Balancing the tensions between the control and innovative roles of management control systems: a case study of Chinese organization

Zheng, Tong (2012) Balancing the tensions between the control and innovative roles of management control systems: a case study of Chinese organization. Doctoral thesis, Northumbria University.

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Abstract

Management Control Systems (MCS) have been intensively studied in organizational research in the past five decades. Most of existing studies, however, dominantly focus on the traditional control role of MCS. Recently, adequate attentions have been paid to the role MCS for innovation.
By recognizing the importance of both control and innovative role of MCS, the MCS researchers have argued that the control and innovative roles of MCS are incompatible with each other. Dynamic tensions exist between them, and how to balance the dynamic tensions of these two contradict roles has emerged as an interesting topic in MCS research, especially in the context of Asian culture.

Given the growth in interest of balancing traditional control role and innovative role of MCS, this study aims to explore ‘How do managers attempt to implement and balance the traditional control and innovative roles of MCS in a Chinese organization?’ Coherent with this research question, the main objectives of this study are to discover what kinds of tensions exist between control and innovative roles; how these tensions can be balanced. In addition, influencing factors and organizational capabilities in relation to balancing different tensions are explored.

Taking social constructionism philosophical paradigm, an in-depth single case study is conducted by sampling a Chinese joint-stock commercial bank in China. Due to heavy regulations, the Chinese government imposed on banking industry, Chinese state-owned banks often over emphasize the control role. Chinese commercial banks, differently, have more freedom to introduce and implement MCS for innovation. To gain a deeper understanding of the phenomenon, a set of
data, including semi-structured interviews with senior and middle level managers, observations of management meetings and secondary data including organizational internal and government reports, are collected. Template analysis is employed as the main data analysis technique with the assistant of Nvivo 8 qualitative data analysis software.

The findings reveal that the Chinese managers use a wider range of MCS frameworks, including formal accounting and performance controls, as well as strong culture and social controls. In drawing upon these sources, three levels of tensions between control and innovative roles of MCS
have been emerged: 1) MCS for controlling strategy implementation VS. renewing strategy; 2) MCS for controlling risks VS. exploring new business; 3) MCS for controlling employees’ behavior VS. enabling employees’ behaviour. Moreover, by discovering external environment and internal demand factors, this research identifies certain levels of organizational capabilities that are in relation to balancing different levels of tensions, including abilities of designing and implementing suitable MCS package, appropriate organizational structure, effective communication channels and information systems, positive organizational culture and leadership.

This research presents a holistic picture of balancing the control and innovative roles in a Chinese organization in the context of banking industry. Proactively, this study provides Chinese organizations valuable information when designing their organizational MCS package as a whole.
Furthermore, it offers valuable insights to the Chinese bank managers and guides them to balance the different tensions between control and innovative roles of MCS. By highlighting the cultural role in balancing the three levels of tensions, it is hoped that this research offers an alternative way
to inspire Chinese banking institutions and individual managers to develop and use a suitable MCS package that can balance the dynamic tensions between the control and innovative roles of MCS.

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