Management control systems and managerial dysfunctional behaviour : an empirical study of direct, intervening and moderating effects

• Main Author: Soobaroyen, Teerooven
• Other Authors: Ap Gwilym, Owain Maelor
• Published: Aberystwyth University 2007
• Subjects: 658.4720285
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.489488

This study considers the perspective that Management Control Systems (MCS) have a general impact on managers' extent of dysfunctional behaviour. More specifically, this study models, and empirically tests, the effects of several control systems, namely Standard Operating Procedures (SOP), Budgetary Participation (BP) and Reliance on Accounting Performance Measures (RAPM) on two 'broader' forms of dysfunctional behaviour (gaming and information manipulation). Furthermore, task uncertainty (TU) and the superior's style in the use of controls (diagnostic vs. interactive - INT) are the first two selected contextual variables, with MCS modelled as an intervening mechanism between these contextual variables and dysfunctional behaviours. In addition, insights from the institutional / legitimacy perspectives are used to develop a third contextual variable - known as the legitimating nature of control systems (LNC), as perceived by managers – to be separately modelled as a moderating variable. Based on 130 responses of functional managers from a sample of Australian manufacturing companies, the findings regarding SOP provide new evidence on a much used control system in its role as a mechanism constraining gaming practices whilst the findings relating to BP are particularly significant in demonstrating the primarily motivational benefits of BP and its role in defusing both information manipulation and gaming practices. Notably, it brings empirical support to the theoretical arguments for participative budgeting (Shields and Shields, 1998) in contrast to claims that it encourages budget games (Hansen et al., 2003; Lukka, 1988). However, RAPM is found to have a significant enhancing effect on both the managers' extent of information manipulation and gaming activities but it does not have a significant intervening effect for TU. This is in sharp contrast to Hartmann's (2000; 2005) expectations on the central role of uncertainty in the RAPM contingency framework. The 'beneficial' nature of an 'interactive' superior, as argued in Simons (1995; 2000), is put into question with the finding that such an outlook might actually enhance managerial dysfunctional behaviour. The overall implications of this interactive style and the levers of control framework are also considered in the light of recently published studies. Finally, the findings suggest that a higher agreement to LNC interacting with the various control systems appears to intensify instances of dysfunctional behaviour. This also provides empirical evidence on the extent to which legitimacy arguments - rather than efficiency/rational ones - may be pertinent in understanding the role of controls in organisations.