A socio‐economic view on management control

Abstract

Purpose

The purpose of this paper is to introduce a framework of management control that accommodates phenomena found in literature, like the importance of social factors for coordinating behavior, rule‐following behavior and the evolutionary nature of control. Phenomena that the dominant economic view, based on self‐interested actors and financial incentives, cannot easily absorb.

Design/methodology/approach

The framework characterizes control as the coordination of behavior in organizations. It is based on two‐stage rationality in which rule‐following behavior gives meaning to self‐interest, and in doing so, coordinates behavior.

Findings

Management control of two‐stage rational behavior involves managing the various elements of the framework in combination. The evolution of the coordinating rules in an organization will be partly autonomous and partly formed within the organization. Therefore, management control entails influencing the development path of the organization. Although it is concerned with the formation of controls in an organization, it is not exclusively concerned with the design of controls.

Practical implications

The framework provides broader opportunities for managing an organization than the theory based on simple rational choice.

Social implications

In this socio‐economic approach, management will not consider controlling the “economic man” to be its core activity; instead, management will be coordinating the behavior of authentic human beings.

Originality/value

These aspects of management remain undervalued in mainstream literature on management control. The non‐mainstream literature does pay attention to these aspects; however, they are seldom integrated in one theoretical structure that is based explicitly on a broad conception of human behavior. The socio‐economic view can offer valuable insight into management and organization.

Citation

Verstegen, B.H.J. (2011), "A socio‐economic view on management control", International Journal of Social Economics, Vol. 38 No. 2, pp. 114-127. https://doi.org/10.1108/03068291111091990