Governance and Control of Shared Service Centers ^☆

Some parts of this chapter are derived from the paper of Minnaar and Vosselman (2013) and of the PhD thesis of Minnaar (2014).

Abstract

Purpose

The study aims to add to the knowledge of governance and control aspects of intrafirm relationships by exploring a transaction costs economics perspective (TCE perspective) on governance and management control structure choices related to the development of a shared service center (SSC).

Design/methodology/approach

The notion of governance and control in SSC organizations is explored and a TCE model is developed to analyze management control structure choices for SSC governance. The nature of internal transactions is related to the dimensions of transactions. Then an example case study is used to illustrate the application of the theoretical model.

Findings

The theoretical analysis broadens existing frameworks of management control structures by particularly pointing to the possibility of including governance structures for internal transactions and exit threats (connected to a market mechanism) in the management control structure of an organization. Confrontation with the case example illustrates that the possibility of an exit threat was not explicitly considered by top management (“the designer” of management control). Although the TCE model may be a useful tool for analysis purposes, it has little explanatory power in this particular case. Organizational change processes toward SSCs are complex and can only partly be examined with conventional economics-based approaches such as TCE.

Research limitations/implications

Governance and control of SSCs is conceptually theorized, using an instrumental economics approach. The case study is not generalizable but illustrates the use of the model in a particular situation. To understand governance and control change within SSC organizations, more longitudinal case studies are needed.

Practical implications

A TCE approach to governance and control choices regarding SSCs might provide practitioners with insights into the efficiency of specific management control structures.

Originality/value

This chapter contributes to the extant knowledge by both exploring and challenging a TCE perspective on SSC-related changes in management control.

Citation

Minnaar, R. (2014), "Governance and Control of Shared Service Centers ^☆

Some parts of this chapter are derived from the paper of Minnaar and Vosselman (2013) and of the PhD thesis of Minnaar (2014).

", Shared Services as a New Organizational Form (Advanced Series in Management, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 85-103. https://doi.org/10.1108/S1877-636120140000013005