The impact of the nature of organizational objective on the functionality of an entire management control package

Abstract

The objective of this study is to address a gap in management control literature concerning management control packages in non-profit organizations. More specifically, this study focuses on explaining the less-developed state of management control of non-profit organizations compared to for-profit organizations.

The research question that is used for approaching the topic is as follows: does a for-profit organization whose activities are identical in nature to those of a non-profit organization’s public service production suffer from management control problems like is characteristic of non-profit organizations. The combination of traits in the research question makes it possible to examine whether management control issues of non-profit organizations stem from the nature of activities or the nature of the objective.

The research question is approached is with a case study where a case organization with very specific characteristics is chosen. The case organization is a private for-profit nursing home that produces public nursing services on behalf of a municipality based on a contract. In this arrangement, the private for-profit organization produces a public nursing home service, but it does so as part of its business.

To be able to answer the research question, a literature review is carried out to facilitate successful data gathering and analysis. The literature review consists of three main components; defining relevant concepts, establishing the tools for empirical inquiry and presenting prior literature’s views on management control in non-profit organizations. Then, the theoretical framework is employed to guide in conducting and analyzing interviews with key personnel in the case organization.

As the main observations of the analysis, extensive complementary interdependencies between management control components within the management control package were found, no substitute interdependencies could be identified and each management control component properly fulfills a role in either serving as a core management control component that guides employees towards successful fulfillment of the nursing home’s value proposition or as a supplementary management control component for the former. Overall, to answer the research question, the functionality of the management control package can be deemed high.

There are certain conclusions that can be derived from the observations. Most importantly, the high functionality of the management control package despite the nature of activities suggests the possibility that the management control issues that are common in non-profit organizations aren’t related to the nature of activities but the nature of organizational objective. While the weaknesses of this study prevent strong conclusions to be drawn, the findings nevertheless indicate that it could be fruitful for future studies to delve into the relationship between nature of organizational objectives and functionality of management control packages.