Telework and the Management Control Consequences A case-study at three Dutch pioneering tele-organisations Martijn A. Hoekstra

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Telework and the Management Control Consequences

A case-study at three Dutch pioneering tele-organisations

Martijn A. Hoekstra

RijksUniversiteit Groningen

Abstract

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Introduction

How, why, where and when we work has never been so open to individual interpretation. Nowadays, employees are offered a wide range of work-life arrangements by their employer (Bond et al., 2005; Riedman et al., 2006). Various organisations offer employees laptops, smart phones, flexible work stations, and flexible work schedules in order to eventually reap the benefits of a so-called alternative work arrangement (AWA). Telework refers to such an AWA facilitated by ICTs that enable employees to work physically outside the conventional workplace by bringing work to the workers (Nilles, 1994; Feldman & Gainey, 1997; Fairweather, 1999). Nowadays, telework is a component of a flexible way to manage work (Taskin & Vendramin, 2004). It is potentially favourable to both employees as employers, but it can lead to new sources of tension as well (Taskin & Edwards, 2007). This study will use the following statement regarding telework:

‘Telework is a form of work where employees receive a certain amount of freedom and space to decide how, where, when and with whom they work’

This study uses a rather broad definition of telework in comparison to other telework articles. That is, because this study mainly focuses at describing the highly aggregated managerial control changes that are the consequence of teleworking. Besides, this study tries to map the teleworking process by describing manager and subordinate actions and reactions. Therefore, initiatives that can be linked to freedom in deciding how, where, when and with whom to work, as well as the managerial reactions that follow from these initiatives, are regarded to be telework and influence management control.

Over the past two decades, the demands of an increasingly diverse workforce have challenged the traditional workplace structure of firms (Connor, Hooks & Maguire, 1999). There is evidence that younger workers hold a ‘non-traditional’ view of career success compared to more senior employees and are actively seeking greater balance between their work and non-work lives (Guest, 2002; Tulgan, 1996; Spangenberg & Lampert, 2009). Work-life balance is defined as ‘satisfaction and good functioning at work and at home’. Telework, including flex time, telecommuting, part-time schedules, and leaves of absence, represent a common work-life balance initiative. The productivity crisis and increased international competition have also led firms to experiment with new structures, employment relationships and contracts, in order to cut costs and maximise profitability (Ferber & O’Farrell, 1991). In addition, employers introduced telework: as a solution to problems of housing expanding staff, as a means to stay an attractive employer so valuable talented personnel could be attracted, and as a means to propagate the companies sustainable working initiatives (Mayo et al., 2009; Bailey & Kurland, 2002) Telework researchers have concluded that supervising managers play an important role when it comes to the introduction, continuation and success of the concept (Mayo et al, 2009; Kwon & Zmud, 1987; Rogers, 1983; Daft, 1978; Gary, Hodson & Gordon, 1993; Kimberly & Evanisko, 1981). In this context, managers are those supervisors who introduce, communicate, and control subordinates in their way of teleworking. Within the teleworking concept, work is brought to the workers instead of the other way around. Telework therefore involves ‘the decoupling of work activity from one material workplace as “the office” as well as from prescribed working hours, schedules, scripts and practices, and thus challenging traditional organisation theory and management practices (Tietze, 2002). Especially, the exercise of control, based on the visibility and presence of the employees is not directly applicable to remote working arrangements as telework (Felstead et al., 2003). Moreover, telework can be regarded as a consequence of the developments in ICTs. Yet, this doesn’t mean it’s a technologically superior way to conduct work. Rather it’s a new form of organising work, still embedded in a managerial relationship and therefore calling for supervision and control (Taskin & Edwards, 2007).

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directed as a subject for further research (Taskin & Edwards, 2007). Until now, a number of telework studies placed their emphasis on teleworker-related issues instead of managerial implications. Shin, Sheng & Higa (2000) argued that the small volume of telework research with respect to its organisational and managerial implications limits our understanding of its effects. Since then, Taskin & Edwards (2007) researched the managerial control implications, but focused solely on the public sector. This thesis addresses the managerial issue mainly from the private sector perspective and tries to describe its originating managerial control effects. Managers at different levels (top, middle and operational) in the organisation have been interrogated about their thoughts and experiences with controlling telework. The process of management control change, as a consequence of the introduction of telework is the primary research objective. Since the composition of working and controlling is different in teleworking organisations, because of the diminished attendance and visibility of subordinates, it is believed that management control forms need to change accordingly. The difference(s) in control forms are investigated by describing and mapping the process of teleworking. Through the description and exploration of the teleworking process, it’s argued that the interpretation of both manager actions and reactions will lead to new insights in ways managers direct and lead subordinates nowadays. Three successful Dutch teleworking organisations are investigated in order to describe and draft the process. At each organisation four managers participated in a semi-structured interview, which forms data for drafting the telework process.

Management control literature of Simons (1995), Merchant & Van der Stede (2007), and Ouchi (1979) is used to clarify and materialise the observed changes at the three organisations. These theories are used, as they are still core management control literature explained in Universities and form a solid construction to express the investigated phenomena. The three explored organisations are waterschap de Dommel, Rabobank the Netherlands, and Microsoft the Netherlands. The resemblance of these organisations is that they all successfully introduced the teleworking concept. They benefit both economically (productivity increase, reduction of costs) as non-economically (higher job satisfaction, work-life balance improvements). For the most part, the companies differ quite a bit however. This will lead to diverse insights in how managers at different types of organisations react to the influences of telework. De Dommel is a public company aiming for quality rather than profit in a relatively stable environment, since their demand is fairly solid and predictable. Rabobank finds itself in a turbulent and competitive (crisis) environment and delivers financial services all over the world with a strong corporate vision on customer focus. Microsoft has to deal with fast changing preferences and external environments as well. They can be denoted as market leader and constant innovator in many of their products (segments) and processes. Precisely these differences between the organisations will point out if the teleworking concept is the same across different sorts of companies and branches. Will managers respond otherwise in different organisations, or is the teleworking concept of such impact that it forces managers to make the same control changes regardless of company strategy and other contingency variables?

Another issue this study wants to investigate is, whether leadership style changes occur within telework, since telework entails a strong HR component (Martinez-Sanchez et al, 2007). Weiss (1974) found that fitting leadership styles can contribute to the manager’s control and therefore it’s presumed that managers will increasingly act as leaders.

Finally, this study aims to research the emergence of new forms of control, because of the relatively new form of organising work and coordinating. In the end, all research objectives will be combined to answer the research question and consequently contribute to the management control literature field. The following research question is used in this thesis:

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process and links theory to practice by describing observed phenomena and explaining them in a theoretical point of view. This will be followed by the conclusion section, which will be used to answer the research question. Then, contributions to the management control and teleworking literature field are explained in the discussion section and finally, the thesis concludes with a recommendation part, which is used for future research.

Telework influence on management control practices

Because telework is a relatively new work form and its relation to management control has hardly been investigated, this thesis can be denoted as a descriptive and exploratory one in essence. Within this kind of research, the literature part is of significant importance. The theories in this section are used as an underlying, explaining framework of the observed phenomena. By reviewing the literature, it can be used to interpret, analyse and concretise the observed changes in management control forms. This section begins by addressing the concept of telework more extensively, discussing its advantages and drawbacks. Furthermore, the supervising manager’s role is discussed, which illustrates the need for accurate managing and leading. Management control theories of Simons, (levers of control) Merchant and Van der Stede, (control forms) and Ouchi, (control mechanisms) are introduced in order to explore the changes between traditional control and telework control. Leadership styles are described as well, since telework and change management involves a significant human resource section. Therefore, specific leadership style(s) might contribute to alignment between the organisational objectives and subordinates actions, providing better control for the supervising manager. Lastly, new control forms are addressed. Since telework entails a new way of acting within an employees’ work environment, it might create opportunities for new kinds of controls. It needs to be accentuated however, that this study isn’t created to test hypotheses. Its objective is to describe and explain the observed phenomena in an explorative manner by using a case study.

Telework is attracting a great deal of attention from both academics and practitioners because of its multifaceted implications for individuals, organisations, and society (Shin, Sheng & Higa, 2000). Although there exist many variations in the execution of teleworking in different cultures, all implementation objectives share some resemblances, such as: enhancing organisational flexibility, lowering overhead costs, improving employees’ productivity, and reducing commuting time for employees.

Teleworking benefits can be roughly divided into two different areas. Firstly, the economic benefits, and secondly, the non-economic benefits, which in time can be converted into economic benefits. Economic benefits that can be differentiated are: an increase in productivity, a reduction of waste and a substantial reduction of costs and time (Hill et al., 1998 and Nord et al., 2002). The non-economic benefits that are identified are: a better balance between professional and private life (Powell and Maineiro, 1999; den Dulk, 2001 and Poelmans et al., 2003), more organisational commitment, job satisfaction, and employee retention and attraction (Bailey and Kurland, 2002). Moreover, teleworkers may not only be given a greater say in their spatial work conditions, but receive more decision-making authority and responsibility for control and enhancement of products and/or services as well. This relates to the concept of empowerment (Klidas, 2001).

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citizenship behaviour (OCB). OCB is associated with employee performance that exceeds normal expectations, ‘above the call of duty’ (Allen & Rush, 1998). So, employees who propagate OCB traits obtain higher evaluations from their managers, because these managers find the traits that are propagated to characterize the ‘ideal worker’ (Williams, 2001). ‘Family-friendly’ policies (such as telework) often create a mommy track that most men and ambitious women want nothing to do with. According to Wayne & Cordeiro (2003) teleworking participants are evaluated lower than their peers because they don’t comply to OCB norms. In the long term, insufficient OCB may be viewed as a lack of organisational commitment making the telework participant an unlikely candidate for advancement and promotion.

Telework thus has its advantages and disadvantages and can lead to both success and failure. Teleworking becomes successful when the implementation is a holistic and integral approach that is supported by top management. Clearly, the supervising manager plays an important role within the introduction and continuation of this concept (Mayo et al, 2009; Kwon & Zmud, 1987; Rogers, 1983; Daft, 1978; Gary, Hodson & Gordon, 1993; Kimberly & Evanisko, 1981). The manager not only judges which jobs are teleworkable and which individuals are suited to telework. Research suggests that his or her role is also critical when it comes to utilising work-life programs and the effectiveness of these programs (Perlow, 1997; Fried 1999; Thompson et al., 1999; Allen, 2001; Poelmans, 2003), since it is up to the manager to communicate, implement and manage work-life policies in organisations (Lewis, 2003). Moreover, the manager is the one force that can abolish existing structural inertia (Aldrich & Pfeffer, 1976). A common fear of middle-managers is that employees will not meet their responsibilities when not monitored directly (Leeds & Leeds, 2002; Cascio, 2000; Jarvenpaa et al., 1998). and fear that that telework schemes may make their own work more complicated and stressful (Powell & Mainiero, 1999; Godron, 1997; Gary, Hodson, Gordon, 1993). Middle-managers may also be reluctant in allowing telework, since the enhancement of employees’ autonomy or self-control may require fewer management functions. Therefore, these manager fear a loss of relevance regarding their own position and may think it’s a loss of power and status (Betz, Riegler & Schwarz, 1999; Harrington & Ruppel, 1999). Besides, organisations have the tendency to reward middle-managers primarily based on results achieved within their work units, rather than for their demonstrated concern for their employees’ work-life balance (Powell & Mainiero, 1999; Williamson, 1985).

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Mayo et al. (2009) concluded that telework is more conducive in younger, smaller firms with a large proportion of international employees. According to them, younger and smaller organisations tend to use more informal rather than formal control systems (Galbraith, 1982; Churchill & Lewis, 1983; Miller & Friesen, 1984). Their finding regarding firm size being inversely related to classical contingency theory is consistent with empirical evidence suggesting that smaller firms are more willing to innovate (Tomaskovic-Devey & Risman, 1993). Smaller firms are less bureaucratised, have less inertia, and are more likely to adopt telework, because it provides financial and operational benefits and is consistent with their entrepreneurial culture. However, relatively large firms are under greater legitimacy pressures to respond to work-family related issues and studies have found that these large organisations were more likely to be responsive to work-family issues than small ones (Ingram & Simons, 1995; Morgan & Milliken, 1992). According to Mayo et al. (2009) a large percentage of international employees in various locations makes teleworking an ideal way to coordinate individuals’ actions. Besides, it can aid to attract and retain international talented employees in this way.

In this thesis it is argued that teleworking success is independent of firm size. As Simons (1995) states: in relatively small firms managers consult with their subordinates in mostly informal ways, since they are relatively close connected to each other. On the other hand, within relatively large firms, senior managers are no longer in constant contact with employees who identify and respond to emerging problems and opportunities. Nonetheless, the guiding principles of communication and control are every bit as important. Therefore, managers in larger organisations deliberately introduce informal ways of connecting with subordinates. In other words, some large firms choose intentionally to stay as decentralised as small firms. Therefore, the probability of telework success is regarded equally amongst the two.

Gomez and Jones (2000) argue that the telework concept fails when control principles are introduced that are in conflict with the internalised and collective norms that individuals share within an organisation. Therefore, telework controls must fit the contingent factors of the organisation. Shin, Sheng and Higa (2000) concluded that telework programs that fit current organisational cultures, procedures, and value systems have a higher chance of succeeding. As stated before, when current cultures and procedures differ from aspired ones, an integral approach is needed to effectively implement teleworking. This study connects to the statements of Gomez and Jones, and Shin, Sheng and Higa and perceives it’s critical to match future aspired corporate culture and beliefs with current teleworking initiatives.

Management control theories: existing and teleworking theories

To clarify and elucidate which shifts are indicated, three management control theories are described in this section. The theories are used to find out whether the teleworking process leads to a shift in controls, or to a design of newly formed controls. Simons (1995) ‘levers of control theory’, Merchant and Van der Stede’s (2007) ‘control types theory’, and Ouchi’s (1979) ‘control mechanisms theory’ are used, since they are currently explained theories in universities, cover three different periods in time, and complement each other in controlling individuals, teams, and organisations. Especially the terminology from the theories can be used in terms of positioning, so analysing and concluding becomes more explicit.

Simons levers of control

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There are two control levers that work in tandem and guide search activity in organisations, these are beliefs systems and boundary systems. Both are variations on formal control systems. Neither system is cybernetic though. That is, neither of them relies on the routine feedback of variance information to correct a process. The beliefs system provides organisational purpose and momentum to guide and motivate individual opportunity seeking employees within an unlimited opportunity space. Boundary systems communicate the acceptable domain for search activity. Beliefs and boundary systems thus transform unbounded opportunity space into a focused domain that organisational participants can be encouraged to exploit.

The other two control systems are diagnostic and interactive control systems. Diagnostic control systems are used to guard the key objectives of the organisation and to prevent constant monitoring. Whereas interactive control systems are used to signal and review new opportunities and threats. Both diagnostic and interactive control systems work top-down and bottom-up. The following paragraphs are used to explain more thoroughly the levers of Simons.

Beliefs systems communicate the core values and mission of the organisation. It’s a positive system that motivates the search for opportunities. Moreover, it’s the explicit set of organisational definitions that senior managers communicate formally and reinforce systematically to provide basic values, purpose, and direction that senior manager want subordinates to adopt. These core values are linked to the business strategy of the firm. A formal beliefs system is created and communicated through documents as credos, mission statements, and statements of purpose. These statements and credos may be considered part of a system when they are formal, information-based, and used by managers to maintain or alter patterns in organisational activities. The primary purpose of a beliefs system is to inspire and guide organisational search and discovery. When problems arise in implementing strategy, a beliefs system helps participants to determine the types of problems to tackle and the solutions to search for. More importantly, in the absence of problems, beliefs systems motivate individuals to search for new ways of creating value. As aforementioned, businesses have increased in complexity. Firms for instance combine multiple business units under the same corporate umbrella. In many companies and industries, this increasing complexity makes it difficult for individuals to comprehend organisational purpose and direction. Furthermore, technology now overloads managers with data that forces constant reassessment of their competitive positions. Managers must use this information to ensure that internal operations are efficient and effective. Downsizing and realignment are the new realities. This environment of constant challenge and change creates a need for strong basic values to provide organisational stability. Finally, the work force has changed. Better educated participants with higher expectations desire personal challenge and the ability to contribute to a purposive endeavour. If managers are to transform individual abilities into cohesive organisational outputs, each individual must understand the organisation’s purpose and his or her contribution to that purpose. As managers look to empowered employees for new ideas and competitive advantages, this need to understand the organisation’s purpose grows in importance. Managers who are engineering organisational change (towards teleworking for example) could use formal beliefs systems, since these can aid to guide the change. “A new vision, can help to attract and unite followers and galvanize them to high levels of effort”. Many of the benefits of creating formal beliefs systems flow from the discussion necessary to communicate and understand the beliefs rather than from the credos and statements themselves. Through discussion, senior managers can increase the commitment of participants to organisational goals and mission. Within organisations, commitment means believing in organisational values and being willing to exert effort to achieve broad organisational goals. In general, the higher the level of an individual’s commitment, the higher the level of his or her performance.

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action was a prerequisite for effective organisational decision making. He stated: “The process of decision as we shall see, are largely techniques for narrowing choice.” Although boundary systems are essentially negative systems, they allow managers to delegate decision making and thereby allow the organisation to achieve maximum flexibility and creativity. In many ways, boundary systems are a prerequisite for organisational freedom and entrepreneurial behaviour. For this reason boundary systems could be of significant value when teleworking.

Diagnostic control systems build and support clear targets. Managers use diagnostic controls to both monitor goals and profitability, and to measure progress toward targets such as revenue growth and market share. Managers measure outputs to compare them with preset standards of performance. Feedback allows management to adjust and fine-tune inputs and processes so that future outputs will more closely match goals. One of the main purposes of diagnostic measurement systems is to eliminate the manager’s burden of constant monitoring. Once goals are established and people have performance targets on which their rewards will be based, many managers believe they can move on to other issues, knowing that employees will be working diligently and independently to meet the agreed-upon goals. There are built-in dangers however when empowered employees are held accountable for performance goals, and then left to their own devices to achieve them. Especially when goals are difficult to achieve, manipulation of information, or even fraud can occur (Birnberg, Turopolec & Young, 1983). Diagnostic control systems can even lead to crises when the system creates such pressures that control fails. Therefore, diagnostic control systems may not always be adequate to ensure effective control when subordinates are empowered.

When there is less personal contact with people throughout the organisation, formal systems must be created to share emerging information and knowledge and to harness the creativity that often leads to new products, processes and markets. Interactive control systems can serve this purpose, since they open organisational dialogue to encourage learning. Interactive control systems are the formal information systems that managers use to involve themselves regularly and personally in the decisions of subordinates. Through these systems, senior managers participate in the decisions of subordinates and focus organisational attention and learning on key strategic issues. It therefore complements to the logic of collaboration of Illegems et al (2001), and Peters et al. (2004). There are four characteristics that set interactive control systems apart from diagnostic control systems. Firstly, they focus on constantly changing information that top-level managers have identified as potentially strategic. Secondly, the information is significant enough to demand frequent and regular attention from operating managers at all levels of the organisation. Thirdly, the data generated by the interactive system are best interpreted and discussed in face-to-face meetings of superiors, subordinates and peers. Fourthly, the interactive control system is a catalyst for an ongoing debate about underlying data, assumptions, and action plans. When a manager decides to use a specific control system interactively, (meaning, investing time and attention in face-to-face meetings to review new information) this could be a clear signal to the workforce about what’s important. Through the dialogue and debate that surrounds the interactive process, new strategies often emerge. Questions that usually return are: What has changed since our last forecast? Why? And, what are we going to do about it? The answers of these question are new ideas and actions plans that can be developed into new strategies. Interactive control systems are likely to become more important when teleworking. Dialogue and debate are ways of guiding employees and making them focus on the important organisational indicators.

Simons proposed a combination of levers to be most effective when employees face empowerment. Teleworking aims for lower level responsibility, autonomy and self-control and therefore the concept of teleworking and empowerment of subordinates predominantly match. To that end, managers could utilise Simons’ levers to effectively exhibit teleworking. It is the objective of this study, to analyse change in management control practices and among others, to understand how and if they relate to Simons’ levers of control.

Merchant and Van der Stedes control types

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that employees perform (do not perform) certain actions known to be beneficial (harmful) to the organisation. Personnel controls are designed to make it more likely that employees will perform the desired tasks satisfactorily on their own. Cultural controls exist to shape organisational behavioural norms and to encourage employees to monitor and influence each other’s behaviour. Finally, results controls exist to reward those who work the hardest, or add the most value. Mostly, a combination of these controls exist within organisations.

Action controls are the most direct form of management control. They ensure that employees (do not) take certain decisions that benefit (harm) the organisation. The employees themselves are the focus of control within action controls. There are four types of action controls: behavioural constraints, pre-action reviews, action accountability, and redundancy. Behavioural constraints are a negative form of control. They are introduced to make it impossible for employees to perform actions that are disadvantageous for the organisation. The constraint can be applied physically (locks) or administratively (passwords/separation of duties). Pre-action reviews involve the scrutiny of the action plans of the employees being controlled. Reviewers may (dis)approve the proposed actions, demand modifications, or ask for a more carefully considered plan before granting approval. Pre-action reviews are common within planning and budgeting. Managers could be reviewing action plans in early stages of teleworking in order to determine whether the action plans of subordinates are in line with the beliefs and values of the organisation. In action accountability, employees are held accountable for the actions they take. In order to implement action accountability controls effectively, there are certain requirements: what are (un)acceptable actions according to the manager? how do we communicate these to our employees? how do we track or observe the actions? and what are the rewards (punishments) for good (bad) actions? Redundancy involves assigning more employees to a task than strictly necessary. Redundancy is common in security facilities since it increases the probability that tasks will be accomplished satisfactorily. Most action controls aim at preventing undesirable behaviours. These controls cannot be used effectively in every situation however. They are only useful when organisations can determine what actions are (un)desirable, and are able to ensure that the (un)desirable actions (do not) occur. Lack of knowledge as to what actions are desirable is the constraint that most limits the use of action controls. Most organisations do not have a good idea as to how employees in complex roles (top-level managers, salespeople) should best spend their time.

Personnel controls build on employees’ natural tendencies to control and motivate themselves. Self-monitoring is an important concept within personnel controls. It is the naturally present force that pushes an employee to want to do a good job and to be naturally committed to the organisation’s goals. The concept of self-monitoring has been discussed in management literature under a variety of labels, including self-control, intrinsic motivation, trust, and loyalty. Three methods of implementing personnel controls exist. Through selection and placement, training, and job design. Selection and placement involves finding the right people to do a particular job. Important predictors of successful selection are education, experience, personality, and social skills (Smart, 2005). Training can provide useful information of what actions or results are expected and how the tasks can best be performed. In addition, training might have positive motivational effects as well, because of the greater sense of professionalism and understanding of the job. Another way to help employees act in the organisation’s best interest is to make sure that the job is designed to allow motivated and qualified employees a high probability of success.

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stakeholders, and the ways in which management would like the organisation to function. The code is designed to help employees understand what behaviours are expected when rules or principles are absent. In order to maximize the effects, formal training sessions and discussions among employees and their superiors should be stimulated. Group rewards are a compensation based on collective achievements. Bonus, profit-sharing, and gain-sharing are examples that provide compensation based on corporate performance. Organisations should encourage broad company ownership, since it keeps employees informed, enthusiastic and most importantly, it encourages them to think as owners (Rosen, Case & Staubus, 2005). Within teleworking, managers often argue that a change of organisational culture is a prerequisite in order to exploit the advantages of the method. As the literature states, this isn’t easy to accomplish. The analysis section therefore will focus both on: if managers try to change corporate culture, and how they try to change it.

Results controls are preventive-type controls and create meritocracies. Meaning, the rewards are given to the most talented and hardest working employees, rather than those with the longest tenure or the right social connections. The linkage between working and results remind employees as to what result areas are important. Consequently, results controls influence employee actions. The organisation does not dictate what decisions employees should take, instead they are empowered to choose those actions they believe will best produce the desired results. In addition, results control are an indirect form of control, because they don’t focus explicitly on the employees’ actions. However, this indirectness provides some important advantages. Results controls can be effective when it’s not clear what behaviours are most desirable. Moreover, they can yield good control while allowing employees, whose behaviours are being controlled, high autonomy. Many employees, especially those higher in the organisational hierarchy often respond well to it. In order for results controls to be effective, three conditions have to be met: knowledge of the desired results is crucial, the organisation must have the ability to affect these desired results, and must have the ability to measure controllable results effectively. Results controls are particularly dominant as a means of controlling the behaviours of professional employees, those with decision authority, like many subordinates within the teleworking concept. Results controls are consistent with, and even necessary for, the implementation of decentralized forms of organisation with largely autonomous entities. Because results controls promise high rewards for good performers, use of these controls can help firms attract and retain employees who are confident about their abilities (Ayra & Mittendorf, 2005).

As stated before, a combination of control types is used in organisations. When teleworking is implemented, the combination of controls is likely to change, since employees are facing more autonomy and responsibility and managers have to cope with controlling subordinates at a distance. The analysis section will point out the way these control instruments are used in practice or changed to fit the requirements of control in contemporary telework settings.

Ouchi’s control mechanisms

The problem of an organisation is obtaining cooperation among a collection of individuals who share only partially congruent objectives. Organisations can seek to cope with the problem of evaluation and control through the use of control mechanisms referred to as: markets, bureaucracies, and clans. In a fundamental sense, markets deal with the control problem through their ability to precisely measure and reward individual contributions. Bureaucracies rely instead upon a mixture of close evaluation with a socialized acceptance of common objectives. Clans rely upon a relatively complete socialisation process which effectively eliminates goal incongruence between individuals. Goal incongruence is when goals are inconsistent across the board. It arises in organisations when members do not ‘share a selfless devotion to the same objectives’. The incongruence causes a lack of cooperation among members to an organisation’s mission. Besides, performance ambiguity is a condition that is used to determine the best mechanism for control. Performance ambiguity is the lack of clarity in how work will be valued.

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Unfortunately, it’s only rarely possible to arrive at perfect prices, because technological interdependence and uncertainty complicate the problem. The bureaucratic mechanism arrives when prices aren’t feasible as a mechanism. It involves close personal surveillance and direction of subordinates by superiors. The information necessary for task completion is contained in rules; these may be rules concerning processes to be completed or rules which specify standards of output or quality. Rules differ from prices in the important sense that they are partial rather than complete bundles of information. In order to use a rule (a budget, or cost standard), a manager must observe some actual performance, assign some value to it, and then compare that assigned value to the rule in order to determine whether the actual performance was satisfactory or not.

A group of people with a common specialisation represents a profession, the citizens of a political unit make up a culture and the collection of individuals within an unique organisation is a clan. The clan mechanism determines the transaction costs through a system of authority, but not evaluation. Evaluation takes place among close co-workers. Strict evaluation is unnecessary, because the organisation has socialized its members. This mechanism is efficient for organisations to employ when goal incongruence is low and performance ambiguity is high. In a clan, the information is contained in the rituals, stories, and ceremonies which convey the values and beliefs of the organisation (Clark, 1970).

There exist some social and informational prerequisites of control within Ouchi’s theory. A market cannot exist without a norm of reciprocity, but it requires no social agreements beyond that. A norm of reciprocity assures that a cheater, if discovered, will be punished by all members of the social system. When a market fails as the mechanism of control, it is most often replaced by a bureaucratic form. A bureaucracy contains not only a norm of reciprocity, but also agreement on legitimate authority. In exchange for pay, an employee gives up autonomy in certain areas to his organisational superiors, thus permitting them to direct his work activities and to monitor his performance. A clan requires not only a norm of reciprocity and the idea of legitimate authority, but also social agreement on a broader range of values and beliefs. Because the clan lacks the explicit price mechanism of the market and the explicit rules of the bureaucracy, it relies for its control upon a deep level of common agreement between members on what constitutes proper behaviour, and it requires a high level of commitment on the part of each individual to those socially prescribed behaviours. While a clan is the most demanding and the market the least demanding control form with respect to social underpinnings, the opposite is true when it comes to information.

Ouchi’s control mechanisms are also used to determine possible changes in management control to fit teleworking. Together with Simons’ and Merchant and Van der Stede’s distinctions of control, it will function as a basis to analyse the qualitative field study. As aforementioned, these distinctions are chosen, since they form the basis of control theory at lectures at universities nowadays. Besides, they can also complement each other and provide an holistic view on the identified phenomena in the case study.

However, besides the choice of control mechanisms, choosing for a telework concept also depends on leadership styles and preferences. Therefore, this subject will be discussed in the next paragraph. Telework and leadership

Many managers accustomed to traditional, daily visual supervision are fearful of abandoning management techniques that do not transfer well to the telework environment (Nilles, 1997). Telework is more suitable for the so-called knowledge workers benefiting from higher autonomy, performing complex tasks and working on projects according to Daniels et al. (2001). Besides, teleworkers are said to be mainly professionals (Belanger, 1999; Daniels et al. 2001; Bailey and Kurland, 2002), and telework itself contributes to the individualism of work (Taskin & Edwards, 2007). These phenomena should be taken into account when searching for new fitting leadership styles.

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positive behaviour and action, where other styles direct on preventing negative behaviour and action. John Kotter (1990) studied leadership and concluded that effective leaders are able to motivate and inspire organisational participants to bursts of energy in support of organisational goals and strategies. He concluded that inspirational (positive) motivation is created by articulating a vision that addresses the values of participants, allowing each individual to appreciate how he can contribute to achievement of that vision, providing enthusiastic support for effort, and encouraging public recognition and reward for all successes. This leadership theory therefore focuses on encouraging rather than preventing. Selznick (1957) stated that leadership should protect against organisational drift and misguided behaviour by establishing direction, aligning, motivating, and inspiring people, and defending institutional integrity and therefore focuses on the negative side, meaning that unwanted or harming behaviours should be prevented.

According to the original path-goal theory (House, 1971), the manager’s job is viewed as guiding workers to choose the best paths to reach their goals, as well as the organisational goals. The theory argues that leaders will have to engage in different types of leadership behaviour depending on the nature and the demands of a particular situation. It is the leader’s job to assist followers in attaining goals and to provide the direction and support needed to ensure that their goals are compatible with the organisation’s goals. A leader’s behaviour is acceptable to subordinates when it’s viewed as a source of satisfaction and motivation. A leader should facilitate, coach, and reward effective performance. Leaders within telework have to deal with various circumstances, since subordinates are granted with the freedom to choose themselves whether they need guidance and direction. Leaders therefore have to be capable of dealing with situational differences between various employees. Some employees simply desire other leadership behaviour and styles than others. Leading, consequently might be a broad and diverse task within telework. The original path-goal theory identifies achievement-oriented, directive, participative, and supportive leader behaviours. The achievement-oriented leader refers to situations where the leader invents challenging goals for followers, expects them to perform at their highest level, and shows confidence in their abilities to meet these expectations (House, 1974). This type of leader works best in situations where professionals (scientists, engineers, entrepreneurs) are employed (House, 1996). The directive leader refers to situations where the leader lets followers know what is expected of them and tells them how to perform their tasks. The theory argues that this behaviour has the most positive effects when subordinates’ role and task demands are ambiguous and intrinsically satisfying (House, 1974). The participative leader involves consulting with followers and asking for their suggestions before making a decision. This type is predominant when subordinates are highly personally involved in their work (House, 1996). Within supportive leadership, the leader shows concern for the followers’ psychological well being (House, 1974). It directs behaviour towards the satisfaction of subordinates needs and preferences. This is especially needed in situations in which tasks or relationships are psychologically or physically distressing (House, 1996). Path-goal theory assumes that leaders are flexible and that they can change their style, when that’s required. The theory proposes two contingency variables, environment and follower characteristics. These contingencies moderate the leader behaviour-outcome relationship. Environment is outside the control of the follower-task structure, authority system, and work group. Environmental factors determine the type of leader behaviour required if the follower outcomes are to be maximized. Follower characteristics are the locus of control, experience, and perceived ability. Effective leaders clarify the path to help their followers achieve goals and make the journey easier by reducing roadblocks and pitfalls. Since directive path-goal theory states that leaders have to engage in different types of leadership in order to reach organisational goals, this study maps the style changes that can be noticed. The introduction of telework presumably leads to other leadership styles, just as the probable change of management controls. If leadership styles change, it presumably depends on the manager’s believes, that another leadership style contributes to controlling subordinates more efficiently. As aforementioned, since working practice changes with teleworking, changes in management control systems usage and leadership styles are expected to be identified as well.

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a changing set of management controls and leadership styles. Then, management control reactions will influence the functioning of telework in turn. How and when precisely the set of controls and leadership styles change, is investigated at three different Dutch teleworking organisations which will be introduced in the following section. In addition, besides control form and leadership style changes, the analysis section aims to look for newly invented forms of control as well.

Figure 1: telework influences the use of control systems

Research context and methods: introduction to the case companies

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further along this process. On the other side, the case companies differ largely from one another. Since the focus is to describe noticeable changes regarding control, the dissimilarity between the companies becomes rather useful. The following section contains an introduction of the case companies, this is followed by the research methods.

Waterschap de Dommel is a public body which resembles many traits of a municipality. The organisation collaborates with others, so they can assure dry feet and sufficient clean water in their area. Most governmental services suffer from inertia and slow decision making. De Dommel decided to tackle these common public disadvantages by adopting telework. They aspire to be a contemporary, functional authority which directs its efforts on what society demands. Their approach is entrepreneurial, innovative and aims for high quality. Besides, they try to reach their goals at the lowest possible social cost, assuring an optimal balance between people, the environment and the economy. For employees, de Dommel tries to be an inspiring organisation, creating room for development, flexibility and entrepreneurship.

Rabobank Netherlands is an internationally operating financial services bank. They’re active in banking, asset management, leasing, insurances and estate. Rabobank Netherlands mainly focuses on financial services. In order to increase customer focus, Rabobank Netherlands adopted ‘unplugged’ (their vision on teleworking). Unplugged stands for releasing rules, time, space and going back to basics. Conscious decision making has to aim for end results. Traditionally the bank always had a cooperative character, this is displayed in unplugged as well. It’s about making an achievement together via honesty, realness and pureness. Besides, IT and the new buildings facilitate the core mission of unplugged. All together, the initiative is a platform for talent to develop themselves.

At Microsoft 100.000 people from over 60 different countries are working to redeem the promise that everyone gets helped by Microsoft to reach their full potential. Microsoft tries to aid people and organisations reach their goals, aspirations and ambitions mainly by letting technology work for them. This accounts for SME’s, large businesses and governmental institutions. Microsoft Netherlands is responsible for sales, marketing and support of Microsoft technology in the Netherlands. At Microsoft Netherlands they’re practicing what they’re preaching. In other words, they are letting technology build by themselves, work for them in order to show the benefits of their software to their customers. Teleworking according to Microsoft is another way of working supported by the latest technology. Both people and organisations become more flexible regarding work time and workspace. This increases satisfaction levels, which makes the organisation more productive.

The adoption and implementation of telework roughly led to changes in three subject areas (place, people, and technology). It is claimed that employees within telework should be at the heart of the enterprise. In order to reach this, organisations firstly changed their physical work environment (place). Work is no longer tied to the office alone. People now work from home, while in transit, or at customer sites. Secondly, organisations changed their technology tools in order to enable practical improvements in the way people work. These improvements are both in communication and meeting participation in order to capture knowledge and information. The usage of technologies got altered so employees were able to reach the full potential of these new tools and services. Finally, the teleworking culture and organisation that was created, should empower the people with freedom and accountability. Moreover, employees experienced social impact in terms of management philosophy and practice. They encountered another way of how meetings were conducted, how conflicts within teams were resolved, and how people will be motivated, nurtured, and empowered. The teleworking changes have led to different relationships between manager and subordinate and have resulted in employer awards. To an extent, awards like: the innovation award, great place to work, etc. can be attributed to teleworking. Therefore, the telework process is described based on the data collected at these teleworking and award-winning case companies.

Research methods

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against empirical evidence, are falling due to the differentiation of objects. Therefore, research is increasingly forced to make use of inductive strategies. This study utilises such an inductive strategy by starting from researching patterns and analysing actual alterations in controlling, rather than starting from theory and hypotheses, and testing them. Since telework can be denoted as a relatively new, interactive, social process that influences relations between organisations, managers, employees, clients, and other stakeholders, qualitative research is preferred to use as research method. The following paragraph will deliberately explain why.

The objective of this study is to analyse and describe change in management control practices. The cause of the presumed management control change is the introduction of telework. Telework can be denoted as a relatively new work form. One where its effects on management control yet need to be explored and described properly. Qualitative research is said to be ideal for these earlier phases of research projects (Flick, 2006). Besides the immaturity of telework, there are multiple other characteristics of telework that favour qualitative over quantitative research. Firstly, qualitative research is used because this study contains qualitative difficulties that need to be answered. Secondly, telework implementation can be regarded as an intensive and prolonged process. With qualitative research, different perspectives of respondents can be recognised and analysed, different point of views can be researched, and (controlling) process aspects can be explored (Flick, 2006). Thirdly, qualitative research is primarily subjective in approach as it seeks to understand human behaviour and reasons that govern such behaviour. This links to this study’s research topic as well, since its objective is to analyse management control change by researching teleworkers their experiences, thoughts and opinions. Finally, qualitative data is known for its richness and holism, with strong potential for revealing complexity. It provides ‘thick descriptions’ that are vivid, nested in a real context, and have a ring of truth that has strong impact on the reader (Miles & Huberman, 1999). On the contrary, quantitative research focuses more on counting and classifying features and constructing statistical models and figures to explain what is observed. It therefore isn’t suitable for this study, since scarce information about the combination of telework with management control practices exist. Of the two research techniques, qualitative research thus connects better to this study’s research goal.

Miles and Huberman (1994) distinguish between tight and loose qualitative research design. They see indications for both variations in concrete cases according to the research question and conditions. Narrowly restricted questions and a strict selection procedure determine tight qualitative research. This study combines tight and loose research designs in a way. Firstly, this study starts from the framed, pre-determined research topic that is management control. Secondly, within this frame, a loose qualitative research design has been chosen to uncover the various implications that (the relatively un-investigated phenomenon that is) telework has on management control. In this way, the field of investigation can be denoted as relatively narrow, since this thesis predominantly contributes to the management control field, but the empirical material within this field will be abundant rather than limited. An advantage of using loose qualitative designs, is that it provides great openness and flexibility in its theoretical sampling (Glaser and Strauss, 1967). Especially the opportunity to gain a deeper understanding of the analysed cases and to facilitate the development of analytical frame and concepts represents an advantage to gain more knowledge about the research topic and its sub-topics.

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interviewee’s subjective theory about telework at different points in time (Flick, 2006). The semi-structured interview contained pre-determined teleworking topics: general teleworking questions, controlling output, controlling behaviour, and telework and leadership. During the interviews, the more general, non-sensitive questions were asked at the beginning and the more confronting ones at the end. The interview questions were open ended, so interviewees could respond on the basis of knowledge immediately available. Besides, some theory-driven questions were asked. The different types of questions allowed the interviewee and researcher to start a dialogue about the topics. Within every interview topic (phase), both past, present and future situations have been discussed in other to uncover the changing conditions and controls. Besides, questions about the teleworking process have been asked as well. The goal of using interviews, was to reveal existing knowledge in a way that can be expressed in the form of answers and so become accessible to interpretation. The interviews all lasted approximately 60 minutes on average and were recorded on tape. At each case-organisation, four managers were questioned about their thoughts and beliefs regarding telework and its implications for management control. Top-, middle- and operational managers were asked questions about several sub-topics in order to uncover the changed and new ways of controlling employees. Moreover, managers were asked to indicate and illustrate control changes compared to the past. In this way, not only the old-fashioned traditional and the contemporary teleworking controls can be researched, but different phases within this process, which eventually leads to teleworking control, as well. Managers from different levels were utilised, so discoveries could be made about controlling changes at various levels of the organisation. That is, because top managers mostly face other types of employees opposed to middle- and operational managers and therefore might encounter other types of controlling difficulties. Examples of typical questions asked during the interviews are detailed in Appendix 1. Questions meaning to answer in this study partially concentrate on the content of subjective theories and partially on how they are applied in activities. In this way, managers at various levels can be interrogated about their beliefs and experiences regarding management control practices, because of the introduction of telework. Then, interpretations of respondents can be used to analyse whether patterns or other inventive ideas about controlling the new telework situation emerged.

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category. Besides, similar paraphrases are bundled and summarised as a second reduction of data. This method is used since it’s a common procedure in analysing subjective viewpoints, collected from interviews (Flick, 2006). Once data got reduced in every phase, quotes were highlighted which illustrated the controlling or process change. Finally, those quotes were used which most vividly and clearly represented how controls changed or emerged in a particular phase. In the end, the combination of phases and its quotes provides the content for answering this research problematic.

Quotations fulfil an important role within this study. Quotations about actions, reactions, and consequences regarding the changing control situation form the descriptive way of illustrating the managerial intentions. In this study, quotations are used in the following constructs: as evidence, as explanation, and to deepen understanding. The use of quotations has several methodological advantages and disadvantages. Firstly, quotations can help to strengthen the reports’ credibility. On the contrary, some people feel that using direct quotations isn’t evidence to strengthen a study, since researchers would be able to at least find one quotation to support any point they wish to make. Secondly, quotations are used to see how people position themselves within societal processes, and some of their underlying assumptions, ambivalence and uncertainties. Showing what people really said by using their choice of words can be especially useful in illuminating what went on. Thirdly, quotations can deepen understanding by showing the strength of respondent’s views or on the other hand, their passivity and lack of engagement in ways that the researcher’s own narrative could not (Corden and Sainsbury, 2006). In addition, quotes can bring data to life as well, since they present the ‘thick vivid descriptions’ nested in the real context (Taylor-Powell and Renner, 2003).

Analysing the change, from traditional to telework controls

This section provides descriptions and quotations of practice that illustrate how management control practices change because of teleworking. Descriptions have been classified in six subject phases (telework introduction, controlling output, controlling behaviour, use of reward systems, telework and leadership, and concrete changes in actions). Besides, a new subject phase has been added: newly invented controls. In this way, both alterations in existing management controls and invented new controls can be indicated and described thoroughly. Moreover, the combination of existing and new control forms will provide a rather complete understanding of how managers utilise and combine their set of controls, so subordinates can be monitored efficiently. In addition, this analysis is presented (whenever possible) in chronological order, so a teleworking process can be constituted. This process shows when and how managers encounter problems, and how they try to solve these by changing their set of control instruments. From the case study it has been concluded that the identified phases aren’t as segregated as they are presented in this section. Every subsequent phase overlaps with the previous one in a way. That is, controls that changed in the first phase, are still utilised in the second, third, etc. phase. However, within the manager’s set of control instruments, his main focus has shifted to other controls now.

A description of the teleworking introduction phase illustrates how organisations try to cope with the implementation of the phenomenon. The other phases start from a managerial point of view and illustrate how management control changes for the top-, middle, and operational managers. As aforementioned, this is illustrated by quotations. The meaning and theoretical consequences of these quotes are described with the aid of Simons’, Merchant and Van der Stede’s, and Ouchi’s terminologies. In other words, descriptions are provided which entail the theoretical controlling changes that can be derived from these quotations. By using both quotations and rich, bulky theoretical descriptions, I tried to convince, explain, and deepen understanding about management control change in every identified phase. This routine is not only applied within the teleworking introduction phase, but is repeated in the following phases as well. In the end, table 1 provides a summary of the teleworking phases as well as the various controlling changes that are the result of this process. Figure 1 shows the teleworking overlap between the identified phases.

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(use of rewards systems). Therefore, differences that have been identified are described in the specific phase where they are found.

Teleworking introduction phase

The introduction phase starts approximately six years ago. Boards of case-companies De Dommel, Rabobank Netherlands and Microsoft Netherlands choose to change their way of working in order to respond to the changing needs of the environment. Telework is implemented so organisations could react to this changing environment. Besides, board-members were confident that executing telework would lead to improved client and employee satisfaction as well as some other advantages. They started to emphasise on teleworking principles rather than traditional ones. They now wanted managers and employees to focus on knowledge sharing, cooperating, trusting, entrepreneurship, a different usage of IT, etc. Since these organisations were among the first ones to introduce telework, there existed a lot of question marks about how organisations should deal with these changing circumstances. Managers took considerable time and effort to make plans about how telework could be implemented into their organisation. They anticipated that it wouldn’t be easy to change from a traditional to a telework organisation and therefore tried to anticipate on differences in multiple areas:

‘You cannot state, on Friday we work traditionally and on Monday we’ll start teleworking. I think it’s more like a prolonged process. If you look at us the last four, five years, our way of working changed seriously’ (Middle-manager at Rabobank). ‘Teleworking isn’t a HR party, it isn’t a party because of a new building, and it isn’t a technology party as well. It is an integral approach. You cannot emphasise one thing and leave the others’ (Top-manager at Microsoft).

Some question marks could be related to the subject of management control. Managers at different levels in the organisation (top-, middle-, operational managers) didn’t precisely know how telework would change their way of controlling subordinates. Some managers didn’t even want to know how controlling and leading employees would change. They didn’t see telework as a cause to change their managing style. Others resisted against the new way of working by deliberately choosing to disallow telework at their teams. These managers often encountered problems, because they couldn’t cope with the reduced status and diminished hierarchal position. Besides, some managers simply didn’t possess the social skills that are needed for telemanaging. They therefore were regarded incapable telemanagers. The three case-companies treated these unwilling or incapable managers differently though. At de Dommel and Rabobank Netherlands, these managers were offered other positions in which their beliefs didn’t do as much harm as in their previous position. At Microsoft however, there was a policy of changing or leaving. Consequently, relatively many layoffs were found at Microsoft and relatively few at the other case companies:

‘Multiple managers didn’t make it throughout the transformation, because you nowadays need people-management skills. Not everyone possesses them. You can learn to activate them, but if you really don’t posses them, telemanaging won’t work’.

‘Are there managers who find it difficult to adapt? Yes, but they’re gone’ (Top-managers at Microsoft).

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case-companies. Besides, the Anglo-Saxon background is one of results, which led to a shorter period for their managers to change their managing style before being dismissed. This handling of the workforce can be regarded as the first difference between the case-companies.

Directing on output phase

Although case-organisations encountered some unwilling managers, most managers wanted to explore how their managing style could contribute to telework control. Top- and middle-managers received the freedom and responsibility to invent management styles that would contribute most efficiently to the changing working circumstances. It took managers suitable time, effort and various (re)actions in order to reach a good balance between providing freedom or control, and responsibility or guidance. The following paragraphs provide a guidance of how the three case-companies and its managers acted and reacted in order to reach this balance. As aforementioned, this will be done in the form of (overlapping) phases, starting at the directing on output phase.

The introduction phase can be regarded a relatively short one. The change-willing managers tried to adapt to teleworking in order to unleash its potential. These managers acknowledged that there exist changes compared to traditional working and that a change in control forms might contribute to better monitoring of subordinates, leading to better performance of the subordinate, manager, and finally the organisation. One of the first control decisions of managers was the implementation of output standards for subordinates. It was the public conviction that directing on output would lead to a successful governing of telework. Superiors used management by exception and tried to specify and monitor the output figures. As long as subordinates reached their targets, managers were satisfied and employees received their bonus:

‘We are now definitely focusing on output and on the main issues more’ (Operational manager at de Dommel).

‘We’re focusing more on output than on the way how subordinates reach their output. It shifts though, originally it was 90% output monitoring and 10% behaviour. Nowadays, it’s 65%-35%’ (Operational manager at Microsoft).

Managers originally implemented output standards and used management by exception to control their subordinates. Within the following phases the focus shifts to other controls however. This doesn’t mean that output controls aren’t employed anymore. They’re added to the manager’s set of control instruments and are applied in the background. Moreover, managers even improved the employment of output controls throughout the teleworking process. And since they’re a relatively widely used control, managers have found ways to connect their usage to various personal performance (review) models:

‘We are using a controlling model in order to reach output. This is called the INK model. It’s a kind of best practice tool. As an organisation, department, or manager, you need to organise things which lead to results for your clients. Besides, you’ll have to organise value for your employees as well, because when you don’t, the first goal only will be accomplished very shortly’ (Top-manager at Rabobank).

Telework and the Management Control Consequences A case-study at three Dutch pioneering tele-organisations Martijn A. Hoekstra