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Strategy and Performance in Professional Service Firms: Does
Personnel Control Tightness Matter?
Name: Roy van de Zilver Student number: 11396040
Thesis supervisor: Prof. F.H.M. Verbeeten Date: 22-6-2018
Word count: 14688
MSc Accountancy & Control, specialization Control
2 Statement of Originality
This document is written by student Roy van de Zilver who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
3 Abstract
This study has been executed to obtain a MSc in Accountancy & Control, specialization Control. The study uses the survey method to investigate the relationship between Strategy and Personnel Control within Professional Service Firms and the impact these variables have on Performance. The theoretical framework used in this study acknowledges that the firms’ Strategy can be of influence on the emphasis that is placed on Personnel Control and that these variables separately, as well as the fit between these variables, can affect Performance. This study predicts that; 1) the Cost Leadership strategy is positively related to Implicit Personnel Control Tightness while the Differentiation strategy is positively related to Explicit Personnel Control Tightness, 2) both Explicit and Implicit Personnel Control Tightness are positively related to Performance, and 3) the Cost Leadership strategy is positively related to Performance when it’s pursued together with Implicit Personnel Control Tightness while the Differentiation strategy is positively related to Performance when it’s pursued together with Explicit Personnel Control Tightness. Using multiple regression analysis with survey data from the Professional Service Firm Thesis Survey Project 2017-18, this research finds 1) a significant correlation between the Differentiation strategy and Explicit Personnel Control Tightness, 2) only a significant correlation between the Implicit form of Personnel Control Tightness and Performance, and 3) a significant positive correlation between Implicit Personnel Control Tightness and Performance when Implicit Control Tightness is used in combination with the Cost Leadership strategy and a weak significant negative correlation with Performance when Implicit Personnel Control Tightness is used in combination with the Differentiation strategy. Any significant correlation with Performance cannot be found for both strategy types in combination with Explicit of Personnel Control Tightness.
4 Table of contents
1 Introduction ... 5
2 Literature review and theory ... 7
2.1 Professional Service Firms ... 7
2.2 Personnel Control ... 8
2.3 Strategy... 10
2.4 Performance ... 12
3 Hypotheses development ... 14
3.1 Strategy and Personnel Control ... 14
3.2 Strategy, Personnel Control and Performance ... 16
3.3 ‘Fit’ between Strategy and Personnel Control and Performance ... 19
4 Research method and design ... 22
4.1 Sample and survey procedure ... 22
4.2 Measurement of variables ... 24
4.2.1 Personnel Control Tightness ... 24
4.2.2 Strategy ... 26
4.2.3 Performance ... 28
4.2.4 Control variables ... 29
5 Empirical results ... 35
5.1 Descriptive statistics and univariate results ... 35
5.2 Multivariate tests of hypotheses ... 36
6 Concluding discussion ... 41
6.1 Limitations of this study and directions for future research... 45
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1 Introduction
In recent years, organizations have become flatter and leaner, managers have wider spans of control and elaborate hierarchies and systems of action controls have been dismantled and replaced with empowered employees. Moreover, there has been a movement from a largely industrial economy dominated with manufacturing firms to an economy dominated by more knowledge intensive firms. In this environment, shared organizational values and the selection and placement of employees have become more important. These personnel controls, as a part of the MCS, ensure that employees understand the organizations’ objectives and increase the likelihood of self-monitoring, which is the intrinsic naturally present force that drives most employees to act in line with the organizations’ objectives (Merchant & Van der Stede, 2007). The vast majority of previous literature mainly investigated the design of Management Control Systems (MCSs) in general or specifically in manufacturing firms, rather than professional service firms. As these professional service firms account for an increasing part of economy activity, there is a need for more research into professional service firms (Chenhall, 2003).
In previous literature, it has been argued at an early stage that professional service firms need a different way of strategic thinking compared to manufacturing firms (Thomas, 1978), and that the knowledge complexity characteristic of professional service firms is a driving force in the design and use of MCSs (Ditillo, 2004). Previous literature also shows that strategy can have implications for the way that MCSs are designed (Merchant & Van der Stede, 2007; Porter, 1985), in particular when it comes to personnel control (Liao, 2005).
According to Ouchi (1979), professional service firms should place emphasis on personnel control, since output measurement is low and behavior control is difficult or imperfect in these organizations. In addition, professional service firms will have formal control systems that guide behaviors of their employees (Goodale et al., 2008). A key feature of professional service firms relevant to the design of their MCS is that they must rely on employees with a high degree of professional expertise and therefore, professional service firms are trying to hire the best graduates and employees within a specific expertise (Auzair & Langfield-Smith, 2005). Those strategic resources of a professional service firm are for that reason critical to the success of the firm. However, they are mostly owned and controlled by the individual professional rather than the firm itself, implicating that professional service firms should place emphasis on the hiring process and other personnel controls (Løwendahl, 2005).
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The purpose of this paper is to add knowledge to the organizational theories and the limited body of knowledge of the design of MCSs in Professional Service Firms. This paper assumes a contingency approach and uses empirical analysis to investigate whether the use of Personnel Control Tightness varies from Strategy across a wide range of occupations in Professional Service Firms. More specifically, this paper predicts that it is the specific ‘fit’ between the type of Personnel Control Tightness and the Strategy of a firm that affects Performance.
The empirical results of this study suggest that with regard to Professional Service Firms, the Differentiation strategy is positively related with Explicit Personnel Control Tightness, Implicit Personnel Control Tightness is positively related with Performance, Implicit Personnel Control Tightness in combination with the Cost Leadership strategy is positively related with Performance, and Implicit Personnel Control Tightness in combination with the Differentiation strategy is negatively related with Performance. Jointly, these findings suggest that there is no moderate effect of Personnel Control Tightness and that it is most probably not the ‘fit’ between the specific combination of Strategy and Personnel Control Tightness that affects Performance, implicating that other contingent variables might be the driving force for Performance.
I would especially like to thank Prof. F.H.M. Verbeeten for his invaluable input into the development of this study. I would also like to thank all the individuals that participated in the Professional Service Firm Thesis Survey Project 2017-18 and in particular Ms H. Kloosterman MSc for organizing and setting up this project.
The remainder of this paper is organized as follows. First, this paper presents the theoretical framework relevant to Professional Service Firms, the types of Personnel Control, and the Strategy typologies that have been acknowledged in prior literature. It’s followed by chapter three which builds towards the hypotheses of this study. In the subsequent chapter, the research design is outlined, detailing the survey procedure, data sample and measurement of variables. Then, the empirical findings are presented in the second last chapter. Finally, this study concludes by discussing the implications of the findings, study limitations, and directions for future research.
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2 Literature review and theory
2.1 Professional Service Firms
In previous years, some research in understanding professional service firms has been done already. However, in many instances of this research, the term of a professional service firm remains undefined or is defined indirectly by only providing a brief list of industries in which professional service firms operate rather than providing characteristics of a professional service firm. This study utilizes the framework of Von Nordenflycht (2010) and defines Professional Service Firms on the basis of three distinctive characteristics, 1) knowledge intensity, 2) low capital intensity, and 3) professionalized workforce. Based on fifty-two articles associated with professional service firms, of which only twenty-one offer a definition of the term professional service firm encompassing a wide range of distinctive characteristics, the framework of Von Nordenflycht (2010) explains these three distinctive characteristics associated with professional service firms. The most fundamental characteristic of professional service firms is knowledge intensity, which implies that professional service firms rely on intellectual skilled employees in all organizations’ levels. The second characteristic of professional service firms is low capital intensity. Instead of knowledge intensity, low capital intensity is not necessarily an implication for professional service firms since it could be possible that a professional service firm relies on high capital intensity (e.g. Hospitals). Finally, the last characteristic comes from the “professional” part and is defined as professionalized workforce, to refer to two institutional features of professionalization: ideology and self-regulation (Von Nordenflycht, 2010).
Compared with other organizations, pure service firms have unique characteristics. These characteristics include 1) intangibility of services, meaning that a service is not a physical product, 2) inseparability of production from consumption, where customers play an essential role in the production of services, 3) perishability of services, where unconsumed services will be lost, 4) heterogeneity of services, where every delivered service is unique in any way whatsoever (Auzair & Langfield-Smith, 2005), and 5) the usual simultaneity of service production and consumption (Brignall et al., 1991). Based on the number of customers processed by a typical unit per day and six dimensions that detail the firms’ response to this demand, three generic service types can be identified, 1) professional service firms, 2) mass service firms, and 3) service shops (Brignall et al., 1991). For professional service firms applies
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that they process a low number of customers per day while careful considering contact time, customization and discretion and orientating on people, front office and processes.
2.2 Personnel Control
This study defines Personnel Control as the use of employee selection procedures with the goal of maximizing goal congruence between employee and organizational objectives (Merchant, 1982; Ouchi, 1979; Perrow, 1970; Snell, 1992). More specifically, this study defines Control Tightness to distinguishes two forms of Personnel Control. Tightness is defined as the degree of flexibility in the control system, which can be created in two ways; 1) increasing the extent or scope of the MCS or 2) expanding the level of tolerance for deviations from the MCS. In the first case, Tightness is achieved by creating more controls, more rules and more procedures. In the second case, Tightness is achieved by minimizing the difference in scope between the actions defined by the control system and those deemed acceptable within the organization. This study distinguishes between Explicit Tightness and Implicit Tightness. Explicit Tightness can be achieved through control selection, definition and completeness, while Implicit Tightness is created by decreasing the level of tolerance for deviations from the MCS. Explicit Personnel Control Tightness is defined as the extent of use of employee selection procedures as part of the MCS, where a Tight system is one in which the employee selection procedure is extensive, as the organization seeks to actively select employees with particular attributes. Implicit Personnel Control Tightness is defined as the degree to which deviation from human resource standards is tolerated, where a Tight system is one which does not allow any deviation from human resource standards.
Existing literature does not consistently define control tightness for each type of control1 (Van der Stede, 2011). And instead of defining tight and lose control systems as a whole, relatively many researchers discussed the components or characteristics of tight control. Merchant and Van der Stede (2007) define control tightness as the “degree of certainty that employees will act as the organization wishes (pp. 118) whereas other studies define and characterize a tight control system as one in which administrative control dominates over several social and individual control (Amigoni, 1978; Dearden, 1971; Dalton 1971). Another definition of control is utilized by Anthony, Dearden and Govindarajan (1992) and is also
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adopted by Hunton, Mauldin and Wheeler (2008) and Campbell, Epstein and Martinez-Jerez (2011). In these studies, control is defined based on the extent of monitoring whereby a firm can be said to exercise tight control if management monitors the activities of the business unit frequently. Whitley (1999) built on this approach and utilized the interpretation of Lerner and Wanat (1983) and Butler (1991) to imply a control system as tight when decision rules are precisely defined, whereas in loose control systems precise rules may exist but the idiosyncrasies of the particular situation and the people involved are taken into account when deciding a course of action.
One of the first works that has been done with regard to organizational controls is the work of Ouchi (1979). This framework describes two conditions determining which controls should be used for applying an effective control system. The conditions are, 1) the ability to measure outputs; output measurability, and 2) knowledge of which behavior of employees will lead to success; also defined as task programmability (Govindarajan & Fisher, 1990). The latter is also appointed as task uncertainty; when task analyzability is low and the number of expectations of is high, task uncertainty is high (Abernethy & Brownell, (1997). In a situation where one is unable or when it is hard to define the rules of behavior and measure output, the organization relies heavily on ritualized, ceremonial forms of control. These include personnel control; the recruitment of only a selected few individuals, each of whom has been through a schooling and professionalization process which has taught him or her to internalize the desired values and to revere the appropriate ceremonies (Ouchi, 1979).
More recently, Merchant and Van der Stede (2007) explained personnel control as part of a MCS. In their work, they describe that personnel controls build on employees’ natural tendencies to control and/or motivate themselves. In a situation where employees are unaware of or do not support their organization's goals and objectives, little will be accomplished and employees may experience emotional stress. According to Merchant and Van der Stede (2007), personnel control solves this problem of goal congruence, serving three basic purposes. First, they help ensure that every employee understand the organizations’ objectives. Secondly, some personnel controls ensure that the employee have all capabilities and resources to do a good job. And third, some of the personnel controls increase the likelihood of self-monitoring, which is the intrinsic naturally present force that drives most employees to act in line with the organizations’ objectives. The three major methods for implementing personnel control are; 1) selection and placement of employees; 2) training; and, 3) job design and provision of
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necessary resources (Merchant & Van der Stede, 2017). This study mainly focuses on the former and defines Personnel Control as the use of employee selection procedures with the goal of maximizing goal congruence between employee and organizational objectives.
2.3 Strategy
This study utilizes the framework of Porter (1985) and defines two Strategy types based on the focus of the organization, Cost Leadership and Differentiation. In the rich literature related to strategy, many researchers endeavored to identify and define strategic organizational archetypes. Only a few of these studies are frequently used and cited in other studies, which are summarized in Table 1.
Mintzberg (1973) discussed some important implications for strategic planning and distinguished between Three Modes of Strategy-Making. The first Mode is described as The Entrepreneurial Mode, where one strong leader takes bold, risky actions on behalf of his organization. In the contradictory Adaptive Mode, the organization adapts in small, disjointed steps to a difficult environment. Finally, formal analysis are used to plan explicit, integrated strategies for the future in the Planning Mode (Mintzberg, 1973).
Another framework that is used in literature with regard to strategy types is The Strategic Typology, developed by Miles et al. (1978). Their framework specifies relationships among strategy, technology, structure and the process of organizations to interact dynamically with their environments into four strategic types of organizations. Defenders are good at one thing and do not intend to do something new. Prospectors are in contrast to Defenders focused on innovation and how they could respond to new market developments with regard to technology, customer needs, products and services. In the middle are the Analyzers, they offer solid products or services but are also experimenting with new developments. Finally, Reactors encompass those organizations that improperly pursue on of the other three strategies (Miles et al., 1978).
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Table 1. Illustrative studies of strategic archetypes
Study Identified archetypes Features Mintzberg
(1973)
Entrepreneurial Mode
Strategy-making is dominated by the active search for new opportunities and characterized by dramatic leaps forward in the face of uncertainty, power is centralized in the hands of the chief executive and growth is the dominant goal of the organization.
Adaptive Mode The strategy-making process reflects a division of power among members of a complex coalition, reacting to existing problems rather than search for new opportunities. Clear goals do not exist and disjointed decisions are made in incremental, serial steps.
Planning Mode The analyst plays a major role in strategy-making, focusing on systematic analysis, particularly in the assessment of costs and benefits of competing proposals. The planning mode is characterized above all by the integration of decisions and strategies
Miles et al. (1978)
Defenders Maintaining a stable environment with efficient production at a low price with good service
Analyzers Offering solid products or services which are made as efficient as possible with highest possible value for the customer, but also experimenting with new products.
Prospectors Focusing on innovation and responding to new market developments with regard to technology, customer needs, products and services.
Reactors Organizations that improperly pursue one of the other three strategies. Porter
(1985)
Cost Leadership These organizations have a broad scope and serve many industry segments, selling a standard product and placing emphasis on lowering costs from all sources.
Differentiation Emphasizing one or more attributes that customers in an industry perceive as important. Being awarded for their uniqueness, usually asking a premium price for the product, delivery system, marketing approach or broad range of other factors.
Focus Narrow scope within an industry, focusing on one specific segment or group. Tailoring their strategy to serve a specific segment, seeking to achieve competitive advantage herein, instead of in the whole industry.
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One of the most used and cited frameworks for defining strategies is the Generic Competitive Strategies Framework of Porter (1985). According to this framework, a firm can have two types of competitive advantage: low cost or Differentiation. Porter (1985) combined these types of competitive advantage with the scope of activities for which a firm seeks to achieve the competitive advantage to finally define three generic strategies: Cost Leadership, Differentiation and focus. Porter (1985) further distinguishes the focus strategy into cost focus and Differentiation focus. The Cost Leadership and Differentiation strategies seek to achieve competitive advantage in a broad range of industry segments, while the focus strategies seek to achieve competitive advantage in a narrow segment (Porter, 1985). Firms that are exerting a Cost Leadership strategy strive to be become the low-cost producer within its industry. Firms seeking uniqueness within the industry it operates, are defined as differentiators. The key element in order to achieve Differentiation is that the firm chooses attributes that are different from its competitors. In contrast with the Cost Leadership strategy, multiple Differentiation strategies can be successful within the same industry (Porter, 1985). The focus strategy is different from the other strategies in the way that it is focused on a narrow scope within an industry. Firms that are following one of two variants of the focus strategy, cost focus or Differentiation focus, choose to focus on one specific segment or group within an industry, instead of achieving competitive advantage in the whole industry (Porter, 1985).
2.4 Performance
Performance itself is an obscure term and is not well defined in the vast literature that relates to it. More specifically, performance itself does not indicate to whom the organization is delivering its performance. In general, performance can be defined as the extent to which an organization is capable of attaining its objectives. In other words, performance is the extent to which an organization succeed in effectively implement an appropriate strategy (Otley, 1999). It has been mentioned that measurement of performance in manufacturing firms has been more extensively investigated than in services (Brignall et al., 1991). It is the characteristics of pure service firms that make it difficult to generalize implications from manufacturing firms related literature to the area of research into service organizations. To measure performance in Professional Service Firms, Brignall et al. (1991) defined six generic performance dimensions, 1) competiveness, 2) financial, 3) quality, 4) flexibility, 5) resource utilization and 6) innovation. Competiveness and financial performance reflect to the success
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of the chosen strategy (Brignall et al., 1991), and thus reflect the extent to which an organization is capable of reaching its objectives (Otley, 1999).
In previous literature, the vast majority explains performance on the basis of performance measurement and performance measurement systems. Rouse and Putterill (2003) define performance measurement as the comparison of results against expectations with the implied objective of learning to do better, while Neely et al. (1995) define performance measurement as the process of quantifying the efficiency and effectiveness of action. Building on this, they define a performance measurement system as the set of metrics used to quantify both the efficiency and effectiveness of actions. In their framework, they classify individual performance measures in four categorizations, 1) Quality, 2) Time, 3) Cost, and 4) Flexibility (Neely et. al., 1995).
With regard to performance measurements systems there are two frameworks that are widely used in previous literature. The first framework is the framework of Kaplan & Norton (1992). They developed the Balanced Scorecard which includes four connected perspectives, 1) financial, 2) customer, 3) internal, and 4) innovation and learning. The performance measures of the Balanced Scorecard are a translation of the activities that are represented in a strategy map. Ferreira & Otley, 2009 developed the performance management systems framework. It represents a progression of previous frameworks to a broader perspective of the role of control in managing organizational performance and aims to give a managerial emphasis by integrating various dimensions of managerial activity with the control system (Ferreira & Otley, 2009).
Based upon the study by Otley (1999), who defines performance as the extent to which an organization is capable of attain its objectives, I define Performance based on financial and nonfinancial subjective measures of the relevant Professional Service Firm’s relative profitability, competitiveness, market share, growth, innovativeness and size (Govindarajan & Gupta, 1985). This is similar to other papers in this research area that also focus on performance relative to competitors (King & Clarkson, 2015).
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3 Hypotheses development
Personnel controls have become more important (Merchant & Van der Stede, 2007), in particular when it comes to professional service firms (Merchant & Van der Stede, 2007; Løwendahl, 2005), since in those firms, output measurement is low and task programmability is imperfect (Ouchi, 1979; Govindarajan & Fisher, 1990; Abernethy & Brownell, 1997). For this reason, it is essential for organizations to implement and use the right employee selection procedures to maximize goal congruence between employees and the organizations’ chosen strategy (Merchant, 1982; Ouchi, 1979; Perrow, 1970; Snell, 1992). However the relationship between strategy and MCSs has been extensively investigated, the majority of the researchers mainly investigated manufacturing firms rather than service firms. Certainly less research has been done into professional service firms specifically and even less research can be found related to strategy and personnel control and the influence that the alignment of both have on performance in professional service firms.
3.1 Strategy and Personnel Control
The success of a strategy may be directly influenced by activities that take place in other areas of business than the level of senior management (Langfield-Smith, 1997). The types of controls that are used with regard to mid-level employees may be critical to the success of a strategy. However, the interactions in studying MCSs and strategy are complex and calls have been made for both case and survey research to understand the complex nature of MCSs and strategy (Langfield-Smith, 1997) and organizational functions and settings (Abernethy & Brownell, 1997).
A study of Auzair and Langfield-Smit (2005) concludes that mass service firms place a greater emphasis on a more bureaucratic MCS than professional service firms and that firms pursuing a Cost Leadership strategy place greater emphasis on a more bureaucratic MCS than firms pursuing a Differentiation strategy. They define a more bureaucratic form of MCS as a MCS that emphasizes action, formal and tight controls, rather than result, informal and loose controls. One of the limitations of this research is that it is focused on bureaucratic MCSs as a whole, not incorporating personnel control. The researchers mention that other types of control have been found to be important in service firms and that it thus may be interesting to investigate the use of personnel control in professional service firms (Auzair & Langfield-Smith, 2005).
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Another research only scratched the surface of control practices of knowledge-intensive firms, which is one of the features of professional service firms according to the framework of Von Nordenflycht (2010). The study suggests that knowledge complexity is a driving force in the design and use of MCSs. More specifically, it concludes that MCSs on the one hand help to coordinate activities and on the other hand foster a specific mode of knowledge integration (Ditillo, 2004). The most important takeaway from this research is that it calls for more research that enlarge the set of variables that affect both MCSs’ choices and their effectiveness in knowledge intensive firms.
A somewhat similar study to the present research is the study of Govindarajan and Fisher (1990). Their empirical results indicate that output control and high resource sharing are associated with higher effectiveness for a low-cost strategy and behavior control and high resource sharing are associated with higher effectiveness for a Differentiation strategy. While this research also supports the implication that the use of controls varies from strategy, the researchers did not incorporate input control or personnel control in their study. For this reason, the researchers propose that future research could incorporate other organizational variables that are relevant in implementing differentiated strategies and relationships (Govindarajan & Fisher, 1990).
Some organizations rely more heavily on personnel control than other organizations. For professional service firms, the key actions to provide the greatest probability of success may be the selection and hiring decisions (Merchant & Van der Stede, 2007). The strategy that the firm is exerting could determine the emphasis that a firm places on personnel control. Firms that are following a Cost Leadership strategy usually have tighter control systems and are more dedicated to the learning curve than firms that are following a Differentiation strategy (Porter, 1985). Merchant and Van der Stede (2007) also supports that cost leaders should control their employees’ behaviors through relatively tight and formal control while firms competing based on Differentiation should have a looser and informal control system. However, contradictory literature suggests that innovative firms must be prepared to adapt to rapid market changes and technological progress and that their employees need to be creative and meet specific characteristics and competences (Liao, 2005) and that flexible and creative strategic resources may be more appropriate, commonly found in more differentiating organizations (Ittner & Larkcer, (1997).
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In general, literature suggests that firms pursuing Cost Leadership strategies place more emphasis on a set of controls and usually have tighter control systems than Differentiation orientated firms. However, existing literature also suggests that personnel control can be important for firms that are pursuing a Differentiation strategy. For both Strategy and Personnel Control, the present study distinguishes two types. For Strategy there is a distinction between Cost Leadership and Differentiation, while the extent of use of Personnel Control is measured by its Tightness, distinguishing Explicit Personnel Control Tightness and Implicit Personnel Control Tightness. The sparse literature that can be found with regard to the relation between strategy and the use of personnel control in professional service firms hasn’t utilized this distinction in Personnel Control Tightness. Therefore, this research tests whether the Tightness of both Explicit and Implicit Personnel Control depends on the Strategy that is being pursued by Professional Service Firms. Existing literature finds that cost leaders use tight control systems (Porter, 1985; Van der Stede, 2007; Auzair & Langfield-Smith, 2005). The implication is that cost leaders have an intolerance towards any deviation from standards and procedures and thus are expected to use a Tight form of Implicit Personnel Control. Differentiators are on the other hand expected to focus on the Explicit form of Personnel Control. These firms are expected to actively select employees with particular attributes since their employees need to be creative, flexible and meet specific characteristics and competences (Liao, 2005; Ittner & Larkcer, 1997). Jointly, the previous review suggests that:
H1a: Pursuing a Cost Leadership strategy is positively related to Implicit Personnel Control Tightness in Professional Service Firms.
H1b: Pursuing a Differentiation strategy is positively related to Explicit Personnel Control Tightness in Professional Service Firms.
3.2 Strategy, Personnel Control and Performance
Existing research indicates conflicting conclusions with regard to the relationship between strategy and performance on the one hand, and the use of personnel control and performance on the other hand. Ebben and Johnson (2005) find that small firms significantly underperformed when using mixed strategies rather than single strategies. However, their strategy classification for small firms, efficiency and flexibility is different than for instance Porter’s (1980) Cost Leadership and Differentiation classification. Therefore, these findings should not be generalized to the present study. Another study shows that there is no direct
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relationship between strategy and performance. More specifically, Smith et al. (1989) investigate the relationship between size, performance and the four Strategic Typologies of Miles et al. (1978) and only finds support for the relationship between strategy and performance for the analyzer and prospector strategies, indicating that firm size, rather than strategy, can explain differences in this relationship (Smith et al., 1989). Another study shows that the sources of competitive advantage that are responsible for high performance may lie more in the complex relationships among multiple factors rather than one single factor such as strategy (Stimpert & Duhaime, 1997).
Hitt et al. (2001) investigate the reliance on professional employees and firm performance. Their study suggests that human capital, two dimensionally measured as 1) quality of the law school attended by partners (a proxy for articulable knowledge and prestige), and 2) total experience as partners in the focal firm (a proxy for firm-specific tacit knowledge), affects firm performance and the implementation of firm strategies. However, they find a curvilinear relationship between human capital and performance. While human capital is important and increases firm performance, it is also more costly, suggesting that it could decrease firm performance (Hitt et al, 2001). Ittner and Larcker (1997) conclude in their study that several strategic control practices are negatively associated with performance. They substantiate this finding by claiming that strategic control systems can suppress performance in some circumstances when too much emphasis is placed on formal and rigid action plans, targets and information gathering, which are more common in cost leader organizations, when flexible and creative strategic resources may be more appropriate, commonly found in more differentiating organizations (Ittner & Larkcer, (1997). Other studies conclude that businesses that manage employees with more progressive HR practices, including selection and staffing, training, pay for performance and participation, can expect to see higher operational performance as a result (Wright et al., 2003; Wright et al., 2005). However, the researchers do not provide proof that these practices cause that high performance directly and they do not provide any conclusions on the specific use of personnel control, in these studies defined as selection and staffing. Finally, in their investigation, Abernethy and Brownell (1997) provide evidence that when task uncertainty is high, reliance on personnel control is positively related with performance. More specifically, it provides evidence that this type of control is significantly more positively related to performance than any other accounting of behavior control. However, this study has some limitations and suggests areas for future research as
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well. First, while a recognized measure of task characteristics was used in the study, the measurement of reliance on all forms of control needs further development, especially in the operationalization of personnel control, where an unproven proxy was employed. Additionally, despite this research is done within the context of a research and development setting, which certainly has the characteristics of a professional service firm, this research should be broader extended to generalize the study’s findings. The main contribution of their study is that where task uncertainty in research and development organizations is highest, reliance on personnel controls is significantly and positively related to performance, rather than reliance on other accounting or behavior controls (Abernethy & Brownell, 1997).
In conclusion, pursuing a single strategy rather than a mixed strategy can positively influence performance. Secondly, some studies show that only some particular strategy types are positively related with firm performance. Moreover, the sources of competitive advantage that are responsible for high performance may lie more in the complex relationships among multiple factors rather than one single factor such as strategy or systems that control human capital. In contrast, there is some research that provides evidence that human capital does affect firm performance. However, while human capital is important and increases firm performance, it is also more costly, suggesting that it could decrease firm performance. This is supported by a study that claims that strategic control systems can suppress performance in some circumstances when too much emphasis is placed on formal and rigid action plans, targets and information gathering, which are more common in cost leader organizations, when flexible and creative strategic resources may be more appropriate, commonly found in more differentiating organizations. Finally, there are also studies that conclude that businesses that manage employees with personnel control, can expect to see higher operational performance as a result. Furthermore, literature finds that in professional service firms, reliance on personnel control is significantly more positively related to performance than any other accounting of behavior control. Although existing literature provides discrepant outcomes, the present study proposes the following hypotheses:
H2a: Explicit Personnel Control Tightness is positively related with Performance in Professional Service Firms.
H2b: Implicit Personnel Control Tightness is positively related with Performance in Professional Service Firms.
19 3.3 ‘Fit’ between Strategy and Personnel Control and Performance
As previous discussed, literature shows that the emphasis that is placed on personnel control can affect firm performance. Skaggs and Youndt (2003) find that strategic positioning is related to human capital. In their study, they split strategic positioning in customer co-production, customer contact, and service customization. Human capital refers to selection and/or training and is measured by assessing whether or not firms select production employees with high levels of prior education, training, and experience, and how much time and money they spend on internal training activities, relative to competitors. Additionally, they conclude that a proper ‘fit’ between these variables is associated with changes in performance. More specifically, they find partial support for differences in performance among service firms as a result of the fit between strategic positioning and human capital (Skaggs and Youndt, 2003). A study done in a Taiwanese setting implies that firms should use an appropriate combination of human resource management (HRM) control systems (behavior, output and input control) to achieve better performance. More particularly, this study concludes that HRM control systems should be linked with strategic goals and objectives to achieve better performance (Liao, 2005). This indirectly implies that the emphasis that firms place on personnel controls could vary from strategy, that it has influence on firm performance and that the way in which strategy and personnel control are coordinated with each other can influence performance. The study of Liao (2005) investigates the relation of three types of control on performance, behavior control, output control and input control. Personnel control encompasses what is defined as input control in this study; rigorous selection and training that help to socialize employees to ensure they have requisite abilities as well as understand and internalize the values and goals to the organization so that they are likely to act in the best interest of the firm (Liao, 2005). More importantly, this study provides evidence that the direct effect of input control on performance suggests that, when executives focus on input control, thus personnel control, it will have a positive impact on a firm’s performance. Another interesting finding from this study is that HRM systems based on input control have a positive effect on performance, particularly in firms that are using a more innovative strategy. The study of Liao (2005) support this by arguing that innovative firms must be prepared to adapt to rapid market changes and technological progress and that their employees need to be creative. The innovation strategy in their study is based on the classification of Schuler and Jackson (1987) and refers to organizations that emphasize the development of products or services that are unique or
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different from those of the competitors, which can be assumed to be identical to the Differentiation classification of Porter (1985). Another study concludes that if an innovative strategy is exerted with an improper HRM strategy, the negative impact on performance will be limited, while matching other strategies with wrong HRM strategies may lead to a decline in performance (Huang, 2001).
In conclusion, literature suggest that a proper ‘fit’ between strategy and personnel control is associated with changes in performance and that HRM control systems therefore should be linked with strategic goals and objectives to achieve better performance. More importantly, some literature finds that the direct effect of input control on performance suggests that, when executives focus on personnel control, it will have a positive impact on a firm’s performance, particularly in firms that are using a more innovative strategy. Building on these findings, the final hypothesis tests whether the ‘fit’ between Strategy and Personnel Control is positively related with Performance. More specifically, the third hypothesis builds on the first hypotheses and therefore predicts that the specific combination of Strategy and Explicit or Implicit form of Personnel Control, is positively related with Performance in Professional Service Firms. The present study therefore provides the following hypotheses;
H3a: Pursuing a Cost Leadership strategy in combination with Implicit Personnel Control Tightness is positively related with Performance in Professional Service Firms. H3b: Pursuing a Differentiation strategy in combination with Explicit
Personnel Control Tightness is positively related with Performance in Professional Service Firms.
To visualize the hypotheses propositions of this study, all hypotheses are captured in Figure 1. The section hereafter explains the research design of this study and sets out the sample and survey procedure and the measurement of variables.
21 Figure 1: Hypothetical framework
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4 Research method and design
4.1 Sample and survey procedure
Mid-level employees of medium to large Professional Service Firms2 were targeted to fill in an online survey questionnaire. The targeted sample population does not include occupations in non-profit organizations, publicly owned organizations such as universities, government organizations, NGOs and social work agencies3. Though, it does include medical doctorswhich may be employed at public or non-profit hospitals4. More specifically, respondents and the organizational units they manage must have met specific characteristics in order to participate, that is to say that the respondent;
has worked the field for more than 3 years;
is not an owner, partner or board member of the organization and is thus subject to the management accounting and control system rather than designing it;
works in an organization with more than 50 employees; speaks and understands English at a business level.
The survey has been prepared in the Professional Service Firm Thesis Survey Project 2017-18, initiated by Ms H. Kloosterman MSc in order to obtain a PhD at the University of Amsterdam. In this project, the way in which Professional Service Firms design their management accounting and control systems, and the effect that these systems have on the
2 Professional service firms include the following occupations;
- Actuarial services - Advertising
- Architecture - Biotechnology
- Consulting Engineering - Consulting IT
- Consulting HR - Consulting Management/Strategic
- Consulting Technology - Engineering
- Fashion design - Financial advising
- Graphic design - Insurance brokerage
- Investment banking - Investment management
- Law - Marketing/public relations
- Media production - Medicine/Physician practices
- Pharmaceutical* - Project management
- Real estate - Recruiting - executive
- Research/R&D - Risk management services
- Software development - Talent management/agencies
3 NGOs and not-for-profits are excluded because they might have different types of incentives when designing the MCSs.
4 Although hospitals will also have this problem, medical doctors make up one of the archetypical professional occupations. Since the Netherlands does not really have private hospitals., most medical professionals working in large organizations are working in public hospitals or not-for-profit hospitals.
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professionals working in these organizations, is being investigated. Since the survey questionnaire covers a broad range of variables, only a part of the complete survey is used to operationalize the variables for this research.
Online survey questionnaires were conducted with 769 respondents via an online platform which enabled the respondents to start the survey and complete it at a later time. A survey questionnaire is considered complete when the respondent clicks on the ‘complete’ button at the end of the survey, disregarding whether all survey questions have been answered. Since all 769 respondents started the online survey questionnaire, it can be excluded that there is unit nonresponse. However, in total, 638 (83%) questionnaires were completely finished. This indicates that there is some item non-response, which is shown in Table 7. The item sample for all the variables included in this research ranges from a minimum of 628 to a maximum of 654.
The online survey questionnaire was constructed and refined following feedback from two separate pre-tests. One pre-test was designed to assess the quality of the items that were used to measure variables of management control types, while the second pre-test was designed to assess the quality of the survey as a whole.
In the first pre-test, twenty professionals were asked to take part in a cross-reference test, of which fourteen professionals5 completed the test. The participants were asked to match the construct definitions for eight control constructs6 on one sheet of paper, to each of the 52 statements on another sheet of paper they felt it most closely resembled. These 52 statements were designed to test each of the eight constructs. For each of them, the number of correct and incorrect matches identified by the participants were sized and the four statements of each of the constructs with the least number of incorrect matches were included in the survey. Consequently, 32 statements were included in the survey, ranging from zero to six incorrect matches out of fourteen.
In the second pre-test, an additional twenty professionals7 were asked to view the survey online in Qualtrics8 and answer a series of questions regarding the content, clarity and
5 2 Management Consultants, 1 IT Consultant, 1 Security Consultant, 1 Accountant, 1 Psychologist, 1 Dentist, 1 Architect, 1 Marketing professional, 4 Lawyers, 1 Graphic Designer.
6 Both Implicit and Explicit forms of Results, Behavior, Cultural and Personnel Control.
7 3 Medical doctors, 1 Dentist, 3 Chemists, 1 Advertising executive, 3 Lawyers, 2 Management Consultants, 1 Architect, 1 Graphic Designer, 1 Artist, 2 Marketing professionals, 1 Electrical engineer, 1 Mining engineer.
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appearance of the online survey as well as the amount of time required to complete the survey. Thirteen participants provided written answers to the questions and the remaining seven participants provided answers by telephone. The answers to the questions resulted in only minor changes in wording and the inclusion of additional answers to a few multiple choice questions.
4.2 Measurement of variables
4.2.1 Personnel Control Tightness
Following Merchant and Van der Stede (2017), the three major methods for implementing personnel control are; 1) selection and placement of employees; 2) training; and, 3) job design and provision of necessary resources. This study defines personnel control as the use of employee selection procedures with the goal of maximizing goal congruence between employee and organizational objectives (Merchant, 1982; Ouchi, 1979; Perrow, 1970; Snell, 1992) and therefore only focuses on the first method of personnel control implementation, according to Merchant and Van der Stede (2017). The present study distinguishes Explicit Personnel Control Tightness (EPCT) from Implicit Personnel Control Tightness (IPCT). Explicit Personnel Control Tightness is defined as the extent of use of employee selection procedures as part of the MCS, where a Tight system is one in which the employee selection procedure is extensive, as the organization seeks to actively select employees with particular attributes. Implicit Personnel Control Tightness is defined as the degree to which deviation from human resource standards is tolerated, where a Tight system is one which does not allow any deviation from human resource standards.
Of all of the eight items that were selected for the questionnaire, only item four was inspired by existing literature. To measure Explicit Results Control Tightness, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements;
1. You have to go through many steps in order to be hired at this firm. 2. The hiring process to become employed at my firm is extensive.
3. I interviewed with several people in my organization before being offered a position. 4. The hiring process at my organization evaluates the knowledge, skills, abilities, values
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High scores on these items indicated a Tighter use of Explicit Personnel Control.
To measure Implicit Personnel Control Tightness, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements;
5. Before being hired, most of my colleagues and I acquired the same kind of job experience.
6. Before being hired, most of my colleagues and I followed the same type of education and training.
7. There seems to be little consistency in the type of professional that gets hired for my job (reverse coded).
8. The competence of employees within my job title varies greatly (reverse coded). High scores on items 5 and 6 indicated a Tighter use of Implicit Personnel Control while high scores on items 7 and 8 indicated a looser use of Implicit Results Control. For this reason, items 7 and 8 were reverse coded in order to optimize answer validity; so that a high value indicates the same type of response on every item.
As shown in Table 2, the initial factor analysis for Personnel Control resulted in three factors. This extraction is in line with the pre-defined distinction between Explicit and Implicit items. Within the Implicit items, the reverse coded items resulted in a separate factor from the other Implicit items, having reliability scores of 0.514 and 0.675 respectively. Therefore, a second manipulated fixed two-factor extraction analysis was carried out to extract only the two forms of Personnel Control, resulting in reliability scores with further possible improvements. After excluding item seven with its low factor loading on IPCT in the additional factor analysis, the reliability score was even lower. Consequently, a final factor analysis in which items 7 and 8 were dropped, resulted in sufficient reliability scores for both EPCT and IPCT. These scores were already reported in the initial analysis. Therefore, the first four items were summated into the EPCT factor and the remaining two unreversed coded items were summated into the IPCT factor for further analysis.
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Table 2
Factor analysis – Personnel Control
Items Initial factor analysis Two factor
analysis Additional factor analysis Additional factor analysis EPCT loadings IPCT (1) loadings IPCT (2) loadings EPCT loadi ngs IPCT loadi ngs EPCT loadi ngs IPCT loadi ngs EPCT loadi ngs IPCT loadi ngs
1. You have to go through many steps in order to be hired at this firm.
0.845 0.850 0.824 0.844
2. The hiring process to become employed at my firm is extensive.
0.824 0.825 0.846 0.827
3. I interviewed with several people in my organization before being offered a position.
0.707 0.703 0.707 0.706
4. The hiring process at my organization evaluates the knowledge, skills, abilities, values and motives of prospective employees.
0.565 0.561 0.567 0.568
5. Before being hired, most of my colleagues and I acquired the same kind of job experience.
0.864 0.708 0.803 0.859
6. Before being hired, most of my colleagues and I followed the same type of education and training.
0.844 0.742 0.822 0.867
7. There seems to be little consistency in the type of professional that gets hired for my job.
0.853 0.532
8. The competence of employees within my job title varies greatly.
0.747 0.656 0.562
Cronbach’s alpha 0.724 0.675 0.514 0.724 0.586 0.724 0.568 0.724 0.675
4.2.2 Strategy
Prior studies have developed and refined survey instruments to utilize Porter’s (1980) competitive strategy framework (see, e.g., Govindarajan, 1988; Miller, 1988; Kumar and Subramaniam, 1997; Chenhall and Langfield-Smith, 1998). The survey questionnaire that is used for the present study includes the items that were taken from the study of Auzair and Langfield-Smith (2005). However, factor analysis shows that the classification of items to both Cost Leadership and Differentiation strategy was not as obvious as in the original study. To measure an organization’s focus on Cost Leadership and Differentiation, respondents were asked to indicate on a 5-point scale how much emphasis is placed on each of the following activities, of which according to the original study, items 2, 4, 9 and 11 were classified as Cost Leadership items, and the remaining seven as Differentiation;
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2. Improving the cost required for coordination of various services 3. Introducing new services/procedures quickly
4. Achieving lower cost of services than competitors 5. Customizing services to customers' needs
6. Improving the time it takes to provide services to customers 7. Providing after-sale service and support
8. Offering a broader range of services than the competitors
9. Improving the utilization of available equipment, services and facilities 10. Providing services that are distinct from that of competitors
11. Making services/processes more cost efficient
Table 3 shows the factor loadings for both strategies. In line with the original study, items 2, 4 and 11 are indicating Cost Leadership (CL) loadings, while item 9 has almost as strong loads for both strategies. Moreover, contradictory with the original study, a stronger loading for Cost Leadership than Differentiation (D) resulted for item 6.
Table 3
Factor analysis – Strategy
Items Auzair &
Langfield-Smith (2005)
Present study
CL D CL D CL D
1. Providing high quality services -0.008 0.610 0.610 0.610
2. Improving the cost required for coordination of various services
0.761 0.245 0.761 0.761
3. Introducing new
services/procedures quickly
0.336 0.547 0.547 0.547
4. Achieving lower cost of services than competitors
0.753 -0.062 0.753 0.753
5. Customizing services to customers' needs
0.178 0.565 0.565 0.565
6. Improving the time it takes to provide services to customers
0.506 0.371 0.371 0.506
7. Providing after-sale service and support
0.171 0.618 0.618 0.618
8. Offering a broader range of services than the competitors
0.151 0.668 0.668 0.668
9. Improving the utilization of available equipment, services and facilities
0.390 0.432 0.390 0.390
10. Providing services that are distinct from that of competitors
0.074 0.717 0.717 0.717
11. Making services/processes more cost efficient
0.753 0.158 0.753 0.753
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Table 3 also shows the classification of the items’ factor loadings based on the study of Auzair and Langfield-Smith (2005). As it is clear that items 2 ,4 and 11 should be classified as Cost Leadership loadings, for items 6 and 9, a more critical decision must be made. Considering the questionnaire statements of both items, for both strategies, arguments can be given why they should be classified as one. But, a cost leader will most likely put more emphasis on improving the utilization of available equipment, services and facilities, rather than a differentiator. For item 9, the factor loadings are almost equal. Regarding item 6, at first sight, improving the time it takes to provide services to customers is a critical success factor that is mostly used by differentiators to differentiate themselves from competitors. However, improving the time it takes to provide services to customers will most likely result in significant cost reductions. And thus, this critical success factor can also, if not more than, be used by cost leaders. Additionally, the factor analysis for items 6 resulted in a higher factor loading for the Cost Leadership strategy than the Differentiation strategy. Taking these considerations together, both item 9 and item 6 are aggregated to the Cost Leadership factor. The reliability scores for both the Cost Leadership and Differentiation strategy changes for the classification based on the original study from 0.695 and 0.746 respectively, to 0.722 and 0.727 for the classification of the present study.
4.2.3 Performance
The characteristics of pure service firms make it difficult to generalize implications from the extensively investigated manufacturing literature to the area of research into service organizations. As performance can be measured through several indicators, the survey questionnaire of the Professional Service Firm Thesis Survey Project 2017-18 used two different constructs for measuring Performance, 1) Work Unit Performance (King & Clarkson, 2015), and 2) Individual Performance. The present study uses Work Unit Performance to operationalize the Performance variable. The survey items for this variable are conducted from the study of King and Clarkson (2015) and includes financial as well as nonfinancial subjective measures of the relevant Professional Service Firm’s relative profitability, competitiveness, market share, growth, innovativeness and size (Govindarajan & Gupta, 1985). More specifically, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements. Compared to other organizations, generally my organization:
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2. has greater market share 3. is growing faster
4. is more profitable 5. is more innovative 6. is larger in size
High scores on these items indicated higher Performance.
Table 4 shows the factor analysis on the Performance items. Although the analysis resulted in two factors, all item loadings direct to one factor. In addition, a more critical consideration has to be taken on item six. In general, larger firms will probably have higher Performance. However, in the present study, Organizational Size is already taken into account as a control variable. Therefore, item six is excluded from the Performance construct in the second analysis, which has a nil effect on the reliability score.
Table 4
Factor analysis – Performance
Items First analysis loadings Second analysis loadings
Performance 1 Performance 2
1. is more competitive 0.749 0.181 0.774
2. has greater market share 0.774 -0.460 0.701
3. is growing faster 0.739 0.324 0.781 4. is more profitable 0.743 0.113 0.767 5. is more innovative 0.612 0.514 0.668 6. is larger in size 0.659 -0.633 Cronbach’s alpha 0.804 0.790 4.2.4 Control variables
Existing literature calls for more in-depth research to understand the complex nature of MCSs and strategy and organizational functions and settings. Some literature proposes that future research should incorporate a large set of organizational variables that are relevant in implementing strategies. More specifically, literature calls to enlarge the set of variables that affect both MCSs’ choices and their effectiveness in knowledge intensive firms. Therefore, this study includes control variables which are expected to influence the experimental outcome while not being of primary interest.
30 Organizational Size
The measure of Organizational Size was based on how large the organization is in terms of number of employees9. Respondents were asked how many people are employed by their entire company to select one box only that represented this number; 1) less than 100, 2) more than 100 but less than 500, 3) more than 500 but less than 5000, and 4) more than 5000.
Results Control
Results Control was measured in multiple ways. Two questions were measuring this variable in a numeric way. Respondents were asked how many performance targets are used in evaluation of job performance and how often results of their own performance are discussed with their supervisor. However, this numeric measure of Results Control is not used for the present study. Results Control is defined as the use of performance standards in the form of goals or targets to evaluate and reward employee actions with the goal of achieving organizational objectives. The survey questionnaire distinguishes between two subtypes of Results Control Tightness. Explicit Results Control Tightness is defined as the extent of use of goals, targets and performance measures as part of the management control system, where a Tight system is defined as one with a lot of controls in terms of amount and scope, while Implicit Results Control Tightness is defined as the degree to which deviation from goals, targets and performance measures is tolerated and/or encouraged, where a Tight system is defined as one which does not permit any deviation from established goals/targets/performance measures. The items that were selected for the questionnaire were conducted from multiple studies, which are indicated below. To measure Explicit Results Control Tightness, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements;
1. In my job, there is a performance measure for everything (Van den Ven and Fery, 1980). 2. My organization sets a large number of performance goals/targets that I am expected to
meet (Van den Ven and Fery, 1980).
3. Employee attainment of goals/targets is checked constantly (Hage and Aiken, 1967). 4. My supervisor frequently checks to make sure that I am meeting my performance
targets (Bodewes, 2000).
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High scores on these items indicated a Tighter use of Explicit Results Control.
To measure Implicit Results Control Tightness, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements;
5. In our organization, goals/targets are essentially a guideline rather than a true commitment (Van der Stede, 2001) (reverse coded).
6. My supervisor is very considerate of my explanations of deviations from pre-established goals/targets (Van der Stede, 2001) (reverse coded).
7. Responding to new, unforeseen opportunities is considered more important by my supervisor than achieving pre-established goals/targets (Van der Stede, 2001) (reverse coded).
8. In my organization, employees are expected to meet pre-established goals/targets with no exceptions (Hage and Aiken, 1967).
High scores on items 5, 6 and 7 indicated a looser use of Implicit Results Control while a high score on item 8 indicated a Tighter use of Implicit Results Control. For this reason, items 5, 6 and 7 were reverse coded in order to optimize answer validity. Therefore, a high value indicates the same type of response on every item.
The details of factor analysis are presented in Table 5. Items 5, 6 and 7 indicated factor loadings in the opposite direction and the Cronbach’s alpha was only estimated at 0.58. These three factors relate more to the ‘lack of Results Control’ or the more ‘interactive use’ of it rather than the emphasis that is placed on this type of control. Thus, these three items were excluded from the measure. A second factor analysis was conducted with the remaining five items and the individual factors all scored above 0.60. The significant increase in the reliability measure has made the decision to summate the five items from the second analysis into a composite Results Control variable for subsequent analysis.
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Table 5
Factor analysis – Results Control
Items First analysis loadings Second analysis loadings
1. In my job, there is a performance measure for everything.
0.769 0.788
2. My organization sets a large number of performance goals/targets that I am expected to meet.
0.736 0.751
3. Employee attainment of goals/targets is checked constantly.
0.808 0.813
4. My supervisor frequently checks to make sure that I am meeting my performance targets.
0.759 0.753
5. In our organization, goals/targets are essentially a guideline rather than a true commitment.
-0.117 6. My supervisor is very considerate of my
explanations of deviations from pre-established goals/targets.
-0.352
7. Responding to new, unforeseen opportunities is considered more important by my supervisor than achieving pre-established goals/targets.
-0.202
8. In my organization, employees are expected to meet pre-established goals/targets with no exceptions.
0.625 0.652
Cronbach’s alpha 0.578 0.808
Behavior Control
The Behavior Control variable is defined as the use of standardized processes, procedures, rules and routines to monitor, evaluate and reward employee actions with the goal of achieving organizational objectives. Similar to the other variables of Control, the Behavior Control variable separately measured Explicit Behavioral Control Tightness and Implicit Behavioral Control Tightness. The Explicit form is defined as the extent of use of standardized processes, procedures, rules and routines as part of the management control system, where a Tight system is defined as one with a lot of controls in terms of amount and scope, while the Implicit form is defined as the degree to which deviation from established processes procedures, rules and routines is tolerated and/or encouraged, where a Tight system is defined as one which does not allow any deviation from standard processes, procedures, rules and routines. The items that were selected for the questionnaire were conducted from multiple studies, which are indicated below. To measure Explicit Behavior Control Tightness, respondents were asked to indicate on a 5-point scale, the degree to which they agreed on the following statements;
1. Whatever situation arises, we have existing processes, procedures or rules to follow in dealing with it (Hage and Aiken, 1967).
