders, Lewis and Thornhill (2009) adoption of inductive research approach will serve as a solid foundation through which the researcher will be able to translate the outcomes obtained from the research into detailed conclusion. The elementary requirement of this research paper is to study, assess and understand the impact of management control systems and leadership on organizational performance and inductive approach is best fit approach to fulfil the requirement. The details mentioned in this section rationalize the adoption of inductive research approach. 5. Ethical considerations The survey and interview will be conducted after getting permission from the sample organization’s HR officials. The participants will be informed about the objective and purpose of the research prior to initiating the research process. The researcher will ensure the anonymity of the participants by not revealing any personal information. 6. Timeframe (Source: Author’s creation) Reference List Ambrose, M. L. and Kulik, C. T., 1999. Old friends, new faces: motivation research in the 1990s. Journal of Management, 25(3), pp. 231-292. Apospori, E., Papalexandris, N. and Galanaki, E., 2005. The motive and responsibility profile of Greek CEOs: comparing entrepreneurs and professionals. Leadership & Organization Development Journal, 26(2), pp. 141-162. Ardichvili, A., 2001. Leadership styles of Russian entrepreneurs and managers. Journal of Developmental Entrepreneurship, 6(2), pp. 169-188. Baum, R. J. and Locke, E. A., 2004. The relationship of entrepreneurial traits, skill and motivation to subsequent venture growth. Journal of Applied Psychology, 89(4), pp. 587-598. Blaxter, L., Hughes, C. and Tight, M., 2006. How to Research. 3rd ed. New York: McGraw-Hill International. Chenhall, R. H. and Langfied-Smith, K., 1998. Adoption and benefits of management accounting practices: an Australian study. Management Accounting Research, 9, pp. 1-19. Chenhall, R. H., 2005. Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes an exploratory study. Accounting, Organizations and So­ciety, 30, pp. 395-422. Govindarajan, V., 1988. A contingency approach to strategy implementation at the business-unit level: integrating administrative mechanisms with strategy. Academy of Management Journal, 31, pp. 828-853. Hoque, Z., 2004. A contingency model of the association between strategy, environmental uncertainty and performance measurement impact on organizational performance. In­ternatio­nal Business Review, 13, pp. 485-502. Langfield-Smith, K., 1997. Management control systems and strategy a critical review. Accoun­ting, Organizations and So­ciety, 22, pp. 207-232. Macey, W. H. and Schneider, B., 2008. The meaning of employee engagement. Industrial and Organizational Psychology, 1, pp. 3-30. Marginson, D. E. W., 2002. Management control systems and their effects on strategy formation at middle-management levels Evidence from a U.K. organization. Strategic Management Journal, 23, pp. 1019-1031. Mukherji, P. and Albon, D., 2009. Research Methods in Early Childhood: An Introductory Guide. London: SAGE. Nohria, N., Groysberg, B. and Lee, L., 2008. Employee motivation: A powerful new model. Harvard Business Review, 86, pp. 78-84. Otley, D. T., 1980. The contingency theory of management accounting: achievement and prognosis. Accounting, Organizations and Society, 5, pp. 413-428. Peljhan, D., and Tekavcic, M., 2008. The Im­pact of Management Control Systems - Strategy Interaction on Per­for­mance Management: A Case Study. Organizacija, 41(5), pp. 174-183. Plummer, K., 1983. Documents of Life: An Introduction to the Problems and Literature of a Humanistic Method. New South Wales: Allen & Unwin. QAA, 2012. Student Experience Research 2012. [pdf] QAA. Available at: [Accessed 5 May 2014]. Saunders, M., Lewis, P. and Thornhil, A., 2009. Research Methods for Business Students. 3rd ed. New Jersey: Pearson Education. Shields, M. D., 1997. Research in management accounting by North Americans in the 1990s. Journal of Management Accoun­ting Research, 9, pp. 3-62. Simons, R., 1995a. Control in an Age of Empowerment. HarvardBusiness Review, 73(2), pp. 80-88. Simons, R., 1995b. Levers of Con­trol: How Managers Use In­novative Con­trol Systems toDrive Strategic Renewal. Boston: Harvard Business School Press. Simons, R., 2000. Performan­ce Measurement and Con­trol Systems for Implemen­ting Strategy. New Jersey: Prentice Hall. Somekh, B. and Lewin, C., 2004. Research Methods in the Social Sciences. California: SAGE. Spradley, J. P., 1979. The Ethnographic Interview. New York: Rinehart and Winston. Whittington, R., 1995. What is Strategy – And does it matter? London: Routledge. Zeidan, H., 2009. The Blake Mouton Managerial Grid Identifying five different leadership styles. The Certified Accountant, 39, pp. 82-85. Read More