Management control and strategic decision making: what links in top executive’s narration?

Summary: The present research is an exploration on the role of management control in the strategic decision making process as expressed by top executives. It is based on the narrative reports of 16 French CEOs or top managers about a precise decision process in which they were involved. The researcher was careful not to suggest items, thus circumventing heroic or over -rationalistic story-(re)telling. The research question is in accordance with extant literature, especially concerning strategic management accounting (SMA). The lexical analysis reveals interesting links and oppositions. Controllers and controlling actually play a role, at least in the respondent’s representation of the process. But references to control and to its classical tools are in opposition both with market-oriented items generally associated with SMA and with inter-organisational contexts. Thus, even if control seems to be involved in complex processes it is often absent when the stake is really strategic.

Dr Bernard GumbAssociate Professor

Grenoble École de Managementgumb@grenoble-em.com

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Introduction

The role of management control – and/or management accounting – in strategic decision

making is a great deal in recent academic literature. Several tools and theories had the

pretension to provide new opportunities for a better alignment between strategic formulation

and day-to-day operations. Of course, as for instance Anthony (1988) defined it, management

control is an interface whose vocation precisely consists in translating strategic slogans in

concrete actions. Depending from the countries and authors, the derived discipline takes

different designations: strategic cost accounting (Govindarajan & Shank 1992), strategic

management accounting (Simmonds 1981), strategic management systems (Brignall &

Ballantine 2004), strategic control (Winterhalter 1981)… Some tools like activity based

costing or the balanced scorecard, born in this context, reached huge success in big firms,

supported by consulting firms and IT editors.

Nevertheless, several surveys question the real impact on practice of such tendencies. Even

when significant cases are identified, they reveal a slender role of controllers in their

implementation (Lord 1996). Often, the latter keep centred on routine and internal tasks,

whereas strategic stakes need an inter-organisational and market-oriented mindset.

In its first part, the article comes back on the diverse conceptions of the role of controllers in

strategy. It also clarifies the context of the present research. In its second part, the

methodology is detailed and justified. Based on top managers’ “blind narration”, the study

proposes an original observation of the role of controlling in the strategic decision making

process. Initially designed as a pure exploratory approach, our methodology is founded on the

hypothesis of a lesser influence of controllers when the decision is really strategic. In the third

part, the lexical and thematic analysis reveals some interesting links and oppositions,

generally confirming the resilience of a traditional entity-oriented perception of the role of the

controller. Nevertheless, we also observe diverse modalities of that role, this way confirming

a perceived role of controllers in the top managers’ decision making process.

Of course our narrative based approach presents several limitations, due to potential confusion

between perceptions and practices as much as to the specificities of the French context. With

more intensive and/or extensive ambitions, such limitations might be surpassed, leading to

stronger conclusions.

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1. The research question

1.1. What about strategic management accounting?

The topic can be presented through two separate points of view:

The role of controlling and controllers on the decision making process, especially

when the latter concerns strategic choices.

The emergence of new trends in controlling, generally strategy oriented ones, which

tend to build up a new theoretical corpus around strategic control.

Even if both tendencies might have common aspects in practice, it could be useful to

distinguish the literature on each one.

Concerning the first trend, it is a rather ancient one, underpinned by a classical debate

between positivists / rationalists and critical / intuitionalists. Operational research (OR) made

huge efforts, from the fifties, to provide solutions for optimal decisions. Some algorithms for

linear programming or sequencing became standards while embedded in popular IT tools. The

pretension of OR to shift – via expert systems and business intelligence tools – from routines

to strategy was an ambitious concern as early as Leibniz who tried to prove the existence of

God through mathematical formulas. Several serious researchers in the area nevertheless

denounced the “myth of MIS” as management information systems (Dearden 1966 & 1972,

Mintzberg 1972). The tendency was concomitant with the “Marchian” continuation of the

bounded rationality theme (Feldman & March 1981). Whereas IT editors persevered in

proposing decision oriented solutions, academic research revealed that the decision making

process was far from being a deterministic and rational one. Some (Carr 2003) go even further

and claim that “IT doesn’t matter”. This did not prevent other authors to design new models

with the ambition to extend the role of control functions in that process. Activity based

costing is a pure example, as it was originally promoted as a more accurate cost calculating

method for better decision making. The target costing principle had a similar positioning

through the promise of the extension of cost control to the strategic phase of product

conception. The management controller, as an information provider, was then supposed to

enrich strategic decision making. The project seemed feasible since, in the same time,

integrated databases and ERPs multiplied the potentials of what if analysis, drill-downs,

requesting and extracting relevant data. Some authors (Simons 1995) then draw enlarged

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frontiers of the control functions, directly linked with strategy, and the alignment scheme

found more and more promoters.

This leads us to the second trend, which is probably more recent. In a certain way, the success

of ERPs could represent a threat for the controlling profession via the automation of some of

its tasks. Thus controllers had to get more than an information provider status. Therefore, it

became essential to shift from a merely internal perspective to an extended value chain

perspective. If we consider, like for instance Ansoff (1965), that strategy necessarily

implicates the firm’s environment – at least suppliers and customers – then a strategic

controller has to take in account those interactions in its models. Govindarajan & Shank’s

(1992) work on strategic cost management is emblematic of this trend. It proposes extended

value chain analysis as a generic tool for a better intelligence on the firm’s position vis-à-vis

its partners and its competitors. The comparison between the firm and its competitors is

precisely the core subject of strategic management accounting (SMA) as Simmonds (1981,

1982) first designed it. If the idea is not new, there is no choice to accept that it is not really

part of cost controllers’ daily practices. That is why not only Simmonds, but also Bromwich

(1990) or Slywotzky & al. (1999) propose to systematize the resort to such comparative

analysis. Apart from Anglo-Saxon countries, similar trends appear in France (Lorino 1991,

Gumb 2000), in Germany (Horvath 1990) or in Japan (Hiromoto 1991): books and articles’

titles often refer both to control and to strategy.

Nevertheless, Lord (1996, p. 347-348) comments: “However, although it is now more than a

decade since Simmonds first used the term, and despite the fact that there have been many

papers on the subject, particularly in professional journals, there still seems to be a paucity of

examples of strategic management accounting actually being used”. Through a case study,

Lord provides evidence of an experience looking like a SMA practice. She notices that the

latter is not bore by controllers nor accountants, but “by those at the operational level” (p.

364). Roslender & Hart (2003) generalise the scepticism about SMA, rejoining Froud et al.

(2001) or Cooper & Hopper (2006) who claim that “to understand SMA we must often look

beyond legal boundaries of the organization” (p. 35).

Thus, we often get an opposition between introverted management accountants and more

open-minded professions linked with strategy and marketing. If such an opposition is true,

management accountants should be absent from the strategy design process, even when IT

decision systems or SMA tools are used. This is the basic hypothesis of the present research.

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1.2. The context

The context needs to be clarified, as it determined the following methodological choices. The

research takes place in France, and focuses on a function called contrôle de gestion. It is not

only an academic field corresponding literally to management control, but also a concrete

occupation existing as a trade, if not a function, in every big company. It has been studied as a

profession by several French academics. Bouquin (1994) treats it in a way similar to Anthony,

as an intermediary level between strategic control and operational control. As such, it has an

essential role in strategy implementation, while influencing manager’s behaviours. Surveys

(Chiapello 1990, Jordan 1998, Bollecker 2003) generally show that the so called contrôleurs

de gestion aspire to participate to the strategic process in itself. Therefore, most of the

“strategically designed” management tools (activity based view, balanced scorecards, beyond

budgeting principles) found a sound echo in France, even if their use borrowed specific paths

due to cultural features (Bourguignon & al. 2004). Even if market oriented SMA is probably

less vivid in France than – for instance – in England, there are several works emphasizing the

inter-organisational dimension of cost control. Some recall us the blur inside / outside

frontiers of the organisations (Besson 1997), whereas others object to an “entity dogma”

which generally limits the scope of control to the sole internal performance (Gumb 2000).

When the studied context appears to be really interactive – like in the case of the textile

industry – controlling is observed without referring to management controllers (Poissonnier

2005).

Thus we have, in France like elsewhere, a kind of dialectic between a wish for a more

strategic oriented controlling function, and statements of merely internal focused controllers.

At its origin, our research was more IT oriented, as it was focused on the use – or absence of

use – of IT systems in the strategic decision making process. This applied project was a

clearly exploratory one, and the data collection was designed that for. Two choices were

made:

As systematic observation seemed difficult to manage, and quantitative questionnaires

risking to revealing poor in content, we first moved towards semi-structured

interviews. While testing the practice, we noticed a critical bias: the questioner’s

follow-ups might lead the interviewee to overestimate his resort to IT, even when he

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spontaneously not referred to it. Finally non directed narratives were used, in a way

that we’ll detail later.

Rather than interviewing controllers, we decided to meet directly the main actors of

strategy: directors and top managers. They were selected through informal contacts

and, to avoid any bias, were not informed about the precise aim of our research. They

were just informed about a “survey on strategic decision making”.

Through such choices we turn to a study on the perception – by directors and top managers –

of the role of the controlling function in strategic decision making. It is also an attempt to

assess whether or not the perceptions identified by the analysis of narratives hold a SMA

dimension, through mentioned tools or concepts.

2. The method

The method had to be designed in accordance with the aim of the study. As we saw above,

some potential methods were rejected. As our first project was linked with the use of IT tools,

we were cautious from an overestimating risk. To prevent such a bias, the following choices

were made:

The real subject of the research was kept unknown to the teller. Thus, the latter might

not be influenced in suggesting irrelevant items.

The initial question was an open one, always the same: “Please tell us the story of a

recent strategic decision you were involved in”. Whenever the teller asked about

“what is strategic”, he got no other answer than “it’s your choice”.

The researcher referred nor to methods neither to tools or functions. The only follow-

up questions were as neutral as possible: “What kind of data did you use?”, “Who was

involved in this decision?”, “Were you confident for success?” etc.

All the respondents were selected through informal contacts, and asked to be available an

hour along without disturbance (which was not easy to achieve, due to time pressure). There

was no sampling strategy, except in avoidance of sector-based specialisation. The size of the

sample as well results from an informal saturation reflexion: we stopped to contact new

prospects when we felt – rightly or wrongly – having circumvented a huge part of the

situations.

The discussions, all conducted between end 2003 and end 2004, were all recorded and near

from fully transcribed1. Due to the lack of place, the transcriptions – 16 narratives with about

1 We just deleted hesitations and out-of-subject concerns when the teller drifted on personal topics with no relevance with the told story. Neither did we transcribe the final part of each discussion, where some structured questions about the available IT tools in the company where asked. The latter information nevertheless can be

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800 words each – are not fully disclosed here. Exhibit 1 gives a short synthesis of each one.

Of course, having promised full confidentiality to the respondents, we replaced the company

names with numbers affected in chronological order. The whole material was injected in a

lexical analysis tool called Sphinx Lexica™. In a first stage, after standardisation of the

lexical corpus2, we proceeded to the counting of occurrences and to the simulation of some

primary cross analysis. It was a crux in the process, as it revealed something we did not really

anticipate: half of the tellers (8 amongst 16) quoted the controller as an actor of the decision

making process. Such an unsophisticated statement allowed us at least two conclusions:

According to top managers’ perceptions, controlling and controllers – which appeared

to be, in each case, management controllers or contrôleurs de gestion – have a

significant influence on strategic issues. In fact, it was the most cited function in the

whole corpus.

The fifty / fifty result lead us to create a binary dependant variable – called Control –

without any other segmentation. If all – or none – of the tellers had mentioned control

it would have been more difficult to apply.

Thus we found the opportunity to extend our research to a more control focused topic. It

doesn’t mean that the IT subject was abandoned. At the contrary, we merged the IT dimension

with the Control variable to create a crux variable we called Pilot. Four groups were identified

in this variable:

Control IT (++): the stories that mentioned both control and (spontaneously)3 IT.

Control (+-): the stories that mentioned control, without referring to any IT system.

IT (-+): the stories including IT references but nothing without control.

Negative (--): the stories which referred nor to control nor to IT.

By chance, as we’ll see, we had a quite homogenous distribution.

This led us to the second stage of our methodological process. We then could observe the

lexical specificities of the four groups, and consider the Pilot variable as the independent one.

From that point, we could transform our research question in a formal hypothesis (H1):

considered as a variable in our analysis. 2 The “tool words” (like if, what, that, the…) were eliminated and lexical groups were created. That means, for instance, that #control is a five letter root item (racine) gathering all longer words with the same root: contrôle, contrôles, contrôleur, controlling…3 Of course the IT dimension was approached with all the respondents, but not necessarily linked with the strategic narration. We quote only IT as positive when the teller referred to it while relating his precise experience.

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H1: When the Pilot score is ++ (or - -), then the context of the story is more (less)

internal, which means that external partners are less (more) implicated.

Even if our aim became not to generate a hypothetic-deductive protocol, we had to create at

least one independent variable in representation of this internal / external dimension. Let us

recall here that we consider the latter dimension as highly correlated with the strategic content

of the story. Thus, we can prolong H1 with H2 by saying:

H2: When the decision is really strategic, then the Pilot score is rather low (-) than

high (+).

Of course, as we have no pretension to measure precisely the strategic content of a story, H1

and H2 are quite similar. The possible gap might be solved by final discussion rather than

calculations.

The qualitative nature of our data does not allow us nor to reproduce the full content of the

discussions, neither to relate the whole data reduction process. Concerning the data analysis, it

consisted in at least two distinct steps:

First, an informal rereading of the whole corpus allowed us to pinpoint some

tendencies. That’s where we noticed the significant role of controlling and controllers,

the dominant status of Excel as an IT tool (especially for simulations), the

systematically collective nature of the decision process and the rarity – if not absence

– of reference to any kind of SMA device like balanced scorecard or activity based

frameworks4.

Second, a structured data reduction process was launched. It relied on the constitution

of diverse variables, the exhaustive counting of occurrences, the identification of

lexical specificities etc. A lot of cross analyses were made at this stage, but often they

revealed inconsistent or non significant. Several Correspondence Factor Analyses

(Benzécri & al. 1973) were run, and the most relevant ones are presented further.

The next part of our article precisely presents the results of the data reduction.

3. The results

First, let us recapitulate major primary findings, which all were confirmed by the systematic

lexical analysis:

4 In opposition with a pure strategy modelling concept like the SWOT analysis which was cited by four tellers.

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The role of controlling is present in half of the cases. Each time it is mentioned, it is

involved in the decision process. When it is not mentioned, the context is often a small

or medium size firm where the control function has no “organic” existence. Of course,

such a frequency might be credited to a heroic story-(re)telling tendency of the

respondents5. It does not really matter: we analyse representations more than actual

processes that we are unable to observe.

The frequency of the IT systems item cannot be compared with the one of controlling:

we clearly suggested the IT theme as one of the core subjects of our research. Thus,

each respondent was prompted to cite the IT tools that he is familiar with, even when

those systems played no role in the narrated decision strictly speaking. The quoted IT

systems are given in Exhibit 1 for each case. When designing the IT binary variable,

we only retained the item as positive when the use of IT was reported as directly

linked with the story.

In most of the cases – if not all – the decision process is collective. This is relevant

with what we know from literature on strategic decision making.

As we already noticed, no story relates the use of any management tool generally

associated with SMA. Nonetheless, several stories are mentioning more classical tools

like cost estimation, reporting, accounting or benchmarking. Thus we have “material”

to enrich our analyses.

Very early in the analysis, we noticed a huge frequency of market related items:

customers, market, competitors, suppliers6… There is no surprise here, whereas such

references often are necessary when the teller wants to describe the context of the

story. What’s more, an item like #market sometimes means a trade or an activity,

sometimes refers to a practice like marketing, or even an indicator like market share…

Thus, our modelling process was driven by two early segmentations: the Pilot variable about

Control and IT and a variable called Watch (Veille in French). The concept of Watch was

chosen as he allowed us to create three segments:

Watch + when the story holds at least two items amongst Watch, Competitor, Market

study, Commercial and Marketing.

Watch = when it holds only one of those items.

Watch – when all those items are absent.

5 We tried to hide the researcher’s status as much as possible. Nevertheless, it is possible that some respondents knew the interviewer’s professional interest in controlling, and therefore might have introduced the subject in the story just to satisfy this curiosity. 6 See Exhibit 2 to find the counting of the main occurrences.

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When crossing Pilot and Watch variables we had a first confirmation of our hypothesis (see

figure 1). But it appeared more complex than anticipated: the presence of Control seems

actually linked with the absence of Watch, whereas IT without Control is linked with a Watch

position.

Figure 1. The crossing of Pilot and Watch variables

The third variable concerns the Context of the Decision. We borrowed Fallery’s model

(Fallery 2001) and its four dimension typology: Leader, Decision maker, Inter-organisational,

Complete. Trying to be as objective as possible, we submitted each story to three research

assistants who had to classify it in one of the four compartments.

The Type of Decision variable was created as a complement, if not a test, of the previous one.

It was submitted to the same assistants than the Context variable, ranking the decision stricto

sensu as an Offensive one, a Defensive one or a Neutral one. Both variables revealed to be

correlated (Chi2 = 10,24; df = 6)7, with high proximity between the Leader context and

Offensive decisions on the one hand, the Decision making posture and the Defensive type on

the other hand. This reveals at least how the assistants interpreted the stories. The story n° 8,

for instance, is considered as an offensive one (consisting in an external growth project) in a

Leader context (as the respondent clearly implicated himself in the process). The Neutral and

7 The Chi2 (or X2 or khi square) statistic is equal to the sum of the squared differences between the expected and observed cell frequencies. The df, for degree of freedom is the number of categories or classes being tested minus 1.

Axe 2 (22,4%)

Axe 1 (77,6 %)

Control

Control IT

IT

Neg

Watch =

Watch +

Watch –

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Complete squares were chosen when the process was unclear, i.e. when it was difficult to

classify.

The cross analysis reveals high dependence between Pilot and Context (Chi2 = 21,29; df = 9).

Figure 2 highlights on proximity of inter-organisational contexts with the absence of both IT

and Control. At the contrary, Decision making is linked with presence of both IT and

Control8. There is no significant dependence between Pilot and Type of Decision.

Figure 2. The crossing of Pilot and Context variables.

Some other variables have been built: the size of the company measured as the number of

employees; the domain, following the FTSE segmentation; the function of the respondent (12

CEOs, 2 heads of subsidiary, 2 top managers). The first step of the exploratory approach

consisted in the seeking for links between the variables. Except the above mentioned ones, we

found no other significant link.

A more in depth process was launched after the systematic exploration of the lexical corpus.

The aim was to spot lexical associations. This step led to Figure 3 which highlights some

interesting proximities and oppositions:

The North West Control group is clearly in opposition with market and competition

items. Control is close to reporting and finance and, surprisingly, far from

accounting.

8 There might be some tautological mythology in the constitution of the Decision making category. Maybe some stories are considered as decision making ones only because they refer to formal tools like IT and control.

Axe 2 (44,6 %)

Axe 1 (54,3 %)

Control

Control IT

IT

Neg

Complete

Decidor

Inter

Leader

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The reference to customers is higher in the Negative group, close to marketing topics

which are linked with the use of IT.

Simulative practices occupy a central position: they are evoked in diverse contexts.

Figure 3. Lexical associations with the Pilot variable

The observation of the factorial diagram reveals East/West segmentation: on the one hand the

tools (including IT) classically used by management controllers, and on the other hand clearly

market-oriented concepts. In itself it seems not counter-intuitive to spot, for instance, on the

fact that people mentioning control in their narration have a high frequency of #control in

their vocabulary! But the left/right dichotomy is richer when we consider the abscissa as an

Internal / External axe.

The last step of the lexical drill-down was the discovering of lexical specificities. While

lexical associations were built on arbitrarily identified items, lexical specificities observe the

whole corpus (Muller 1979). It pinpoints the items that are much more (or less) present in a

given category than in the global text. Considering the Pilot variable, the counting of

excessive presence (with a positive specificity rate of 2) shows an over-representation of the

#cost and #ERP items in the Control IT category, whereas the negative segment refers more

often to trading operational concepts like #ordering, #difficult, #products… Nevertheless, due

to the limited size of the total corpus, it seems not relevant to conclude much more than a

Axe 2 (26,3%)

Axe 1 (64,2 %)

Control

Control

Control IT

Control

Control

IT

Neg

#control

#reporting

#ERP

#simulation

#cost

#Excel

#competitor

#account

#market

#commercial

#customer

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bureaucratic vocabulary associated with the control function which is not a surprise (Ouchi

1979).

Finally, an in-depth re-reading of each narration was made, based on the drawing of cognitive

maps. It revealed that references to control appear in diverse moments of the decision process.

Sometimes it issues very early as a preliminary “cost analysis”, like in the story n°1. But in

the same story, calculations appeared also in help of the justification of the decision. We find

also an ex post resort to control in n° 5 and 6 stories, and more intermediate situations where

the control function has a core role (n° 3). That tends to keep things in perspective, far from

the mythological representation of the controller who enlightens managers’ decisions with

appropriate analysis.

4. Discussion

Basically our research confirms a significant role of management control in the strategic

decision making process. However, we have to remember that the latter process is here only

tracked through managers’ narratives. Having no means to check the correspondence between

those told stories and the actual events we just can confirm that “in business manager’s

representations, management control holds a significant role in so called strategic decisions”.

This leads to at least two comments:

When evoked, the role of the controller (or controlling) appears in diverse shapes. It

seems more complex than a classical conception of a management control function

providing “relevant” information for strategists. Sometimes decision makers use it as

an attention directing system which alerts them about some malfunction or

problematic variance. Sometimes control systems play support what if analyses. At

last, we also noticed cases where they contributed to the justification of the decision.

Such a statement is in accordance with extant researches which highlighted the

complexity and plurality of controlling activities (Argyris 1951, Simon & al. 1954,

Simons 1995).

It is possible that the tellers resorted to a heroic stance, thus emphasizing their own

economic rationality. The choice of the stories by the teller being rather humble, such

jeopardy seems out of subject. Yet another tendency might have influenced in a

similar way through reluctance – from the manager’s point of view – to “the

routinization of strategy implicit in strategic management accounting” (Seal 2006).

Under such a belief the teller might as well underscore the role of any accountancy,

financial or controller: finally the resort to control tools is all but heroic.

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Have the tellers told the “truth” or not, the stories are figments of their representations. Thus

in any case the presence of control and its positioning is a clear statement in our conclusions.

The proximities and oppositions shown by our correspondence factor analyses tend to confirm

our hypotheses. H1 is half confirmed in figure 1 where Control holds a position clearly

opposite to Watch. On the other hand, when associated with IT, Control takes a central

positioning and might be linked with any configuration. In figure 2, the Control and IT

matches with the Decidor perspective, which is difficult to interpret on H1. Figure 2 tends to

confirm H2 if we agree that strategy has vocation to borrow an inter-organisational posture.

Figure 3 seems in accordance with H1 and H2: when Control is present market oriented

concepts are generally absent. Yet our statements need to be qualified when we relate them to

the SMA research question. In a certain way our observation leads to believe in SMA as an

existing domain as the role of controlling is significant in the decision process. On another

hand, the concepts and tools generally associated to SMA hold a clearly distinct position than

Control. Thus, taken in a wide sense SMA actually exists; taken in a market oriented

perspective it might also exist, but it escapes to the controller’s influence.

Such statements not only concern scholars in management accounting or controlling. It seems

already embedded in teller’s discourse: “generally I don’t think that in our trade management

information systems provide help for strategic decision making. The fact that we have now an

ERP, for instance, changed nothing in the way we design our strategy. Nevertheless we use

surveillance and alert systems which show us where to make incremental adaptations.” (Story

n° 7). Such comments refer to a traditional dichotomy between unstructured strategy and

structured operations. Strategy is supposed to require intuitive skills and qualitative data,

whereas operational choices are considered as rationales. We found such an opposition in

several cases. The resort to formalised data is considered by diverse respondents dependent of

the number of persons involved in the process: “if I were alone, I’d use more data for my

decision” (n°12). Another teller (n°6) confirms: “in my opinion, the resort to IT systems is

more useful for an individual decision maker. His subjectivity being higher, the isolated

decision maker cannot weigh his choices and their effects like a group does it naturally”. The

resort to formalised data – associated or not with Control9 – is also supposed to have

psychological effects: “in our company strategic decisions are taken in common by the four

top managers. According to me, data coming from IT systems could be more efficient for an

isolated manager, providing him some self-assurance” (n°7). That might constitute an on

9 Those verbatim are extracted from the final parts of the interviews, when the teller was asked to comment more generally his IT practice. They do not concern control in itself, as control never was a suggested item in the whole discussion.

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going hypothesis: strategic decisions being collective ones, the actors feel strengthened and

thus express less demand for management data (through IT as through controllers). This

might explain in passing the clear proximity between the Negative and Inter-organisational

items in figure 2. Of course, it is impossible to check this new hypothesis, as all the studied

cases were more or less collective.

Our research process inherits classical limitations generally attributed to qualitative methods.

First, the sample is small and we have no guarantee that it is representative of the studied

phenomenon. Conclusions are fragile as the statistical tests do not guarantee significance with

such reduced classes. But small samples are acceptable (Yin 1994, Ragin 1999) when the

choice of the cases is relevant. Having not chosen the subject of the stories, we basically had

no influence on this.

Second, as we told, the French context is known for presenting some specificity. For instance,

the contrôle de gestion function cannot be assimilated to an international standard and lies

somewhere in-between comptrollers, controllers and management accountants.

Third, even if we tried to avoid any influence on the respondent, our status of management

control teacher was sometimes known by the teller. So he might have introduced some

controlling references just to get an opinion or to satisfy the researcher’s curiosity. However,

it could not explain why they did it in some cases and not in others.

More globally, as we already acknowledged, we have no means to check the accuracy of the

stories. We work on representations and therefore it limits our conclusions in terms of actual

practices.

As often, our limits lead directly to potential continuations of our research. Of course, if

ideally researchers were in situation to observe – with participation or not – strategic

decisions in action, than the conclusions could be richer… But then the sample’s size would

be even smaller…

A more reasonable ambition could consist in the comparison – if not confrontation – of

decision makers’ discourse with other actors’ points of view of the same process.

Management controllers could be questioned, but also consultants, or IT experts…

Conclusions

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Despite its limitations our research brings strong evidence on diverse phenomena:

The role of control and controllers in strategic decision making is significant and

complex, according to top managers. Control appears under diverse aspects and at

diverse stages of the process.

At the contrary, there is no clear trace of SMA tools as they are promoted in

management handbooks.

When the situation involves several entities (inter-organisational) the role of the

controller seems to be absent in top managers’ representations. This tends to confirm

H1 & H2 if it is given that inter-organisational decision processes might be the most

strategic ones.

The propensity of strategic decision makers to act collectively might be an

explanation, if we suppose that inter-organisational strategic stakes are necessarily

collective ones.

Thus we strengthen extant literature which sceptically described SMA. We also confirm the

diversity and complexity of the control function in its relations with top management. Such

statements might at least interest several actors in this area:

IT editors who might find in such studies a better understanding of the way the users

consider, or not, strategic decision making systems.

Teachers, students and scholars who might catch new ideas for a realistic reflexion on

strategic decision making, far beyond traditional mythology.

Managers who could question their own practices and their way to deal with both IT

systems and controllers.

Controllers themselves in their will to contribute fully to the strategic control process

and in their rightful worry about their image.

Exhibit 1

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Story n° 1: The head of an industrial group decided to relocate his Austrian plant in England. The decision was preceded by comparative cost analysis lead by the controlling department. An extant database allows the company to monitor all the variable costs in the diverse business units, and the specific fixed costs occurring in each plant. Once the decision taken, the feasibility of the English project has been studied, with a more qualitative point of view, including security stakes. Finally, the decision had to be justified and the closing costs were computed. AS400

Story n° 2: An associate director of a metallurgy sub-contractor relates how he decided – with the other members of the family – to modify the repayment period of the main customer. The latter demanded to profit from discounts for cash payment. Having a good financial structure, the supplier hesitated, but finally accepted. No calculation neither simulation was made, all the decision-makers knowing the situation. Excel

Story n° 3: Due to financial problems, the US headquarters of a French chemical company envisaged to sell the electric cogeneration division of the firm. As this division represented an important part of the company’s activity, the head of the French subsidy (our narrator) tried to negotiate for status quo. After some individual calculation, he relied on his financial director and controller’s simulations. After one year and a half, the selling hypothesis was rejected. JD Edwards, Excel

Story n° 4: In a huge micro-electronic manufacturing firm, a manager revisited the strategy of his division. Challenged by aggressive pricing policies from competitors, the firm had to face economic trouble on his markets. The tendency seeming long-lasting, some cost cutting initiatives had to be included in the next five years plan. The stake was to rationalize the resource allocation process, with a focus on the most strategic segments. Several collective meetings lead to the deleting of diverse projects. Such a process is recurrent, but does not always result in concrete decisions. Access, Excel, BO

Story n° 5: The general manager of a big – but non listed – industrial firm, decided to give up its historical branch. Even if this decision had no drastic social consequences, it was not easy to take, given the elder family members’ attachment to this activity. The fact that this branch was no more profitable, and represented less and less as part of total turnover, was known by everybody. But the implementation of an ERP allowed the general manager to prove – through diverse simulations, especially highlighting benefits on overheads – the relevance of the decision. Once the conviction was made, the selling campaign was launched, with market studies which allowed the seller to find a buyer. SAP, Excel

Story n° 6:

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In the same company than story n°5, an operational top manager decided to remove the Spanish subsidiary’s autonomy. This choice was based on the observation of customers’ behaviour: the concentration of decision making in car industry leads to the absence of any strategic instance in Spain. If the clients – the car manufacturing plants in Spain – have no autonomy, than the local branch of the supplier needs no autonomy. The relevance of this choice was based on a good intelligence of the market, but also on financial reporting and on our controller’s audit of the subsidiary. SAP

Story n° 7: The CEO of an IT consulting firm decided, with his three associates, to organise the international development of the company. First they identified the need, for several industrial customers, to have access to the firm’s services for their North American divisions. Second, they studied the feasibility of the operation in terms of market, financing, tax systems and manpower availability. Such environmental analyses lead to the choice of Canada for the setting up. The decision process was fed by economic analysis on the diverse countries and their specificities rather than on the firm’s internal figures. Nevertheless, the ERP later revealed efficient for the monitoring of the offshore results. ERP

Story n° 8: In a paper-making company, the general manager concentrated on an external growth opportunity. The aim was to merger with a MBO firm who was seeking for a partner to create a better sized actor on the market. Both firms had extant links, and their activities were complementary. The MBO firm provided detailed data via his counsellor, and this represented the main file for the buyer’s decision makers. But the latter checked – via his marketing and R&D experts – other sources of information: financial databases, market analyses, physical visits… Several simulations were made, especially with Excel. BaaN, Excel, B.O.

Story n° 9: The CEO of a local press group hired a high level executive as a project manager. The aim was to develop a new segment, based on the publishing – on a web site – of all public announcements (calls for tenders…) concerning the district. He considered this as an ideal complement to the historical trade of the firm: the publishing of legal declarations. The information was mostly external, consisting in a permanent watch of the market. The final choice was to launch a web portal, whose notoriety could be fostered by traditional paper journals of the group. Lotus Notes

Story n° 10: In an IT service start-up, the founder and CEO observed lesser than expected results. First, he thought it was linked with a hollow seasonality. When he realised it was a long term trend, he revisited of the firm’s market positioning. The new strategy was based on the conquest of the public sector market, which demanded huge adaptations of the sales force, the pricing policy etc. Several sources of information were used: internal scorecards, informal reporting from salesmen, external data (newsletters, newspapers…), the Carcenac report10. Intranet10 A report to French government that notably announced that state administration would move towards open source IT solutions.

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Story n° 11: The CEO of a diversified manufacturing group made a counter-current decision: the “disimplementation” of an ERP. First, he signed the order form of the solution, influenced by his CFO and CIO. But the implementation revealed critical, especially because of the lack of competences of service providers. Whereas the solution was initially supposed to fit to our specific business context, the consultants seemed unable to make this promise concrete. Thus, the new solution did not replace extant systems, but just consisted in additional – and sometimes redundant – processes. Pressed with cash problems, and relying on controllers’ budget alerts, the CEO convinced one by one the managers to abandon the project. Sage, Excel

Story n° 12: This IT service provider had three different trades: editor, distributor and integrator. The CEO of this listed company considered for years the opportunity to concentrate on one sole segment. The hypothesis was that such a streamlining could help to enhance the firm’s quotation… which was an actual concern for shareholders. After collective reflection, they first decided to sell the edition segment, which generated losses. The top mangers launched controlling and financial studies. The most profitable segment – but also the most risky one – was distribution. It was also given up, and a buyer was found. In the following, an acquisition of another integration company was decided, with the aim of maintaining a critical size on the market, considered as essential by customers. Excel, CRM, Sage

Story n° 13: This common goods manufacturer sustained evenly losses. The CEO focused on scope reduction as a way to rationalise the supply chain and to generate cash through lower inventories. The challenge was to identify the unprofitable products and to protect the profitable ones with high margin and turnover. The decision relied on internal cost and margin calculations, but also on external market analyses trying to anticipate tomorrow’s tendencies. The decision had bad consequences on the P&L, but good ones on cash. SAP, Excel

Story n° 14: The CEO of this automotive family firm is anxious about the evolution of steel prices (which increased around 65% in one year). It creates a dilemma: “should we reflect, or not, this inflation in our pricing policy, given the risk to lose markets?” At the date of the interview, a non decision was made: anticipating a stabilisation of steel prices, the CEO considers that the price bidding gap has not much future. This anticipation was based on market information coming from steel suppliers, professional journals and expert advices. XL, ERP

Story n° 15: The industrial manager of this young engineering company relates a proposal coming from an important costumer. The opportunity was to buy a service based segment of this company. For the moment, the respondent firm already had a service provider status, but only as after-sales maintenance on his own equipment. Such a diversification opportunity was an old idea,

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but while the client’s demand became insistent, procrastinating was no more possible, and the proposal was rejected. The choice was based on diverse data on the products, the company’s image, the customer’s customers and the risks generated by the acceptance of the transaction. The rejection was a collective decision, principally linked with the fact that the appointed services did not fit with the high tech image of the firm. Internet, Outlook

Story n° 16: The CEO of this IT edition start-up decided to create a survey division. The main product of the company was a software solution for network surveys, but the firm was not able to advise its costumers for the design of such surveys. The adjunction of such an activity was a long lasting idea which was accelerated by the opportunity of hiring an expert. Once the person was hired, the question was to know how to integrate this new department in the organisation and in the sales process. The decision maker resorted to budget forecasts and to surveillance of competitors’ behaviours. Excel.

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Exhibit 2 – The ranking of spontaneous occurrences11 Word or item (#) Nombre

d'occurrences Nombre

d'observations#customer #data #market #activity #ERP #produce #firm #cost #importance #commercial #international #first #needs #finance Management #know #work #analysis #service #control #allow#competition #Excel#project#trade

554132322928 27262422212121212121201919181818171717

13161312881281381211111099894101091298

11 We count here only the items which were not suggested by the interviewer. Had we kept suggested items, #decision and #information would have been the two most cited ones, just before #customer.

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