M C : SME C S B I T University of Groningen

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University of Groningen

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HE INFLUENCE OF

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USINESS

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NTELLIGENCE SYSTEMS

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ANAGEMENT

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ONTROL

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SME

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ASE

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TUDY

Name: Melissa L. Perotti

Address: Wilhelminastraat, 1054VX Amsterdam Telephone: +31 (0)6 30 71 43 25

Email: melissa.perotti@gmail.com Student number: 1708708

Master of Science Business Administration Specialisation Organisational & Management Control

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PREFACE

Hereby I present you, dear reader, my master thesis. After only 16 months of hard work, it might be so that my student life has come to an end. This thesis is a result of following the master in Business Administration with specialisation of Organisational & Management Control. My interest in internal organisational complications has now been summarised within this small booklet.

My thesis focuses on how management control can be supported within SMEs. Many theories explore management control systems, enterprise systems and business intelligence systems and how these systems can be used to support control. However, almost none of them realise that a huge and very important group, small and medium sized organisations, are overlooked. SMEs are functioning on a whole different level which means that certain systems meant for large organisations are not useful for these smaller, more fragile companies. By acknowleding these differences within this paper, I hope scientists realise that much more research in neceessary on this topic. Additionally, my main intention is that this paper can help smaller organisations to implement and use BI systems in order to control their business, keep finding solutions in order to grow and enhance their performance.

In this preface I see the chance to thank my supervisor, mr. Jan Willem de Kort, for his patience and help, and Vanboeijen, without the honesty and openness of all interviewees it would have been impossible to write this thesis. Additionally I would like to thank my father in particular for his help and support and my family and friends for their support, especially the last couple of weeks.

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ABSTRACT

This paper explores the importance of having management control within SMEs and how (business intelligence) systems can support this control. It is claimed that the use such information systems by SMEs often does not provide good support due to lack of internal knowledge or too little (financial) resources to implement and use the system. However, new developments within the market creates new opportunities. With the use of an in depth case study at a medium sized healthcare facility, the opportunities of BI system support for management control is explored based on the foundations of the Balanced Scorecard. Additionally focus is put on the selection and implementation phases, which parties are involved and what kind of organisational characteristics can influence the final effectiveness of the BI system support. A model is developed which shows how a BI system can be used in order to overcome management control problems. It is found that a BI system creates much value in supporting management control once the selection and implementation phases are performed accurately and when the right parties are involved.

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Understanding. It is all about understanding. Understanding your friends reduces the chance of arguing, understanding theories enhances the probability of passing your exams. Ignoring issues that you do not understand causes bumps in the road such as an argue with your friends or failing your exam. Just like you, organisations need to understand their internal actions to navigate around those bumps. Without navigation, the organisation can crash which leads to financial losses or even organisational failure.

For an organisation to have awareness of their internal processes, management control is critical. Without knowing why certain results occur no improvements can be made. Additionally, without some sort of control, employees will follow their own objectives, which could be in the expense of others or of the organisation itself. Management control is a broad concept which can be monitored with the use of various types of systems. Many literature states that for small and medium enterprises (SMEs) the implementation and use of those systems will not work due to several reasons concerning a lack of (financial) resources and unsuitable business strategies for the type of control the systems distribute.

Recently new, affordable integrated software systems have entered the SME market which are especially developed for smaller organisations. This paper will focus on business intelligence (BI) systems, systems which are using multiple data channels to create an overview of all key performance indictors to create a better understanding of the internal processes of the organisation.

The paper will start with a theory chapter to exploit earlier research on management control. Much scientific literature is published on management control and information system integration, however in combination with SMEs less is researched for. My contribution to the management control literature will be two-folded. First, information is gathered on BI systems for SMEs in the Dutch market. Second, a case study explores the implementation and use of this BI system within a medium sized healthcare facility to investigate if the system can support management control. With the gained knowledge, a model is created which links the BI system with management control based on the four factors of the Balanced Scorecard. The purpose of the paper is as follows: (1) Design a model on how business intelligence systems can support management control within SMEs in order to improve business performance and (2) determine how organisational characteristics will influence the implementation process of such a business intelligence system.

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1.THEORY

For organisations, control is indispensable. It is essential to make sure their main strategy will be implemented correctly and that their employees are doing their job as needed without the necessity to interfere. Management control is a difficult issue which is discussed frequently within the scientific literature for decades. Discussions on how much control is necessary and how to distribute control is mentioned many times, however, almost all discussions include large organisations. While middle sized and even small organisations do face comparable problems, little research has focused on them until recently. Harrigan, Ramsey, and Ibbotson (2011) state that there are approximately 18 million small and medium sized enterprises (SMEs) in the European Union, and together they are responsible for 67% of the jobs and 59% of the GDP (Ritchie & Brindley, 2005). In other words, SMEs are considerably important for employment and the economy, however, are often overlooked.

In this chapter, first, management control and the problems which arise with it will be discussed. Next, a solution for these management control problems will be explored, namely management control systems. After this, the focus will be put on medium enterprises (50-250 system users) and other solutions will be explored such as enterprise systems and business intelligence systems.

1.1MANAGEMENT CONTROL

Ouchi (1979) states that “the problem of organization is the problem of obtaining cooperation among a collection of individuals” (p833). Without some sort of control, each individual will follow his or her own goals and objectives, perhaps in the expense of other individuals within the organisation, or even in the expense of the organisation itself. Managers must ensure that their employees will act in the organisation's best interest and therefore they must exercise management control. Management control exists to address management control problems, is available in countless forms, and has been categorised in many ways (see table 1).

Studies Type of controls

1. Anthony et al, 1989 formal and informal control

2. Ouchi, 1977 output and behaviour control

3. Ouchi, 1979 market, bureaucracy and clan control

4. Hopwood, 1976 administrative and social control

5. Merchant & van der Stede, 2007 results, action, personnel and cultural control

Table 1: Type of control

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organisation, organisational size has more influence on the informal control. The culture of small enterprises is proven to be significantly stronger in supportiveness, competitiveness and innovativeness, and is more performance-oriented compared with large organisations (Gray, Densten & Sarros, 2003). Informal control contains clan control, social control, personnel and cultural controls.

(2) Output and behavioural control are pretty much straight forward. Output control is the ability to control the desired results of an individual where behavioural control includes the actions and attitude of the individual.

(3) The three controls mentioned by Ouchi (1979) are divided in the possibility to measure contributions. Market control is the ability to precisely measure and reward individual contributions. On the other side of the equation stands clan control which uses a socialisation process which effectively eliminates goal congruence between individuals. Bureaucratic control includes close evaluation with a socialized acceptance of common objectives and can be seen as a combination of market and clan control.

(4) Hopwood (1976) his definition of types of control can be compared to the formal and informal control of Anthony et al (1989) where administrative control equals formal control and social control is the same as informal control.

(5) Results controls are more indirect compared with action controls and can give more autonomy and creativity in a job, while action controls are far more direct and give the employee little room for mistakes and own initiatives. Personnel and cultural controls are informal, behavioural types of control which are not consciously designed. They often supplement formal control with helping to ensure understanding organisation’s goals, norms and values (Langfield & Smith, 1997; Merchant & van der Stede, 2007).

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1.2MANAGEMENT CONTROL PROBLEMS

Causes of management control problems can be lack of goal congruence which exists out lack of direction and motivational problems, and/or personal limitations and will be discussed in the following part.

1.2.1 Lack of goal congruence

Goal congruence means that the entire organisation is shaped to meet the organisation’s goals. Lack of goal congruence occurs when management control problems are present in the form of lack of direction or motivational problems (Merchant & van der Stede, 2007). Bouillon et al (2006) examined the importance of goal congruence and concluded that understanding and accepting organisation’s values combined with reinforcing incentives may result in less control costs and more effective control.

Motivational problems and lack of direction are thus integrated with each other here. Knowing what an individual will contribute within the organisation leads to understanding and less motivational problems. Goal congruence (next to resource interdependence and mutual trust) increases inter-organisational cooperation which leads to better performance (Merchant & van der Stede, 2007).

Lack of direction of employees

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Overall, it is essential that each person in the organisation understands their contribution to the organisation in all levels of business. If not, management control problems will occur which leads to inefficiency.

Motivational problems of employees

Work motivation is a major factor in distinguishing performance effectiveness, and must be taken into consideration in designing jobs. Motivational problems can occur when the fit between the person and their work is imperfect. Various reasons can cause these problems; the individual and organisational objectives do not align, or individuals do not know what their exact job description is, or their job is too simple or complicated.

Many literature has been written on how to keep employees motivated. It is stated that the degree of role diversity (i.e. having multiple tasks) an job level (i.e. position within the organisation) can influence the degree of motivation significantly. In addition, intrinsic rewards such as self-worthiness and pleasure must be met and can be manifested in programs of job extension, job enrichment, and job enlargement. Without realisation of these intrinsic rewards, motivational problems are most likely to occur (Culmi & ElSalmi, 1970; Gallagher & Einhorn, 1976)

1.2.4 Personal limitations of employees

Last, personal limitations occur when employees know what is expected of them, they are motivated to do so, however they lack knowledge to perform well. This can happen because of lack of training or information, or just lack of intelligence (Merchant & van der Stede, 2007). The first two reasons, lack of training and lack of information can occur because of miscommunication. When management is ignorant about activities at lower levels, inefficiency will occur and with that, personal limitations will arise consequently. Often, managers find it difficult to oversee their entire organisation and employees. When a good view becomes too challenging, implementing systems is to keep track of employees’ activities and provide them with essential information and training (Bottazzo, 2005; Rodrigues, 2007).

1.3MANAGEMENT CONTROL PROBLEMS SOLUTIONS

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management control systems (MCSs). By implementing these MCSs in the right manner, employees are led toward the goals and objectives of the firm (Anthony & Govindarajan, 2007; Merchant & van der Stede, 2007). In this part MCSs are further explained, where focus is put on the Balanced Scorecard, and on how SMEs are troubled trying to implement them.

1.3.1 Management Control Systems

In order to gain any type of control mentioned above, management control systems can be implemented. MCSs influence employees’ behaviours in desirable ways and include everything that will help carry out the business strategy. The systems can achieve the highest efficiency in performance if the measurements are well defined and carried out.

Performance measurement includes improving plans and communicates the manner of decision-making within the work activities of all employees. Goals are reviewed in order to operate as effective and efficient as possible (Rue & Byars, 2005; Kaplan & Norton, 1992). Numerous articles are written about this topic with many divergent determinations of key performance indicators (KPIs). KPIs are the most critical measurements within an organisation and make the strategic objectives measurable. When having a good overview of these KPIs and knowing which employees are responsible for certain KPIs, management control will be more tangible. Traditionally, these indicators used to be solely based on financial data, such as return on earnings (ROE) and return on assets (ROA). However, since the introduction of the Balanced Scorecard (Kaplan & Norton, 1992) non-financial measurements (i.e. the amount of sales in a car dealer or the production speed in a factory) are becoming more and more important for determining the level of performance.

According to Merchant (1990) non-financial measurement is a powerful technology that could provide more penetrating control, going beyond limits of aggregated financial measures. In addition, the use of financial and non-financial indicators creates a performance measurement system which gives a more complete view of organisational activities and because of that can lead to better-informed business decisions (Sirikrai and Tang, 2006; Hung-Yi Wu, 2011).

Balanced Scorecard

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Study Method Perspectives Key Performance Indicators Kaplan &

Norton, 1992

Balanced Scorecard

 Finance  Cash flow, sales growth, ROE, etc  Customer  % sales, on time delivery, etc  Internal Business

Process

 Cycle time, actual schedule versus plan, etc

 Learning & Growth  Develop time, process time to maturity, etc

Table 2: Balanced Scorecard

By combining the financial indicators with customer information, internal business process data and learning and growth numbers, managers are forced to consider all important operational measures together and let them see whether improvement in one area may have been achieved at the expense of another. By introducing this system, integration between various departments is realised which should result in more efficiency and better performance due to a rise in awareness of activities in the entire organisation. This integration is not only conducive for managers, employees can benefit from it as well. Because of the better understanding of the impact of their own activities, and knowing which activities in other departments are interdependent, management control problems can be diminished (Kahn, 2003).

To put the BSC to work, organisations need to define their most important goals in each perspective, and translate them in key performance indicators in order to make them measurable. Due to the integration of the goals, the strategy and vision are put in the centre instead of the separate controls (Kaplan & Norton, 1992).

1.3.2 Management Control Systems for SMEs

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Since the size of an organisation can be divided in various manners it is necessary to elaborate on this. According to the EU recommendation of 2003, the amount of employees varies between 0-250 and turnover can vary between €2mln and

€50mln. In case of information system research, focus is not put on the entire organisation population, but on the amount of system users, or the amount of workplaces (see table 3).

Within micro and small enterprises, personnel and cultural control are considered quite strong (Gray, Densten & Sarros, 2003). As companies grow, the possibility of control failure will rise since direct observation of managers becomes too difficult and too costly. For these growing firms, systems are necessary to overcome problems (Davila & Foster, 2007). Normally, control problems are prevented by capturing all activities in the control processes. Because of the incapability of medium enterprises to implement highly expensive MCSs, problems in and between departments occur more often as a result of lack of information. Ignorance of their contribution to the total organisation, departments mainly focus on their own success without regarding the success of the entire organization.

In addition, often, separate key performance indicators (KPIs) per department are chosen without checking the others and loosing track becomes easier, just as employees lose track of the entire organisational goals (lack of direction). Consequences of not having a clear system can mainly be seen in the declining competitive advantages in the market compared with their considerable larger competitors (Todd, 1976).

BSC for SMEs

Garengo & Bazzio (2012) recently acknowledged the same problem and tried to find an answer to the control problems within SMEs. They observed a gap in the literature because, in their words, ‘all performance measurement systems are based upon a top-down approach and aim at translating strategy into action, with little consideration to the tendency of small enterprises who don’t give much importance to the formalisation of their strategic choices’ (p79). They proposed a new model which is based on the Balanced Scorecard but is derived from a bottom-up concept: through analysis of current individual actions, key success factors are established. These success factors are compared with the desired strategy which results into a translation of the desired strategy map into a dashboard of indicators necessary for implementation of the strategy. For the implementation of such a BSC, it is necessary to gain knowledge from external facilitators to monitor the whole process. In contrast to most large organisations, SMEs

Company Category # System users

Medium < 250

Small < 50

Micro < 10

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often do not have the knowledge within the organisation to exploit such a system. Last, but maybe most important, the total process of implementation need to go hand in hand with good communication and commitment, especially true for these small organisations. Often, small organisations are very result oriented and do not want to spend too much time on the implementation of such a system which results in failure of such a new BSC system (Bourne, 2001; Garengo & Bazzio 2012).

Overall, SMEs and large organisations differ considerably in terms of management control. The well-known management control systems are often not applicable in smaller organisations, and thus adjustments or alternatives are needed. The BSC of Garengo & Bazzio can be a solution, and their views on the implementation manner are highly relevant. However besides this exceptional system, other alternatives could be possible which will be discussed next.

1.4MANAGEMENT CONTROL PROBLEMS SOLUTIONS:ALTERNATIVES

Summarising the paragraphs above, management control is necessary in organisations to keep employees working towards organisation’s needs. Problems occur mainly through communication failure because management loses overview, and interdepartmental integration by implementing MCSs can solve them. Since various articles concluded that MCSs too costly to implement in SMEs, other solutions must be found to solve complications. Some recent studies tried to find an answer for how to cope with all the information which is needed to get control. However good results are still lacking, and clarification is needed. In this paragraph information systems (within SMEs) are introduced, new developments are explained, the rise of totally integrated enterprise systems are defined, and most important, why those enterprise systems can contribute to management control with the use of business intelligence systems will be discussed.

1.4.1 Information Systems

Without information management control cannot occur; it is a primary management resource. An Information System (IS) exists of four components; hardware, software, structure and people, which together can contribute in planning, control, coordination and decision making in an organisation. ISs are formal, sociotechnical, organisational systems designed to collect, process, store, and distribute information (Piccoli, 2008).

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orders to customers. (2) Difficulties in finding systems and technologies appropriate to the size of business, limited skills and knowledge about IS within the smaller business. Nevertheless, the key reason is (3) the financial investment involved in IS, with many smaller businesses preferring to spend their limited capital on production and operational technologies rather than management support.

However, since the SME market is growing substantially, problems are detected, and new possibilities have entered the market. Through developments in the market such as for instance cloud computing, and specially altered IS systems for smaller companies by IT organisations such as SAP, and Microsoft, investment in IS for SMEs are made more accessible (Levy & Powell, 2005).

1.5ENTERPRISE SYSTEMS

There are many types of information systems, which can differ in solely information about one part of the organisation (production information system) until a totally integrated information system which covers the entire organisation (enterprise system).

An Enterprise System (ES) is integrated software used to support data analysis, reports analysis and streamline the information flow internally in the company. There are countless definitions about ESs, however, most literature define ESs by including enterprise resource planning (ERP), customer resource management (CRM), supply chain management (SCM), and other enterprise-level systems that are critical to all dynamic, globally aware companies (Motiwalla & Thompson, 2012). The standalone information systems such as ERP, CRM and SCM on their own are integrated information systems which encourage interaction between previously distant individuals in different departments or organisation levels because they integrate information between various departments (Chapman & Kihn, 2009; Davenport, 1998). In addition, it allows managers to gather more detailed information of the employee’s activities which can reduce communication problems. Maleki & Anand (2008) acknowledge various critical success factors (CSFs) which must be realised when implementing such a system. Getting executive support, establishing measurable business goals and good communication with clients and towards employees are examples of them.

In this paragraph every stand-alone integrated information system will be exploited and will end with an in-depth description of the joined system, the enterprise system.

1.5.1 Enterprise Resource Planning

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administration activities and logistics and other issues concerning the internal operations. Within the ISI systems, ERP was relatively new and was rapidly evolving within the 1990s and 2000s (Davenport, 1998; Chapman & Chua, 2000; Granlund & Malmi, 2002). ERP systems combine different information flows in one package for achieving the best control and performance. It compounds internal business operations such as financials, operation and logistics, human resources plus sales and marketing all together in one software system. They do not only facilitate information processing of databases, but are entire systems on its own and have potential to inhibit traditional and comfortable modes of management control (Dechow & Mouritsen, 2005). ERP can be used separately, in means of exerting management control through this system, but is often used to support existing MCSs, in means of strengthen information gathering (Chapman & Kihn, 2009; Kallunki, Laitinen & Silvola, 2011).

This ‘new’ development seemed like a dream was coming true for the business world. However, in 1998 Davenport questioned the system and stated that ERP was full with technical challenges and large investments of expertise time and money were necessary to implement it. Companies failed to fit technical imperatives with organisational needs. In addition, the essence of ERP is to regulate the internal organisation without considering the external stakeholders such as customers. According to van der Reep (2005) ERP formalises and standardises the total information flow within an organisation without any opportunity for using informal structures or flexibility. Though it improves horizontal information flows, within and among business units, improves connection with staff departments, and even makes connections with external parties (Boonstra, 2006), it lacks the critical flexible link with customers.

Other research has been done over time and sequel explorations keep coming. Analyses about the influence of enterprise resource planning (ERP) differ in many aspects but are mainly focused on (financial) performance. On the one hand, no significant improvements were found in residual income, and ERP systems should be too easy to replicate which would not cause competitive advantage for the user (Poston & Grabski, 2001; Carr, 2003; Davenport, 2006). On the other hand, performance did improve compared with non-adopters of ERP and it is stated that the system will contribute in management control because the internal transparency will be highly improved by integrating data of different parts within the organisation (Hunton, Lippincott & Reck, 2003; Davenport 1998).

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performance or income (Quattrone & Hopper, 2001; Elbertsen, Benders & Nijssen, 2006; Hendricks, Singhal, & Stratman, 2007; Madapusi & D’Souza 2012).

Enterprise Resource Planning for SMEs

Focusing on SMEs, Buonanno et al. (2005) composed a huge set of data regarding factors which should affect ERP system implementation and compared those factors within SMEs and larger companies. Their findings were surprising; they concluded that SMEs disregard lack of financial resources as the main cause for not implementing ERP systems instead of structural and organisational reasons which were assumed.

Until recently, the ERP market was only concentrated on large enterprises whereas they were constructed for them and were too costly and complex for SMEs to implement. Nowadays, new ERP systems specifically designed for the SME market are increasingly penetrating the sector and are becoming one of the prime ways for these smaller enterprises to achieve competitive advantage (Gable & Stewart, 1999; Koh and Simpson, 2005; Petroni and Rizzi, 2001). Because of this new development, ERP systems now are affordable and interest within SMEs is increasing. The drawback still is that they remain difficult to implement and effects remain unstable (Deep et al, 2008).

1.5.2 Customer Relationship Management

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Customer Relationship Management for SMEs

Again, SMEs often do not have the financials to obtain a CRM system, and often do not have enough specialists in certain functional aspects of business who can maintain those systems (Hills, Hultman & Miles, 2008). According to Harrigan, Ramsey & Ibbotson (2011), SMEs find other, comparable solutions to overcome these shortages. In developing relatively simple internet-based technologies, SMEs maintain their customer relationships and information management capabilities which creates their own competitive advantages. In fact, it is said that SMEs often create competitive advantage due to these long-term customer relationships, without the use of expensive and difficult CRM systems (Harrigan, Ramsey & Ibbotson, 2011; Zontanos & Anderson, 2004).

Alshawi et al (2011) mention that CRM systems are expanding within the SME industry. Realisation occurs about the importance of these smaller organisations and more affordable systems especially designed for SMEs are developed. The most striking conclusion however, were the problems associated with implementation; the need of ICT skills within the staff and system evaluation, integration and support are often underrated. In addition, it is important to use the right type of system for the right type of data; often too little time is used to gain knowledge about these important considerations which causes CRM system failure.

1.5.3 Supply Chain Management

Since the 1990s, global competition rose quickly and it became more and more important to respond to customer needs rapidly. To remain competitive, operational costs must be reduced while quality and customer communication needed to be better. Due to the progresses made within the ICT sector, it became possible to combine and integrate the stages of the supply chain; procurement, production, and distribution (Thomas & Griffin, 1996). This development is called Supply chain management (SCM); a type of system which integrates value-creating activities across both supply and buy side to integrate their activities which results in waste reduction. It can give organisations competitive advantage and research show that SCM positively influences firm performance (Hsu, Tan, Laosirihongthong & Leong 2011).

Supply Chain Management for SMEs

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1.5.4 Enterprise Systems and Management Control

The aspects of an ES helps organisations to get all the information it needs to gain management control. Due to the integration of all organisational information, it is possible to control each aspect of the business. Unfortunately, often information is not organised well which makes it very difficult to determine total performance. Additionally, the data of ESs is often used to support existing MCSs by filtering specific data from the ES for that specific MCS (Chapman & Kihn, 2009; Quattrone & Hopper, 2005; Bose, 2006). Previous research suggests that the integration of ESs and MCSs heavily depend on organisation’s people and cultural control. For translating data into information which can be used to take actions, Business Intelligence (BI) systems are created.

1.6BUSINESS INTELLIGENCE

BI systems can support ES data by enabling the organisation to consolidate all relevant data for improving decision making and management control (Brignall & Ballantine, 2004; Williams, 2004). BI is meant to translate existing data into information based on organisational goals and objectives. Simply said, the task of a business intelligence system is to transform data from quantity to quality information which creates transparency of all important business within an organisation; it delivers critical information in the right form at the right time (Yeoh & Koronios, 2010). It can be seen as a type of management control system, however, it differentiates itself due to its bottom-up approach whereas traditional MCSs can be seen as top-down driven (Elbashir, Collier & Sutton, 2011). It bases its analyses and reports on relevant data gathered from enterprise systems such as CRM, ERP, and SCM data through data mining. Because the integration of various parts of the organisation and different view angles, BI can function as basis for analysing and optimising business processes, management control, and can help with making strategic decisions (Bose, 2006).

In other words, BI systems can filter necessary information from ES data which in their turn can be converted in management control systems, such as for instance a balanced scorecard. The use of MCS is already explained earlier in this paper and states that they are separate systems which are generally studied in isolation. BI systems make it possible to extract any information the organisation needs from the ES which could thus create any type of management control needed, it makes deployment of integrated MCS possible (Elbashir et al, 2011).

1.6.1 Business Intelligence Implementation

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the most important issue they highlight is the possibility of implementation. Implementation requires time, knowledge, complex changes and acceptance. It is an infrastructural project which will change the way of doing business within an organisation (Yeoh & Koronios, 2010). In order for a business intelligence system to survive, it is critical that the organisation adopt and absorb the possibilities of the system and acknowledge the changes that are needed. For this, an operational-level manager is needed who can support and adopt the BI systems, and have absorptive capacity which means that they can influence the culture of an organisation that determines the identification, absorption, and strategic application of new external information. Thus, successful management control does not result solely because of perfect chosen information systems, but due to the level of the organisation’s capabilities in using the converted knowledge of the enterprise and business intelligence systems as well.

Furthermore, Elbashir et al (2011) state that this topic is not elaborated enough and more exploitation is necessary to gain more understanding in BI implementation and the role of the management in this. Most reasoning is emphasized by focussing on a top-down control of the implementation while these systems often are driven from a bottom-up perspective, where the operational managers play a critical role. In addition, it is important to include cultural effects due to the requirement of change within an organisation when a BI system will be applied.

1.6.2 Business Intelligence within SMEs

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2.METHODOLOGY

This part will explore the goal of this research, the type of research which will be adopted, and the research method will be put forward.

2.1THEORY SUMMARY AND RESEARCH GOAL

Normally management control systems will keep the management control problems regulated. Since these systems are proven to be too expensive and not focused on smaller organisations, other solutions must be found (Kaplan & Norton, 1992; Koller, 1994; Player, 2003; Lovata & Costigan, 2002; Hudson et al, 2001; Fassoula & Rogerson, 2003). Processes are evolving over time, and many new systems have entered the market the last couple of decades; ERP, CRM, and SCM systems were developed and later integrated into one combined enterprise system of which BI systems can filter management control information. Systems such as ERP have been analysed extensively within the MC literature of which conclusions until now yield no exclusive answers. Many arguments consider the implementation part, especially concerning SMEs; people are not devoted enough, do not embody the right knowledge, do not incorporate enough time, or do not realize the consequences it has on the internal changes that come along. This altercation keeps coming back on all system developments such as ERP, CRM, SCM, and now on Business Intelligence as well. However until now almost no literature can be found which tackles this problem (Deep et al, 2008; Hills et al, 2008).

Elbashir et al (2011) carry out that the usefulness of a BI system depends not solely on the type of software nor on the manner it will be used, but most important is the way a BI system will be implemented and the influence organisational characteristics have with this implementation. Additionally, it is said that BI systems are comparable to integrated management control systems, however, little literature is elaborating on this topic so far.

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(1) Design a model on how business intelligence systems can support management control within SMEs in order to improve business performance and (2) determine how organisational characteristics will influence the implementation process of such a business intelligence system.

To design this model, several questions need answering; this can be divided in two overarching main questions and multiple sub questions:

1) In what degree can business intelligence support management control within SMEs?

2) Which organisational characteristics are optimal for an effective and efficient business intelligence implementation?

The first part of this research will address in which extend a BI system supports management control in order to enhance business performance within SMEs. For this, the four perspectives of the balanced scorecard will be used; finance, customer, internal business process, and learning and growth. These four aspects are designed to help organisations formulate their KPIs which are aligned with the business strategy. Once the right KPIs are set and communicated throughout the organisation, employees are acquainted with the circumstances an progresses which come along and management control will be more effective which lead to diminishing management control problems. To see whether a business intelligence system can be used in order to regulate management control in this manner the following sub questions are formulated:

1a) In what extend can a BI system supports financial control? 1b) In what extend can a BI system supports customer control?

1c) In what extend can a BI system supports internal business process control? 1d) In what extend can a BI system supports learning and growth?

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2a) What is the influence of the role and support of the top management?

2b) What is the influence of the role and support of the operational-level manager? 2c) What is the influence of the role of the expert (internal/external)?

2d) What is the influence of the type of culture (i.e. willingness to change)? 2e) What is the influence of business strategy link?

2f) What is the influence of management control perceptions?

The absorptive capacity of both operational-level management and top management is already acknowledged within the literature mentioned in the theory section of this paper. Further research on how both manager groups can support the implementation process and the changes which come along with it will be interesting and thus will be explored. In addition, most SMEs do not have the expertise for implementing such a difficult system. Often, experts are hired who will help with the implementation. Interesting will be to see how much influence these experts will acquire or take within the process. Next, a BI system implementation will be accompanied by change. Culture is a big issue when change comes along. Are employees willing to adopt and do they know what kind of changes are necessary? A BI system must be linked to the overall business strategy; KPI can be inserted into the BI system to control the organisation. Is the strategy indeed linked correctly? Last, it is important to check what kind of control perceptions an organisation has. Do they acknowledge management control?

In order to answer these questions, the research will be set up in two main steps. For forming the foundation of this research it is first explored what kind of business intelligence systems for SMEs are on the Dutch market of today and why SMEs differ from larger organisations (see paragraph 3.1). Second, an in depth case study is performed at a middle-sized healthcare organisation to study their management control and how a BI system is capable of supporting this control (see paragraph 3.2). With the results of this study, the research questions are answered (4.1 and 4.2) and a model is created to visualise how a BI system can support management control.

2.2TYPE OF RESEARCH

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Empirical studies are especially important in studying topics that have not attracted significant previous research attention and are useful in developing new, testable, and empirically valid theoretical and practical insights (Eisenhardt 1989; Eisenhardt & Graebner 2007; Ghauri 2004). With the help of another qualitative method, in-depth interviews, information will be gathered in order to answer the research question. The exploratory research will be carried out on two aspects of this study; the first one based on BI, the latter one on the management control capabilities with these systems within a middle-sized organisation.

Because this research is an exploratory in depth case study at one particular organisation, no generalisations can be made. However, the model can be used as starting point for further investigation; it can clarify which aspects need to be addressed in sequential studies. Knowing the focus areas in this particular case on how BI systems can support management control can lead to other studies to generalise these findings, or can lead to finding improvements of BI system support. As Malmi & Granlund (2002) said: “The value of exploratory field studies is their ability to generate questions instead of answers” (p303).

2.3RESEARCH METHOD

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these management control problems can be diminished by using the BI system. Fourth (4), conclusions will be drawn by answering the research questions and creating the using the results of the case study which will capture the most critical aspects that need consideration when implementing a BI system (chapter 4). Last, the discussion chapter elaborates on the pitfalls of this research and recommendations are made for further research (chapter 5).

3.RESULTS

In this section, the results will be discussed. First, an analysis is done about various enterprise systems and business intelligence systems at three different organisations: Microsoft, SAP, and Visma software. Next, the internal case study of Vanboeijen will be put forward.

3.1BI SYSTEMS ACCORDING TO SOFTWARE ORGANISATIONS

Interviews were performed with three large players within the business software market to gain knowledge about the newest enterprise and business intelligence systems focused on SMEs with regard to the Dutch market. The most important question which will be explored here is what the difference is between large organisations and SMEs concerning creating the right BI system. A brief summary will be provided here to exploit the main issues concerning the systems, the (Dutch) interviews can be found in appendices I-III.

3.1.1 BI systems

Business intelligence systems can be seen as an overarching system covering various enterprise systems which filters out most important information out of a pile of data. Because the BI system already collects the information the organisation needs to function and monitor their most important aspects or key performance indicators, this system is easier to understand than the underlying enterprise systems. Training employees in order to work with the BI systems costs less time and (financial) resources. A BI system can be used as interlayer situated as a kind of intranet which helps to inform all employees; "In an organisation of 250 employees, 30 of them maybe know how to use the ESs. Microsoft SharePoint is a kind of BI system for all employees which has different functions including a kind of scorecard which makes it possible to control on various KPIs". So, the BI system cites information from the ES which all employees can understand more easily.

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new BI system which is online accessible and can be used easily on computer, tablet or phone. Additionally, besides looking back to previous results which a BI system normally does, forecasts can be assembled. "Due to the combination of various applications, collaboration and communication will improve significantly. With this system, KPIs can be secured without the use of a management control system which makes it more flexible and less expensive" (product manager Visma.net, Visma Software).

Since a BI system is relatively easy in use and implementation, adoption is possible for smaller organisations which often have limited knowledge on aspects other than their primary operations. New ways of data warehousing and financing makes the systems better attainable and due to new technology developments such as smartphones and tablets new ways of giving information makes the BI system access more flexible and better obtainable.

3.1.2 Differences between large organisations and SMEs

According to the small and midmarket solutions director of Microsoft, it is important to realise that SMEs are incomparable to larger organisations due to several reasons: "First, they do not have big and knowledgeable IT-departments which means that the systems must be relatively simple to work with. Second, the systems should be easy to implement and must be flexible since SMEs develop as no other."

Besides an easier system and less costs to train employees as mentioned above, the BI system itself becomes easier to finance as well. By using new ways to store data such as cloud computing, organisations do not have to invest in large data warehouses, instead they can choose to 'rent' storage at large repositories (product manager, Sap Software).

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Top management Facility Management Region Managers Team leaders Care employees

Summarizing, smaller organisations do differ compared to larger enterprises. Software organisations realise this for quite some time now, however only recently they are capable to fulfil those needs due to new developments on software and data warehousing. Furthermore, the software organisations state that it is critical, especially for SMEs, to design and implement the system accurately with the help of external knowledgeable organisations.

3.2ACASE STUDY:VANBOEIJEN

In order to answer our research questions and to create the final model, a case study will be used. In this particular case, the healthcare facility Vanboeijen was chosen based on several reasons. First, for getting a clear understanding of the use of various information systems in enhancing management control, a difficult to monitor organisation is suitable. Service organisations in which recording all actions is impossible fits in this description. In addition, an organisation with multiple locations makes monitoring even more challenging. Second, Vanboeijen is a medium sized organisation which uses several enterprise systems, and has recently implemented their new BI system. Since the transition is still in its infancy, good comparisons can be made between the old and new situation plus the creation and implementation phases of the system can be remembered easily.

First, a quick overview of the organisation in general will be given (3.2.1). Next, the three stages of an system life-cycle will be put forward: the selection and creation phase (3.2.2), implementation phase (3.2.3) and operation phase (3.2.4) (Sternad, Gradisar & Bobek, 2011). All information is gathered within four in depth interviews with the strategic manager, business controller, IT staff and a team leader. With the collected information the research questions are answered and conclusions are drawn.

3.2.1 The organisation

Vanboeijen is a mental healthcare organisation focused on specialised help for physical and/or disabled people located in three northern provinces of the Netherlands; Groningen, Drenthe and Overijssel. The primary process, the care of the clients, vary from separated facility centres to day care activities segregated in approximately 100 different locations. Within the organisation

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the facility functions and the primary functions, or, the nursing of the clients (see figure 1). Within the primary functions, three hierarchical layers are formed; First the top management is situated, which includes the CEO, CFO, strategic manager, etcetera. Below, the facility management which includes departments such as HR, IT, control, communication, and finance, and the three region managers can be found. Last, various team leaders supervise the care employees who are directly responsible of all client care. Overall, Vanboeijen counts around 1000 FTE in total and has a yearly turnover of €80 million.

In this paper, focus is put on the people using systems in general, and business intelligence systems in particular. The BI system is designed and implemented for the team leaders who are managing the locations in order to create a better overview all results within their location. Since 2010 Vanboeijen implemented a new way of working called ruling at sight (Regie op Locatie). With this method, more responsibility is given to the team leaders in order to respond better and faster to the needs of the client. By communicating with the clients, their guardians, and the care employees, the idea is that locations will continually explore where improvements can be met in order to improve efficiency. For this new method to work even better, top management wanted to design a BI system which can contribute to these improvements by making information per location more visible. The BI final system puts focus on four KPIs; profit (income versus cost), amount of working hours, amount of absenteeism, and client occupancy.

Besides the team leaders, several other employees do work with the BI tool. The region managers use the BI system to control their locations. In addition, Vanboeijen has an organisational control management which function as internal consultant, they can inform locations when change is necessary or the locations can ask the department for help. Last, within the IT department there is one manager mainly responsible for the technical aspects of the system such as implementing new versions of the software or handling authorisation issues. In total, there are approximately 130 people using the BI system.

Though Vanboeijen is a quite large organisation when it comes to the totality of all employees and their turnover, they can be seen as a typical medium sized organisation from a information system perspective based on their system usage and knowledge other than their primary operations. Because the various hierarchical layers above the direct healthcare employees are very small, this organisation suits perfectly for analysing their BI usage and implementation.

3.2.2 The selection and creation phase

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be combined together which easily shows the overview of a complete location which results in a good overview for team leaders of each location. This overview must create better awareness of aspects such as financial result, occupancy, employee sickness and working hours. “Financial results are very important of course, but those results are caused by certain aspects. One of those aspects is employee absenteeism which is a hot topic in this organisation. Normally, absenteeism fluctuates around 5%, however at some locations within Vanboeijen, there are scores of eight, nine, even 10%, so it is necessary to check what to do about this problem. Next, deployed hours is seen as a KPI. Within a service oriented organisation such as Vanboeijen, personnel costs covers 80% of all costs. As you can imagine, deployed hours are thus very relevant since once the personnel is scheduled rightly, costs can be reduced considerably. Fourth and last, our clients, which are our biggest revenues. Clients differ in case of intensity of care which results in different revenues and thus it is important to monitor what kind of clients you have within the various facilities” (Ria Doddema, Business Controller).

For selecting the right system a project group was formed including employees from top management, IT, and some other facility departments. With this group, an organisation was chosen which is expert on BI systems and implementation and acquainted with some people within top management. Vanboeijen started their BI system creation with a third party, however, this collaboration fell apart due to several communication problems. After evaluating the problems, a second partnership was created which lead to the final BI system which is implemented recently.

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difficult organisation which demands specific processes. Collaborating with an organisation which have never dealt with this kind of organisations makes communication the most critical part of the process and this failed considerably the first time”. After 16 months, Vanboeijen decided to quit the development of the BI system in collaboration with the first external party.

The new strategic manager became head of the steering committee and a new project group was formed to search for a new supplier to help with the establishment of the BI system. However, the members of the project group changed frequently which caused delay in development: “The project group was led by the head of the ICT department. One day, he quit his leadership and gave it to the controller without discussing his decision. This was a difficult issue since once a project is started, changes in the composition of the group, led alone the leader, requires time. In addition, letting a controller lead a whole project group is not my best idea” (Lambert Ysbrandy, Strategic manager). The business controller agreed that entering a group half way through a project is not convenient:“After six months of developing in collaboration with the second supplier, my predecessor quit and I had to take over. To enter in an up and running project is very challenging since I was not involved in particular decisions which had been made already. Some of those decisions I would have done differently which made it even more difficult, but you have to deal with it. This second attempt was better than the first one since more focus was put on the end product, however looking back, we started building the system much too soon, more in depth communication was necessary including the end users as well. Instead of communicating and brainstorming about the model, we started building too quickly which resulted in many flaws along the way”.

In total, the development with the second supplier took 16 months as well which should not have been necessary. According to the strategic manager, the external party did the best they could, however at the end of the process they needed to be pushed in order to deliver the final system. Overall, it was the slow communication which caused most of the delay. “Maybe I had to intervene earlier in order to make it work” (Lambert Ysbrandy, Strategic manager).

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3.2.3 The implementation phase

As stated in the theory, implementation requires time, knowledge, complex changes and acceptance (Yeoh & Koronios, 2010). They state that an operational-level manager is needed who can support and adopt the BI systems. In the case of Vanboeijen, the business controller can be seen as the operational-level manager. After the lengthy development phase the BI system needed to be implemented and the controller was held responsible by top management since she was involved at the development process. In order to understand the entire BI tool, the controllers took a course to build reports using the BI system. However, because the development phase took three years in total, the knowledge of their first course had slipped away, and the second course can use some clarification as well.

The first test runs failed due to several data gathering errors and because of this the start of the implementation was once again delayed another two months. This created a lot of resistance from the end user’s point of view. As the business controller put it: “Officially, the final system should have been finished at the end of 2011. Due to several flaws like data errors and other mistakes in information gathering, the BI system was set live on the 1st of March 2012. Additionally, the first day the system was live it flawed directly, the information which should update every night did not work which lead to even more rejection from the team leaders and managers. Thanks to the very long and dreadful creation phase and the flaws in the beginning, it is very difficult to convince the end users that it is a beautiful system and to motivate them to use it. Everyone is still accustomed in using the various enterprise systems and trying to get them to use something new is a challenge”. Because of this, the implementation phase must be taken very seriously. The team leaders and managers were informed per region. Within each of the three regions, a training was given in order to get acquainted with the BI tool. Before, they used various enterprise systems in order to gather information on the four KPIs, but now all information can easily be accessed using this BI system. In addition, they were told how to use this tool in order to communicate certain decisions within their location towards their employees and (the guardians of) their clients. Because the created dashboards within the BI system have clear overview, all operations within a location can easily be linked which creates a better overview which leads in their turn to probably easier and better improvements.

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responsibility for the location managers, in the future they will only by monitored by top management but have to keep their own locations alive based on their decisions what used to be the main task of their managers. When they need some advice it is possible to get in contact with the business controller which can be seen as a kind of internal consultant. The other way around, the business controller can inform and advice the various team leaders when she ascertains striking results at a particular location. However, this way of working has not yet been implemented within the timeframe of this research.

Summarizing, the implementation phase mainly included a training which was held within the three different regions. The end users do realise its efficiency, however since the selection phase took a lot of time and because they were not involved in the prior phases, some resistance was created towards the usage of the new BI tool. At the moment, changes are still occurring regarding adjustments within the organisational structure and the use of the BI information.

3.2.4 The usage phase

Now the implementation has started, the various users can get acquainted with the BI system. Since the new way of working has started as well the team leaders face multiple changes which causes defiance for some and acceptance and motivation for others. “The system camps with resistance of some team leaders. This because they feel that they have enough tasks and responsibilities and for them this is just one task more. In addition, not only the BI system has been implemented, the new way of working is also fresh. This ruling at sight comes along with many new and much more responsibilities of which some team leaders feel resistance as well. I think that the only way to show them how effective and efficient the system is, is by letting them use it. Some of the team leaders are convinces already, however, we have a long way to go” (Ria Doddema, Controller).

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been much less if the end user was involved during the development process, it should have been coherent to involve people who will actually work with the end product”.

The care employees are the people who have direct contact with the clients. These employees do not have directly access to the BI system. At each location, monthly meetings are scheduled to discuss the results within that particular location. With the use of the BI tool, team leaders can better explain why certain actions have to be taken. “Sometimes a team leader have to make decisions which can look unsympathetic in the eyes of the care employees. A good example of this is to diminish healthcare for certain clients because costs have to be diminished. By showing the BI dashboards, team leaders can show the most important reasons why these cutbacks are necessary and together they can discuss various solutions how to improve certain aspects within the location such as absenteeism and deployed hours” (Ria Doddema, Business controller). The team leaders agree with this line of reasoning. Besides communicating the insight of the results per location, every three months each region has a gathering to discuss all pursuits within that particular region and the entire organisation. With the introduction of the new way of working and the BI system, the monthly financial results of each location are shown. “To see how your location is doing compared to your peers works very motivating and creates much value for me. You do not want to fall behind in comparison to the others, it is an extra judiciary control which results in even more excessive considerations. (…) The pitfall is that with the ruling at sight it is assumed that the team leaders will take more responsibility. True, I can interfere concerning retrenching costs by improving the care efficiency and keep an eye on other costs, however, other things I cannot steer. This is because much costs cannot be controlled. For instance, I have to procure monthly issues such as overhead, P&O and costs of other departments, even if I do not use any of their services while other locations use them a lot. I think it is regrettable that these kind of things cannot be controlled per location”.

Besides trying to optimise the financial results by steering on the various KPIs, it is also possible for each location to indicate whether other aspects are necessary such as courses for the entire location or team building activities when their resources are sufficient: “It is possible for us to arrange various courses via O2, an internally established department which focuses on the learning and growth of the employees. Last year I used it a lot, however, this year there are too little resources within my location and thus not possible to arrange any”.

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will try to optimise the operations at location level. In other words, much responsibility is put on the team leaders, since little steering comes from above, with the use of the BI tool they need to run their own part of the organisation. As the strategic manager says: “I consider the BI system as a useful tool which can be used to give feedback towards the primary process concerning important KPIs in an effective manner. It is a reliable instrument which gives enough information for the team leaders that they can intervene on location without a controlling manager on top of it”. The business controller does monitor all locations and when one of the locations stands out, the controller can inform the manager of that particular region. However, this is not a standard protocol, because as Vanboeijen says “Interfering too much is not in line with the new ruling at sight. With the new way of working we even want to cut the management layer out which results in a direct link between top management and team leaders”.

Thus, the BI tool has finally been implemented and the end users are starting to put the system into practice. However, improvements are necessary, which require communication between the adopters and the maintainers of the system. “ It would be logical and handy if the maintainers of the BI system asked our opinion. I agree that many things can be improved, however, I have my daily job and do not have the time to actively intervene with the project, especially when nobody ask you to do so” (Jurjen de Jong, Team leader).

In summary, the usage of the system supports management control within a location. The results create overview of all important KPIs which constitutes as a good communication tool to inform employees and (the guardians of) the clients. Additionally, the financial results of each location are discussed per region every three months with the use of the BI tool. This comparison motivates the team leaders to outperform their colleagues. Overall, improvements do are necessary in order for the BI system to inform the team leaders in the best way possible.

4.CONCLUSIONS

With the results mentioned in the previous section, conclusions can be formed by answering the two research questions on how business intelligence systems can support management control within SMEs (paragraph 4.1) and how certain organisational characteristics can influence the implementation process and usage of it (paragraph 4.2). Furthermore, a model is developed which shows how a BI system can support management control (paragraph 4.3).

4.1SUPPORT MANAGEMENT CONTROL