title: Strategic Priorities, Management Control Systems, and Managerial Performance: An Empirical Study
Creators: name: Sands, John Stephen
Publisher: name: Griffith University
Year: 2006
Subjects: subject: Strategic priorities management
subject: balanced scorecard
subject: strategic orientations
subject: managerial performance

description: Literature questioned the accuracy and appropriateness of the description and prediction propositions underlying the elements of Porter's theory of generic competitive strategies. Two common conclusions evolved from these criticisms. Firstly, future strategy research should develop a more accurate and more relevant description of strategic priorities for today's business environment. Secondly, an examination of a range of strategic and organisational variables within a contingency framework may provide more powerful insight into what contributes to an effective competitive strategy. However, the dominating emphasis on accounting controls and accounting information in past management accounting contingency-based research has been criticised. This criticism occurs because the focus of the research is not broad enough to capture modern approaches needed to achieve effective control and to cope with increased competition and market globalisation. For example, evidence suggests that middle management are involved in activities of strategic significance and the new styles of strategic decision making rely on middle management participation beyond the budgetary setting process. Modern management systems, such as the balanced scorecard (BSC), place an emphasis on administrative and personal controls so that the objectives of the chosen strategy can be communicated and reinforced. Therefore, the involvement and psychological empowerment of middle management in the strategic decision process are elements of the control mechanism needed to develop emergent competitive strategies for timely implementation in today's dynamic business environment. This contemporary view sees management control systems (MCS) as a more active set of control elements so that it can provide individual managers with information and power to achieve their goals. Therefore, academic commentators have concluded that future research needs to focus on contemporary dimensions of MCS and behavioural outcomes to maintain the relevance of MCS contingency-based research. Consequently, there were four objectives for this study. The first objective of this research aimed to provide a more accurate description of the dimensions of the differentiation strategy. This has been achieved by adopting competitive methods that prior studies derived from a number of strategy theories (e.g., Miles and Snow [1978], Hofer and Schendel [1978], and Porter [1980]). Competitive methods have been described as the composition of different strategic dimensions that might be used to characterise a particular generic strategy. These more specific descriptions of strategy have been labelled strategic priorities by other researchers. The first aim of the second objective was to establish a more accurate description of organisations' strategic orientations that have greater generalisability than Porter's notion about the mutually exclusive implementation of his broadly described typologies. For the second aim of the second objective, the research aimed to provide a better prediction about an organisation's performance ability compared to Porter's financial performance proposition that requires the selection of a single priority as an organisation's strategic orientation. The results of the confirmatory factor analysis, within a structural equation modelling (SEM) technique, support the description of more specific dimensions of the differentiation strategy. Similarly, the cluster analysis indicates organisations adopt a single strategic priority, no strategic priority, or different combinations of these strategic priorities as their strategic orientations. Furthermore, the ANOVA and post hoc tests results show no significant difference in above-average performance when organisations place an emphasis on one or more of the four strategic priorities. Such results suggest that a more accurate prediction of organisations' performance may be based on one strategic priority or multiple strategic priorities in an organisation's strategic orientation. Additionally, the results are consistent with prior findings that do not support the accuracy of Porter's descriptions or prediction propositions. The third and fourth objectives examine the relationships that require path analysis to identify the direct and indirect effect of variables on relationships examined in this study. The third objective concerns the set of relationships between four strategic priorities and managerial performance. The regression analysis produced two significant positive (Product &amp; Service Quality and Cost Leadership) and one significant negative (Product Innovation) relationship results. The use of the more descriptive dimensions of differentiation strategy provides new evidence that adds to the body of knowledge for a direct relationship between Product &amp; Service Quality and managerial performance. Finally, the fourth objective of this study examined the mediating effects of control elements, middle management involvement and empowerment, on the relationships between each of these specific strategic priorities and managerial performance. To achieve this objective, this research investigated, firstly, the four strategic priorities-involvement relationships and the four strategic priorities-empowerment relationships. Separate relationships between involvement and managerial performance as well as empowerment and managerial performance are examined. Results suggest significant different relationships exist between Product &amp; Service Quality, Marketing/Brand Image, and Product Innovation strategic priorities and involvement as well as between these strategic priorities and empowerment. These significant different relationships results would not be available for researchers who examined differentiation or prospector strategy as a single variable. Furthermore, all relationships between involvement and managerial performance or empowerment dimensions and managerial performance were found to be significant and extend the scope of the findings by prior management accounting studies. Finally, significant or meaningful indirect (mediating) effects for each relationship were calculated using the results of the path analysis. Indirect effect calculations suggest that the mediating effects of middle management involvement as well as their influence and competence (two dimensions of empowerment) depend upon the selected strategic priority. The indirect effects for involvement, influence, and competence intimate they have a mediating effect on the separate relationships between Product &amp; Service Quality, Marketing/Brand Image, and Product Innovation strategic priorities and managerial performance. However, involvement and influence do not have a mediating effect on the Cost Leadership strategic priority-managerial performance relationship. Additionally, the calculations suggest that only middle management's competence mediates the relationship between the Cost Leadership strategic priority and managerial performance. Also, the computations intimate that while autonomy does not mediate the relationship between Product Innovation and Marketing/Brand Image strategic priorities and managerial performance, autonomy does have a negative mediating effect on the Product &amp; Service Quality-managerial performance and Cost Leadership-managerial performance relationships.