Performance Measurement and Management Control:

Global Issues
New Trends in Performance Measurement and Management Control
Antonio Davila
Article information:
To cite this document: Antonio Davila. "New Trends in Performance Measurement
and Management Control" In Performance Measurement and Management Control:
Global Issues. Published online: 08 Mar 2015; 65-87.
Permanent link to this document:
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

http://dx.doi.org/10.1108/S1479-3512(2012)0000025006
Downloaded on: 23 March 2016, At: 10:43 (PT)
References: this document contains references to 42 other documents.
To copy this document: [email protected]
The fulltext of this document has been downloaded 814 times since NaN*
Users who downloaded this article also downloaded:
(2012),"Performance Measurement and Management Control: Global Issues", Studies
in Managerial and Financial Accounting, Vol. 25 pp. i- http://dx.doi.org/10.1108/
S1479-3512(2012)0000025021
(2012),"Toward a Model of Performance Measurement of Output Based on the Theory
of Constraints", Studies in Managerial and Financial Accounting, Vol. 25 pp. 117-137
http://dx.doi.org/10.1108/S1479-3512(2012)0000025008
(2012),"Accounting Information and Performance Measurement in a Nonprofit
Organization", Studies in Managerial and Financial Accounting, Vol. 25 pp. 465-487
http://dx.doi.org/10.1108/S1479-3512(2012)0000025020

Access to this document was granted through an Emerald subscription provided by

emerald-srm:145608 []
For Authors
If you would like to write for this, or any other Emerald publication, then please
use our Emerald for Authors service information about how to choose which
publication to write for and submission guidelines are available for all. Please visit
www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society.
The company manages a portfolio of more than 290 journals and over 2,350 books
and book series volumes, as well as providing an extensive range of online products
and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner
of the Committee on Publication Ethics (COPE) and also works with Portico and the
LOCKSS initiative for digital archive preservation.
 *Related content and download information correct at time of download.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)
 NEW TRENDS IN PERFORMANCE
MEASUREMENT AND
MANAGEMENT CONTROL
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Antonio Davila

ABSTRACT

Purpose – The purpose of this chapter is to present a state of the art of

performance measurement and management control systems based on the
papers presented in the 6th Conference on Performance Measurement and
Management Control in Nice, France, 2011. The chapter is structured
around two main topics: performance measurement and control systems.
Methodology/approach – The chapter is based on a thorough review of all
the papers presented at the conference. Each paper was classified according
to the topic it dealt with and the methodology used in the paper.
Findings – We structure the papers around the following topics: cost
measurement and management, mapping the landscape, financial
measures, nonfinancial performance frameworks, performance measure-
ment design, sector-specific measures, and marketing measures within
performance measurement. The topics identified in management control
systems are compensation, management control systems’ design, motiva-
tional aspects, strategy, risk management and enterprise software,
governance, nonprofit organizations, and innovation.

Performance Measurement and Management Control: Global Issues

Studies in Managerial and Financial Accounting, Volume 25, 65–87
Copyright r 2012 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 1479-3512/doi:10.1108/S1479-3512(2012)0000025006
65
 66 ANTONIO DAVILA

Research limitations/implications – The chapter provides a comprehen-

sive review of these topics. The review is limited to the selection bias
implicit in the papers submitted to the conference. However, with almost
200 papers, the conference includes a large set of papers and topics. The
analysis indicates that the field is dynamic with close connections to
practice and promising research lines.
Practical implications (if applicable) – This state-of-the-art review
reveals relevant research findings for companies and organizations. It also
indicates that the research community is tackling important issues to
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

society and the evolution of research promises to offer interesting

alternatives to tackle these problems.
Social implications – Performance measurement and management
control systems are important topics for management. Recent work is
extending the implications of these fields beyond companies to include
nonprofit organizations and public sector departments. Advances will
definitely shape the way societies are designed.
Originality/value of chapter – The chapter provides a review of the field
based on the contributions at the conference. As such it portrays the state
of the field and gives researchers as well as practitioners a quick way to
update their knowledge of the topics that are dominating the field.

Performance measurement and management control is a dynamic field

addressing the new challenges that emerge in management practice. The
Performance Measurement and Management Control Conference provides
the opportunity to gauge this evolution. It showcases new ideas and
identifies new trends that shape the future of this field of knowledge. This
chapter presents trends from the conference at the forefront of performance
measurement and management control.
Performance measurement is progressing in various fronts. New ideas are
emerging in traditional fields. Financial performance measures and cost
measurement, topics that have characterized the field for decades, are still
being fruitfully explored to reflect new management needs. Another aspect
where ideas are emerging is around extending performance measures beyond
financial to include nonfinancial measures; a trend that dates back to the
1960s with the concept of Key Performance Indicators from GE and then
given a big push in the 1990s with concepts such as the Balanced Scorecard.
New concepts and frameworks are extending performance measurement to
 New Trends in Performance Measurement and Management Control 67

provide information on innovation opportunities and specific industries.

Performance measurement models are also extending their scope beyond
traditional functions such as finance or manufacturing to go deep into
functions such as marketing and sales and R&D where intangibles play
more of a role.
Management control is also extending its reach into new and attractive
areas. Budgeting, the original starting point of this field back in the 1960s
(Anthony, 1965), is still a central topic. But the field is extending to
embrace the complexity around management control in organizations.
Research effort is progressing on issues such as incentives, compensation,
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

and control systems’ design. New topics are being researched. For instance,
management control presents challenges in public administration and
nonprofit organizations that are very different from those of traditional
for-profit companies. These organizations do not have a dominant logic,
the logic of economic value, but work with objectives that are both more
numerous, harder to conceptualize and summarize in measures, and more
dynamic than economic value. Management control in these organizations
balances a wider range of interests and works with a more diverse set of
motivators. Management control is also exploring governance. Tradition-
ally, management control was centered on the implementation of strategies
with little or no attention to the way in which agency relationships at the
top shaped the performance of companies. This attention on governance
examines how stakeholders relate to the management of companies
through their governance mechanisms. Finally, research is also extending
into the role of ethics and risk management. Internal controls often
appear in various models of management control systems (Simons, 2000),
but it is only now that they are being studied within the broader context of
risk and ethics.
The objective of this chapter is to present the trends based on the latest
research presented in the Performance Measurement and Management
Control Conference, 2011. The chapter is structured into two parts. The first
part presents the evolution of topics around performance measurement. The
second part focuses on topics in management control.

NEW TRENDS IN PERFORMANCE MEASUREMENT

Ideas on performance measurement are advancing quickly. For the purpose
of this chapter, the discussion of the evolution of these ideas is structured
around the following topics: (1) cost measurement and management,
 68 ANTONIO DAVILA

(2) mapping the landscape, (3) financial measures, (4) nonfinancial perform-
ance frameworks, (5) performance measurement systems’ design, (6) sector-
specific measures, and (7) marketing measures.

Cost Measurement and Management

Cost measurement is often studied from a technical perspective, and cost

allocation is addressed as an engineering challenge. The challenge of cost
measurement is how to best reflect resource consumption through the design
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

of a cost system. Activity-based costing is based on this logic and claims that
an activity perspective does a better job of reflecting this resource
consumption (Kaplan & Porter, 2011). Further research has extended this
perspective to address cost allocation challenges including an agency
perspective (Baldenius, Dutta, & Reichelstein, 2007).
But the issue of cost measurement is also being examined from a different
perspective. Researchers are looking at how cost system design impacts the
behavior of users. Depending on whether resources are shared and how
performance for the various managers is measured, distorting actual costs
can be a fruitful approach to entice a particular behavior. For instance,
managers of different product development projects can chose to either
share a common part or design a specific one for their product. The benefits
of the common part are associated with lower costs, yet these benefits do not
happen unless enough projects use these common parts. But projects face
lower performance compared to unique parts that are tailor-made for the
specific product. One alternative is to force managers to use common parts
and remove the decision out of these people who often have better specific
information. Another alternative is to lower the perceived cost of the
common part to get enough adopters to realize the cost savings from part
commonality.
The role of cost measurement also varies across countries and this line of
research has provided interesting insights; for instance, a comparative study
of German and Japanese firms found that the former have more complex
and timely systems than the latter due to cultural and institutional reasons
(Kajuter, Moeschler, & Wada, 2011). Cost measurement does not appear as
just an engineering problem to be solved but also as a social construction
where power and tradition lead to different solutions and different amount
of resources devoted to designing a cost system. Another cost measurement
aspect that is gaining relevance is the increasing weight of industries with
cost structures that are very different from the traditional manufacturing
 New Trends in Performance Measurement and Management Control 69

ones. Healthcare (Kaplan & Porter, 2011) and services more broadly have
economic structures where fixed costs play a much larger role. However,
new research is examining settings that will be central to future
competitiveness including creative and knowledge workers. These settings
present several challenges not only in terms of measuring resource
consumption but also in measuring value creation (Harri, Jaaskelainen,
Lonnqvist, & Ruostela, 2011).
In this volume, Cescon (2012) examines the relationship between
Advanced Manufacturing Techniques (AMT) and organizational charac-
teristics including environmental uncertainty, organizational size, and level
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

of integration. The chapter then moves to study the impact of the presence
of AMT on these companies’ use of more advance cost and control
techniques such as activity-based costing, strategic costing, target costing,
and life cycle costing. The study also looks into the quality of nonfinancial
performance measures and the adoption of innovative managerial practices,
just-in-time manufacturing, total quality management, and activity-based
management.

Mapping the Landscape

Traditional performance measurement systems have focused on tracking the

progress of the organization. Most performance measures take an internal
perspective on how processes within the company are progressing. They
inform about quality, productivity, uptime, or budget performance. Other
measures take an outside-in perspective. They look at the organization from
the perspective of external stakeholders. For instance, customers’ perspec-
tive is a traditional way of outside-in view of the organization. Another
stakeholders’ view that is common is partners’ view. The underlying
assumption is that the organization is at the center of the performance
measurement system.
However, the volatility of the environment and competitive threats
coming from a global market have enhanced the importance of taking an
inside-out perspective. The idea is to look at an organization’s environ-
ment and its landscape from the perspective of the company. The company
is not anymore the center of the measurement system but rather a
perspective to look into the world. These landscape scorecards map the
landscape of a company to identify, measure, and track those actors
that are potential sources of opportunities or threats. For instance,
universities can become important actors if the company believes that new
 70 ANTONIO DAVILA

technologies may come from them. Venture capitalists can be important to

track new promising start-ups. Governments can change the rules of the
game creating both opportunities and threats. These measurement systems
look at the world from the perspective of the organization, rather than
looking at the organization from the perspective of different external
stakeholders.

Financial Measures
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Financial measures have been at the core of performance measurement.

Still, technology and conceptual advances are making this topic interesting.
For instance, technology is facilitating the communication of financial
information through the Internet. New information communication
protocols are easing the transfer of financial information. Lowering the
cost of information transfer facilitates the integration of new players to the
financial markets but also simplifies the use of intelligent software to make
performance evaluation decisions for investment purposes.
Another emerging issue is new financial measures such as comprehensive
income but also a focus on accounting for sustainability. Concepts such as
the triple bottom line or one report (Eccles & Krzus, 2010) are efforts to
integrate into financial measures of performance costs that so far have been
ignored. The impact of organizational decisions on the environment and
society at large are coming into the picture with force. These effects had
traditionally been ignored because there is no cash flow associated with
them coming out of the company. Environmental and social costs were
absorbed by society and the public sector with organizations failing to
recognize them as part of their production function. The transition to
recognizing these costs as part of the cost of doing business cannot happen
until they are properly measured. Financial measurement is working on
generating adequate measures to be able to integrate these costs.
The recent financial crisis has also provided the opportunity to use
financial information to identify financial characteristics of those companies
that have excelled versus those that did not do as well (Needles, Shigaev,
Powers, & Frigo, 2011).
Financial measures are also a central aspect of budgeting and behavioral
implications or budgets are still central to management research. As
discussed later on when talking about management control systems, the
recent crisis has put a lot of stress into management tools such as the
budget.
 New Trends in Performance Measurement and Management Control 71

Nonfinancial Performance Frameworks

The complexity of reality makes it impossible to summarize all the

information in a single performance measure. This complexity is translating
into higher disclosure requirements in capital markets. It is also translating
into more sophisticated analysis of how to structure measurement systems
within companies. Frameworks themselves are progressing. For instance,
the idea of structuring measures around the concept of value-based
management is gaining some interest. However, the concept itself still
requires some additional theoretical refinement to be widely adopted.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Companies, especially in Northern Europe, are starting to experiment with

the idea of organizing measurement around the value creation process.
There is also progress in looking at existing measurement frameworks,
notably the Balanced Scorecard, from different perspectives. The original
approach to these measurement frameworks was functionalist, giving
almost an engineering view to the challenge of having adequate information
for management. The success of the Balanced Scorecard relied heavily on its
logic and simplicity, appealing to all organizations and managers. On the
research front, knowledge is advancing through looking at the phenomena
from different perspectives. The history of the Balanced Scorecard in early
adopters offers the possibility of having long-term case studies that look at
implications over long horizons of this tool (Bescos & Foulquier, 2011).
Also there are contributions on the role of this framework coming from the
fields of psychology and sociology.
Performance measurement frameworks’ research is also looking at the
deployment of these frameworks at all levels of the organization. For
instance, the sophistication of the performance measurement system at the
top of the organization permeates and influences the quality of systems
lower in the organization. The quality of these lower-level systems is also
found to affect the translation of value drivers into performance (Burkert,
Davila, & Oyon, 2011).

Performance Measurement Design

Another fruitful research line in performance measurement is explaining the

variability of performance measurement design through contingency factors
of the environment, the organization, and the characteristics of top
management. For instance, managers have different attitudes toward the
use of performance measurement systems. Roughly, they align between
 72 ANTONIO DAVILA

analytical managers who rely heavily on them and intuitive ones who use
their informal networks and their own intuition to a larger extent. These two
types of managers need different systems. The former feels more
comfortable with detailed information, while this same level of information
can be overwhelming for the latter type (Burkert, Davila, & Lueg, 2011).
Experiments have also found that the level of knowledge also affects the
design of performance measurement systems. Knowledge of more financial
measures is associated with a preference for numbers, while managers with
less knowledge prefer graphical information.
Performance measurement design also depends on the environment. This
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

line of research is not only limited to the traditional contingency paradigm

looking at the covariance of certain design characteristics and environ-
mental changes, but it is expanding to in-depth case studies using
sociological paradigms. For instance, network theory and network analysis
techniques are being used frequently to understand the particular design of a
performance measurement system. This network perspective is especially
effective in looking at interorganizational performance measurement
systems, a phenomenon that is increasing in importance as the complexity
of business requires the cooperation and integration of network of
companies to deliver services.

Sector-Specific Measures

A new trend in performance measurement research is studying sector-

specific measures. So far, most research had a general perspective providing
the logic of the particular framework and leaving the manager with the task
of finding measures relevant to her or his particular industry. This new trend
is filling this void. Healthcare industry is the most noticeable example of this
trend. Researchers are developing measures specific to healthcare delivery
that will help better understand and manage this industry.
Energy is another sector where specific measures are being developed
around concepts such as efficiency and externalities. The trigger factor
appears to be renewable energies. The discussion around these alternative
sources of energy is how they compare to traditional sources in terms of
efficiency but also in terms of a lower environmental impact. In this book,
Virtanen, Tuomaala, and Pentti (2012) address the issue of measuring
sustainability in the context of energy consumption. In particular, they
examine the issue of measuring energy efficiency. This issue that may be
simple from a conceptual perspective poses significant challenges when
 New Trends in Performance Measurement and Management Control 73

brought into practice as the various sources and uses of energy need to be
identified and valued to have a reliable measure of efficiency. The case study
reveals how existing measures do not meet the criteria for a good
performance measurement system and how its use as a management tool
and the target-setting process also present some unique challenges.
Performance measurement is also taking a relevant role in nonprofit
organizations and the public sector. Organizations, for which economic
performance is not the main objective, require alternative approaches to
measuring performance. Hirtz and Guernaccini (2012) in this book offer an
interesting application. The chapter is not only relevant for its conceptual
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

contribution bridging theory of constraints with output measures in the

public sector, it is also relevant as an example of applying theory to improve
practice. The authors document how the application of performance
measurement concepts allowed a public sector organization to have the
right information for decision making and improve its performance.

Marketing Measures

Traditional performance measurement has not looked at the marketing

function. Marketing was often associated with intuition, creativity, and
numbers-free. However, the marketing function has evolved dramatically
over the last decade. Information technology has probably affected marketing
more than any other management discipline. Now, marketing is deeply
embedded with large databases of consumer behavior, customer relation-
ships, and transaction information. Marketing is now a highly quantitative
discipline. As such, performance measurement has become a relevant aspect
of the marketing function. The performance measurement community has
been slow at adapting to these new circumstances and a lot of the advances
have come from marketing itself. Concepts such as customer equity are
financial measures that using discounting techniques estimate the value of a
customer. The cash flow predictions are based on customer demographics
and transaction history to profile the customer within a particular segment
with a cash flow profile. Customer equity is a life cycle value measure and as
such the question of relevant cash flows becomes significant. Incremental cash
flow estimates assume that each customer is marginal and can lead to a
situation where all customers have positive equity but the company itself does
not. On the other hand, full cost estimates can lead to rejecting customers
attractive at the margin. These are traditional issues in financial performance
measurement that marketing is now starting to face.
 74 ANTONIO DAVILA

Performance measurement is integrating marketing in various ways. For

instance, looking at customer satisfaction with management control systems
is a new perspective to assess the quality of these systems. Social media and
social marketing also require carefully designed performance measurement
systems. Finally, financial measures can be important sources of informa-
tion to value brands.

NEW TRENDS IN MANAGEMENT CONTROL

Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Management control is a much broader field than performance measurement.

This diversity is reflected in a larger number of papers at the conference
around this topic addressing a large variety of topics using different
perspectives and research methods. For the purposes of discussion and
identifying trends, I have identified the following topics: (1) compensation,
(2) management control systems’ design, (3) motivational aspects of man-
agement control systems, (4) strategy, (5) risk management and enterprise
software, (6) governance, (7) nonprofit organizations, and (8) innovation.

Compensation

Economic incentives have been a traditional way of addressing the goal

divergence issue at the heart of the control problem. Agency theory has
made important contributions to theory moving from single- to multiperiod
models and from explicit to implicit contracts. This theory has helped in
sharpening our concepts and arguments. It has also given a strong
foundation for empirical research and researchers from accounting, but
finance and strategy have also contributed significantly to testing whether
existing contracts for top managers align with agency predictions.
Management control research is still devoting attention to top manage-
ment compensation and the problems of balancing short- and long-term
incentives. Stock prices that traditionally were argued to take care of this
problem have proven to be less powerful than expected. The level of noise in
this performance measure makes it expensive to use beyond top manage-
ment, and even there it is expensive. Furthermore, it creates strong pressure
to influence stock price and therefore encourages behavior that is often at
the limit or beyond legal or ethical boundaries. Finally, different investors
have different time horizons and the timing of stock price maximization is a
controversial aspect.
 New Trends in Performance Measurement and Management Control 75

Budgeting research, a research line with a long tradition in management

control, is also integrating new evidence. The short-term perspective
inherent in budgeting needs to be balanced with longer-term perspective
to balance incentives for myopic decisions. Budget setting is also being
studied beyond the issue of negotiation and integrating information from
comparable divisions. Relative performance evaluation has often been
presented as a fruitful approach to reduce noise and the cost of using noisy
performance measures in compensation contracts. However, contracts are
sticky over time and they seldom change from one year to the next. Relative
target setting refers to using performance from comparable companies or
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

organizational units to set targets. In contrast to the stickiness of

compensation contracts, budget targets are more flexible and the weight
that supervisors put on different measures can radically change from one
year to the next or from one person to another.
Recent research is extending the reach of compensation beyond top
management and beyond the economic perspective. One issue is how to
replicate market mechanisms within the organization (Tamas, Friis, &
Hansen, 2011) to enhance the resource allocation process. Another issue is the
role of subjective evaluation. Bringing in qualitative assessments of perfor-
mance gives an additional degree of freedom to compensation mechanisms
but also the option of misusing this freedom. Centrality and leniency biases
are both challenges in subjective performance evaluation that only now are
receiving attention (Nicola, Hartmann, & Collini, 2011). Compensation is
also studied from a psychological perspective in terms of understanding how
managers perceive different types of incentives and relative performance
evaluation issues (Alvesi, Emmanuel, & Kominis, 2011). Ruggeri (2012) uses
an experiment to contrast agency predictions and the controllability principle
in settings with high or low interdependence. She finds that agency theory
performs better in low interdependence, while managers rely on the
controllability principle to a larger extent in high interdependence settings.

Management Control Systems’ Design

Contingency theory has been the most common approach to study

management control systems’ design. The accumulated knowledge from
all this work is well established with a few consolidated findings but
also with a complex picture where design depends on the interaction of
multiple contingency factors. Simons’ work dating back to his finding that
management control systems were used intensively in dynamic environments
 76 ANTONIO DAVILA

(when theory predicted the opposite) opened up the field to qualitative,

ethnographic studies that provide the richness to understand the underlying
forces. This research approach complements contingency theory using
questionnaire-based methods and has provided interesting insights.
An aspect of management control design that is receiving attention recently
is design in interorganizational settings. This topic is important because
organizations as value chains migrate to networks. Mineev (2012) takes an
institutional perspective to analyze a case of a network in North-West Russia
and how the network and its systems are formed. The chapter is interesting in
documenting the emergence of systems and how local networks are created.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

The chapter shows how path dependency is as important as contingency

factors.
Florez, Ramon, Velez, Araujo, and Sanchez (2012) address another
important aspect of interorganizational control mechanisms. They analyze
the relationship between exporters and their partners in different parts of the
world. Their findings indicate that control systems enhance the relationship
and social control is the type of control that has a more significant impact
on performance.
Another important topic in interorganizational relationships is open book
accounting. Sharing of information can lead to important savings; however,
power struggles can bias the appropriation of these savings to one party.
Understanding the implications of open book accounting and its impact on
power relationships is important to better structure value networks
(Piontkowski, Hoffjan, Schuchardt, & Lachmann, 2012).
Management control systems’ design is a fruitful line of research. New
research approaches are complementing traditional questionnaire-based
contingency studies. This transition is welcome. Understanding this
phenomenon requires in-depth knowledge that cannot be accessed through
questionnaires. This new trend is best appreciated in interorganizational
research. Yet, other aspects of management control systems’ design are also
benefiting from these complementary approaches ranging from better
understanding interactive systems, the systems’ perspective on performance
measurement systems, and the role of systems in innovation and creativity.

Motivational Aspects of Management Control Systems

Management control systems affect behavior through their impact on the

motivational structure of people. Incentives speak to extrinsic motivation
and people’s economic needs. But control systems also affect other types of
 New Trends in Performance Measurement and Management Control 77

motivation. For instance, Kunz and Linder (2012) use an experiment to

study the impact of low controllability on extrinsic and intrinsic motivation.
Consistent with psychological predictions, low controllability is associated
with lower extrinsic motivation. Interestingly, it also reduces intrinsic
motivation, suggesting that the selection of performance measures is
important not only when they are linked to incentives but also in settings
where intrinsic motivation is more important.
Control systems also influence the perception that employees have about
procedural fairness and the effect on employee commitment. He and Lau
(2011) find that the use of nonfinancial information has a positive impact on
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

job relevant information, role clarity, and procedural fairness. Therefore,

the use of more advanced performance measurement systems not only help
in having more relevant information for decision making but also enhance
people’s perception of fairness within the organization.
Motivational aspects beyond economic incentives include issues asso-
ciated with social identity. The concepts of belief systems highlight the
importance of vision and missions not as much as isolated statements but as
values that permeate the organization. Values that appeal to higher needs
and self-actualization will reinforce intrinsic motivation and lower the need
to rely on extrinsic motivation. This motivational structure is associated
with creativity, commitment, and effort; all of them characteristics that are
needed in a market where differentiation is an important source of
competitive advantage. The concept of interactive systems has also come
to the forefront of research (see next subsection). Interactive systems have
an important role to exchange information about emerging opportunities
and threats but they may also affect motivation. Interactive systems provide
a communication mechanism to involve lower levels of the organization in
strategic discussions around opportunities. The integration in the strategic
thought of the company can reinforce intrinsic motivation and self-
actualization to the benefit of coming up with sources of differentiation.

Strategy and Control Systems

Management control systems were originally designed as tools to implement

the strategy that came out of the formulation stage. Our understanding of
the interplay between strategy and control systems has evolved significantly
since then. The separation between formulation and implementation led to
the input–process–output model or personnel–action–results model. As the
strategy field progressed, our conceptualization of management control
 78 ANTONIO DAVILA

systems also advanced. The concepts of intended, emergent, and realized

strategies saw the development of Simons’ levers of control model where
traditional controls came as diagnostic systems and beliefs, boundaries, and
interactive systems captured the idea of search and discovery of new
strategies. This model is currently dominating the literature with significant
work going on understanding the workings of interactive systems.
Meanwhile, the strategy field and the strategic process subfield have
evolved from the idea of emerging strategies to autonomous and induced
strategic actions. The latter refers to the traditional idea of emerging
strategies and interactive systems where people on the ground adapt the
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

intended strategy of top management to the reality of their day-to-day work.

The former captures the development of radically new strategies by people
outside the top management team. Autonomous strategic actions are not
about adapting the existing strategy but about creating a totally new one
and rather than coming from top management, coming from operating
people. In most companies, existing management control systems are
designed to ignore ideas that do not fit with the current strategy. However,
leading ones are creating structures and systems to capture these radical
ideas spread out inside and outside the organization. The concept of
corporate entrepreneurship and corporate venture capital are exploring
these new strategic issues (Cardenas, Oyon, & Davila, 2011).
Management control systems’ research is also looking into issues
associated with strategy implementation. For instance, research is examin-
ing the role and evolution of these systems in mergers and acquisitions
(Cording & Christmann, 2011), multinational companies (Kornacker,
2011), green field investments, and strategy formulation.
The strategic field has diversified into several lines of research ranging from
top management teams to networks, industry dynamics, technology transfer,
or government relationships (lobbies). Almost each strategic issue has a
management control challenge behind it. The progress of management control
research and strategy needs to collaborate closely with the development of
strategic field. So far, the lag between progress in strategy and progress in
management control has been significant. For research in this intersection to
be more relevant, it needs to work closer to the development in strategy.

Risk Management and Enterprise Software

The developments of the last few years with the 2008 crisis as their starting
point have brought the issue of risk management to the forefront. The
 New Trends in Performance Measurement and Management Control 79

failures leading to the financial crisis have been often associated with risk
management mistakes. Risk is intimately associated with control as
traditionally interpreted: mechanisms to limit self-interested behaviors
from agents that undermine the position of the principal. Failures in the
financial sector were associated with faulty control systems that did not
trigger action when the unintended consequences of incentive systems
created problems.
Risk management is being approached from different angles. One aspect
is to modify existing incentive mechanisms to include risk measures.
Making risk measures explicit helps improve people awareness about risks
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

and influences organizational culture attitude toward risk (Aureli &

Salvatori, 2012). Another angle is looking at Enterprise Risk Management
(ERM) and how it is deployed in organizations. ERM are triggered by
regulation, stakeholders’ demands, and business competitiveness. These
systems combine quantitative approaches to evaluate and manage risk
exposure traditional of the financial world with qualitative approaches that
emphasize sensitivity toward risk and ethical criteria in decision making
(Silva de Souza, da Silva Gomes, Garcia de Oliveria, Santos Sampaio, &
Almeida de Faria, 2012).
A topic closely related to risk management is enterprise software. Risk
management requires extensive information, and advances in enterprise
software are making this information available. Of course, this latter topic is
much broader than just risk management and crucial to management
control. However, the attention it has received so far is limited. Several
reasons can explain this lack of research. First, it is a complex issue at the
intersection of technology progress and control theory. As such it falls in
between technology and control research, which is dealt by few researchers.
Good research on this field requires up-to-date knowledge on technology
advances and then in-depth analysis of its consequences. The possibility to
the Foucauldian concept of ‘‘seeing through’’ becomes central to the
advances in technology. On the one hand, communication technology allows
people to coordinate and communicate skipping the traditional hierarchies.
This possibility has been shown in the recent events in Arab countries where
grassroots organizations have been able to bring down governments. This
ability to self-organize is also present in larger organizations exploring new
ways of doing businesses. The flip side is the possibility of controlling
through the tracking of information exchanges and low-level performance
measures. This flip side not only presents control issues but also presents
ethical issues involving privacy, access to personal communication, or
disclosure of confidential information (and insider trading).
 80 ANTONIO DAVILA

Governance

Management control systems range all the way from the implementation of
strategy at the bottom of the organization to the monitoring at the board of
directors. While the former has been the focus of research since the inception
of management research in the early part of the 20th century, the focus on
boards is more recent. The high-profile failures in the early part of the 21st
century turned research attention to control at the very top of the
organization, the governance as implemented through the board of directors
(Larcker & Tayan, 2011).
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Governance presents many challenges. The board of directors’ main role is

to represent the shareholders who choose them. As such, its members have a
fiduciary responsibility. It is the ultimate body in charge of supervising the
direction that the company takes. Board members’ main duties are to monitor
the work of the CEO and her or his team and to contribute and approve
strategic decisions such as large investments both in terms of money and
human resources. While the mandate is clear, its implementation is
challenging. There are issues of independence associated with whether board
members have shareholders’ interest and the long-term growth of the
company as their objective or rather they are loyal to the CEO who appointed
them. Another issue is whether a part-time dedication to a company is enough
to grasp the complexity of today’s businesses. These issues come to the
forefront when high-profile breakdowns of governance catch the headlines.
Epstein (2012) in a chapter in this book highlights another relevant issue which
is how governance has very different realizations across the world. Governance
in the United States is a very different phenomenon from governance in
Germany, Japan, or Spain. Merino, Manzaneque, and Banegas (2012) examine
governance in this latter country and, in particular, board members’
compensation. Their conclusions are interesting and critical suggesting various
changes that need to be implemented for governance to be more effective.
Most research on governance has so far relied on quantitative analysis of
board characteristics using publicly available data. Yet, the complexity of
this phenomenon requires a more in-depth analysis of what is actually going
on in the process of governance relying on qualitative research methods.

Nonprofit Organizations

The recent pressure on the public sector in Western economies is putting

additional demands on nonprofit organizations. They are asked to use
 New Trends in Performance Measurement and Management Control 81

management control systems with the objective of being more effective and
efficient in achieving its goals (Jaaskelainen, 2011). But these organizations
are qualitatively different from traditional for-profit companies, and simply
translating the tools from profit-seeking companies does not work. New
Public Sector Management was developed mostly in the United Kingdom
over the last decade with precisely this objective. The translation of
management control systems proved to be much harder than anticipated
with mixed results.
Nonprofit and public sector organizations have a much more complex set
of objectives. Profit-seeking companies have a clear purpose: maximize
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

profits over time within a set of constraints that are different across
companies depending on how they structure their relationship with society
and the environment. Even these companies face important challenges in
balancing the various time horizons. Nonprofit organizations often have a
range of objectives that are not always well defined or easy to measure. In
addition, the motivational structure of their people is more complex with
noneconomic motives playing a much larger role.
These organizations face multiple challenges of a higher complexity than
those companies face. For instance, the definition of objectives can be a
controversial issue. Certain government functions see different logics
competing to have their rationales dominate government action. Competi-
tion for ideas affects the objectives and the design of the institution. This
competition often happens in the public domain and external control
systems have a role that is seldom seen in for-profit organizations. Research
on this area is emerging. Some of the work is looking into the negotiation
process among stakeholders of nonprofit organizations and how this
negotiation gets reflected in the information and evaluation systems
(Francisco & Alves, 2012).
Nonprofit organizations also face challenges in implementing their
strategies. Challenges range from the people employed who can be at-
risk groups, limited economic resources, and, in some cases, the use of
volunteers, and using the economic logic embedded in existing manage-
ment control systems in an environment where this logic is marginal.
Research in public sector and nonprofit and management control
systems is looking into how the control challenge is being addressed.
These studies are using frameworks and concepts developed in the profit-
seeking sector and the question remains whether they will be powerful
enough to translate into this new reality, or theory will need to advance to
develop new concepts (Sedysheva, 2011; Wallstedt, 2011; Verbeeeten &
Spekle, 2011).
 82 ANTONIO DAVILA

Research on this field is examining a variety of issues. Case studies are

looking at the institutional changes going on in nonprofit organizations in
their transition to incorporate some of the economic logic of efficiency.
Longitudinal case studies are important in documenting these transitions.
Leotta and Ruggeri (2012) use as a framework to structure these episodes
around the object (performance measurement and evaluation systems), the
subjects, the place and time, and the how and why change happens. Their
setting is a hospital. The healthcare sector is an important part of public
sector services in most countries where a sizeable part of this sector is public.
Management control research in hospitals started a decade ago and is now a
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

well-established line of research. Research questions are structured around

the interaction between formal and informal control mechanisms, the
adoption of management reforms on performance, and the impact of
institutional changes (Frances & Widener, 2011).

Innovation

Management control systems’ research is also moving from traditional

settings characterized by repetitive processes where unexpected deviations
are seen as problems rather than opportunities into creative settings.
Innovation has taken central stage in today’s competitive world. Value
creation is intimately related with the ability to differentiate. Creativity and
the ability to transform it into value is one of the main sources of
differentiation (others include privileged access to resources either through
regulation or ownership). Creativity literature constantly reinforces that
creative activities require stability in terms of objectives that are stable over
a certain period of time and through clear boundaries that limit the search
space. Management control systems play an important role in these two
aspects. Economic incentives are not the way to motivate creative
activities. Creative people have to perceive economic rewards as fair to
forget them and get their intrinsic motivation to act. They also need
inspiration, an attractive reason to deploy their creative instincts.
Management systems play a role in inspiring systems. These are
inspirational systems (Davila & Ditillo, 2011). Management control
systems are also important elements in setting the boundaries of creative
activities. They set the limits on the budget available, time to market, type
of products to develop, or interaction with other parts of the companies.
These systems are aspirational systems that manage the aspirations of the
creative teams.
 New Trends in Performance Measurement and Management Control 83

Management control systems also play important roles in the process of

moving ideas into value. This process is configured with stages that
require these systems. Selection of ideas to invest in is a resource
allocation process intimately associated with strategic control systems and
budgeting. Monitoring of innovation projects is also associated with
control. Incremental innovation relies on stage gate systems that have
detail project plans describing the characteristics of the project going
forward and its development. Gates are control events where deviations
from the plan are analyzed and used for decision making. Radical
innovation uses a less-structured mechanism inspired in the control mech-
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

anisms used in start-up companies through staged financing. Integration

of different projects requires portfolio management tools to have an
overall view of the strategy of the company. The use of partners during
development also relies heavily on interorganizational control practices,
while product release requires close coordination with production and
marketing.

CONCLUSIONS
The previous sections have detailed trends identified through the articles at
the conference and this book. Yet, this research field also includes
researchers interested in the evolution of knowledge (Libby & Lindsay,
2011), the process of research (Kruis, 2011), and education (MacDonald &
Kam, 2011). The outcomes of this work are not directly associated with
management practice but they are very important to help researchers reflect
on how to approach their projects and to help educators improve the
learning process. These papers provide tools to improve the validity of
research processes or identify those articles that have had more influence
and from which we can learn to do better research. They propose new
concepts that make sense of findings difficult to explain with existing
theories.
This review of trends based on the sixth conference on performance
measurement and control systems identifies a rich and diverse field. An
important aspect is the intimate relationship between researchers and the
challenges facing managers. Most of the research is empirical and often field
based with an in-depth relationship between academia and practice. This
relationship is important to the relevance of the field and to translate the
progress in basic sciences such as economics, sociology, and psychology into
practice.
 84 ANTONIO DAVILA

The papers at the conference cluster around traditional research questions

such as financial performance measures, incentives, motivation, or budget-
ing and emerging fields where practice requires the insights from careful
analysis. Emerging topics include performance measures specific to certain
industries and functions including sustainability, healthcare, or marketing.
Emerging topics in management control include risk management,
governance, nonprofit organizations, or innovation. All these topics are
central to the challenges facing society today, speaking of the relevance of
this field.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

REFERENCES
Alvesi, F. C., Emmanuel, R., & Kominis, G. (2011). Exploring the reward perceptions across
organizational levels: A study on middle managers. Working paper. University of Venice,
Italy.
Anthony, R. N. (1965). The management control function. Boston, MA: Harvard Business
School Press.
Aureli, S., & Salvatori, F. (2012). Are performance-dependent rewards a viable tool to assure
managers’ commitment toward firm’s goals about risk management? In A. Davila,
M. Epstein & J. F. Manzoni (Eds.), Performance measurement and management control:
New global perspectives to advance theory and practice. Bingley, UK: Emerald.
Baldenius, T., Dutta, S., & Reichelstein, S. (2007). Cost allocation for capital budgeting
decisions. Accounting Review, 82(4), 837–867.
Bescos, P. L., & Foulquier, P. (2011). Improvement in the implementation of balanced scorecards:
The case of an insurance company. Working paper. EDHEC Business School, France.
Burkert, M., Davila, A., & Lueg, R. (2011). Complementarity effects of performance
measurement systems’ design and top managers’ use on managerial performance. Working
paper. HEC Lausanne, Switzerland.
Burkert, M., Davila, A., & Oyon, D. (2011). How top management measurement systems’ design
affects company-wide performance measurement and the relationship between value drivers
and performance. Working paper. HEC Lausanne, Switzerland.
Cardenas, F., Oyon, D., & Davila, A. (2011). Innovation approaches to value creation. Working
paper. HEC Lausanne, Switzerland.
Cescon, F. (2012). The impact of AMT firm characteristics on innovative costing techniques
and non-financial measures of performance. In A. Davila, M. Epstein & J. F. Manzoni
(Eds.), Performance measurement and management control: New global perspectives to
advance theory and practice. Bingley, UK: Emerald.
Cording, M., & Christmann, P. (2011). Form over substance: The differential effects of embedded
versus non-embedded integration practices on acquisition performance. Working paper.
Rice University, Italy.
Davila, A., & Ditillo, A. (2011). Controlling creativity: Design and use of management
accounting and control systems in creative environments. Working paper. Bocconi
University, Italy.
 New Trends in Performance Measurement and Management Control 85

Eccles, R. G., & Krzus, M. P. (2010). One report: Integrated reporting for a sustainable strategy.
Hoboken, NJ: John Wiley.
Epstein, M. (2012). Governing globally: Convergence, differentiation, or bridging. In
A. Davila, M. Epstein & J. F. Manzoni (Eds.), Performance measurement and
management control: New global perspectives to advance theory and practice. Bingley,
UK: Emerald.
Florez, R., Ramon, J. M., Velez, M., Araujo, P., & Sanchez, J. M. (2012). The role of
management control systems on interorganizational efficiency: An analysis of export
performance. In A. Davila, M. Epstein & J. F. Manzoni (Eds.), Performance
measurement and management control: New global perspectives to advance theory and
practice. Bingley, UK: Emerald.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

Frances, K., & Widener, S. (2011). The power of organic control: A case study of a lean
implementation in a health clinic. Working paper. Clemson University, USA.
Francisco, L., & Alves, M. C. (2012). Accounting information and performance measurement
in a non-profit organization. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Harri, L., Jaaskelainen, A., Lonnqvist, A., & Ruostela, J. (2011). New ways of working:
Measuring the impacts of knowledge work productivity. Working paper. Tampere
University of Technology, Finland.
He, J. Q., & Lau, C. M. (2011). Does the reliance on nonfinancial measures for performance
measurement enhance managers’ perceptions of procedural fairness? In A. Davila,
M. Epstein & J. F. Manzoni (Eds.), Performance measurement and management
control: New global perspectives to advance theory and practice. Bingley, UK:
Emerald.
Hirtz, T., & Guernaccini, P. (2012). Toward a model of performance measurement of output
based on the theory of constraints. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Jaaskelainen, A. (2011). A novel approach to measuring and managing productivity in large public
service organizations. Working paper. Tampere University, Finland.
Kajuter, P., Moeschler, M., & Wada, S. (2011). Conceptual design of cost accounting systems:
A cross-national study of German and Japanese firms. Working paper. University of
Munster, Germany.
Kaplan, R. S., & Porter, M. E. (2011). How to solve the cost crisis in health care. Harvard
Business Review (September), 47–64.
Kornacker, J. (2011). Budgeting and complementary management control in high growth
countries: Evidence from German multinational enterprises in China. Working paper.
Dortmund University, Germany.
Kruis, A. M. (2011). Validity-feedback interviews: Assessing the construct validity of MAC survey
instruments. Working paper. Nyenrode Business Universiteit, The Netherlands.
Kunz, J., & Linder, S. (2012). Buy one, get one free: Benefits of following controllability
principle for intrinsic motivation. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Larcker, D., & Tayan, B. (2011). Corporate governance matters: A closer look at organizational
choices and their consequences. Prentice Hall.
 86 ANTONIO DAVILA

Leotta, A., & Ruggeri, D. (2012). Changes in performance measurement and evaluation
systems as institutional processes: The case of an Italian teaching hospital. In
A. Davila, M. Epstein & J. F. Manzoni (Eds.), Performance measurement and
management control: New global perspectives to advance theory and practice. Bingley,
UK: Emerald.
Libby, T., & Lindsay, R. M. (2011). Life after RAPM: First steps in the development of a new
construct. Working paper. University of Waterloo, Waterloo, Ontario, Canada.
MacDonald, S., & Kam, J. (2011). The skewed few: People and papers of quality in management
studies. Working paper. University of Sheffield, Sheffield, South Yorkshire, UK.
Merino, E., Manzaneque, M., & Banegas, R. (2012). Control of directors’ compensation in
Spanish companies. Corporate governance and firm performance. In A. Davila,
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)

M. Epstein & J. F. Manzoni (Eds.), Performance measurement and management control:

New global perspectives to advance theory and practice. Bingley, UK: Emerald.
Mineev, A. (2012). Building of a network and the construction of controls. In A. Davila,
M. Epstein & J. F. Manzoni (Eds.), Performance measurement and management control:
New global perspectives to advance theory and practice. Bingley, UK: Emerald.
Needles, B. E., Shigaev, A., Powers, M., & Frigo, M. L. (2011). The operating performance of
high performance companies during a period of financial crisis: Risks and opportunities.
Working paper. DePaul University, USA.
Nicola, D. V., Hartmann, F., & Collini, P. (2011). Long-term incentives, managerial effort and
supervisor evaluation bias. Working paper. University of Venice, Italy.
Piontkowski, J. O., Hoffjan, A., Schuchardt, L. D., & Lachmann, M. (2012). Determinants of
the implementation and long-term use of inter-organizational cost management tools –
an experimental investigation. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Ruggeri, D. (2012). Subjective weighting under organizational interdependence conditions: An
experimental investigation. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Sedysheva, M. (2011). Strategic management systems and methods of controlling as key elements
of military expenditure policy making process. Working paper. Estonian Business School,
Estonia.
Silva de Souza, R., da Silva Gomes, S. M., Garcia de Oliveria, G., Santos Sampaio, M., &
Almeida de Faria, J. (2012). Enterprise risk management and performance improvement:
A study with Brazilian non-financial firms. In A. Davila, M. Epstein & J. F. Manzoni
(Eds.), Performance measurement and management control: New global perspectives to
advance theory and practice. Bingley, UK: Emerald.
Simons, R. (2000). Performance measurement and control systems for implementing strategy.
Upper Saddle River, NJ: Prentice Hall.
Tamas, V., Friis, I., & Hansen, A. (2011). Bringing the market inside the firm: Information and
incentive problems. Working paper. Copenhagen Business School, Copenhagen,
Denmark.
Verbeeeten, F., & Spekle, R. F. (2011). Management control systems, results oriented culture and
performance: Evidence from Dutch municipalities. Working paper. Erasmus University,
The Netherlands.
 New Trends in Performance Measurement and Management Control 87

Virtanen, T., Tuomaala, M., & Pentti, E. (2012). Challenges in energy efficiency performance
measurement in the process industry. In A. Davila, M. Epstein & J. F. Manzoni (Eds.),
Performance measurement and management control: New global perspectives to advance
theory and practice. Bingley, UK: Emerald.
Wallstedt, N. (2011). Management control in the public sector: The professionalization of public
sector workers. Working paper. Stockholm University, Stockholm, Sweden.
Downloaded by University of Cincinnati At 10:43 23 March 2016 (PT)