Heard It through the Grapevine: Conceptualizing Informal Control through the Lens of Social Network Theory

Abstract

The investigation of management control has been a continuing theme in management accounting research over the past four decades. Although studies in this area collectively constitute a considerable body of knowledge, the vast majority of research attention has been directed to the design or use associated with formal management control systems (MCS). However, although often recognized as fundamentally inherent within organizational control environments, few studies have explicitly investigated informal control, despite its pervasiveness and the effects repeatedly attributed to it in the overall organizational control package. Predicated on the view that this knowledge gap may be largely explainable by the difficulties associated with conceptualizing and, therefore, operationalizing informal control, the purpose of this study is to advance the use of social network theory as a means to provide a deeper understanding about how informal control operates within organizations, and as an aid in developing more fully specified control models. JEL Classifications: M41.

Top managers’ formal and informal control practices in product innovation processes

“…In contrast, studying a range of controls enable an understanding of how different controls supplement and complement each other and how contrasting controls may create beneficial dynamic tensions that promote innovation (Curtis and Sweeney, 2017; Henri, 2006; Moll, 2015; Mundy, 2010; van der Kolk et al , 2020). Many recent studies have thus started to incorporate a broad set of controls, going beyond formal accounting-based controls (Davila et al , 2009; Chenhall and Moers, 2015) to include informal and “softer” forms of controls (Akroyd et al , 2019; Akroyd and Kober, 2020; Evans and Tucker, 2015; Goebel and Weissenberger, 2017; Grunwald-Delitz et al , 2019; Tucker, 2019).…”

“…Through informal communication, interaction and trust, informal controls can compensate formal controls to provide appropriate conditions for innovation (Sandelin, 2008). From this view, informal controls can be “an intrinsic component of an organization’s overall control package” (Tucker, 2019, p. 221), which can sometimes play an enabling role in ill-coordinated formal systems (Otley, 2016). Nevertheless, the understanding of how informal controls operate and combine with formal controls remains underdeveloped (Tucker, 2019; Sandelin, 2008).…”

“…From this view, informal controls can be “an intrinsic component of an organization’s overall control package” (Tucker, 2019, p. 221), which can sometimes play an enabling role in ill-coordinated formal systems (Otley, 2016). Nevertheless, the understanding of how informal controls operate and combine with formal controls remains underdeveloped (Tucker, 2019; Sandelin, 2008). To our knowledge, few studies have explicitly investigated informal controls in an innovation setting and there are even fewer studies on both formal and informal control practices at the top management level.…”

Management Control for Microfinance: An Examination of the Belief System of A Malaysian Microfinance Provider

“…In contrast to formal systems, which seek to control behaviour through written procedures and policies or codes of conduct, informal control systems comprise shared values and corporate culture, and are not based on measureable objectives or explicit measures (Evans & Tucker, 2015;Norris & O'Dwyer, 2004;Riccaboni & Leone, 2010). Informal control systems are regarded as a form of social control because they consist of less well-defined practices and embody the connections and communications between organisational members (Tucker, 2011). Simons' (1995) levers of control (LOC) framework views management control as the combination of four control systems; it has been argued to be relevant to balancing the trade-offs faced by organisations such as between short-term and long-term goals, the needs of the different constituents and the different objectives/pressures faced by organisations.…”

“…Such action could lead to focusing on financial performance instead of social performance, which might break the link between the objectives of microfinancing and the way the process is managed internally. To resolve this tension, several authors have argued that MFIs should use management control practices that could assist MFIs to balance the demands of their social and financial goals, while at the same time ensuring a coherent translation of the organisation's strategy and the achievement of both its economic and social goals (Epstein & Yuthas, 2010;2011).…”