Rick Payne reports on an American Accounting Association discussion of management control systems.
There were a few apposite film quotes courtesy of Mark Dendle, CFO of ECOM trading, during the panel I chaired recently at an American Accounting Association conference. Notable was one from the dinosaur movie Jurassic Park and the character Dr Ian Malcolm: “If there is one thing the history of evolution has taught us it’s that life will not be contained. Life breaks free, it expands to new territories and crashes through barriers, painfully, maybe even dangerously, but there it is.” It was a sentiment the real doctors on the panel (Wim A Van der Stede, London School of Economics; Roland Speklé, Nyenrode and Tatiana Sandino, Harvard) could relate to.
Van der Stede opened the discussion by examining the nature of management control. While emphasising the need to look at management holistically and without pigeonholing particular aspects of organisations, he arrived at a definition of management control as “any organisational arrangement, explicit or implicit, which helps align and regulate individual behaviours in pursuit of organisational objectives.” Like Jurassic Park we can see management’s need to nurture the energy of employees but to constrain that energy when it is being misdirected. As Van der Stede pointed out, there are numerous examples of organisations failing because management control systems, such as incentive arrangements, shape culture (not always productive), and drive dysfunctional behaviours.
This is an extract from the Finance & Management Magazine, Issue 242, April 2016