Combining Categories of Management Control Tools for High Performance of Start-ups.
| Autor | Carraro, Wendy Beatriz Witt Haddad |
I Introduction
According to Ries (2011), start-ups do not exist to "do things"--rather, they are created to build a sustainable innovative business. Blank and Dorf (2012, p. 17) offer a definition of start-up: "a temporary organization in search of a scalable, repeatable, profitable business model." Workers of small firms are in close contact with an entrepreneurial role model and are likely to acquire entrepreneurial skills more easily than workers of large firms. Such role model effects may trigger a positive perception of entrepreneurship and stimulate a personal decision to start a firm (Battisti, 2019; Fritsch & Wyrwich, 2018).
Start-ups often fail because founders and investors neglect to look before they move forward, without taking the time to realize that the basic business plan assumption is wrong. Entrepreneurs tend to be single-minded with their strategies, wanting the venture to be all about the technology or all about the sales, without taking time to form a balanced plan. According to Nobel (2011), sixty percent of start-ups do not survive the first five years, whilst seventy-five percent of venture capital funded start-ups fail. Moreover, most empirical studies referring to management control systems in new ventures or small and medium-sized firms have focused on the context of developed countries (Lin, Chen, & Lin, 2017).
From the moment of their establishment, the focus of these companies is the development and penetration of their products in the market, based on a strong presence of technology and innovation in their production process. Among the most common problems that threaten the survival of these companies is the absence of management tools and procedures (Magdaleno, Engiel, Tavares, Pisa, & Araujo, 2017).
Management control tools are instruments designed to induce individuals to behave in a manner that is consistent with the organization's objectives and strategies. According to Alvesson and Karreman (2004), management control is necessary to develop an effective organization of work. Addressing management controls in startups is important. However, they should be used once there is a routine (Abernethy & Brownell, 1997). Thus, the stage of the life cycle in which the firm finds itself should be borne in mind when this approach is addressed (Wang, Edison, Bajwa, Giardino, & Abrahamsson, 2016).
In addition, management control systems are time-consuming and expensive (Sandelin, 2008). This means that each company may have both formal and informal control mechanisms tailored to its needs and resources. Having management control tools becomes a top priority for companies that wish to overcome the challenges raised by business uncertainties.
This issue has been investigated by researchers over the past two decades (cf. Abernethy & Brownell, 1997; Davila & Foster, 2005; Otley, 1999; Sandelin, 2008; Sandino, 2007). Nevertheless, more recently, a number of relevant studies have sought to analyze the practices of management control tools in start-ups (Bolisani & Bratianu 2017; Busco, Giovannoni, & Riccaboni, 2017; Elbashir, Collier, & Sutton, 2011; Ferreira & Otley, 2009; Magdaleno et al., 2017; Manyaeva, Piskunov, & Fomin, 2016; Strauss & Zecher, 2013; Voss & Brettel, 2014).
In this context, the objective of this paper is to examine possible combinations of management control tools that are likely to lead to high performance in start-ups. The study involves the development of a new methodology on the basis of a conceptual framework that led to the identification of nine categories of analysis: Clients, Strategy, Information Systems, Quality, Performance, Collaborators, Risks, Budget, and Costs.
To develop the research, we interviewed forty-five entrepreneurs whose start-ups are based in science and technology parks linked to universities. The interviews were conducted face-to-face, allowing for the identification of management control tools and practices for each category of analysis. The fuzzy-set qualitative comparative analysis (fsQCA) methodological approach was used, which is an analytical technique that uses Boolean algebra to implement principles of comparison involving qualitative studies of social phenomena (Rihoux & Ragin, 2008).
Recent studies have examined combinations of management control tools in different strategic contexts in large organizations using the fsQCA methodology (Bedford, Malmi, & Sandelin, 2016; Erkens & Van der Stede, 2015). The intention to study the combination of practices in start-ups is justified since they need a set of tools that allow them to achieve good enough performance for them to thrive.
Knowledge is a key source of competitive advantage for start-ups, particularly in innovative industries (Acs, Brooksbank, Gorman, Pickernell, & Terjesen, 2012; Fritsch & Aamoucke, 2013; Fritsch & Wyrwich, 2018). Accordingly, new ventures can be regarded as expressions of knowledge spillovers from existing knowledge sources (Fritsch & Wyrwich, 2018). As a consequence, this study contributes to management control literature in several ways. Firstly, the study provides evidence on how management control tools enhance the performance of start-ups. Secondly, it shows that management controls related to Clients, Strategy, Information Systems, Performance, Risks, and Budgets are interconnected and are necessary to achieve sustainable results, expanding knowledge applied to large companies (cf. Bedford et al., 2016; Erkens & Van der Stede, 2015). Thirdly, the methodological approach used makes it possible to offer insights on the organizational
The paper is structured into five sections. After this introduction, the second section addresses the literature review on management control tools. This is followed by a section that focuses on the methodology and then there is a section on the results which discusses its implications. Finally, the key contributions of the study both to researchers and practitioners are summarized in the conclusion, along with the limitations of the investigation and suggestions for further research.
2 Conceptual Background
According to Ries (2011), start-ups are new human institutions which create new products or services under a high level of uncertainty. Thus, start-ups are considered to be open, flexible, creative, and innovative systems (Kalliath, Bluedorn, & Gillespie, 1999). However, this kind of freedom can also be a weakness. Bruneel, Ratinho, Clarysse, and Groen (2012) stress that the lack of management experience and marketing skills of start-ups tends to be the main cause for their short life cycle and high death rate. In this regard start-ups face a trade-off: they need flexibility to be creative and innovative, but, at the same time, they also need management controls to survive.
Anthony (1965) was the first author to present a formalization of the management control concept. In his seminal work, the author refers to it as the process through which managers ensure that resources are obtained and used effectively and efficiently to achieve organizational objectives. Elements of management control systems include strategic planning, budgeting, resource allocation, performance measurement, evaluation and reward, allocation of responsibility centers, and transfer pricing (Anthony & Govindarajan, 1998). Moreover, Atkinson, Kaplan, Matsumura, and Young, (2011, p. 275) state that "control refers to the set of procedures, tools, performance measures, systems, and incentives that organizations use to guide and motivate all employees to achieve organizational goals."
In short, management control is the process by which managers at all levels ensure that the people they lead will implement their intended strategies. The literature presents different perspectives on management control concepts, models, and practices. In this overview, a compilation of management control tools comprising different perspectives and pervading the entire organization will be provided. There is a strong relationship between strategic guidelines and company performance. Product innovation can significantly assist a competitor-led company to improve its financial performance, while a technology-driven company improves its growth and performance in the marketplace (Trapp, Voigt, & Brem, 2017).
This theoretical analysis, based on studies that focus on performance and business management, shows the importance of developing a holistic tool aimed at assessing the extent to which the organization can control in a comprehensive way all aspects related to the nine categories of analysis: Clients, Strategy, Information Systems, Quality, Performance, Collaborators, Risks, Budget, and Costs. This evaluation examines instruments and practices that are considered in management control.
The category of analysis related to Clients includes instruments and practices that aim to control the management of relationships with both current and potential customers. In contrast to the approach assumed by large companies, both startups and SMEs have stated that customer needs are the primary motive for seeking partners. For this, start-ups and SMEs can combine know-how, core competences, and complementary resources (Mercandetti, Larbig, Tuozzo, & Steiner 2017). Examples of customer management practices include databases, customer satisfaction surveys, and studies on customer loyalty (Atkinson et al., 2011; Busco et al., 2017; Magdaleno et al., 2017; Sandelin, 2008; Sandino, 2007). The organization's internal and external control mechanisms, when based on the market, can be employed to align the interests of managers and other stakeholders. An example is professional digital marketing, which builds social bonds with customers while recognizing them as clients and not merely nameless faces.
The category related to Strategy encompasses practices that aim to dynamically and systemically achieve strategic objectives. In this context, examples of strategy management controls include...
Para continuar a ler
PEÇA SUA AVALIAÇÃOCOPYRIGHT GALE, Cengage Learning. All rights reserved.
