The activities of a municipality and their effects on the Management Control Package

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The activities of a municipality and their

effects on the Management Control

Package

By

Jorn Everts

Supervisor: B. van der Kolk

Co-supervisor: P.M.G. van Veen-Dirks

University of Groningen

Faculty of Economics and Business

MSc Business Administration:

Organizational & Management Control

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Abstract

This case study looked at the influence of the activities of a Dutch municipality on the configuration of the Management Control Package. The Social Development department and the cluster Environment of the Dutch municipality of Borger-Odoorn were observed. The SD department their activities were found to have a low measurability of the outputs and an imperfect knowledge of the transformation process. The MCP of the SD department has a high focus on results controls while personnel and cultural controls help support the focus on results controls. The cluster Environment their activities have a high measurability and a perfect knowledge of the transformation process. The MCP of the cluster Environment was found to have a high focus on personnel controls while the cultural controls support these personnel controls. We concluded that at the SD department the personnel & cultural controls are put in place to cope with the imperfect knowledge of the transformation process and thus that the activities influence the MCP. An implication from this conclusion is that Dutch municipalities should take the imperfect knowledge of the transformation process into account and configure their MCP to deal with this influence of their activities. A conclusion we also make is that the activities have little influence on the MCP in the cluster Environment. An implication of this finding is that informal personnel and cultural controls may substitute for formal results and action controls at Dutch municipalities.

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1. Introduction

1.1 Introduction

The research conducted by Hood (1991; 1995) about the New Public Management had an impact on the Dutch public sector, in particular on local government levels (i.e. provinces and municipalities). Even before the research of Hood, the Dutch local government made changes in their planning and control methods. For example, in 1987 a new project called the Public Management Initiative was introduced at the local governments in the Netherlands. The main objective of this project was to make the governments more 'business-oriented', which translated in increases in efficiency & effectiveness (ter Bogt, van Helden & van der Kolk, 2011). Hood (1991; 1995) identified the trend of governments to make the public sector more 'business-oriented' and labeled it as New Public Management. This NPM focuses more on day-to-day management and increasing the efficiency & effectiveness in the public sector. The more 'business-oriented' approach of New Public Management can thus have a major influence. However, Ter Bogt & van Helden (2000) found gaps between the newly developed accounting instruments and the actual application of these instruments within the Dutch governments. Christofoli et al. (2010) discuss that "the factors identified in the private sector literature do not seem to explain comprehensively the configuration of control systems in the public sector". The claim that control systems from the private sector can be implemented in a public sector environment and subsequently yield the same results has been critically challenged by Lapsley (2009).

A difference between the public & the private sector are their activities. The public sector is driven by public interest and does not face efficiency based competition. Therefore, the activities of the public sector are unique and different from the activities of the private sector. Hofstede (1981) notes that "the specific value of public, not-for-profit and indirect activities must be taken into account" when dealing with management control. Lapsley & Pettigrew (1994) also say that the wider societal context in which public organizations operate has to be taken in consideration. The objectives in the public sector may be ambiguous and Hofstede (1981) mentions several reasons. One of these reasons is "because the lack of knowledge about means-ends relationships in which the activity considered represents the means". An agreement may be formed among politicians regarding the higher objective but they can disagree about the activities necessary to achieve that objective. This political influence on the activities is unique to the public sector.

To understand the claim made by Lapsley (2009) mentioned earlier, we will look at literature about management control systems and activities. Ouchi (1979) describes three different forms of control for an organization. These are marked-based controls, bureaucracy-based controls and clan controls. Ouchi reasons that the optimal controls depend on the activities of the organization. These are categorized in (1) the ability to measure outputs and (2) the knowledge of the transformation process.

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5 the organization. The total of these individual practices can be seen as the Management Control Package (MCP) (Malmi & Brown, 2008).

1.2 Research Question

Malmi & Brown (2008) call for future research on the configuration of the MCP. Looking at the Management Control Package as a whole instead of singular controls can unveil relations between the individual Management Controls. They also call for future research on the link between the package and external factors. Understanding such relations and links can help to optimize the configuration of the MCP in both the private & public sector. We reasoned that the activities of the private & public sector are different. Therefore, the factor in relation with the MCP that is going to be researched here are the activities of a public sector organization. In this paper, that organization will be a Dutch municipality. The following research question can be formulated:

How do the activities of different departments in a Dutch municipality influence the Management Control Package?

Sub questions are formulated to help answer the research question.

Sub questions

1. What does the Management Control Package of the departments in a Dutch municipality consist of?

2. What are the current activities of two departments at a Dutch municipality?

3. According to the literature, is a fit between the Management Control Package and the activities achieved?

A case study at a Dutch municipality will be conducted to answer the research question. This case study will be held at the municipality of Borger-Odoorn. Two different objects of study within this municipality will be observed.

First, the current composition of the MCP at a department and a second object of study will be determined. This second object of study is comparable with a department. Then, the activities of both objects of study will be observed. Next, earlier research will help to determine whether, according to the literature, a fit exists between the current configuration of the MCP and the activities of the objects of study. A framework will be used to provide a clear picture of the total management control systems currently in place and thus the whole MCP. The activities at the municipality are going to be classified based on the Ouchi (1979) model and then matched against the management control systems in place to assess the appropriateness of these systems. The findings of this research will help understanding the link between the MCP and the activities of the municipality.

1.3 Structure

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2. Literature Review

2.1 Management Controls & Management Control Systems

In the research field of management control system, many researchers have different definitions and concepts regarding management controls (MC), management control systems (MCS) and management control packages (MCP). Often, different terms are used for similar concepts. Some researchers use these concepts interchangeably while in other research papers, they have a different meaning and differ in scope. Starting with a broad view, Flamholtz et al. (1985) define control as "attempts by the organization to increase the probability that individuals will behave in ways that will lead to the attainment of organizational objectives". Chenhall (2003) uses a broad terminology and says that management accounting refers to "a collection of practices such as budgeting or product costing". Some definitions focus more on strategy decision making. For example, Groot & Selto (2013) define a MCS "to be the portfolio of management controls that support all of the steps of strategic decision making". Bhimani et al. (2008) their definition is that a MCS "is a means of gathering and using information to aid and coordinate the process of making planning and control decisions throughout the organisation and to guide employee behaviour". Abernethy & Chua (1996) also focus more on behaviour and use the term organizational control system, and they define it as "a system that comprises a combination of control mechanisms designed and implemented by management to increase the probability that organizational actors will behave in ways consistent with the objectives of the dominant organizational coalition". Otley (1999) says that the task of a MCS is to "provide information that is intended to be useful to managers in performing their jobs and to assist organizations in developing and maintaining viable patterns of behaviour".

Most researchers, such as Abernethy & Chua (1996), Bhimani et al. (2008), Chenhall (2003) and Otley (1999) use the term system to refer to the systematic use of a MC in an organization. This illustrates that a MC and a MCS are two different things. Malmi & Brown (2008) argue that systems, rules, practices, values, and other activities to direct the behaviour of employees that are put in place by the management should be called MCs. When these are used as complete systems, only then they should be called MCSs. We will adopt this view of Malmi & Brown (2008) in this paper to make a distinction between a MC and a MCS.

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2.2 Management Control Package

Several researchers have attempted to distinguish different types of management controls used in an organization. As mentioned in the introduction, Ouchi (1979) was one of those researchers that came up with a framework that is still highly cited1. Other papers are for example Simons (1994), who separates interactive control systems, diagnostic controls systems, belief systems & boundary systems and Williamson (1985), who divides management controls as market forces and bureaucratic controls. Based on Ouchi (1979) and other typologies of management controls, Merchant & van der Stede (2012) created their own framework. Their framework contains four different types of management controls, namely (1) results controls, (2) action controls, (3) personnel controls and (4) cultural controls. This framework has several strengths. One of these strengths is that it is wide enough to include all different MCs while also providing sufficient rigidity (Sandalin, 2008). Also, unlike typologies that focus on value creation (Ittner & Larcker, 2001), this framework is suited to be applied on a non-profit organization. Another strength is that Merchant & van der Stede (2012) include the vision and mission of an organization in their typology under cultural controls. Otley (1999) his framework about performance management for example lacks this inclusion, while Simons (1995b) found that the vision and mission are perhaps key elements in management control. Lastly, this framework is suited for different levels in an organization whereas, for example, Simons' (1995b) framework has a strong focus on top management. A critique of Sandalin (2008) on the typology of Merchant & van der Stede (2012) is that "it lacks specificity in explaining the couplings between control elements". Based on these strengths and weaknesses, the typology of Merchant & van der Stede (2012) will be used in this paper because our case study will be conducted in a non-profit organization and it does not have a high focus on top-management. The framework of Ouchi (1979) will be briefly explained, after which the typology of Merchant & van der Stede (2012) will be discussed more extensively.

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2.2.1 Ouchi

Ouchi's framework is based on two questions, namely: "What are the mechanisms through which an organization can be managed so that it moves towards its objective?" and "How can the design of these mechanisms be improved, and what are the limits of each basic design?" Three types of such mechanisms were identified. These are market-based controls, bureaucracy-based controls and clan controls.

The market-based controls reward individual contribution based on the information of the market. Therefore, such information should be available if this mechanism is implemented in an organization. This mechanism requires the minimum social requirements, defined by Ouchi (1979) as "that set of agreements between people which, as a bare minimum, is necessary for a form of control to be employed". To secure this social requirement, a norm of reciprocity must exist. A norm of reciprocity means that when one party cheats on another party during a transaction, the cheating party will be punished by the whole social system. If information is purposely withheld by one party, a form of cheating, then the correct market price (formed by competitive bidding) cannot form because the price is based on the information. Therefore, a norm of reciprocity is necessary to keep the market prices correct. This mechanism can measure the individual contributions most accurately and reward appropriately. Bureaucracy-based controls rely not only on a norm of reciprocity but also on an agreement on legitimate authority. This agreement on authority mostly implies the acceptance of payment in exchange for a decrease in autonomy by the employee. This allows the employer to direct the activities of the employee and monitor him. The clan controls require both a norm of reciprocity & an agreement on legitimate authority and next to that also a social agreement on personal values & beliefs. The shared values & beliefs make up for a lack of price mechanisms and the rules of bureaucracy because those values & beliefs result in proper behaviour approved by the community.

In short, market-based controls measure most accurately the individual contribution and reward appropriately. Bureaucracy-based controls "involve close personal surveillance and direction of subordinates by superiors" (Ouchi, 1979), while clan controls rely on the

socialization processes in place to control individuals.

2.2.2 Merchant & van der Stede

Merchant & van der Stede (2012) distinguish four different classifications for management controls. These are results controls, action controls, personnel controls and cultural controls.

Results controls

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9 The results controls of Merchant & van der Stede (2012) have strong similarities with the market-based controls of Ouchi (1979) and the diagnostic control system of Simons (1994). All three controls focus strongly on the output of employees. With the market-based controls, individual contribution to the output is measured most easily. Results controls also look at the output and reward on basis of the contribution to the output. With both market-based and results controls, only the output is important and not the way that the output was reached. However, the market-based mechanism assumes that all information is available in order to establish the market price. The results controls do not incorporate this assumption. The diagnostic control systems differs in the fact that it also focuses on how the results were created and aims to looks for reasons when the performance deviates from the expectations.

Action controls

Action controls are put in place to ensure "that employees perform (do not perform) certain actions known to be beneficial (harmful) to the organization" (Merchant & van der Stede, 2012). Action controls are only effective if the organization can determine what actions are acceptable & unacceptable. They divide action controls in four different forms. These are behavioral constrains, preaction reviews, action accountability and redundancy.

Behavioral constrains are put in place to discourage or even make it impossible for employees to show certain behavior. These constrains can be physical, for example computer passwords or limited access to information, or administratively. An example of administrative constrain is the restriction of decision-making authority, which is preventing the use of resources by employees that should not use that amount of resources. Behavioral constrains help to eliminate motivational problems by preventing employees to be tempted into engaging in undesirable behavior.

Preaction reviews "involve the scrutiny of the action plans of the employees being controlled" (Merchant & van der Stede, 2012). This can help identifying proper actions that are to be followed because it helps communicating which actions are desirable to employees.

Action accountability is concerned with holding people accountable for their actions. A firm should make clear what actions are acceptable or unacceptable and communicate this clearly to the employees. This can be done formally via work rules, policies & procedures, or socially through meetings with superiors. The firm should also observe what actions are taken by the employees and should reward or punish accordingly. It is important that employees know that their actions can be properly monitored so that reward or punishment is justified.

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10 contrast, the boundary systems by Simons (1994) focuses on what actions are not acceptable and establish limits and rules for employees. The actions controls are thus largely a combination of the beneficial actions of Ouchi (1979) and the limits and rules of Simons (1994).

Personnel controls

Personnel controls "build on employees' natural tendencies to control or motivate themselves" (Merchant & van der Stede, 2012). There are three purposes that personnel controls serve. Firstly, they can help understand employees what the organization wants and what expectations the organization has of their employees. Secondly, certain personnel controls can help with making sure that each employee has the capabilities to successfully do their job. Thirdly, it increases the probability that employees monitor themselves.

Personnel controls can manifest themselves through training, selection & placement and job design & resourcing. Training can help with the understanding of how the assigned task can be performed best while selection & placement help select the right job applicant to match the job requirements. Job design & resourcing can make sure that "the job is designed to allow motivated and qualified employees a high probability of success" (Merchant & van der Stede (2012).

The personnel controls have small similarities with the clan-based controls of Ouchi (1979) and no presence in the framework of Simons (1994). Both clan-based and personnel controls assume at least partially a presence of intrinsic motivation at employees. The personnel controls are more specific than the clan-based controls and differ from it by including job design and the selection & training of employees. The clan-based controls have more overlap with the cultural controls discussed next. Simons' (1994) framework has no focus on personnel controls and this is largely explained by the fact that his framework is focused on top management strategy. Overall, the personnel controls have little presence in the frameworks of Ouchi (1979) and Simons (1994) and are relatively unique to Merchant & van der Stede their framework.

Cultural controls

Cultural controls "are designed to encourage mutual monitoring; a powerful form of group pressure on individuals who deviate from group norms and values" (Merchant & van der Stede, 2012). Cultural controls are effective when shared values & beliefs between members of a group are present. Cultures revolve around shared traditions, norms, beliefs, values, ideologies, attitudes and ways of behaving (Merchant & van der Stede, 2012). A culture does not change much over time but can be influenced in a variety of ways, including codes of conduct, group rewards, intra-organizational transfers and setting the tone at the top.

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11 The cultural controls are similar to the clan-based controls by Ouchi (1979), as both rely on strongly shared values & beliefs in the community to monitor individuals. Both controls require the presence of shared values & beliefs. If this is not the case, social monitoring becomes ineffective because employees with different values & believes have a different concept of correct and incorrect behavior. The belief systems control of Simons (1994) differs in the fact that it is a formal system in which the basic values are defined and communicated from the perspective of the top management. Social monitoring is not the goal of installing this beliefs system, but rather to "inspire and promote commitment to the organization's core values" (Simons, 1995a).

2.3 Activities

When designing an MCP, it is largely dependent on situational factors. One of such factors are the activities of an organization. Bhimani et al (2008) defines an activity as "an event, task, or unit of work with a specified purpose". Activities are performed to meet the organization's strategic goals. Within an organization, departments often have their own specified goals and in accordance different activities than other departments. In not-for-profit organizations, it is often difficult to have a quantitative bottom-line performance indicator. In for-profit organizations, this indicator is often profit or return measures. Without a reliable quantitative performance measurement it becomes difficult to "compare the performance of entities performing dissimilar activities" (Merchant & van der Stede, 2012).

Ouchi (1979) has developed a framework containing two dimensions that determine the degree of measurement of an activity or task. These are the ability to measure output and the knowledge of the transformation process. The ability to measure output refers to the extent to which an organization can measure the results of a certain activity. The knowledge of the transformation process refers to the ability of an organization to measure behavior shown when performing an activity. Another framework was developed by Perrow (1970). According to Birnberg, Turopolec & Young (1983), his framework focuses on "(1) the extent to which the task is analyzable and (2) the degree to which the activities in the process are homogeneous among different performances of the task". Both the framework of Ouchi (1979) and Perrow (1970) have in common that the first dimension focuses on the output of an activity and the second dimension focuses on the process. In a similar framework, Fisher (1998) draws comparisons between task uncertainty and knowledge of the transformation process.

2.4 Link between the MCP and Activities

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12 The link between activities and the MCP is mostly realized by the fact that activities which are hard to measure cause uncertainty for an organization. Uncertainty makes results controls difficult to implement because it is hard to assess if the desired results are achieved. Also, when employees do not know how to achieve the desired results, results controls are not effective. According to Merchant & van der Stede (2012), action controls are also less effective when the knowledge of the transformation process is low because it is not known which actions have to be performed to create a certain output. Hofstede (1978) observed that the cybernetic model is inadequate for real firms that are complex, dynamic, social organizations. The cybernetic model fits within the results controls of Merchant & van der Stede.

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3. Methodology

3.1 Research Method

To help answer the research question, the theory development process formulated by Van Aken, Berends & van der Bij (2007) was adopted. We choose to adopt the theory development process because little is known about implementing ‘business-oriented’ MCPs in a public organization. Cooper & Morgan (2008) recommend a case study when the researcher is investigating “actual practices, including the details of significant activities that may be ordinary, unusual, or infrequent”. Furthermore, Yin (1989) argues that case studies are best suited for answering ‘how’ questions. Therefore, a case study was performed to closely observe how the MCP is currently composed and to look at the activities. Malmi & Brown (2008) encourage longitudinal case studies and large-sample empirical studies to look at the configuration of MCPs but time constrains limited us to a single-case study. This case study was held at a Dutch municipality. Two objects of study within this municipality were observed. This observation helped to compare their activities and subsequent use of the MCP.

3.2 Case description

This research took place at the municipality of Borger-Odoorn, one of the 408 municipalities in the Netherlands. The municipality of Borger-Odoorn has around 200 employees. Per 31 January 2013, 25.659 citizens reside in this municipality and are spread across 25 villages. The organization has four different departments, which are the Customer Contact Centre, Social Development, Territorial Affairs and the supporting department. Each department consists of two or more clusters. The five clusters of the supporting department are Financial Administration, Financial Policy & Control, Vision & Strategy Support, Internal Facilities and Human Resources. The two objects of study that were observed are the department of Social Development and a cluster of the Customer Contact Centre. Each department has a manager. A coordinator is responsible for a cluster and reports to the manager. An overview of the organizational hierarchy can be found in Appendix A.

The department of Social Development consists of two clusters. One concerns the social economical policies and the other one handles matters of youth, education & sport. The main difference between these clusters is that they handle different topics. However, they work closely together and employees of this department often work on topics of both clusters. The activities are generally the same at both clusters, only the topic differs. An interviewee who works at the department of SD explained that the department works integrated, which leads to a lot of communication between the employees. Also, employees are not formally assigned to a cluster. Therefore, we will consider the department as a whole.

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14 can be compared with the cluster Environment even though they are at different hierarchical levels.

3.3 Data collection

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3.4 Data Analysis

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4. Analysis & Results

4.1 Organization wide controls

The managers make use of three formal conversations with the individual employees of the departments. This cycle of formal conversations are implemented at an organizational level. These are the individual working plan, the job evaluation and the performance review.

In the individual working plan the manager and the employee discuss the capabilities and skills of an employee, what the employee wants and what the employee needs in order to better do their job. All these things are put into the individual working plan. The manager also tells the employee what the employee is expected to do this year and what he has to deliver this year. The purpose of this individual working plan is twofold. First, the manager can manage the expectations he has of the employee for the coming year. Second, the employee can let the manager know what he needs to fulfill these expectations. This individual working plan can be seen as a personnel control. The manager formulates the expectations he has of the coming year which helps making sure that the employee knows what the organization wants of him. Also, communicating and discussing the skills and capabilities of the employee helps with making sure that the employee is actually put in a position to successfully do his job.

The second formal conversation is the job evaluation. This conversation is held at least once a year, but in some cases more often. Generally, this conversation takes place in the middle of the year. The main idea is to see if the individual working plan is followed through. The employee is asked if he is able to fulfill the expectations of what he has to produce for the rest of the year. It is a formal moment in which the manager can see if the employee is carrying out the expectations formulated in the individual working plan. The HR advisor notes that the job evaluation is very much alike the individual working plan, with the difference that it is in the middle of the year instead of in the beginning. Therefore, we can also classify this as a personnel control. The expectations set in the beginning of the year are managed from both the manager and the employee. It is very much a check to see if the employee is on course to fulfill the expectations that were set at the beginning of the year. If this is not the case, the management can take actions to make sure the expectations are achieved by the end of the year.

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17 whether the employee achieved the expectations set by his manager and himself. It also lets employees know if the results they achieved are important for the organization.

4.2 The department of Social Development

The department of Social Development (SD) is responsible for making local policies. The department is divided into two clusters. These clusters are the Social Economical cluster and the cluster of Youth, Education & Sports. Both clusters have a coordinator and the department as a whole has one manager. The difference between these clusters are the topics the clusters handle, whereas the work on both clusters regards making local policies. Nation policies are determined by the national government and it is expected of the SD to translate these to local policy. Also, local policies can be developed for the civilians in the municipality specifically. These local policies should not intervene or contradict with the national policies. An example of a local issue is the reduction of citizens in the municipality of Borger-Odoorn. A third increasing role of the SD department is the directing role within the municipality. The SD department has performance agreements with organizations that are active within the municipality. These organizations receive subsidies because they help with carrying out the local policies. The department also handles the exploitation of certain facilities like swimming pools or sports halls.

4.2.1 The MCP at the department of Social Development Personnel Controls

All the employees have a job description. However, this description is very generic and includes a wide array of activities. Expectations are mostly managed through the formal conversations and through individual experience of the employee. Aside from these formal conversations, the manager and the coordinators focus heavily on personnel controls. They see their own role as facilitating, to make sure that everybody can do their jobs. The manager notes:

"For me, it is important that colleagues are at a place in which they can utilize their talents, for them to deliver their product and that they aren't sick. In other words, happy colleagues who live healthy also deliver the best products. And that is our most important role and as long as that is possible within the organizational context, then I as a manager have a facilitating role and the coordinators partially too." Manager

SD department

This quote shows that the manager and the coordinators want to make sure employees are in the right place to do their job. They have the opinion that when they put employees in the right place, the employees will motivate themselves. This builds on "employees' natural tendencies to control or motivate themselves" (Merchant & van der Stede, 2012) and can be seen as a personnel control.

Employees also notice that they are put in a place where they can utilize their talents. An employee of SD notes:

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18 That also happens in consultation with us, the whole department helps looking for that." Employee 2 SD department

Furthermore, employees have the option to get training or courses on a wide array of topics. Employees are mostly free to choose which training or course to go to. In the individual working plan, employees are also asked or offered to do certain courses to help them develop skills or capabilities suited to their function.

When asked if the employees monitor themselves, a coordinator reacted with:

"It has to do with putting people on topics which they have talent for and thus what they like. That also has to do with the qualities of the employees. If you tell them to do something based on responsibility then I do not think that people will slack."

Coordinator 1 SD department

This quote shows that the manager and the coordinators are very much depending on the employees to control themselves and they try to achieve that by putting them in a place where they can succeed, making them responsible for the topics they like. This high responsibility is also illustrated by the following quote. When asked about formal systems to check the work of employees:

"In principle, that has to do with the high responsibilities. I assume that if a colleague is stuck in his work, he will inform me. Or he informs [coordinator 1] or [coordinator 2]." Manager SD department

This shows that employees themselves have high responsibilities regarding their work and that they are expected to inform their superior when problems arise. We can say that the usage of such high responsibilities is a form of personnel control because it relies on the employees natural tendencies to control themselves. Of course the manager also has the formal control conversations mentioned earlier but those generally only take place two times a year to check on the progress of the work. The manager also has an non-compulsory office hour for employees to inform the manager of any problems regarding their work.

Rewards for employees are also meant to motivate people's natural tendencies. When asked if good work was rewarded, a coordinator responded:

"The appreciation that you get for it." Coordinator 1 SD department

In addition, the manager said:

"That is what you are doing it for. I think that that is the basis for almost all colleagues. People work here because they think they are of additional value for the citizens." Manager SD department

And:

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19 For example managers who think you should do things differently. So, you have a lot of space here." Manager SD department

The quotes above illustrate that the rewards are mainly, next to a fixed salary, the appreciation that the employees get from the citizens, either directly or through the council, and the freedom the employees get to do their work. When people are not performing well, their freedom will be relatively limited.

When employees are doing their job exceptionally well while promotion within the organization is not possible, the manager and coordinators will look at the possibility of transferring this employee to other municipalities where he can get a higher function better suited for his capabilities. The manager notes that they find it important that employees can keep developing themselves and that people who can do more than they can showcase will become unsatisfied. This example highlights the importance that the managers and coordinators give to personal development and intrinsic motivation. This is also a form of personnel control.

We can see that the managers make much use of personnel controls to achieve the desired results. The high responsibility leads to employees having to control themselves and that the manager often only checks on the end product of employees. The manager is ultimately responsible because she has to put her signature under policies made by the employees. The manager expects employees to inform her only when there are problems and expects that employees first try to have colleagues check their work. This is not done in a formal way but rather an informal way of working.

Cultural Controls

The culture is described as very open & informal and the manager promotes teamwork. "If you yell 'I have a question', everybody wants to help.” Manager SD department An employee confirms that this is the way things work on their department:

"You help each other to keep one's head above water." Employee 2 SD department The manager furthermore emphasizes teamwork by not rewarding individuals because they feel that if you make use of their talents, it is not about individual success but about the success of the group. And if there are problems, you are expected to not only inform the manager but also colleagues that can possible help. The manager thinks that the culture has a powerful influence on the employees of his department.

"But primarily we believe in the power of the group and we have to facilitate and not intervene too much" Manager SD department

An effect that this emphasis on teamwork has on the group is that everybody is prepared to help their colleagues and according to one employee it also helps with the motivation.

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20 In addition to the personnel controls, we can see that cultural controls are also very present on the SD department. This form of control expresses itself mostly by mutual monitoring. However, the employees themselves do not see it as monitoring but more as a way of working and to make sure that their performance is up to standard before the manager gets to evaluate it.

Results Controls

The aforementioned personnel controls and cultural controls are put in place to enable employees to achieve results. Most of the policies that have to be developed are included in the yearly 'Kadernota'. This 'Kadernota' contains an outline of the policies that are expected for the following year. The Board of Mayor & Aldermen present the 'Kadernota' to the city council and they have to approve the Kadernota or can request adjustments. Next, a programme budget is made which contains more specific social goals and the budgets for each policy. It is the city council's responsibility to monitor the Board, which develops the policies stated in the programme budget. The Board then orders the SD department to develop the policies. The progress throughout the year is recorded in management reports which appear three times a year.

The policies that the employees develop are first checked by their own colleagues in an informal manner. When an employee feels it is finished, the manager has to approve it and sign it. Then, the responsible Alderman has to approve it because he has to present it to the council. Officially, the employee advises the Alderman in the form of a policy. There are results that are expected to be achieved. An employee notes the following about an advice to the board:

"Results in the sense that the policy has to be finished. It has to be checked by multiple colleagues, it has to be checked by superiors, then it has to be checked by the Aldermen and only after that it can go to the board." Employee 1 SD department Something similar is said by another employee of SD:

"If I have to write a policy which I have to deliver, then that is a result." Employee 2

SD department

The department of SD has to deliver results and the employees are aware that they are expected to deliver the results. This can be seen as a results control. The high responsibility can help to deliver the desired results too. We argued earlier that the high responsibility results in intrinsic motivation and thus can be seen as a personnel control. In addition, it also helps employees to achieve their results because they can choose their own course of action. In that sense, the high responsibility of employees can also be seen as a results control. Indeed, a coordinator notes:

"One guy has his own way and somebody else has another way." Coordinator 2 SD

department

And the manager additionally said:

"It is not right or wrong as long as it leads to the result and if somebody can explain why he does it the way he does it. There is no single path to the right answer."

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21 Both quotes illustrate the importance of the results and show that the way those results are achieved can differ. That is a characteristic of a results control defined by Merchant & van der Stede (2012). A good result is when a policy passes the council. A policy is advised to the board. The board can accept it or in certain cases has to presents it to the council. Two different employees said the following when asked about the judgment on the quality of their advice:

"We look at 'could this pass in the Board' or 'could this pass in the council'. 'Is this what we want to present' or 'is this what they want, what they probably want to receive'." Employee 1 SD department

"That is the Board's responsibility. The Board has to judge whether it is qualitatively sufficient and if it is not, then it gets sent back and it has to be improved." Employee 2

SD department

Again, we can see the importance of whether the board or council will think the advise is sufficient.

Action Controls

The employees are very free in their work as long as they achieve the desired results. The relative lack of action controls seems to support this. Only after an employee informs the manager that there is a problem with his work, the manager will monitor more closely. However, this has the goal of fixing the problem so that the employee can work towards his results on his own again. After that, the manager can stop to monitor more closely again. This is an action control and comes into place only after the personnel and cultural controls have failed. Employees do not have a predetermined set of procedures that will lead to automatic results when followed. A coordinator mentions the following protocol:

"The decision making process, that is a protocol. You have to deliver something to the Board, it has to be within a certain period of time and there are some aspects that have to be mentioned. That is the only protocol that we have to follow on a daily basis." Coordinator 1 SD department

These protocols are largely based on legal terms. An employee mentions:

"The only procedure I have is to inform every relevant actor, make sure you are informed yourself and after that, make a decision. That is almost always a procedure you follow. That is not formally documented; it became a way of working."

Employee 2 SD department

A different employee has similar thoughts on this matter:

"I think that it differs per topic, but what is similar is that you inform with different actors 'what do we want, what is possible' et cetera. That is in my head." Employee

1 SD department

(22)

22 integrated into the culture and is a result of the focus on teamwork. This encourages communication and helping each other.

An action control put in place is the budget. This limits the course of actions possible and the budget must be followed. When an employee has exceeded or deceeded their budget by a previously determined margin, an explanation has to be given.

Overall, the MCP of the SD department has a high focus on results controls. The autonomy that employees have helps with the focus on the end results. The results are in most cases measured by whether the board or council accepts the advice. The personnel controls help greatly to make use of the autonomy that is given while the manager depends on the cultural controls to monitor the process towards the end results. Action controls set very wide parameters in where an employee can move and are mostly based on regulation.

4.2.2 Measuring the output & knowledge of the transformation process at the department of SD

Measurability of the output

The main activities of the department of SD are translating national policy to local policy and making sure that the policy is carried out. Often this is done by signing agreements with third parties who carry it out for them. A small part of the activities are focused on exploitation of facilities which the municipality owns.

The first step of analyzing the measurability of the output is by looking at what the actual output is. The manager said the following about end results:

"End results are the accepted policies. And accepted does not have to mean that people are happy with the outcome but that they have to understand why it is like it is. Our most important measure of results are customer satisfaction surveys, are the citizens happy, is the council happy, is the Board happy. That are our most important monitor stations.” Manager SD department

This shows that the manager thinks that the end results are the policies that are submitted to the Board or council and not necessarily how they are carried out. If third parties around them are happy with a policy, the manager thinks that their department did a good job regarding that specific policy. If one adopts the view that the end results are when policies are accepted or denied by the board and/or council, than the output would be easily measurable. It can only have one satisfactory outcome, which is acceptance. If the citizens are not happy with the policies, than the consequences will have to be faced by the councilmen and the Board. This is because they approved the policies made by the department of SD. Notable is that when asked about results, all three interviewees of the SD department initially started talking about submitted policies to the board as a result. Later in the interviews, the interviewees addressed the effects of a policy as an end result after being asked about it. The coordinator said the following about the measurability of output:

"The difficulty is the causality. If it is an economically better time, perhaps people themselves feel better. Then, you might account it to your own policy but that does not have to be the case. In that sense, it is really difficult to measure.” Coordinator 2

(23)

23 The manager talks about a policy that is aimed at a more healthy lifestyle of citizens:

"That is about the behavior of citizens, and you cannot change that in a year. How do you want to measure that? In about 10 years you can tell what the effect [was]. And then you have to take into account everything that has happened over those years, if [the policy] had any effect.” Manager SD department

These answers show that it is very hard to measure the effect of the policies, especially when those policies are long-term. An employee said the following when asked about the quality of policies:

"Evaluations. You probably have certain premises in the policy that you want to work on. That also means that you have to carry out certain things. That does not mean that you as a policy maker have to do that, but you have to keep an eye on it." Employee

2 SD department

In most cases, it is a third party that receives subsidies to carry out the policy. This employee also talked about the outcomes of the evaluations:

"These goals were set, but it happens often that those are not met. You have to wonder then, did you put something in motion or did you met all the set premises. So, did you actually follow the policy. If there is something wrong, you have to look at 'who is at fault'. There are a lot of things you cannot control." Employee 2 SD department So if we look at the measurability of outputs if we view the carrying out of a policy as the result, we can conclude that measurability of the output is low. This arises from the fact that it is hard to establish causality between the policy and the outcomes when a long amount of time is involved.

Knowledge of the transformation process

The knowledge of the transformation process is also ambiguous. There are not a set of predesigned steps that can be taking which can lead to the desired results. Behavior cannot be specified to make sure that results are achieved. We have shown earlier that the managers think that there is not a right or a wrong way to achieve results. They also know that their own activities are uncertain:

"It is clear for us that it is unclear because we get tasks from the national politics. Only sometimes it goes this way and the other time that way. So you are depending on how the national policies are going to look like and when you do not know what it looks like you have to anticipate. So it is known that it is uncertain." Coordinator 2

SD department

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24 These quotes show that the knowledge of the transformation process is imperfect according to the framework of Ouchi (1979) because there is no standard set of behavior that leads to the desired output.

4.3 The cluster Environment

The main responsibility of the cluster Environment is the authorization of requested permits and the supervision on enforcement by the permit owner. These permits are construction or environmental related. They also deal with calls from citizens about environmental related questions and problems within the municipality. These tasks require intensive contact with the customers, which is a big part of why the cluster Environment is a part of the Customer Contact Centre. The coordinator has the main responsibility over the cluster and reports to the manager of the Customer Contact Centre.

4.3.1 The MCP at the cluster Environment Personnel Controls

The employees at the cluster Environment all have a formal job description. These include a wide array of activities and are not very specific. A more common way to communicate to employees what is expected from them is through the three formal conversations. The manager thinks it is important for employees to know what is expected from them:

"I think that one of the main conditions is that you create a little role clarity and I believe that the employees know [their role]." Coordinator Environment

This is a form of personnel control because it helps with letting the employees know what the organization expects from them.

Training and courses are also widely available within this cluster. Employees can follow courses if they think it helps with their job and they can arrange this with the coordinator. Changes in the regulations of construction & environmental permits are often the reason employees request courses so that they can stay up to date with the changing regulation. Also, if the manager notices through the formal conversation that an employee can use additional training, the manager will stimulate the employee to go to the training. An employee said:

"If it turns out that you do not have some capabilities that you are assumed to have, then the employer stimulates you to take courses in order to get the necessary capabilities." Employee 2 Environment

This is a form of personnel controls because the employees are put in a place where they can develop themselves and are given the necessary capabilities to do their work.

(25)

25 now. The coordinator says that the manager of CCC and he deliberately choose to let the employees do as much as possible themselves. This freedom for the employees shows that the employees are expected to control themselves. This can be seen as a personnel control. An employee notices:

"I think that the self-controlling character of the cluster, it is being stimulated and we are picking up on that." Employee 2 Environment

"And if you can arrange it among yourselves, it generally is a lot smoother. Than you can pick mutually, which without doubt is motivating. If it is only 'do this, do that', you might as well stand along an assembly line because you do not influence, or at least have less influence on what you are doing and the way you do it. Most people see it as pleasant if you can arrange your time and your work, and it gives a responsibility." Employee 2 Environment

The sense of self-control helps to intrinsically motivate people in doing their job, a characteristic of a personnel control.

The coordinator wants to implement additional responsibility for the employees in the coming year. All the products that the cluster delivers are identified and the coordinator wants to connect employees to a standard set of products that they bear responsibility for in the coming year. This can be seen as making the cluster even more self-regulating and assumes a high level of self-control of the employees, leading to a higher dependence on personnel controls.

Cultural Controls

The self-regulation is also something that is encouraged through the culture. The coordinator stimulates mutual control among employees to make sure that the quality is up to standards. However, according the coordinator this is not done enough. He says it is an agreement regarding work that was made with the employees but that it is not followed up on enough. The whole cluster operates in a single room and that is a deliberate choice. This stimulates communication among the employees when problems arise and can prevent unnecessary work. While this allows for easy help from colleagues, it has not resulted in actual mutual monitoring on results but rather on the working process. Also, the coordinator tries to focus on the whole group:

"I focus on the group. I think it is very important that the group keeps being harmonious and if something is up, I try to manage it.” Coordinator Environment "I always look at the individual but I believe that the group is the most important."

Coordinator Environment

He tries to steer the group towards using intervision. It makes them think about the working processes and according to the coordinator that should result in more mutual monitoring.

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26 The above quotes show an use of cultural controls because they try to focus on mutual monitoring thought shared norms & values about working quality and working processes. The shared norms & values about working quality and working processes have to come from the group and are not instilled by the coordinator or manager.

"I believe that working protocols and working processes have to come from the employees and that with the working processes, it has to come from the intervision. I really believe that it has to come from the group and that they have to make arrangements about it." Coordinator Environment

The working processes were identified in great detail by the employees themselves. The employees were asked what actions they go through when dealing with a certain product from start to finish. The time each single action took was also identified. The actions were put into a matrix together with all the products that the cluster provides. This makes it very clear what processes employees follow when dealing with a certain product. However, the goal of this identification of the working processes was not to better measure individual performance but rather to have a better planning tool. Because the average product throughput time is now known, the cluster knows how much resources they need each year. Also, it helped making employees think about how they do their work. The aim was not to make a formal list of activities that the employees should follow strictly. The list of actions per product are assumed to be followed in reasonable fashion because it is the most efficient way. There is no control on whether the employee has followed each action that was identified. This reason makes us believe that this is a form of personnel control because it makes employees think about their work and thus tries to challenge and motivate then intrinsically. It can also be seen as a preaction review and thus an action control, but the employees are not restricted to only the actions that were identified. The coordinator said the following in that regard:

"I want to look at it more loosely, really just the main steps and that a certain system is written on paper but people should do that themselves." Coordinator Environment

Action Controls

There is however a formal control system on certain actions that are required by law. Regulation limits the freedom in actions that employees can perform. In general, the action controls are determined by law and not implemented by the manager or the coordinator. For example, when a permit is handed out, the owner has to comply to certain regulation. The supervision done by the cluster has to address whether the owner of the permit complies with the regulation. A standard checklist exists for this work. The control on whether the actions by the employee are lawfully correct happens at the end of the process. The end results are generally when a permit request has been handled or when the supervision on a permit was completed. The permit request is checked by a colleague when it is ready to be sent to the person or organization who requested the permit. This colleague has to sign the permit in addition to the person who processed it. Some controls are done informally by others, for example when the legal department notices mistakes. A formal control is a third party from outside the organization that checks a random sample of handled permit requests on quality and on whether the law was followed. An employee said that he sees this control as a tool to improve quality rather than an individual control system.

Results Controls

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27 eventually a more reliable average product throughput time can be formed. Employees that deviate consistently negatively from the norm are being asked by the coordinator why it took them so much time, but employees are not judged on their throughput times otherwise. The coordinator explained:

"I never check a permit, I will not do that. They have to stand for their own work but I do check on quantity, whether there are flows or ebbs, but not qualitatively. Sometimes [I do check] certain people, but that is something for teachers."

Coordinator Environment

We can see that the results are mostly based on quantity. In the beginning of the year, the expected workload is divided among the employees and they are expected to process their workload throughout the year. An employee explained:

"We have a permit enforcement plan and that states what my tasks are this year and how much hours I can spend on it. For example, for a permit for an event I have this much hours and at the end of the year I had to do this much supervision at events. And you do not always reach that amount, or you exceed it in which case it gets adjusted the following year." Employee 1 Environment

We can see that the employee is being checked on quantity. If he has reasons for not reaching the planned hours or if he exceeds them, the coordinator will ask for these reasons. Most of the time, reasons will be provided. Again, we can also see that the strict registration of working hours by the employees is not so much for individual control but for planning purposes.

Another result that the employees are responsible for is the customer satisfaction. Because the cluster Environment has a lot of contact with customers, it is important that they are satisfied. This result focuses on the whole cluster and not individuals and supports the idea of the coordinator that the group is important.

In short, the personnel controls play a large role on the cluster Environment. Through autonomy and freedom the personnel is being motivated intrinsically. This autonomy is supported by focusing on a culture which centers around the group and mutual monitoring among the employees without intervention of the coordinator. The fact that the employees are convinced that accurately filling in their timesheets does not lead to close supervision shows that there is not a major focus on the results. The action controls in place are mostly determined by regulation.

4.3.2 Measuring the output & knowledge of the transformation process at the cluster Environment

Measurability of the output

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28 authorized the permit and who was responsible for the supervision. The cluster cannot produce a product that is not listed in the database. An employee said:

"It shows how much [products] you did and at the end of the year it shows you much [products] you have done." Employee 2 Environment

Knowledge of the transformation process

The knowledge of the transformation process can be called perfect. As said, a list of actions necessary for each product was assembled to better understand the throughput time. When these specific actions are followed, it will result in the appropriate product. This is illustrated by the following comment of an employee:

"In principle, in the beginning of the year everybody has a workload for the upcoming year. And in theory, if you do your work like you are supposed to do and no unpredictable things happen, you will have processed your workload at the end of the year." Employee 2 Environment

(29)

29

5. Discussion

5.1 The department of Social Development

From the analysis we concluded that the SD department has a high focus on results controls and that the personnel controls & cultural controls help support the focus on results controls. Action controls do not have a great presence within the department and most existing ones are put in place to comply with regulation. Another conclusion was that the measurability of the output of the department was low while the knowledge of the transformation process was imperfect.

Ouchi (1979) argued that in an organization where the output is difficult to measure and where the knowledge of the transformation process is imperfect, clan controls are the most useful. With clan controls, monitoring and evaluation is based on attitudes, values and believes. This is desirable because the output is hard to measure and thus needs other means of control that do not directly focus on output.

The SD department has a high focus on results controls while the output is difficult to measure & the knowledge of the transformation process is low and thus contradicts Ouchi (1979) his theory. However, the supporting presence of the personnel & cultural controls and the relative absence of action controls does fit with the theory of Ouchi (1979).

We found that the measurability of the output was low because the effects of a policy are hard to measure. However, we also found that the interviewees of the SD department often look at the Board after submitting a policy and view the approval or disapproval of the policy as a result. This makes the output more easily measurable. We argue that looking at the output not only as the effects of a policy but also whether it is approved by the board is a way for the SD department to reduce uncertainty regarding their output. By looking at the Board their judgment on the policies, the output becomes more visible and gives employees more certainty about the results of their output. This mechanism shows parallels with the outcomes of Marginson & Ogden (2005). They found that managers that cope with high uncertainty in their activities make more use of budgets to get more direction in their activities. In this case study, employees of the SD department focus more on the approval of the Board and less on the effects of a policy because it is more visible and thus gives more direction to their activities.

The activities of a municipality and their effects on the Management Control Package