ABSTRACT
For many industrial companies a rising tension between efficiency considerations on the one hand and the promotion of strategic flexibility on the other is visible within the last years. Various studies in different contexts have confirmed that management control can mitigate the tradeoff between efficiency and flexibility to a considerable extent, but no research in this regard was conducted in the field of energy management so far. Based on data of 236 German manufacturing companies this paper empirically examines the impact of energy-related strategic flexibility of firms on the design of their management control system (MCS) and their corresponding energy efficiency. Using structural equation modeling, we examine primary data that captures the energy-related strategic flexibility as well as the design of management control elements and longitudinal secondary data that was used to calculate energy efficiency. The results indicate that the importance of formal as well as informal management controls increases in those firms with a high energy-related strategic flexibility. Furthermore, there is in general a positive relation between the use of formal management controls and energy efficiency, whereas the emphasis companies place on informal management controls does not result in a significant effect on energy efficiency. This study contributes to a general understanding of how organizations balance formal and informal controls in the simultaneous pursuit of efficiency and flexibility.
5 CONCLUSION
5.1 THEORETICAL AND MANAGERIAL IMPLICATIONS
The main research goals of this study were to evaluate whether and how (1) energy-related strategic flexibility influences the use of different types of management controls and (2) whether and how different types of management controls relate to energy efficiency. Our findings contribute to both management accounting and environmental management research by providing first insights into the interplay of strategic flexibility, management control and energy efficiency.
With respect to the first research goal, our results confirmed that energy-related strategic flexibility indeed influences both formal and informal types of controls. As suggested within our hypothesis development, a high degree of energy-related strategic flexibility fosters the implementation of informal controls. Hence, with rising degrees of a firm’s energy-related strategic flexibility, the use of personnel controls like placement, training and job design to increase the likelihood that employees will engage in self-monitoring (Merchant and Van der Stede, 2012) as well as cultural controls that foster the company-specific set of values, beliefs and normative patterns (Flamholtz et al., 1985) increases. This finding is in line with previous of research, suggesting that informal control mechanisms are particularly well suited for organizations that pursuit interfunctional co-operation and adaptation (Abernethy and Lillis, 1995). However, in contrast to our expectations, energy-related strategic flexibility also enhances the implementation of formal controls. Based on findings of previous research, showing that manufacturing firms with a rather high degree of standardization move away from the use of formal controls (Govindarajan, 1988), we suggested that the movement will proceed in favor of the implementation of informal controls. Yet, instead of only implementing mechanisms that induce self-regulation in form of personnel and cultural controls (Ouchi, 1979), our findings suggest that companies striving for energy-related strategic flexibility foster all types of controls. This finding might suggest that a high degree of energy-related strategic flexibility requires both the presence formal and informal regulatory mechanisms to support strategic priorities associated with differentiation, innovativeness and organizational learning (Simons, 1987).
