Management Control Systems in Complex Settings: Emerging Research and Opportunities Filippo Zanin University of Udine, Italy Eugenio Comuzzi University of Udine, Italy Antonio Costantini University of Udine, Italy A volume in the Advances in Logistics, Operations, and Management Science (ALOMS) Book Series Published in the United States of America by IGI Global Business Science Reference (an imprint of IGI Global) 701 E Chocolate Avenue Hershey PA, USA 17033 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: cust@igi-global.com Web site: http://www.igi-global.com Copyright © 2018 by IGI Global All rights reserved No part of this publication may be reproduced, stored or distributed in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher Product or company names used in this set are for identification purposes only Inclusion of the names of the products or companies does not indicate a claim of ownership by IGI Global of the trademark or registered trademark Library of Congress Cataloging-in-Publication Data Names: Zanin, Filippo, 1974- editor | Comuzzi, Eugenio, 1963- editor | Costantini, Antonio, 1974- editor Title: Management control systems in complex settings : emerging research and opportunities / by Filippo Zanin, Eugenio Comuzzi, and Antonio Costantini Description: Hershey, PA : Business Science Reference, [2018] Identifiers: LCCN 2017025774| ISBN 9781522539872 (hardcover) | ISBN 9781522539889 (ebook) Subjects: LCSH: Industrial management | Management science Classification: LCC HD31.2 M3565 2018 | DDC 658.4/013 dc23 LC record available at https:// lccn.loc.gov/2017025774 British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library All work contributed to this book is new, previously-unpublished material The views expressed in this book are those of the authors, but not necessarily of the publisher For electronic access to this publication, please contact: eresources@igi-global.com Advances in Logistics, Operations, and Management Science (ALOMS) Book Series ISSN:2327-350X EISSN:2327-3518 Editor-in-Chief: John Wang, Montclair State University, USA Mission Operations research and management science continue to influence business processes, administration, and management information systems, particularly in covering the application methods for decision-making processes New case studies and applications on management science, operations management, social sciences, and other behavioral sciences have been incorporated into business and organizations real-world objectives The Advances in Logistics, Operations, and Management Science (ALOMS) Book Series provides a collection of reference publications on the current trends, applications, theories, and practices in the management science field Providing relevant and current research, this series and its individual publications would be useful for academics, researchers, scholars, and practitioners interested in improving decision making models and business functions Coverage • Decision analysis and decision support • Political science • Organizational behavior • Risk Management • Information management • Operations management • Finance • Networks • Services management • Marketing engineering IGI Global is currently accepting manuscripts for publication within this series To submit a proposal for a volume in this series, please contact our Acquisition Editors at Acquisitions@igi-global.com or visit: http://www.igi-global.com/publish/ The Advances in Logistics, Operations, and Management Science (ALOMS) Book Series (ISSN 2327-350X) is published by IGI Global, 701 E Chocolate Avenue, Hershey, PA 17033-1240, USA, www.igi-global.com This series is composed of titles available for purchase individually; 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Theme, Perspectives, and Guidelines “Management Control Systems in complex settings Emerging research and opportunities” is a relevant milestone of a research path centered around the evocative topic of “control and firm’s value under complexity conditions” Complexity and control are analysed with the lens of “economic value” in order to adopt multiple and unconventional perspectives on the topic New lines of reasoning have stimulated the generation of an innovative conceptual framework that is articulated around the following turning points: • From the Corporate Control to the Complexity Control: This methodological shift evokes the adoption of a new approach able to emphasize the pivotal role of the environmental complexity for managing firm’s value The control of complexity becomes the objective of the Management Control Systems (MCS) and, at the same time, the methodological approach for controlling strategy, operations and resources A radical change of perspective is taking place While the classical approaches to management control are targeted to maximize the financial value of the firm and its constituent assets, the Preface • • viii complexity approach explicitly takes into consideration the active role of the context under which management control is performed; From the Management of Organisational Performance to the Management of Complexity: A new conceptual framework is proposed for managing value in complex settings The relation between complexity and firm’s financial performance is analysed by adopting a new methodological perspective that encourages the exploration of the intricate cause and effect relationships among firm’s value and its determinants It is difficult to develop a comprehensive understanding of the value drivers and their impacts on firm’s value The proposed conceptual framework tries to overcome this imbalance by making the causal relationships more explicit; From the Functionalist View of MCS to the Perceived View of Complexity Management: Traditional approaches to management control adopt a narrow and functionalist view of the MCS Consequently, management control is seen as a system of formal and analytical tools that supports rational decision-making by providing financial measures, economic analysis and allowing “management by exceptions” However, decision and control processes are rarely rational and linear Rather, they are complex interconnections of provisional and emerging practices that involve many actors who represent different values, beliefs, biases and competencies This seems consistent with the emphasis on the individual’s perception of the importance and use of specific MCS Thus, MCS and complexity are not objective entities but subjective abstractions beyond the perceived reality of organisational phenomena Following this line of reasoning, it is important to make a distinction between two different conceptualisation of complexity: perceived complexity and managed complexity The first conceptualization refers to complexity as a individual and social accomplishment The second one, draws attention to the problem of the treatment of complexity It depends on the degree of complexity of the analysed problem If the problem is simple to understand, then it is possible to apply analytical and rational tools Conversely, when the problem continues to evolve over time taking unpredictable terms, it is manageable by assuming simplifying assumptions Then, the control of complexity is a bundle of multifaceted practices that involves building imperfect cognitive representations of the problem or, alternatively, rational and computationally tractable solutions; Preface • From Traditional Control Methods and Tools to Advanced Toolkit for the Management of Complexity: Complexity management requires the use of advanced methods and tools able to capture the dynamics that impact on the creation, conservation or destruction of economic value In this perspective: a) multidimensional models are becoming increasingly important tools for the control of firm’s strategy in complex settings; b) there is a systematic change of the methods and metrics that support forecasting, planning and budgeting processes; c) increasing level of complexity stimulates the adoption of more sophisticated measurement tools and techniques; d) advanced management control systems combine different measurement and representation tools (quantification, narrative approach, visual maps, matrix, alternate templates, temporal bracketing) THEME AND OBJECTIVES OF THE BOOK Complexity science has emerged across different research fields in recent years In business management, the term complexity generally evokes a business context involving problems in decision-making, direction, measurement and evaluation, both by managers and stakeholders On the one hand, complexity implies environmental uncertainty, change, dynamism, heterogeneity These characteristics can be ascribed to the contemporary competitive environment Nowadays, firms have to face challenges driven by a variety of factors: changes in manufacturing and operations, the rise of emergent markets and developing economies, the long-lasting effects of the 2008 financial crisis, evolutions in customer tastes and preferences, relations with buyers and suppliers, rapid innovations, variations in the actions of competitors and growing rivalry, deregulation and globalization issues, the diffusion of information technologies On the other hand, firms can also be internally viewed and analyzed as complex systems Firms must respond to the expectations of a range of multiple stakeholders Product life cycles are shorter and factors such as knowledge, innovation and intangible assets are increasing their importance Customer loyalty and reputation have become major concerns Overall, complexity influences organizational structures, and makes planning and control more difficult ix ... (1542-1591) WHY A BOOK ON COMPLEXITY AND MANAGEMENT CONTROL SYSTEMS? Theme, Perspectives, and Guidelines Management Control Systems in complex settings Emerging research and opportunities is a relevant... Managing Value in Complex Firms Chapter Complexity and Control: Managing for Value Creation in Complex Firms .79 Chapter Complexity and Control: Forecasting, Planning, and Budgeting in Complex. . .Management Control Systems in Complex Settings: Emerging Research and Opportunities Filippo Zanin University of Udine, Italy Eugenio Comuzzi University of Udine, Italy Antonio Costantini