Document Type

Article

Publication Date

1-1-2012

Abstract

Considerable experimentation in organizational form has focused executive attention on the design and use of management control systems (MCS) to align environmental context and corporate strategy with a variety of organizational structures. The paper explores how two multibusiness health care firms with a similar corporate strategy–but with different structures, centralized versus decentralized–design and use MCS. Strategy based contingency model is applied to examine the interrelationships among five constructs–environment, corporate strategy, organizational structure, MCS and performance. Results demonstrate the design and use of MCS are contingent on the extent of centralization between the corporate office and business units. In the decentralized firm, MCS consist of different mission statements, one discount rate, reports/measure to monitor and to set standards and a broad array of non-financial measures to improve competitive positioning of the different business units. In contrast, in the centralized firm MCS consists of one common mission statement, different discount rates and reports/measures to support efficient operations and to share overhead resources and capabilities across business units. Findings also suggest the role of structure and MCS are gaining increasing importance as business models of diversified health care firms are getting more complex by combining for-profit and nonprofit businesses.

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Business Commons

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