Strategic behavior and the use of management control systems in agro-industrial cooperatives.
| Autor | de Jesus Silva, Thiago Bruno |
1 INTRODUCTION
The relationship between strategy and management control has been a long-standing concern in the literature on management accounting. Most of the studies follow a contingency approach to establish systematic associations. Although the literature has been relatively successful in identifying associations between strategy and individual management control practices, little progress has been made in understanding the choice and consequences of combinations of management control systems (MCSs) in different strategic contexts (Langfield-Smith, 2008).
Investigations such as those of Grabner e Moers (2013), Indjejikian, Matejka e Schloetzer (2014), Abernethy, Dekker, and Schulz (2015), Erkens and Stede, (2015), and Henri and Wouters (2020) have considered MCS practices in isolation. Indjejikian, Matejka e Schloetzer (2014) explain that the assumed prevalence of complementarity between management control practices within a package is probably overestimated. However, MCSs that are seen as beneficial in isolation need to be simultaneously present in a package, which suggests that relying solely on the results of independent analysis is insufficient to understand the constitution of effective packages (Henri & Wouters, 2020).
This research is guided by the need to understand the combinations of the MCSs that are considered relevant independently in order to find out if they are relevant when analyzed simultaneously, as a package, in different strategic contexts. Hence, we adopt the following research question: what are the combinations of MCSs from the Simons model used with the different strategic behaviors foreseen in the Miles and Snow model, in the case of agro-industrial cooperatives? Thus, the objective was to identify the combinations of MCSs used with the different strategic behaviors adopted by agro-industrial cooperatives.
The investigation provides a number of contributions. First, evidence is presented that MCSs can be combined for organizations that operate in different strategic contexts. The results suggest the control practices used as central and peripheral in each specific strategic context (Ragin, 2009), providing evidence of equifinality. Second, we adopted the suggestion of Bedford, Malmi, and Sandelin (2016) of using other normative MCS structures, opting for the traditional and consolidated levers of control from the Simons model (1995). The results extend the knowledge of these four levers by suggesting configurations that form specific control packages for different strategic contexts.
As for the field, we sought to understand the specificities of cooperatives as a differentiating element in the relationship between strategic behavior and MCSs. Cooperatives play a role in spreading technology and managing rural properties, which directly affects the competitiveness, scale of production, and quality of the dairy chain. This field stands out for its culture of low innovation and resistance to change, especially with regard to entrepreneurship (Beber, Theuvsen, & Otter, 2018).
This study also contributes by providing relevant information about the management process with a view toward business continuity, since the levers of control provide information that allows for the coordination of activities (Muller-Stewens, Widener, Moller, & Steinmann, 2019). It follows that agro-industrial cooperatives need to be competitive to face any challenges that arise and respond to changes in structure and competition in order to maintain their position in the market, as highlighted by Beber et al. (2018). The evidence from the empirical research can contribute to managers better understanding the functionalities related to the independence and interdependence of MCSs, within a package of specific controls, according to the organizational priorities.
2 THEORETICAL FOUNDATION AND PROPOSITIONS
2.1 Miles and Snow's strategic behavior model
Chenhall (2003) describes the most prominent strategic positions adopted by organizations in relation to their task environments, these being closely related to the contingent conditions that influence the MCS choices. Miles and Snow's proposition is a widely used strategic typology, with an extensive body of literature that investigates different market and product orientations (Langfield-Smith, 2008). It maintains robust empirical correspondence (Langfield-Smith, 2008) and is applicable to a wide range of organizations (Behling & Lenzi, 2019).
Organizations seek to constantly review their goals, to adapt them to new realities, and to interact in the best way with their environment. However, the dynamic process of adjusting to the environment is complex and involves decision making at different levels of the organization. With the intention of overcoming this complexity, we propose to establish the behavioral patterns of organizations to describe the organizational adaptation process (Miles et al., 1978).
Kober et al. (2007) show that Miles and Snow indicate four strategic types and provide a detailed description of the organizational characteristics associated with each strategy. Their typology offers explanations of how organizations behave in their environments, how they respond to problems of the adaptive cycle, and how they seek solutions (Chan, Ngai, & Moon, 2017). It comprises the following strategies: prospector, defender, analyzer, and reactor.
If it adopts the prospector strategy, the organization operates in a more dynamic environment and is committed to a constant search for innovation, new products, and market opportunities. Innovation can be even more important than high profitability. This behavior is perceived in creative organizations, which modify and provide changes and uncertainties, to which the competition has to adapt and respond (Kober et al., 2007). If it adopts the defender typology, the organization maintains a stable environment, by producing only one set of products aimed at a specific segment of the market, and its success stems from the efficient way it serves that market (Walker, 2013).
Miles et al. (1978) explain that the analyzer typology involves a specific organizational structure and processes to accommodate stable and dynamic areas of operations. Organizations that adopt this strategy combine aspects of the defender strategy (efficient market consolidation) and the prospector strategy (expansion of services and offer in new markets). When the organization is in a state of permanent instability, given the environmental characteristics, it has a reactive typology. This is typical of organizations that do not have a coherent relationship between strategy and structure (Miles et al., 1978).
In summary, the prospector strategy is characterized by the search for new markets and innovation of products and processes. The defender strategy corresponds to restricted market and product domains, which allows greater attention to be paid to efficiency. The analyzer strategy combines both the prospector and defender strategies, with more stable areas and others that are more dynamic. And the reactive strategy represents those organizations that react impulsively to events (Walker, 2013). Therefore, the prospector and defender strategies are at opposite ends of the spectrum and are more clearly defined, which justifies them being the focus of analysis in this study.
2.2 Simons' (1995) management control systems model
MCSs consist of formalized mechanisms that provide information to maintain or modify organizational management standards (Simons, 1995). The model proposed by Simons (1995), called Levers of Control (LOC), is formed of four types of systems: belief systems; boundary systems; diagnostic control systems; and interactive control systems.
Belief systems comprise the explicit set of organizational definitions that managers systematically communicate and reinforce to provide basic values, purpose, and direction to the organization (Simons, 1995). According to Widener (2007), these systems communicate the essential values to inspire and motivate employees to research, explore, create, and expend efforts engaging in appropriate actions. However, in dynamic environments, there must be some restriction on the employees to prevent them from engaging in high-risk behavior.
This restriction is given by boundary systems. Simons (1995) explains that boundary systems indicate rules and limits of behavior that are accepted in the organization. Their use induces a cautious process of innovation and creativity among employees, since the systems communicate the organizational risks and the previously accepted limits for carrying out tasks (Heinicke, Guenther, & Widener, 2016). Boundaries are included in the codes of conduct (Kruis et al., 2016).
Diagnostic control systems seek to motivate employees to perform and align their behavior with organizational objectives. Information on critical success factors allows managers to focus their attention on the organizational motivators that should be monitored to achieve the intended strategy (Widener, 2007). It allows managers to benchmark against goals. Similarly to the boundary systems, diagnostic control systems act as a boundary for employee behavior (Simons, 1995).
Interactive control systems provide active dialogue between members of the organization with a view to discussing forms of strategic positioning (Widener, 2007). Their use promotes organizational learning and the search for opportunities (Henri, 2006).
Integration of the four levers is essential in strategy control, since their strength does not lie in how each one is used individually (Widener, 2007). Bedford and Malmi (2015) argue that in their investigations researchers should approach control systems holistically, since different organizations can use different control system configurations.
Previous research has identified a relationship between strategic behavior and MCSs, but it has examined them in isolation (Kober et...
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