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How the Rhythm of Management Controls Enables

Organizational Agility in a Rapidly Changing Environment

Chris Akroyd*

College of Business

Oregon State University, Corvallis, USA

Satoshi Horii

College of Business Administration

Ritsumeikan University, Osaka, Japan

Norio Sawabe

Graduate School of Management

Kyoto University, Kyoto, Japan

* Corresponding author – chris.akroyd@bus.oregonstate.edu

Abstract

This paper explores the rhythms created by management control mechanisms. We show how

a budget rhythm and a roadmap rhythm not only measure and report on organizational

performance but can also enable organizational agility. We do this by examining the situated

practices of marketing and product development groups at Buffalo, a Japanese computer

peripherals company which operates in a rapidly changing and uncertain environment. Data

was collected at Buffalo over a two year period and included observations of organizational

activities including meetings, as well as interviews with organizational groups and a review of

documents. We found that budget control at Buffalo created a budgeting rhythm which

influenced the action plans of the marketing groups who were accountable for meeting budget

targets. On the other hand, the rhythm created by product roadmaps influenced the action

plans of the product development groups who were accountable for keeping projects on

schedule which was set in the roadmaps. The budget control cycle and the use of budget

targets created a steady rhythm, while the roadmap rhythm was disjointed as it was adjusted

in an ad hoc manner as the timing of external component availability and internal product

development changed. The budget rhythm, which was kept mechanistically by the budget

control cycle, started the year being connected to the roadmap rhythm. But they became

disconnected during the year due to unforeseen changes in technology and product markets.

As a result, the marketing and product development groups had to continually re-synchronize

the connections between the budget and roadmap rhythms which lead to organizational

agility and facilitated the emergence of new product innovation in a rapidly changing

environment.

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Introduction

The world is changing rapidly and is becoming less predictable with many business

professionals now focusing on how to make organizations more agile so that they can

respond faster to rapidly changing and uncertain environments (Holbeche, 2015; Silverman et

al., 2016; Welbourn & Fathers, 2014). It has been argued that traditional management

controls, and budgeting in particular, may not be effective in these environments as they were

designed for stable environmental conditions (Hope et al., 2011; Welbourn & Fathers, 2014).

The idea that traditional management controls and budgeting in particular are not useful in

rapidly changing and uncertain environments is the central theme of the beyond budgeting

literature (Kaarbøe et al., 2013; Sandalgaard, 2012; O’Grady & Akroyd, 2016). This literature

focuses on how organisations can re-design their management controls to reduce their

reliance on budget targets so that they can become more agile (Kaarbøe et al., 2013; Lindsay

& Libby, 2007; O’Grady & Akroyd, 2016; Østergren & Stensaker, 2011; Sandalgaard, 2012;

Sandalgaard & Bukh, 2014). But survey research shows that most organisations still rely on

traditional budgeting based control systems with budget based targets a common

performance indicator (Dugdale & Lyne, 2010; Dugdale & Lyne, 2011; Libby & Lindsay, 2010).

Our research question is: how can traditional management controls enable organizational

agility in a rapidly changing environment? By focusing attention on the collective behaviour of

organizational groups (Reddy et al., 2006) at our case study site (Buffalo) we found that

organizational agility can be enabled through the rhythms1 created by management controls.

We focus on the product innovation activities at Buffalo as this is a major source of

differentiation and competitive advantage (Brown, 2008; Goto, 2009). Product innovations are

shaped not only by the strategy of the organization but also by organization groups through

their everyday activities (Davila, 2005; Kodama, 2005). Organizational groups need to

continually interpret and adapt to market conditions as their activities take place in a complex

1 Rhythms are “the temporal patterns and regularities that stem from and in turn help to frame and support ongoing forms of action” (Steinhardt & Jackson, 2014).

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and rapidly changing environment influenced by both internal and external time pressures

(Chapman & Hyland, 2004).

The remainder of this paper is organized as follows. The next section presents our

theoretical perspective. This is followed by an overview of our research site and case study

data collection and analysis. Our research findings are then presented followed by a

discussion of the results along with some concluding comments.

Theoretical perspective

It has been argued that social phenomena are best understood as socio-temporal orders

which constitute the foundation of collective action (Zerbavel, 1979, 1980, 1985). Central to

Zerubavel’s (1979, 1980, 1985) account are the key temporal artifacts of schedules and

calendars, and their role in organizations. Orlikowski and Yates (2002) expand on this idea by

showing that temporal artifacts create social processes which establish rhythms that shape

ongoing organizational practice. It has been argued that these “rhythms focus our attention on

collective behaviour” in an organization (Reddy, Dourish, & Pratt, 2006, p. 37).

Collective action requires the alignment of rhythms in order to develop situated practices

that other organizational groups can understand. Jackson et al. (2011, p. 252) identify

rhythms as evolving and durable objects of collective organizational life. Rhythms are said to

establish structures that can be steady or disjointed, tied to specific events, or emanate from

complex and long-term factors (Ancona & Chong, 1996; Ancona et al., 2001; Jackson et al.,

2011). But they can also conflict with each other creating organizational tensions (Jackson et

al., 2011). The manner in which such tensions are resolved may be deeply embedded in the

structures that govern collaborative practices (Jackson et al., 2011). Thus, management

control research needs to understand “which rhythms are adjusted to which (and whose

rhythms to whose)” as this is an “important site for the exercise of power and control”

(Jackson et al., 2011, p. 11).

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Although management control rhythms have not been addressed in the accounting

literature time and collective action have been shown to be an important part of calculative

practices (Ezzamel & Robson, 1995; Robson, 1992; Ushio & Kazusa, 2013). Robson (1992)

has noted that accounting calculations develop visibility for organizational activities. Miller

(2001, p. 393) notes that “accounting accords a specific type of visibility to events and

processes, and in so doing helps transform them.” It has, though, been argued that our

understanding about temporal structures in accounting research needs to be made more

visible (see for example; Chambers, 1989; Ezzamel & Robson, 1995; Loft, 1995).

By removing time from theoretical accounts empirical research often abstracts away from

the temporal flow of organizational life (Sandberg & Tsoukas, 2011, p. 342) which hides “the

nature and dynamics of accounting in its socio-cultural context” (Komori, 2015, p. 154). The

temporal structure of organizational practices and the uncertainty inherently involved in them

are passed over in the search for empirical regularities (Komori, 2015; Sandberg & Tsoukas,

2011). “The particulars that make knowledge actionable - what to do, at what point in time, in

what context” are not part of the timeless propositional statements typically generated in

empirical organizational research (Sandberg & Tsoukas, 2011: 342).

In this paper we aim to contribute to the accounting literature by exploring the rhythms

created by management control mechanisms. Since management controls have been shown

to create the social reality within organizations and provide rhythmic regularity for

organizational activities. We aim to show how two management controls - budgeting and

roadmaps - not only measure and report on organizational performance but can also enable

organizational agility.

In order to understand the effect that management control rhythms have we examine the

situated practices (Garfinkel, 1967, 2002, 2005, 2006; Rawls 2002, 2005, 2006, 2008) of the

marketing and product development groups at Buffalo Technology (Buffalo), a Japanese

computer peripherals company which operates within a rapidly changing and uncertain

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environment. By focusing on the practices of these organizational groups we can see how

rhythm is both experienced and accounted for in situated practices. This is because “situated

interactional time” is “shared by all competent participants in a situation” (Rawls, 2005, p. 169)

as time exists as part of the relationship between ongoing interactions and is thus a feature of

situated practice (Rawls, 2005).

This understanding of the relationship between time and situated practices allows us to

examine how management control rhythms make the practices of organizational groups

visible in specific situations. This helps us see how organizational groups create and maintain

their situated practices thus giving us insights into the meaning they give their practices

through their specific common sense knowledge as these practices require judgment,

improvisation and even artful work on an ongoing basis (Garfinkel, 2002).

By examining the situated practices of organizational groups we can better understand the

meaning these groups give their practices through their specific common sense knowledge

(Garfinkel, 2002). In particular, we focus on accountability2 since this is what organization

members need to show that social reality has been created as this is what gives actions

meaning (Garfinkel, 2002). For this reason we focus on how activities are organized so as to

make them accountable to others.

According to Liberman (2013, p. 99) “the practices of common sense are employed not by

following rules of the game but by behaving in ways that are retrospectively consistent with

those rules. In other words, behaviour is to be accountable to rules and this means engaging

in concrete [situated] practices that are orderly in their own right and are not explained or

provided for in the rules that these practices make visible.”

The contents of common sense knowledge and the reason for using common sense

knowledge are not the objects of research, but topics which are used to understand situated

2 There is actually a direct link between Garfinkel’s use of term ‘accountability’ and its’ historical use in the accounting literature as a fundamental organizing principles of accounting (Ijiri, 1975; Ravenscroft & Williams, 2009; Williams, 2009). This is because Garfinkel’s understanding of ‘accountability’ came from an accounting class he took at the University of Newark where he did his undergraduate degree in business and accounting (Akroyd et al., 2016; Rawls, 2002).

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practices (Garfinkel, 2002). For this reason we are not concerned with the motives of an actor

as “motivation can be sufficiently accounted for by saying that they are motivated by the need

to produce recognizable practice” (Rawls, 2006, p. 21). Thus, motivation to act is “manifest

and made recognizable in and through the situated details of practice: through the concerted

collaborative mutual engagement of persons in sequences of practice” (Rawls, 2006, p. 19).

Our aim in this paper is not to develop a social theory about time as our research is

grounded in situated practices rather than in relating social theories to practices (Garfinkel,

2002). Instead we attempt to place accountability and social order within the temporality of

situated practices as “conventional conceptions of time are about social order, but they are

not of it” (Rawls, 2005, p. 164, emphasis in the original). Thus, we seek to study the situated

practices of groups and their natural accountability (Garfinkel, 2005), by focusing on “social

practices themselves to determine what can be said about them: allowing empirical detail

precedence over abstraction” (Rawls, 2005, p. 164).

Research site and data collection

Our case study site “Buffalo” has been in business for about 40 years. It has its headquarters

in Nagoya Japan and is a 100% owned subsidiary of Melco Holdings which is a publicly

traded company. It has about 400 staff with annual sales of about ¥100 billion (about NZ$1.3

Billion). It operates in the computer peripherals market and develops, manufactures and sells

a wide range of computer components and broadband equipment worldwide. In order to

understand the situated practices and natural accountability of the marketing and product

development groups at Buffalo the authors carried out interviews, observed innovation

meetings, and collected documents over a two year period (see Table 1).

In total 38 interviews were conducted, with ten interviews involving more than one

employee. All interviews were carried out in Japanese and transcribed into English (all the

authors are bilingual in both English and Japanese).

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Table 1: Case Study Data

Interviews 61.4 hours

Senior management 3 hours

Head office staff 4 hours

Sales managers 4.9 hours

Marketing group leaders and personnel 18.5 hours

NPD group leaders and personnel 31 hours

On-site observations 3 days

Documents 106 pages

NPD documents 86 pages

Administration 16 pages

Organization chart 4 pages

The interviews ranged from 50 minutes to 150 minutes in duration, with a total of 61.4

hours of interviews with senior management, head office staff, sales managers and division

group leaders (managers) and personnel from product development and marketing groups.

The data was analyzed jointly by the authors throughout and following the two year data

collection period. This involved becoming immersed in the interview data by reading and

re-reading the transcriptions followed by writing up notes and case descriptions (Witzel, 2000).

Observations and internal company documents were then used to re-analyze the case

descriptions so as to triangulate the findings (Modell, 2009). In the following section we report

on the findings of our case study analysis.

Research findings

Organization, competitive environment and strategy

Buffalo had a business headquarters (HQ), a sales division, a technology management

department, a quality control department, a customer service (CS) department and an

administration department. Within the business HQ were four strategic business divisions and

a manufacturing department. Each of the business divisions had its own marketing and

product development group which managed a number of product categories. Production was

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outsourced to local manufacturing firms while the manufacturing plan was done by the

manufacturing division which was also in charge of parts procurement. In each business

division marketing groups were responsible for managing current and new product plans,

while the product development groups planed and developed new products.

The memory business division produced memory modules and flash memory devices

such as USBs and SD cards. The storage business division produced storage devices such

as hard disk drives. The BBS (Broadband Solutions) business division produced network

devices such as LAN adaptors and wireless communication devices. While the NB (New

Business) business division developed products that linked new technologies in the home

such as NAS (Network Attached Storage) and digital TV set top boxes. Production was

outsourced to local manufacturing firms while the manufacturing plan was done by the

manufacturing division which was also in charge of parts procurement. In each business

division marketing groups were responsible for new product planning, managing current

products and budgeting, while the product development groups planed and developed new

products. The marketing group leaders described the competitive environment as:

“Turbulent.” with “High uncertainty… for example, it is difficult to foresee market growth

rates.” With “a lot of competitors.”

Marketing group leaders recognized that the environment was uncertain and changing rapidly

due to the high level of competition and the difficulty in predicting market change. In this

competitive setting, the marketing group leaders argued that the central aim of Buffalo was to

gain market share by being the first to market with innovative new products. This was based

on their common sense knowledge that they would not be the market leader if they could not

deliver innovative products on time, due to products having short life-cycles. At the same time

there was intensive pressure to cut the cost of current products. Marketing group leaders said

that an assumption built into Buffalo’s product development process was that continual

product changes were necessary to increase profitability.

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Budget control, budget targets and accountability

In Buffalo, the marketing group leader of each business division was accountable for the

sales, profit margin and market share of the division. These targets were set in the budget

and used for performance evaluation which took place every six months. The marketing

group also had a wide range of responsibilities as they were involved in product planning,

development coordination, forecasting orders as well as pricing decisions and inventory

management. Each marketing group leader was, in effect, a product manager and had

responsibility over both new product development projects and existing products within that

category. The marketing group leaders within each business division were also involved in the

budgeting process.

The budget was constructed through a process that started with forecasting the size of the

market and target market share, along with an analysis of the product parts price trends and

the final expected market price for that product. The marketing group leader sent their budget

numbers to HQ to be approved by senior management. These budget numbers would only

get approved if the group leader could show that they could not reach these targets with their

existing product line-up. In other words, they needed to show that the target was a stretch

target and they needed to show how they could reach it through designing a detailed plan of

new products. The product innovation plan for each product category was listed on the

product roadmap at that time as an action plan which showed what had to be done to meet

the budgetary targets. According to marketing group leaders:

“I have to consider new products which become the pillars of sales for the next fiscal

year, because sales targets which I can reach with existing products will not be approved

by senior management.”

“I can prepare the budget, based on the expected market growth rate and the expected

market share. But a [senior manager] said that I should apply an approach where I

consider what to do to reach a higher target… It is difficult to meet the target based on

this approach. But it is not impossible, so I always have to consider how to do it.”

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To meet the targets, the marketing group leaders checked the degree of attainment of the

three main targets (sales, profit margin and market share) every morning. Once a month

reports were presented to senior management at business strategy meetings to make sure

that the results were on target. If actual performance did not meet the targets or were not

likely to meet the targets in future periods, the marketing group leaders had to identify the

reasons and take steps to correct the situation.

Since the budgetary targets were stretch targets the marketing group leaders needed to

show how they could reach it through designing a detailed action plan which included the

introduction of new products. Once the budget had been approved the budgetary targets did

not change during the first half of the year. According to a senior manager the reasons were

that:

“It took at least one month to review the budget and during that month there were

external changes in to business environment”, and “it took half a year to absorb the

noise caused by seasonality and changes in trends, in other words, if the term of

feedback was shorter than half a year and the budget changed frequently, the fluctuation

of the performance due to the noise in the data would be too large.”

Thus it took at least 6 months for performance patterns to be captured. For these reasons,

the marketing group leaders were held responsible for reaching their three main targets: sales,

profit margin and market share for each six month period.

When preparing the budget, the marketing group leaders started with determining the

product roadmap because budget targets could only get approved if the group leader could

show that they could not reach these targets with their existing product line-up. In this way the

budget preparation process promoted the consideration of product strategy such as the

makeup of the product portfolio. A marketing group leader stated that:

At budget preparation time….we analyzed our present status. The details showed that,

low-price models accounted for X% of division’s sales. This was not appropriate. We had

to reduce this to Y%. …So, we formulated a strategy to sell a high-spec model with

added value. We then used the roadmap to plan the product.

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This budget rhythm affected the actions of the marketing group leaders who viewed

innovation activities as a way for them to meet budget targets. In this way, innovation strategy

in Buffalo was influenced by the stretch budget targets which necessitated action plans to

meet the targets set in the budget. The managers at Buffalo used common sense knowledge

about how to combine strategies, budgets, targets and action plans. The natural

accountability for budget targets created the social reality of the marketing group leaders’

everyday activities.

Product roadmaps

In addition to budgets, product roadmaps were the other main management control

mechanism used at Buffalo. These roadmaps were made for each product category and

included the current product line-up as well as the future product line-up. It included

information about the schedule for future product launches based on the format shown in

Figure 1 below.

Figure 1: Example of Buffalo’s Product Roadmap

Product Category Product Line 20XX/Q1 20XX/Q2 20XX/Q3 20XX/Q4

XXX Model aaa

YYY Model aa

XX Model bbb

YY Model bb

X Model ccc

Y Model cc

(Source: Based on a Buffalo Product Development Document)

Planning for the roadmap started before the budget planning took place with marketing

and development group leaders gathering information and exploring opportunities both in

relation to the needs of the market but also in relation to the availability of new components or

aaa-b

aa-a

bbb-b

bb-a

ccc-b

cc-a

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technologies. Discussions then took place between the marketing and product development

group leaders who used the information they had gathered to develop new product ideas.

The start of new product development projects took place when these ideas were placed

on the roadmap. The purpose of the roadmap was to set out the new product plans for the

next year. As these new product ideas had yet to go through a rigorous evaluation process

they were entered on the roadmap with a dotted line. To adapt flexibly to the rapidly changing

environment, the roadmap was reviewed and approved monthly at the business strategy

meeting by the senior managers from across the business divisions and thorough

consideration of the product plan was required for a commercialization decision.

A roadmap was made for all product categories in each business division within Buffalo.

Each roadmap included the current product line-up with with product specifications, the

product concept, product number, price and monthly sales units as well as the new product

plan, with launch dates, product specifications, concept and the relationship with other

products, as well as the expected effects on financial performance and staff assignments

which were used to coordinate the project schedule. According to the marketing group

leaders the roadmap then acted as the action plan and a coordinating mechanism between

the marketing and product development groups.

The roadmap was an input into the budgeting system as it listed the products that

marketing group leaders had to deliver to reach their budget targets. At the start of the year

there was congruence between the budget and the roadmap. Thus, the current product

line-up and new product development plans were regarded as a mechanism to meet

budgetary targets.

“I prepare the budget, by first considering new products to be launched and the planned

strategy… At the start of the year the roadmap for the fiscal year is associated with the

budget.” (interview 21) “The new product development plan is fixed on the roadmap.

Based on this plan, I put the numbers such as cost, price, units for every product and

every month into my excel spread sheet.”

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However, during the year changes took place in the external environment such as new

technologies, parts prices and customer needs which did not always fit with the product plan

when the budget was first prepared. Thus, the marketing group leaders had to update the

roadmap at the monthly business strategy meeting taking into consideration these

environmental changes. This was an important event which enabled marketing group leaders

to adapt to the changes taking place by connecting the current market needs to the roadmap.

According to a marketing group leader:

“At the [monthly] business strategy meeting I am sometimes asked to report on the

actual situation facing the retailers, I go and meet the retailers and make a document

about it… I fully realize that it is inappropriate if I do not have any good product ideas

when I report at the [monthly] business strategy meeting.”

When a decision was made to commercialize a new product the marketing group leader

would hold a concept design review meeting with the development group leader. They

focused on areas such as marketability, feasibility, and profitability. If they decided to carry out

the project they would draw a solid line on the roadmap. Once the marketing and product

development group leaders had decided to make a product at the concept design review

meeting, the product development group leader wrote up and submitted a ‘Plan Sheet B’

while the marketing group leader wrote up and submitted a ‘Product Concept Sheet’. These

planning documents included the sales price, product cost, monthly sales unit forecast,

monthly sales forecast, development cost, target customer, specifications, competing

products, schedule, product concept, selling point, positioning and components needed for

the product. During this process the marketing group focused on the budget targets which

they were accountable for, while the product development group focused on the schedule on

the roadmap and the ‘Plan Sheet B’. According to a product development group leaders:

“Schedule management is the most important. Progress management… I don’t think

that the product development members care about [the attainment of budget].”

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“The budget is important for Mr. X (the marketing group leader). The schedule is

important for me (product development group leader). I focus on development progress...

We in the product development group just ask when and how Mr. X (the marketing group

leader) would like to prioritise the launch… Although some say that we, the development

group, have to work towards the sales budget, I think that we should not be side-tracked

by giving it too much attention.”

This is because the product development group was accountable for keeping product

development projects on schedule. The product development group leader did not follow the

budget rhythm, but instead used the roadmap schedule as the rhythm to order its activities.

The problem was that if all product innovation activities followed the product development

group’s practices then new products would only be developed based on the original schedule

set out in the roadmap without adapting to the rapidly changing environment. This could have

a negative impact on Buffalo’s potential sales and profit margin.

Budgeting and roadmaps rhythms in everyday organizational activities

As already stated, the marketing group leaders were accountable for the products on the

roadmaps as well as for the budget targets (sales, profit margin and market share). The

product development group leaders were accountable for keeping projects on the schedule

set by the roadmap. Because the budget targets were fixed the only way to reach budget

targets in a rapidly changing environment was to develop new products which meant that the

roadmap needed to be updated monthly. A marketing group leader stated that:

“The initial roadmap is associated with the budget. But as a result of a change of

circumstances, for example, a declining market or a delay during product development,

a disconnection between roadmap and budget occurs.”

While the roadmap and the budget were connected at the time of budget preparation they

started to lose this connection during the following months because the roadmap was

changed and updated while the budget was not. Even though the budget lost its connection to

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the roadmap the budget still remained as an absolute target which the marketing group was

accountable for. The marketing group leaders stated that:

“It (the budget) is never changed”, “I aim to reach the budget.” As “The budget itself

governs my activities. Through the budget we promise to the company what we will do.

The budget is our action plan. I aim to reach it 100% of the time.” And “I think that the

budget is the action plan. The budget is the result of planned action for a year”, “I act to

meet budget.”

The budget rhythm of monthly targets for sales, profit margin and market share helped

create order for the marketing group’s activities. The budget targets which marketing group

leaders were accountable for were yearly or half-yearly targets of sales and profit margin

broken into monthly and daily milestones. During their everyday activities, the marketing

group leaders compared monthly actual performance and estimated performance derived

from the budget targets. The marketing group leaders investigated the cause of both

favourable and unfavourable variances. The marketing group leaders then checked the

variances between the budget targets and current performance at the beginning of each day

to see the situation and take steps if needed. According to a manager in the corporate

planning department, the reasons for variances were as follows.

- When sales performance did not reach the budget target but orders had been received, it

meant that the product was not getting to the market. In this case managers would check

to see if there was a problem with parts procurement or manufacturing.

- When sales did not reach the budget target it meant that orders were not being received

which resulted in lost market share. In this case managers would check to see if this was

the result of a poor product concept or unrealistic pricing.

- When sales did not reach the budget target it could be because orders were not being

received even though market share may not have decreased. This was a problem for the

whole market because it meant that the demand for the product was lower than

expected.

- Finally, when sales performance reached the budgetary target but the profit did not reach

the target, this meant there was a problem of low gross profit margin. In this case

managers would check if this was the result of a low price or high parts purchasing costs.

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According to a marketing group leader:

“(When I investigate the cause of a variance), I am back to budget preparation. I review

the logic of budget…I test to see if there was a mistake during budget preparation, or if

there is some unforeseen special demand.”

Even when the budget lost its connection to the current operations as a result of

changes in market conditions, the budget targets did not change. The marketing group

identified problems and clarified the issues by combining multiple complementary

budget-variance calculations, and by comparing the initial strategy and action plans, which

had a strong connection at the time the budget was prepared, with the budget variances. To

resolve the problems, with the aim of meeting the budget targets, innovation was critical.

Marketing group leaders stated that:

To meet budget, I need to design and sell new products. I test whether or not I have

been successful through the sales performance report… after all, if I do not reach

budget, I have not been successful…So I have to consider what to do.

This shows that there were various corrective actions that the marketing group leaders

had learned based on their common sense knowledge. Corrective actions included analysis

of parts procurement and manufacturing or changing the marketing strategy so as to enhance

competitiveness - such as through a price reduction. In the case of product concept problems,

the current roadmap plan was reconsidered along with the new product development strategy

which was revised to adapt to market needs. Sometimes, new products which were not on the

original roadmap were developed at so the firm could increase sales and profit margins in

particular market segments.

New product strategies at Buffalo were created by associating the achievement of budget

targets with new product innovation ideas. This shows that even though the budget targets

were not able to keep up with the changing environment the marketing group leaders still

understood that they were accountable for the budget as the target. Through combining

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multiple complementary budget-variance calculations, and associating the initial strategy and

action plans, which had strong connections at the time the budget was prepared, the budget

variances created a social reality which influenced the timing and intensity of product

innovation activities. As a result, the connections between the budget cycle and product

roadmaps were continually re-synchronized which lead to organizational agility and facilitated

the emergence of new product innovation so that the marketing group leaders could meet

their budget targets.

Synchronization of the budget rhythm and the roadmap rhythm

As shown above, marketing group leaders were accountable for meeting budget targets, in

particular the yearly and half-yearly targets and monthly milestones. Managers focused on

monthly milestones which they checked daily because they had to report to senior

management at monthly meetings where budget targets were analyzed and the roadmap was

updated. According to marketing group leaders, product strategy was formulated and new

products were developed to help them meet the budget targets. Thus, the accountability for

budget targets created the rhythm which acted on the activities of the marketing group.

The product development group, on the other hand, emphasised the schedule on the

roadmap, with the roadmap creating the rhythm for its activities. To meet the budget targets

the schedule of new product release dates on the roadmap was synchronized with the budget

at the beginning of the year. However in reality, if a marketing group leader could see that a

budget target was not going to be reached then they would have to start to think about their

innovation plans. This created a way for managers to adapt flexibly to the budget targets

through their everyday innovation focused activities. Although the budget itself lost its

connection to the environment the budget rhythm was the rhythm which marketing group

leaders needed to follow as they were accountable for the budget targets. This caused them

to start new product development projects on very short notice and make changes to strategy

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by changing their product line-up, with the aim of synchronizing the roadmap rhythm with the

budget rhythm. An assessment of the difference between the roadmap rhythm and

consideration of action for regaining synchronization was needed to adapt to the budget

rhythm. The social reality of the marketing and product development groups was created by

their attempts to synchronize the roadmap rhythm with the budget rhythm.

The roadmap rhythm was interrupted when product development was delayed or

component prices did not drop as fast as expected. If market conditions were stable the

budget and the roadmap schedule would remain synchronised. But in reality the rhythm of the

budget was kept mechanistically as it was dictated by the yearly budget control cycle while

the product development schedule followed the roadmap schedule which was often

interrupted by the delay of components and software development. The product schedule

was also disturbed by the fact that prices of components did not decrease at the expected

rate which lead to product development projects being halted until they were able to meet the

cost specified in the product planning documentation. The only way to re-synchronize the

budget rhythm with the roadmap rhythm was through discussions between the marketing

group leaders and product development group leaders on new product innovation ideas. This

resulted in the projects listed on the roadmap being updated every month. As a result of this,

new projects were added to the roadmap so as to enable the marketing group leaders to

reach their budget targets.

Discussion and conclusions

In this paper we show that even though it is becoming more difficult to make predictions about

the future in rapidly changing environments, traditional budget based management controls

can still play an important role in enabling organizational agility through understanding how

different management control rhythms can help create dynamic tension.

The budget rhythm at Buffalo was kept mechanistically which produced a steady rhythm

19

through the yearly and half-yearly targets and monthly milestones. The roadmap rhythm, on

the other hand, was often interrupted by product development issues and could be changed

every month at business strategy meetings to respond to environmental change. While the

budget was initially prepared in association with the roadmap the budget targets did not

change during the year even when the market changed. As a result the budget and the

roadmap become disconnected. This helped create a dynamic tension between the

marketing and product development leaders and they had to work together to find ways to

re-synchronize the rhythms. This involved developing new product innovation action plans

needed to help meet the budget targets. This led to new innovation ideas and strategic

change emerging at Buffalo which enabled the connection between the budget and the

roadmap to be regained. In this way social order at Buffalo was created through the situated

practices of the marketing and product development group leaders continually

re-synchronizing the roadmap rhythm with the budget rhythm.

A key aspect of the budget rhythm was to provide the framework to interpret the rapidly

changing environment. This in turn opened a space for interactions between the signals from

the market and organizational activities. That is, innovation was influenced by the movement

between the timing of the budget rhythm based on the budget control cycle and the roadmap

rhythm which was influenced by development speed, component parts availability, and

component prices. The budget and roadmap rhythms facilitated the emergence of new

product innovation ideas and strategic change which in turn influenced the timing and

intensity of product innovation activities and enabled organizational agility.

The extant literature on accounting calculations indicates that innovation can be

influenced by comparing actual performance against budget plans (Ahrens and Chapman,

2004, 2006) and by the tension created by between multiple calculations with technological,

organizational and environmental entities (Mouritsen et al., 2009). In this paper we extend

these findings by showing how accounting calculations, in the form of budget targets and

20

variance analysis, can influence innovation and enable organizational agility through the

rhythm of the budget and the natural accountability of the marketing and product development

group leaders. This understanding of accountability also extends Roberts (1991) ideas of

‘individualized accountability’ and ‘socialized accountability’ as well as Frow et al. (2005), and

Faure and Rouleau (2011) ideas about ‘shared accountability’. This case shows that natural

accountability creates reality through the common sense knowledge which becomes visible

through organizational rules. Not because rules govern action, but because rules

retrospectively give actions their meaning. At Buffalo, the practices of the marketing and

product development groups were based on their natural accountability which made the

requests from the marketing group for changes to the roadmap visible, and understandable.

We believe that this shows that individualized accountability can provide the framework for

socialized accountability and that individualized accountability is a necessary condition for

socialized accountability.

Our final contribution is concerned with the agents of the accounting function. Our

understanding of budget control has traditionally been based on a hierarchical

command-and-control orientation used to implement planned strategy (Anthony, 1965;

Simons, 1995). In this context, senior managers are agents who employ budgeting to control

lower level managers. However, in Buffalo, budget control was used to send signals to

managers that they needed to react quickly to a fast changing environment. This gave the

lower level managers a more active role in the budget control process which they used to

create space for new product innovation ideas and strategic change to emerge, using budget

control as a means as well as end.

In conclusion, this paper examined the use of two management control rhythms - budget

control and roadmap control. We show how the rhythms created by the budget control cycle

and product roadmaps influenced the action plans of the marketing and product development

groups at Buffalo which enabled organizational agility in a rapidly changing environment.

21

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