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The influence of remote management control systems in

times of COVID-19 and its impact on performance

Pablo Christian Giesinger Carro S4240944

p.giesinger.carro@student.rug.nl Supervisor: Prof. Dr. Paula van Veen-Dirks

18 January 2021

Master Thesis

M.Sc. Management Accounting and Control Faculty of Economics and Business

University of Groningen

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Abstract

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Table of Content

Introduction ... 4

Literature review ... 5

Management Control Systems ... 6

Telecommuting and Motivation ... 7

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Introduction

The recent worldwide outbreak of COVID-19 has changed the way we live and the way we work. Being in lockdown and having social distancing measures impeded millions of people to do business from their offices. This pandemic boosted digitalization and remote work in an unprecedented way. Employees started working from home for an indefinite duration. Luckily, the information and communication technologies (ICT) allow us to be connected, have meetings and work via the internet. In other words, it can be said that the coronavirus was the single most important event that unleashed the full potential of ICTs. The new environment creates a challenge both for employees and managers.

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The gap in the literature is presented by to two factors. First, the nature of the remote work is completely different to what we have seen before. In the past for example, only individuals who wanted to work remotely actually did. Now, working remotely became an obligation for those who like it or don´t, and for those who are skilled to do it or not. Second, the fact that the new environment in so recent, and presents itself in a massive way restricts the amount of literature available.

This thesis will try to tackle the following research question: How do remote management control systems influence performance in a massive telework environment?

The purpose of this paper is to present new theoretical knowledge on how remote management control systems influence organizational behaviour and performance. This research will examine how managers are reacting to the changing conditions and its impact on employees and their performance. This is achieved through interviews with managers and employees at German corporations. The reason for this thesis to be an exploratory qualitative study based on interviews, is the limited amount of literature focusing on the large-scale teleworking arrangements. With the help of interviews, different point of views can be gathered. It is expected that new ideas and relationships between specific problems will be established.

Literature review

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influence performance is required to understand the far-reaching impact of the completely new environment.

It is imperative to say that the coronavirus is the most life-changing event of the last decades. But what is COVID-19? As reported by the World Health Organization (WHO), the COVID-19 (coronavirus disease 2019) is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) which was first identified in December 2019 in Wuhan, China, and has resulted in an ongoing pandemic. Its high contagiousness was key for turning the world upside-down. The social risk involved with catching the virus (hospitals working above their capabilities, risk of healthcare system collapse) nearly obliges the whole world to work from home to flatten the infections curve.

Management Control Systems

Malmi and Brown (2008) defined management controls as “rules, practices, values and other activities management put in place in order to direct employee behaviour [..] If these are complete systems, as opposed to a simple rule (for example not to travel in business class), then they should be called management control systems (MCS).” These systems were initially not designed for an environment in which mobile work is predominantly as it is becoming now. For that reason, the effectiveness of those systems has to be critically reviewed under the impact of the coronavirus. It is clear that the large changes to the work environment will have a direct impact on management control systems and its effectiveness.

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main goal is to ensure that all individuals have enough intrinsic motivation to display the desired basic values, beliefs and standards set by the organization. Lastly, boundary systems include sets of rules and formal requirements to guide, control and limit employee’s behaviour. Once again, this lever is directly influenced by the telework arrangements. Simons emphasised on the importance of the balance between the four levers. Nowadays, we have to ask ourselves if the new remote work environment is not destabilizing the existing balance between all levers.

Figure 1. Levers of Control (Source: Simons 1997, p. 7)

The entire framework by Simons is based on the contingency theory, which claims that there is no single best way to lead a corporation or to make specific decisions which work for every organization (Otley 1980). Alternatively, the optimal course of action is dependent upon constantly changing internal and external factors. Therefore, the amount of attention that should be paid to the individual levers depends on these contingency factors.

Telecommuting and Motivation

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positive as you might enjoy more freedom working from home. Nevertheless, not everyone is fitted for remote work. It can be challenging for telecommuters to adjust to working at home after spending their lives in corporate environments (Wheelwright, 1995). The telecommuting candidate has to work well independently, be responsible, easily conform to a trusting relationship, and have personal motivation (Weiss, 1994). According to Guimaraes and Dallow (1999), the first identifying characteristic of a potential telecommuter is the wanting to do it. The second it that they must be technically skilled and have significant experience performing the required tasks. These two characteristics are not present in the actual wave of remote work as people are obliged to work remotely. Even new employees without experience doing a certain task have to work from home. In times before the crisis, only those employees wanting to work remotely actually did. Nowadays, nearly all individuals must work from home, regardless if they actually want it or if the job suits a remote workplace. Table 1 illustrates the different characteristics of the flexible workplace before and during the COVID-19 pandemic. As the table shows, the current situation is distinctive to telework prior to the pandemic in many ways. Therefore, it has to be approached differently by managers. It’s undoubtedly distinct to manage a few skilled remote workers than leading a whole team that is dealing with the challenges and difficulties of the sudden shift to telework. Managers will have to pay special attention to their employees and their needs when implementing remote MCS to ensure their well-being which is directly correlated with performance.

Before COVID-19 During COVID-19

• Only those who wanted worked remotely

• Nearly everyone, even if they do not want to

• Only those with jobs suited for

remote work • No matter what kind of job

• Only individuals with the necessary skills

• With no prior experience or skills teleworking

• Only those with a suitable environment at home

• No matter if the environment at home is suitable

Table 1. Different characteristics of telework before and during the COVID-19 pandemic.

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in those three aspects, as they themselves, just as anyone else, were thrown into the new telecommuting situation nearly from one day to another. Communication might be the most difficult challenge to overcome, as the physical distance the virus requires hinders a free flow of communication. Hackman and Johnson (1994) explain that leadership is best understood from a communication standpoint. They in fact define leadership as ‘’communication that changes attitudes and behaviours of others to meet group goals and needs’’. This is where the information and communication technologies (ICT) come into play. Managers will have to adapt and to make the most of the technological tools available to communicate and transfer knowledge. Luckily, the outbreak boosted the availability of software designed to overcome the physical barrier imposed by the pandemic. In 2020, we saw companies like Zoom quadrupling its revenues. Also, other platforms and software like Microsoft Teams or Slack also saw a significant boost of new users. This underlines the crucial role that ICT play in the success of telework arrangements. Managers have to carefully decide on which tools to use and how to make the most out of them. However, there is more to communication than technology. Certain communication methods that were common when work took place at the office cannot be easily replaced with virtual meetings. The essence of communicating in person in stronger than via the internet. Communication also includes passive forms of information gathering. The mere fact of being at the office provided employees with large amounts of information that was gathered in a passive form. Observing what is happening at the office, spontaneously interacting with others or having a lunch break with your colleagues is a communication form that is extremely hard to replace virtually.

Trust is another parameter to focus on. Managing trust is in itself difficult, but it becomes even harder when you cannot meet your peers physically. Mayer et al. (1995) defined trust as the “willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party.” Building up trust makes manager-employee’s relationships more efficiently by reducing the costs of monitoring and controlling (Aubert, Kesley 2003). Baker, Avery and Crawford (2006) illustrate that a relationship-oriented behaviour has a greater impact on motivation when working from home than a merely technical-support relationship.

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structures provide social support” that helps dealing with problems. Now, not having a proximity that stimulates informal communication, managers’ support has to come in alternative ways. Thus, the practices of managers in the new situations will be reviewed and put into contrast with the needs of employees. In this context, the remote management control systems that leaders put into place have a huge potential to support or hinder employees’ motivation in the novel environment.

Employee motivation is the other variable to be analysed in this study, as motivation directly influences organizational performance. On the one hand, intrinsic motivation has been characterized as the doing of an activity for its inherent satisfactions rather than for some separable consequence. When intrinsically motivated a person is moved to act for the fun or challenge entailed rather than because of external pressures, or rewards (Ryan and Deci, 2000). But people not only have different amounts, but also different kinds of motivation. Not only the level of motivation but also the orientation of motivation changes from individual to individual. On the other hand, extrinsic refers to doing certain actions by reason of getting separable outcomes (Ryan and Deci, 2000). Both intrinsic motivation and extrinsic motivation are positively associated with performance” (Van der Kolk, van Veen-Dirks and ter Bogt, 2019). The positive association of motivation and performance shows the significance of finding the right stimuli for employees working remotely. Self-determination theory argues that the optimal levels of motivation are experienced when three basic psychological needs are satisfied (Deci and Ryan, 2000). The three needs are autonomy, competence and relatedness. Managers have to put special attention towards meeting the needs as the remote setting may make it more difficult to satisfy the needs of competence and relatedness.

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fact of being allowed to work remotely already increased their satisfaction. Prior to the pandemic, employees felt rewarded by the possibility to work from home. However, is to argue that the findings related with the new wave of remote work might look differently. To start with, the motive and nature of the actual telework has completely changed. Nowadays, both enthusiasts and detractors of telework find themselves in the same boat. Papers do not differentiate between a flexible workplace by obligation (as it is a new phenomenon) but rather only on mobile work by choice. It can be said that the novel situation has to be researched from scratch as no event before has put workers worldwide in this new environment. The fact that the situation is so recent narrows down the amount of academic research available. Furthermore, telework literature authors (e.g. De Menezes and Kelliher, 2016; Kroll and Nüesch, 2017) focus on the consequences of remote work at the employee and firm level, but there is significantly less emphasis on the managerial challenges emerging from increased home-office work and the use of remote MCS.

The thesis builds upon Simons’ model of the four Levers of Control (1995) to try to depict how specific situational factors affect the relationship between remote MCS and organizational performance. Contingency theory will be used, as it focuses on how the internal and external factors directly influence the way to lead a corporation. Nowadays both the internal and external factors are changed by the massive switch to remote work. Additionally, by taking a look at the self-determination theory, the degree to which each basic psychological need is met in the new environment will be reviewed. Employee and managerial behaviour will be analysed to better understand how to efficiently manage and motivate individuals working from home in order to increase organizational performance.

Methodology

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conducted and transcribed the interviews, these were analysed and interpreted with the qualitative data and analysis software Atlas.ti. Coding the interviews permitted me to identify which parts of the individual interviews were most relevant to implement in the analysis. Data collection:

The chosen method for the data collection is a set of interviews based on theory developed in the literature review. Beforehand, a questionnaire template was drafted to ensure the gathered data was meaningful to answer the research question (Appendix A4). The questions for managers and employees were structured as follows. The first questions were about the general changes that interviewees experienced in a remote environment. Even if this type of questions did not always present significant answers for the thesis itself, they helped to get interview rolling. The next block of questions consisted of questions about Simons model of four levers of control. Individual questions about each instrument were asked to ensure that information regarding each lever was gathered. Interviewees explained how the remote environment influenced the use of MCS and the individual levers combining it with individual experiences at their firms. Then, questions about the changes in the way of communicating were asked to illustrate what had changed to efficiently communicate. Finally, the questions requested the interviewees to share their experiences concerning their motivation, well-being and the degree to which the three basic psychological needs were met. Before each interview, the interviewees were briefed about the topics to be discussed. They also received a handout about the relevant background and theories in question to avoid the interview from going into an unwanted direction.

Qualitative data is necessary in order to study the “why” of relationships (Eisenhardt, 1998). With the help of interviews, relationships between the management controls and performance will be studied under mobile-work conditions. Getting a diverse spectrum of interview partners, in terms of gender, age and position in the organization is necessary to get different points of view, seeking a deeper understanding. Top-, middle- and low-level employees will be interviewed to obtain a broader comprehension of the topic.

Data analysis:

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divided in 3 main steps. Firstly, the interviews are coded using the so-called open coding method. In this step you read through the data several times and then start to create tentative labels for pieces of data that summarize what is being said (not based on existing theory but just based on the meaning that emerges from the data). Secondly, an axial coding is performed. This part consists of identifying relationships among the open codes. The last part, the selective coding tries to find out core variables amongst the transcripts using the advances of the first two steps. The use of Atlas.ti, establishing relationships between different facts and figures gathered, was essential for pointing out high-priority information. This analysis provided insights to discover patterns among the data and reinforces the probability of a reliable and accurate theory. The coded interviews deliver data about different remote management control systems, their effectivity and their effect on employees’ behaviour in times of coronavirus. Coding the interviews giving headlines to each abstract helped to decide which answers were of most quality for to be implemented in the findings.

Analysis

In order to display the relevant outcomes of the interviews in a clear manner, the results gathered will be introduced topic by topic following the same structure as the interviews. After having presented the relevant outcomes, relationships and contradictions will be established to understand the range of the addressed matters.

Levers of Control

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Interviewee 3 also sees a raised focus on the outputs by managers. She attempts to reason this shift to output oriented management as a result of increased trust of managers towards their employees. When managers focus on the outputs, it means that they stop monitoring employees closely. Trust is indeed a keyword when shifting the attention from strict monitoring of actions to checking whether the results were achieved. Aiming the attention to diagnostic controls means empowering your employees which requires large amounts of trust. She believes that in times before the outbreak of the virus the levels of trust were lower. Managers who had the opportunity to strictly monitor employees closely usually did so. Nowadays, these possibilities are significantly less, so managers are forced to trust employees on a whole new level. In her experience in these past months, the increased focus on diagnostic controls has had a positive impact on her performance. By not having to worry about delivering constant updates about her progress, she feels like she can completely focus on delivering a valuable output. Interviewee 8 has a similar view on the relationship of remote work and trust. He explains that “the fact that I was not able to supervise the work and progress of my employees has further pushed my trust in their work.”

However, interviewee 2 provides insights that differ from the rest. He explains that in his case, diagnostic controls are not necessarily getting increased importance by managers. He describes his firm as a traditional firm which prior to the pandemic restricted the ability to work remotely. Employees were only permitted to work from home up to once a month. From his perspective, that was due to a lack of trust. The way the work continued after the start of the outbreak highlighted his perceived lack of trust by his managers. He mentions that there is not an increased use of diagnostic control systems as he has to provide his managers with “a weekly report with everything that was done duringthe week”. The emphasis of control changed from “checking how the work was done to check if work was done during working hours. That was the main change in the control I had”.

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Interviewee 5 describes two interesting ways his firm approached the difficulty to interact in a casual way to mimic the benefits of coffee breaks at the office. He explains that his managers really saw the value in casual but business-related interactions. The first action was that every month each employee was randomly assigned to another employee within company to schedule a virtual 30 minutes coffee break. It did not matter which position or team you belonged to when getting assigned the virtual coffee break partner. Doing so they achieved a networking effect within the company that was difficult to imagine in a complete remote environment. To avoid that important conversations went missing, an online forum was created to write down ideas that emerged from this new initiative. Interviewee five describes the virtual coffee breaks as “quite useful” as “you also felt the pressure to just talk to somebody for 30 minutes”. Even though these conversations did not happen spontaneously, the outcomes were largely positive. Being in a video call with somebody you do not know and without a script to go through, made individuals think and share experiences. That was exactly what the managers were hoping for. The second initiative was to schedule a casual online meeting every Friday. In those meetings, employees could do short presentations on any not business-related topic. It is important for managers to keep their peers engaged and connected to each other. On interview number 8, it is illustrated that there is a need to stay involved in the remote work. Interviewee 8 says that “you need to show involvement to your employees to get their commitment”. Employees need feel like they are part of the team and company to stay engaged. The need for a sense of belonging and its impact will be described in detail later in the paper.

The importance of staying in touch and constantly exchange information is crucial to make sure that the interactive controls are efficient. Therefore, the use of online tools to maintain regular contact has increased considerably. “Everything changed into an online version” of communication, “but the frequency” has stayed the same explains interviewee 10. A large number of interviewees point out how the use of different channels of communication has changed. Instant messaging was not popular in the business environment until recently, but the outbreak of the virus and the resulting remote work environment has spread this way of written communication across different companies. Messaging platforms like Slack are increasingly important to stay in touch in with your peers and managers.

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directly started talking about how the strict but formal culture of her organization was changing. Before the pandemic, “meetings were held in a very professional environment” (usually at the office). That made everyone “stay alert of how they behave, say or show about themselves.” (Interview 6). The feeling employees had that everything had to be perfect and professional started to fade away after switching to remote work. When working from home employees started showing themselves in a much more authentic way. Now, during video calls and meetings employees show their more personal side. It doesn't matter if “the dog is barking; the washing machine is spinning or if your husband walks past the screen” (Interview 6). All that would have been unthinkable a couple of months back. “The company is encouraging a more healthy and real way of presenting yourself. I hope this is something that will stay this way”. Boundary systems are formally stated limits and prescriptions imposed by organizations to allow individual creativity and freedom within defined parameters. The boundary systems have been altered by the new nature of telework. The fact that employees are allowed, or even forced, to work from home means that companies have to reassess the company’s boundary systems. A number of new rules and standard new practices have been implemented across different organizations to control how the work from home is performed. Boundary systems set limits to opportunity-seeking behaviour.

Interviewee 5 illustrates that when he began working from home, he experienced a variety of freedoms which reduced the pressure on him. But soon his firm began to shape and adapt its boundary systems to the new situation. Interviewee 5, who works in sales describes his experience: “We now have to be available on the chat (on Slack) at all times. That is a way for managers to check that employees are actually on their computers.” Managers have to find the right balance between constraining employees’ behaviour and giving them freedom to decide how to act. The use of boundary systems has a direct impact on employees’ autonomy. The higher the use of boundary systems, the lower the autonomy of employees. Finding the right balance is crucial, as autonomy is one of the three basic psychological needs required by employees to feel engaged and motivated.

Motivation and the three basic psychological needs:

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Self-Determination Theory revolves around being able to make you own choices and having control over your actions. This sums to a key part of our wellbeing. The psychological need for autonomy in the workplace can be realized by the ability to make your own decisions on how, when or where to work. Intuitively, the mere fact of switching to remote work already provides an increased autonomy for employees. However, the interviewees show that this is not always the case. Interviewee 1 says: ‘’I wouldn't say I have more autonomy. I have more autonomy to choose the times where I perform individual tasks, but at the end of the day, the nature of the work has not changed”. The interviewees agree on the fact that the autonomy has not changed in every way. Interviewee 2, working at the company which restricted the remote work prior to the pandemic, sees the remote work as an opportunity for managers to digitally track their employees more than ever. His log-in and log-out hours are monitored and he feels like his actions on the firm’s laptop or mobile phone are closely tracked.

Interviewee 6 also does not experience the increased autonomy that she was expecting when changing to remote work. “I enjoy more autonomy when it comes to the working hours and to when I want to take breaks. But even that has not had such a big impact on my autonomy”. She explains that the autonomy has not increased “as much as people might think”. The same goes for interviewee 3. She describes how the autonomy regarding more flexible working hours has changed but not regarding the tasks.

An increased autonomy for employees would allow them to grow and experiment with new things. But managers (like interviewee 9) do fear that an increased autonomy of employees in a remote environment, can traduce to “mistakes being unnoticed for longer time” (Interview 9). This is due to the shrinked visibility of the work progress and processes. Micromanagement becomes a temptation for managers who lack in trust on their employees.

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18 Competence

The second psychological need is competence. Individuals need to gain the mastery of tasks and continuously learn different things. The need for personal and professional growth is very much relevant for employees. Their intrinsic motivation is dependent on the level of competence that they perceive (Deci, 1971). Competence is also closely related with the amount of feedback employees get. Employees not only have to feel that they have the necessary skills, but also seek to receive regular feedback. Positive feedback is a simple way in which managers can ensure that the need for competence of their employees is met. Nevertheless, giving regular positive feedback is slightly more challenging in a remote environment for two reasons. First, the manager-employee interactions are significantly less in a remote environment. There is limited room for constant feedback compared with what an office setting can provide. Second, as managers cannot observe the work progress of their employees on a day-to-day basis, there is no possibility of receiving constant feedback. Interviewee 6 explains that she misses getting regular feedback and talks about the impact it has on her motivation: “When I work from home, I get much less feedback. Sometimes that makes me unsure about the quality of my work”. If employees start to have the feeling that they are not competent enough to perform certain tasks, their motivation decreases rapidly. Luckily the same happens on the reverse context, employees thrive and gain intrinsic motivation by feeling that they are performing well. In order to ensure that employees get enough feedback even when they work from home, some firms have incorporated a specific tool for giving and receiving feedback. “We have a tool that is internally called Lipson which allows us to give feedback to any colleague at the firm” (Interview 1). Lipson is an internal feedback tool at this firm in which he can provide written feedback to any employees. It was incorporated after the pandemic to deal with the fewer possibilities to give feedback. It is designed to promote the giving of feedback across employees. In his eyes, this newly incorporated tool appears to have significant results. Enabling Lipson to give feedback to any employee remarked the importance of giving feedback, even among peers on the same hierarchical level. Managers at his firm realized that the feedback is important in any direction. The day-to-day work of employees regularly happens between employees of the same level or from different departments that work together, not necessarily with their direct superiors. Hence, this tool supports employees with an increased amount of valuable feedback.

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the offering of webinars. Nonetheless, each firm has a slightly different approach. For example, interviewee 1 tells that his firm offers a “’learning budget that can be spend freely over the year”. By doing so the company provides their employees with support to continue their development. Nonetheless, it is up to the employees to spend this budget or not. Unfortunately, not all companies provide personal and professional growth opportunities. Interviewees 2 and 7 declare that they not have access to any additional learning platform other than the mandatory internal trainings.

But the sense of competence is not only achieved by giving positive feedback, by attaining webinars or other courses. Employees also gain the feeling of competence when they sense trust from their managers. Interviewee 10 gives another great example of how to increase the sense of competence. He feels more competent when managers show trust in his work by giving him increasingly important tasks that carry a greater responsibility. “Knowing that managers believe in you by giving you increasingly important tasks is a good way of increasing the sense of competence.” That is something that can be done by managers independently if the work happens in a remote environment or not.

Relatedness

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participate made him feel excluded. He says that “this is only an example, but can be applied to all kinds of situations”. On the contrary, employees who worked long before the outbreak of the virus at their company, have less feeling of disconnectedness with their peers. This is due to the stronger bonds that were tied prior to the pandemic. However, the longer the fully remote work environment persist, the higher the chances are that you feel unrelated with your peers. “I do not have the feeling that I lost the feeling of belonging to my team. I know them personally for quite some time. But if the situation continues this way, I won’t be surprised if this feeling appears” (Interview 9).

One thing that companies used to do prior to the pandemic was to organize recreational team or company events to strengthen the bonds within the teams. Going out for dinner, attending a sports game or escape rooms were usual corporate events to enhance team-building. That brought the teams together and it was a great way to make employees feel like valued members of the company. Nowadays, most of these corporate events had to be cancelled. Firms found an alternative after realizing that doing events was no longer possible: online events. But as interviewee 9 mentions, “the frequency and impact of these events is not the same”.

Communication

The switch from working at the office to working in a complete remote environment influenced the communication between employees and managers on many aspects. To ensure that the communication as well as the access and transfer of information is efficient, diverse new methods had to be implemented. A key foundation of remote work communication relies on the use of technology. Applications like Microsoft-Teams, Slack or Zoom are the most commonly used tools for an effective exchange of information among teams. The interviews show that nearly all firms at least use one of these tools. Nevertheless, it changes from firm to firm how these communication applications are used. For example, interviewee 1 has the freedom to use each platform in the way he pleases. On the contrary, interviewee 10, has to follow stricter rules concerning the use of specific apps. In his case, each application serves for a specific purpose. Therefore, in this case the use of apps is context specific.

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takes a lot of information to be fully prepared to perform at any given job. Therefore, in the first months, new employees require special attention. They need to have a contact person to whom they can constantly ask questions so that their doubts are resolved in the shortest possible time. Being at home makes this initial adaptation to the job significantly slower. Interviewee 1, explains that before the outbreak, he “would just go for coffee with someone or speak to them directly at the office” if he had any questions. Now he is forced to message them via slack or to call them. Doing so is much more of a hurdle. After having asked several questions you quickly get the idea “’that it was enough so you stop bothering them.” He clearly feels that remote workers have “reduced possibilities to gather information” compared with an environment at the office.

Working from home is also changing the importance of different communication tools. As direct social interactions are no longer possible, all the valuable information that was exchanged by this manner has to be passed on through to the employees by other online means. The interviews show that companies redirect the information through different channels. Some emphasize on updating the information on apps like Microsoft Teams while others redirect and pass the information through newsletters. This is the case for interviewee 2. He points out the increased relevance of marketing newsletters: “before the virus, only general information that was not so relevant was passed though the newsletter. But now, if you don't read this marketing newsletter, you actually are missing out crucial information”. In remote work there should be no doubt about what activities each person should do. The communication channels should be well established. “When there is no clarity, there are misunderstandings about the priority of tasks or who should undertake them”.

Discussion

In the following paragraphs, the abovementioned findings will be discussed and compared with the theories developed in the literature review.

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environment makes it more challenging to constantly track employee behaviour. The interviewees’ responses verify the research of Ouchi (1979) and Snell (1992) who explained that in an environment in which employees cannot be directly monitored, output controls (diagnostic controls) gain more importance. The interviewees emphasized on the fact that their output was the ultimate thing that measured their performance since the outbreak started.

Interactive controls also had to be significantly changed to make them work in the remote environment. The most obvious change concerning the interactive controls was the increased use of information and communication technologies (ICT) to communicate amongst teams. All interviewees noticed changes in the way the interactive controls were used. Switching to a complete virtual workplace difficulted communication amongst peers and managers. Interviewees saw this as one of the most critical aspects of control in the new environment. In fact, Hackman and Johnson (1991) say that leadership is ‘’communication that changes the behaviour of others to meet group goals and needs.’’ Communicating efficiently with a remote team proved to be a significant challenge. Interviewees experience different approaches by managers to efficiently communicate. Meetings started to happen online, and a great part of the communication was via chat platforms like Slack. However, interviewees agree on the fact that the impact and bond that is created with online meetings or chat conversations is less. Therefore, the switching to virtual communication with employees has reduced the ability of managers to change employee’s behaviour. Another aspect that was also noticeable concerning communication, is that each employee has different needs when it comes to online communication. Some prefer daily meetings in which they can exchange information directly with their superiors, whilst others prefer to limit the online communication to low degrees. In this new scenario, managers have to respond and adapt the communication to the individual needs of employees.

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competence needs are met. On general terms, the autonomy needed by employees is provided by the nature of a remote environment. However, the autonomy did not increase as much as it was anticipated. Employees described, that the autonomy increased concerning the schedule and working hours but not so much in terms of task autonomy.

The need for competence and its relation with feedback is shown in the findings. Interviewees expressed that the remote work environment offers less chance to give and receive feedback. They mention that the lack of feedback their sense of competence, as they it can make them unsure about the quality of their work. The sense of competence is positively associated with positive feedback (Deci, 1971). When giving positive feedback employees feel responsible for their successful performance (Fisher, 1978; Ryan, 1982) which increases intrinsic motivation. Inversely, negative feedback decreases the perceived competence by employees, which translates in less motivation (intrinsic and extrinsic) (Deci & Ryan 1985). Taking into account that the remote workplace offers less possibility for feedback (positive or negative) the following conclusion can be drawn. Employees who were used to receive positive feedback at the office might feel the lack of encouragement that drives the sense of competence down when working from home. And those who usually had to put up with negative feedback might feel the decreased amount of (negative) feedback as a slight increase of their competences.

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The performance of employees working from home highly depends on their motivation and well-being. The results show that the needs of employees differ more from each other when working from home than when being at the office. Working from home emphasizes on the need to care for each and every employee on an individual and personalized level. Concerning the basic psychological needs, there are a number of activities and practices that can be implemented to minimize the effects of working from home on the three needs. Notwithstanding, no matter how well some firms can adapt to the individual needs of employees, there will be certain activities that promote autonomy, competence and relatedness that cannot be full replaced with digital solutions.

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Conclusion

The sudden worldwide outbreak of the Coronavirus forced employees all around the world to work from home. This has become a challenge for employees, managers and the firms. When firms change to remote environments, there is usually a communication and strategy plan developed well in advance to make sure the transition to the new way of working happens according to plan. This time, there was no time for planning but for acting. Firms had to implement new control plans and completely rethink their communication design during the course of the pandemic. Managers had to ensure that their employees stay motivated working from home. And all employees faced the difficulties related to having to set up an office at home. This research aimed to provide new theoretical knowledge on how the remote management control systems influence performance in the new environment. By interviewing different levels of employees working remotely, this thesis has shown how the adaptation of remote MCS to the new environment along the satisfaction of the basic psychological needs of employees directly influences performance. The main findings were the increased focus on diagnostic controls by managers and the difficulty to keep up with the autonomy expectations of employees. The enlarged emphasis on the outputs is due to the raised difficulty to monitor employees working remotely. Therefore, managers tend to focus on what can be easily measured, which are the results. Switching to a remote environment, employees anticipated to have a significant increase on their autonomy to perform tasks. However, the findings illustrate that the autonomy in the remote workplace does not reach the expectations that the employees had. As a result, the basic need of autonomy fails to be met which negatively impacts motivation. Worth mentioning is also the reduced sense of competence by employees due to a decrease in the feedback which is received online. In addition, the basic need of relatedness is not met to the degree that can be achieved in an office setting. All in all, it becomes harder to satisfy the needs of employees working from home. Thus, the motivation of employees suffers. The direct correlation of motivation and performance indicates a decrease in performance in the new massive remote environment.

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26

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27 Appendix: A1. Abbreviations

MCS Management Control Systems LOC Levers of Control (Simons, 1995)

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28 Appendix: A2. List of Tables

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29 Appendix: A3. List of Figures

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30 Appendix: A4. Interview Questions

Semi-structured questions Introduction

• How many employees do you manage?

• How does your home working environment look like?

• What was it like to switch to a completely remote work environment?

• On general terms, how would you evaluate the impact of working from home from? Positive/Negative, why?

• What new challenges are you confronted with? • What are the benefits of remote work for managers? • What are the downsides of remote working?

• What is the impact of working from home on the working hours/time? MCS & Simons Levers of Control

• Four levers of Control – Individual questions about each instrument

• Explain how the individual instruments (diagnostic controls, interactive controls, belief systems and boundary systems) are being altered due to Covid-19?

• How are the interactive control systems to come up with new ideas and strategies being shaped?

• How do you manage to control your employees when they work remotely?

• Strict monitoring of employees becomes challenging, did you implement new strategies to control your employees?

• Trust vs Control, what drives you as a manager in these times? Why?

• Before COVID, working from home often was frowned upon because of a lack of trust in employees. Did the level of trust change?

• What has changed in your in the application of (remote) MCS? Why? • What techniques proved to be successful?

• How would you evaluate your team’s performance? Communication

• How has the communication with employees changed? • How are you ensuring a free flow of information?

• How it possible to communicate efficiently in this environment? • How is the access to information managed?

• How are the daily interactions you used to have at the office to exchange information being replace in the online environment?

• What tools are being used to manage the communication and access to information? Motivation and employees’ well-being

• How can you keep employees motivated?

• How are you motivating employees working remotely? What must be done differently in the new situation?

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• What challenges does the new environment present when trying to keep employees motivated?

• How do you support employees working from home? • How do you give feedback to remote workers?

• What is the impact of the remote work on the autonomy of workers? What effect does that have on the team performance?

• The new environment has a different impact for each employee working from home, how are you coping with the different needs?

• How are you coping with the basic needs (autonomy, competence, relatedness) of your employees? What is being done to ensure the individual needs is met?

• What have you done to avoid that employees feel isolated? Conclusion

• What is the future perspective? Is a massive remote work environment conceivable after Covid-19 looking at the produced outcomes and performance?

• What are the positive effects of remote work? Why are these positive?

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Appendix: A5. Overview of Interviewees

Interview Nr.

Gender Age Firm Size

(employees) Team Size (employees) Position Managerial Position Industry

1 Male 20-30 400 8 Project Manager Yes Fintech

2 Male 20-30 100.000+ 6 Product Manager No Automotive

3 Female 30-40 52.000 6 International Marketing Manager Yes FMCG

4 Female 20-30 270 15 HR Manager Yes Software

5 Male 20-30 600 4 Sales Associate No Software

6 Female 30-40 400 7 Sales Associate No Software

7 Male 30-40 1.200 8 Sales Associate No Sport

8 Male 20-30 12.000 7 Project Manager Yes Automotive

9 Female 40-50 2.000 11 HR Manager Yes Manufacturing

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