3
A configurational theory of control
LAURA B. CARDINAL
University of Houston
SIM B SITKIN
Duke University
CHRISP. LONG
Georgetown University
Organization theory scholars have long acknowledged that control
processes are integral to the way in which organizations function
(Blau and Scott, 1962; Etzioni, 1965; Tannenbaum, 1962). While
control theory research spans many decades and draws on several rich
traditions (Dunbar and Statler, Chapter 2), several theoretical problems have kept it from generating reasonably consistent and interpretable empirical findings and from reaching consensus concerning the
nature of key relationships.
As new forms of organizational relations (networks, alliances, mass
customization, supply chains, consortia, contract employees, telecommuting, virtual teams, etc.) emerged in the late twentieth century,
traditional organizational control theories were viewed as less and
less relevant by organizational scholars. As a result, attention to
organizational control research waned, with the exception of critical
theorists (e.g., Adler, 2007; Tsoukas, 2007) and accounting researchers (e.g., Davilia and Foster, 2007; Whitley, 1999). For example,
despite the importance of the topic and the pervasiveness of the
control phenomenon in organizations, organizational control research
has not been sufficiently cumulative. The control literature is rich, but
deceptive.
Although most organizational scholars might be shocked by our
assertion, we observe that there is very little empirical work on control
in the organizational literature relative to other classic and fundamental organizational phenomena (e.g., design-effectiveness, planningperformance, diversification-performance relationships). From a
distance, it may appear as though there is a great deal of empirical
work and that there is broad support for the few dominant control
theories (e.g., Merchant, 1985; Ouchi 1977, 1979). However, the
51
52
L. B. Cardinal, S. B Sitkin, and C. P. Long
empirical work within the managerial control tradition has, with few
exceptions, only considered a few elements of control at a time.
A closer examination makes clear that constructs often have not been
tested empirically and, when they have been studied, they have not
been operationalized in ways that build a cumulative base of knowledge. It is telling that it would be impossible to conduct a metaanalysis on control research, in striking contrast with other organizational areas of study with similarly rich traditions. As we sought to
understand the origins, attributes, and evolution of control we came
to more fully appreciate Oliver's observation that "The study of
organizational control has a long history in administrative science
and yet the need to examine the processes and implications of this
phenomenon has never been greater" (Oliver, 1998: letter from the
editor).
Although there has been a very recent resurgence of interest in
control theory (Cardinal et al., 2004; Chen et al., 2009; Kirsch
et al., 2010), before we can begin to understand the role that control
serves in nascent organizations or complex economic and social
organizational relations, a more consistent and robust theory of control is called for that builds on but fundamentally alters some key
precepts from more traditional control research. We came to this
deeper appreciation of where control theorists have been and where
they need to go because we were unable to apply existing control
theories regarding the use of both singular and multiple controls
(e.g., Ouchi, 1977, 1979; Long et al., 2002; Simons, 1995) to theorize
about the full array of controls. In response, we offer a synthesis of
diverse, yet complementary, streams of traditional control research
into a theoretical framework that describes how types of control
mechanisms (e.g., the use of rules, norms, direct supervision or monitoring) aimed at particular control targets (e.g., input, behavior,
output) are applied within particular types of control systems (e.g.,
market, clan, bureaucracy) over time.
We identify four problems (lack of conceptual consensus, fragmentation, singularity, and lack of attention to control development) that
have made it difficult to consistently and precisely operationalize
control and to build a cumulative stream of research. In the next
sections, we address each of the four problems. We address the problem
of lack of conceptual consensus by precisely defining key concepts
A configurational theory of control
53
and terms used throughout the literature. We also systematically
apply these concepts throughout our analysis, thus demonstrating
that the concepts can be consistently applied and that they are
theoretically distinguishable. By clarifying the core control terms
and introducing precision to the operationalization of control-related
constructs, we are able to demonstrate that the fragmentation of the
literature is artificial and that key control constructs can be synthesized. Further, we are able to reflect the complexity of the control
phenomenon' and also show how this complexity can be systematically incorporated into our theoretical and empirical research in ways
that alter our conclusions. Finally, we are able to illustrate the value
of understanding control from a developmental viewpoint. This not
only provides another lens to understand the complexity of control,
but it also can help us to begin to comprehend how organizational
control legacies might be created over time and across different
development sequences (Cardinal et al., 2004). It is our hope that
the frameworks we provide in this chapter will be helpful for clarifying and explaining the composition of control in organizations in
ways that will prove useful in the further development of research on
this topic.
Control theory
Many definitions and constructs and theoretical approaches have
been used to describe organizational control. Traditional research
describes "control" as one of the four primary functions of management (the others are organizing, planning, and coordinating) (Fayol,
1949). Historically, definitions have focused on the manager as the
primary developer and implementer of organizational controls. Theories have posited various ways by which organizational control
might be achieved, including: leadership and the development of
formal policies (Barnard, 1938; Selznick, 1957), the application of
rational-legal authority and rules (Weber, 1946), activation of cultural norms and rituals (Trice and Beyer, 1984, 1993), adherence to
incentive systems (Dale, 1958; Whyte, 1955), reliance on direct
supervision (Mintzberg, 1979), or through the design of work environments such as assembly lines (Richardson and Walker, 1948;
Taylor, 1911).
54
L.B. Cardinal, S. B Sitkin, and C. P. Long
Problems with control research in the management
science tradition
The control literature suffers from four problems which have contributed to the decline in attention to control theory: lack of conceptual
consensus, fragmentation, singularity, and lack of attention to control
development. We contend that the four problems we identify next
have made it difficult to conduct empirical work on organizational
control in a cumulative manner.
Lack of conceptual consensus. In spite of its long history and strong
traditions, control research has been plagued by a lack of conceptual
consensus. The most glaring example of this is that work on organizational control suffers from a dual problem in the use of terms and
concepts. Specifically, we uncovered two consistent problems: (1) false
differentiation - the use of different terms to refer to identical concepts
and (2) false consensus - the use of identical terms to refer to different
concepts. One critical effect of these inconsistencies has been that,
previously, control researchers have not offered a coherent and cumulative body of work:
To illustrate how this problem manifests itself in the control literature,
we describe one instance, using the concept of the "clan" (Ouchi, 1979,
1980, 1981). Ouchi describes the clan as a system of control mechanisms that rely upon the influence of "a deep level of common agreement
between members on what constitutes proper behavior, and it requires a
high level of commitment on the part of each individual to those socially
prescribed behaviors" (Ouchi, 1979: 838). First, this illustrates the
false differentiation problem because theorists have used different
terms to describe concepts that are similar to the clan. For example, in
describing essentially identical concepts, Merchant (1985), Lebas and
Weigenstein (1986), and Birnberg and Snodgrass (1988) used the term
"cultural control," Dermer (1988) used the term "consensual control,"
and Makhija and Ganesh (1997) used "rituals, traditions, and ceremonies," and even Ouchi used the terms "ritual control" (Ouchi,
1977) and "clan mechanisms" (Ouchi, 1979). Still others have used
the terms "input control" (Snell, 1992), "social control," and "people
control" (Eisenhardt, 1985). Second, this illustrates the false consensus
problem, in that researchers have used the term "clan control" to
describe a variety of control concepts. In some cases it has been described
as a specific control mechanisms, e.g., informal control modes (Ouchi,
A configurational theory of control
55
1979, 1980), in other instances as a configuration of control mechanisms
(i.e., organizational control system) (Jaworski et al., 1993; Roth et al.,
1994), and in still other writings as a singular control mechanism, e.g.,
a ritual (Cardinal, 2001; Eisenhardt, 1985; Kirsch, 1996, 1997; Ouchi,
1979). Clan control is also often treated as one anchor on the formality-informality continuum (Makhija and Ganesh, 1997; Martinez and
Jarillo, 1989; Ouchi, 1979). Though this problem may appear inconsequential or trivial, researchers cannot move theoretical and empirical
research forward without a clear consensus on le~els of analysis (Glick,
1985), and we attribute the dearth of empirical work at least in part
to control researchers' inability or unwillingness to establish a consensus on how to label and measure key constructs.
Fragmentation. In spite of its long history and strong traditions, the
control literature currently consists of a fragmented and largely independent collection of typologies and concepts. As a result, control
research has not coalesced around common frameworks that generate
cumulative, systematic research on control issues. For example,
researchers who study individual control mechanisms typically study
only formal control (Cardinal, 2001; Kirsch, 1996; Sitkin, 1995; Snell,
1992), and generally they ignore the overall systems of multiple controls within which those mechanisms are operationalized. In addition,
research on organizational control systems work has remained very
general, has not examined the specific interrelated components
of these systems, and has not moved much beyond Ouchi's (1977,
1979, 1980) original conceptualizations toward empirical examinations of related issues. (Note - exceptions include Cardinal et al.
[2004], Jaeger and Baliga [1985], Jaworski [1988], Jaworski et al.
[1993], Long et al. [2002], and Sitkin and George [2005]).
Singulari"ty. Because organizations are multi-faceted, control issues
are also multi-faceted - but research to date does not reflect this
complexity. Individual studies and theories of control also have been
too singular in their conceptualizations and empirical focus. Historically, control theory has focused on choosing one type of control over
another (e.g., market versus clan or behavior versus output). Part of
this problem can be attributed to ,the prescriptive nature of many
existing control theories (Sitkin et al., 1994 ). The contingent nature
of the early control work resulted in control research taking on a
prescriptive "either/or" nature rather than a multi-faceted nature.
Thus, the critical issues for advancing control theory concern how to
56
L. B. Cardinal, S. B Sitkin, and C. P. Long
balance and integrate the various facets over time rather than focusing
on picking one type of control (Cardinal, 2001; Cardinal et al., 2004;
Sutcliffe et al., 2000).
Lack of attention to control development. Van de Ven and Poole
(1995: 511) point to the value of theories that "provide stronger and
broader explanatory power of organizational change and development processes." In contrast to what Van de Ven and Poole advocate,
traditional views of control were developed to describe a relatively
stable organizational world in which task requirements and organizational boundaries were more clearly defined and economic and social
relationships were less dynamic (Whitley, 1999). Yet despite the widespread recognition that organizations have been changing at an
increasingly dramatic and unrelenting pace, control researchers have
not effectively responded to these developments by incorporating
more dynamic approaches. This is unfortunate because, by definition,
developmental theories are critical to understanding the emergence,
adoption, and adaptation of organizational control in both founding
and mature firms (Van de Ven and Huber, 1990; Van de Ven et al.,
1984). Thus, it is important for control researchers to generate new
insights on how to sequence and balance multiple facets of control and
to extend control theory to reflect more fully the emergence and the
dynamism of organizations and their control requirements (Cardinal
et al., 2004; Long and Sitkin, 2006).
Clarifying control terms and concepts
In an effort to systematically address the current problems with control
theory, we begin by describing the control concepts that we will apply to
create an integrative, configurational perspective on organizational
control. To address the current lack of conceptual consensus in the control
literature, we present definitions of key control-related terms and
concepts: organizational control, formal and informal control mechanisms, control systems, and control targets. We focus specifically on
these concepts because they collectively represent the core elements of
traditional control research and comprise the basic building blocks of
control theory.
Organizational control. Consistent with the management science
tradition, control is defined as any process whereby managers direct
attention, motivate, and encourage organizational members to act in
A configurational theory of control
57
ways desirable to achieving the organization's objectives (Jaeger and
Baliga, 1985; Merchant, 1988; Ouchi, 1977, 1979; Snell, 1992). 1
Theories of organizational control developed within this tradition
describe how managers measure and monitor the work of organizational actors by comparing their performance against established
standards and providing rewards or sanctions based on these evaluations. Key organizational control concepts utilized within the management science tradition include: control mechanisms, formal
and informal controls, control systems, and co.ntrol targets. Each is
discussed next.
Formal and informal control mechanisms. Control mechanisms
describe the individual, molecular units of organizational control
(e.g., standards, policies, norms) that are applied in control processes.
Traditionally, researchers have suggested that control mechanisms are
either formal or informal based on their position along a single "formality" continuum (Anthony, 1952; Barnard, 1938; Blau and Scott,
1962; Makhija and Ganesh, 1997; Merchant, 1985). However,
control researchers (e.g., Cardinal et al., 2004; Long et al., 2002;
Roth et al., 1994; Sitkin and George, 2005) have recently suggested
that formal and informal represent distinct dimensions and that individual control mechanisms can exhibit both formal or informal attributes.
Formal control mechanisms include a range of officially sanctioned
(and usually codified) institutional mechanisms such as written rules
and procedural directives (Sitkin, 1995; Sitkin and Bies, 1994). These
could include a union job description or formal job specifications.
IBM's famous written formal, organization-wide dress code (e.g.,
a blue suit and white shirt for men) represented a formal control
mechanism.
Informal control mechanisms include values, norms, and beliefs
that guide employees' actions and behaviors. For example, software
companies with no formal dress code may exhibit norms that strongly
discourage employees from wearing shirts and ties and encourage
workers to attire themselves in T-shirts and sandals (Kirsch and
Choudhury, Chapter 10).
Control systems. Organizational control systems are configurations
of multiple formal and informal control mechanisms. They are distinguished primarily by the relative emphasis that managers place on the
specific combinations of formal and/or informal control mechanisms
of which they are comprised (Jaworski et al., 1993; Roth et al., 1994).
58
L. B. Cardinal, S. B Sitkin, and C. P. Long
Three types of organizational control systems dominate the literature:
market, bureaucratic, and clan (e.g., Ouchi, 1977, 1979; Williamson,
1975). In market control systems managers primarily focus on evaluating transaction outcomes (i.e., prices), rather than how well subordinates adhere to organizational rules or norms (Ouchi, 1979;
Williamson, 1975). Internal market control systems differ from the pure
external market systems that transaction cost economists suggest involve
no managers and no monitoring. Instead, in intra-organizational
market control systems managers draw upon market-style pricing
mechanisms, such as "intra-company transfer prices" (Ouchi and
Price, 1978: 63 ), commission-based incentives, and results-based performance programs to align the motivations and actions of employees
with organizational goals. In contrast, bureaucratic control systems
differ from internal market control systems by emphasizing the
specification, monitoring, and enforcement of rules (Ouchi and Price,
1978) and primarily apply formal control mechanisms, such as rules
and regulations, specialized jobs, and hierarchies (Le bas and Weigenstein,
1986; Weber, 1946).
Although most organizations exhibit discernable levels of formal
control (Roth et al., 1994 ), managers within clan control systems
place relatively greater emphasis on informal control mechanisms
(Ouchi, 1979). Within these clan control systems, managers use traditions and beliefs to motivate members to align their values with those
of the collectives with which they are affiliated (Roth et al., 1994;
Sitkin and George, 2005). Finally, building from the increasing recognition of formal and informal as independent control dimensions
(Cardinal et al., 2004; Jaworski et al., 1993; Roth et al., 1994;
Sitkin and George, 2005), researchers have increasingly investigated
integrative control systems in which managers apply moderate to high
levels of both formal and informal control mechanisms (Cardinal et al.,
2004; Jaworski et al., 1993; Lebas and Weigenstein, 1986; Roth et al.,
1994; Simons, 1995). See Table 3.1 for a comparison of the four
control systems.
Control targets. Researchers have conceptualized control targets as
specific elements of organizational transformation processes (i.e.,
inputs, behaviors, or outputs) to which control mechanisms are
intended to be applied. While some aspects of control mechanisms
may be applicable across targets (e.g., whether the control is formal or
informal), other aspects of the control mechanisms are specific to a
A configurational theory of control
59
'fable 3.1 Distinguishing control configurations by reliance on formal
and informal controls
Reliance on formal controls
Reliance on
informal
controls
LOW
HIGH
Clan
configuration
Integrative
configuration
Market
configuration
Bureaucratic
configuration
type of target (e.g., input controls might be aimed at individual skills or
credentials, whereas behavioral controls would focus on specific actions
and output controls would focus on a final product). By directing control
mechanisms toward these targets, managers attempt to align the goals
and risk preferences of their subordinates with those of the organization
(Cardinal, 2001; Eisenhardt, 1985; Kirsch, 1996; Merchant, 1985;
Snell, 1992). Managers select input targets ("input control") to direct
how material and human resource elements of their production processes
are qualified, chosen, and prepared. For' example, organizations manage
human inputs through training and socialization to regulate the
knowledge, skills, abilities, values, and motives of employees (Arvey,
1979; Van Maanen and Schein, 1979; Wanous, 1980). Similarly, organizations manage material inputs by qualifying vendors, equipment, or
raw materials. Managers choose behavior targets (referred to as "behavior control" or "process control")- such as process rules and behavioral
norms - when they want to ensure that individuals perform actions
in a specific manner. Finally, managers employ output targets ("output
control") - such as profits, customer satisfaction levels, and production
volumes and schedules - to align output quantity/quality with specific
production standards (Mintzberg, 1979; Ouchi, 1977, 1979).
Developing a configurational approach
to organizational control
Having addressed the first of four problems in the control literature
by clarifying key terms and concepts, we now move on to address
the fragmentation and singularity problems we cited previously by
60
L.B. Cardinal, S. B Sitkin, and C. P. Long
introducing our configurational perspective on organizational control.
In developing this perspective, we go beyond past work that has
looked only at single targets or mechanisms of control in isolation
(Cardinal, 2001; Kirsch, 1996; Snell, 1992) or has operationalized
control systems in very general ways (Ouchi, 1979). Our control
configurations advance control research by clarifying relationships
among control systems, specific control mechanisms, and control
targets and then specifying the role that each concept plays within a
particular configuration of control elements.
In developing our perspective, we first discuss the advantages and
the limitations of typologies and taxonomies in organizational control
research. We then describe how our configurational theory of organizational control integrates various elements of control in ways that
facilitate more systematic and accurate investigations of control development and implementation. Thereafter, we present four control configurations and discuss relationships between and among their
component parts.
Typologies" taxonomies" and configurations
Configurations focus on the systemic nature of phenomena, describing a common alignment of elements within and across a set of
overarching dimensions (Galbraith and Kazanjian, 1986; Miller,
1986, 1987). Configurational models can be conceptually driven or
empirically driven, such as those presented by Miles and Snow
(1978) and Miller and Friesen (1984). While the value of taxonomies
relative to typologies is debated, Meyer, Tsui, and Hinings (1993)
suggest that both make valuable contributions, and in many ways,
they are complementary as they create organizing structures. The
benefit of developing configurational models is that they serve as
points of integration for established lines of literature by "consolidating past gains" and "synthesizing broad patterns" (Meyer et al.,
1993: 1,175) of observations. For example, Miller (1986) developed
a configurational model integrating classic research on strategy
and structure. The three primary dimensions of his configuration
model were strategy, structure, and the environment. Within each
primary dimension (e.g., structure), Miller identified relevant subdimensions, such as bureaucratization and centralization of power.
A configurational theory of control
61
Doty and Glick (1994) also highlight a dual role of configurations in
developing theory. Both contributions stem from the perspective of
configurations as ideal types. The first contribution is that of midrange
theory, or an explanation of the internal consistency within ideal
types. This involves developing an understanding of how and why
the elements interrelate with one another (Doty and Glick, 1994;
Miller, 1986). Second, configuration models typically posit an effect
of the fit between ideal types and actual organizations on organizational performance, which Doty and Glick (1994) refer to as "grand
theory."
Even though it is generally recognized that organizations do not
use controls in isolation, most research has been focused on one or
two individual elements of control (e.g., only a few input control
mechanisms or only formal control mechanisms). Despite calls for
synthesis and testing of control theory ideas, prior work has not
made the various linkages that allow for a synthesized view. To
begin to address this issue, we advocate that organizational control
is best depicted as configurational, a "multidimensional constellation of conceptually distinct characteristics that commonly occur
together" (Meyer et al., 1993: 1,175). Although both typologies
and taxonomies are considered types of configurations, implied in
the conventional wisdom is that a true configurational approach is a
synthesis of the best of both. Typologies are considered conceptual
frameworks (McKelvey, 1982), but they have often been criticized
for not being testable. In contrast, taxonomies are empirically
driven, but have been considered atheoretical. In this chapter, we
use the terms configuration and typology (we do not refer to taxonomies) in precisely this way; a typology is a conceptual framework that is difficult to test, and a configuration describes a concept
that is both theory-driven and empirically testable. Configurational
theorists delineate two key principles to classifying configurations coherence and holism (Meyer et al., 1993; Miller and Friesen, 1984).
First, the elements in the configuration must coalesce in understandable ways to create overall coherence. Second, the patterning of the
elements (rather than the elements individually) must be understood
in terms of a holistic form. We propose that existing control theory
offers the basic building blocks to develop a configurational model
of control.
62
L. B. Cardinal, S. B Sitkin, and C. P. Long
Toward a more coherent and comprehensive theory
of organizational control
We wish to draw from several, previously independent approaches to
studying control to offer a less simplistic, more integrative notion of
how control systems are actually configured in practice. Because prior
research had not simultaneously examined control mechanisms,
systems, and targets, we offer a framework that allows for more
complex configurations of the distinct facets of control that could
better capture and explain the actual use of controls. 2
Researchers have long portrayed control systems as one of three
primary types of governance systems: market, clan, and bureaucracy
(Lebas and Weigenstein, 1986; Ouchi, 1977, 1979). Going beyond
this three-type approach, Ouchi (1979, 1980) alludes to the blending
of all three control systems into one system, and Anthony (1952: 47)
foreshadowed later work on the effectiveness of integrative systems:
"Management control is most effective when the formal and informal
techniques are skillfully blended." Subsequently, the notion of the
integrative control system was further developed (i.e., Lebas and
Weigenstein, 1986; Roth et al., 1994; Sitkin and George, 2005).
Our observations regarding formal and informal control mechanisms and control targets suggest that control researchers could fruitfully utilize a broader perspective that moves beyond the singular
perspectives of control typical of past work. Several versions of the
singularity problem in control research could benefit from such a
theoretical and empirical shift. Researchers (e.g., Makhija and
Ganesh, 1997; Merchant, 1988) typically treat control as formal or
informal (i.e., as categorical or as end points along a single continuum), rather than acknowledging and theorizing about both formal
and informal controls as co-existing in a delicately balanced and
dynamic configuration in organizations (Roth et al., 1994; Sitkin
and George, 2005; Sutcliffe et al., 2000). Anthony (1952) highlights
the importance of informal control mechanisms and points out that it
is easy to overemphasize formal controls. The problem identified by
Anthony is illustrated by Jaworski (1988) and Merchant (1988).
While Jaworski's (1988) theory suggests that control targets can only
be formal, Merchant goes further and questions whether informality
should be used as a core theoretical element in our theories and states,
"Managers do not design informal systems" (Merchant, 1988: 42).
A configurational theory of control
63
'fable 3.2 Distinguishing control configurations by additional details
concerning control mechanisms, control targets, and control systems
Reliance on formal controls
LOW
HIGH
Input
Behavior
Output
Clan system
Formal Informal
--Low
High
Low
High
Low
High
Input
Behavior
Output
Integrative system
Formal Informal
High
High
High
High
High
Hig~
Input
Behavior
Output
Market system
Formal Informal
--Low
Low
Low
Low
High
High
Bureaucratic system
Formal
Informal
Input
High
Low
Behavior High
Low
Output
High
Low
rJJ
0
~0
u
~
s
0'""
]
~
0........
~
d
0
Q)
u
;
~
~
~
0
~
However, researchers who have categorically rejected the notion that
informal control mechanisms can be explicitly designed (Jaworski,
1988; Merchant, 1988) are challenged by Cardinal et al. in a recent
study (2004). They found that firm leaders can explicitly design both
formal and informal controls and, at least some of the time, these
authors found those "designed" controls to be rather effective.
In Table 3.2, we propose a control configuration approach that
integrates, refines, and extends previous approaches to organizational
control.
The three primary dimensions for our configurational model
include control systems, control mechanisms, and control targets.
The first dimension in the configuration is derived from Ouchi's
typology. However, since his approach is a typology, he does not
outline the sub-elements across each type (i.e., market, hierarchy,
clan). Instead, the types are treated as mutually exclusive. Researchers
who have focused on control systems (e.g., Ouchi, 1977, 1979; Roth
et al., 1994; Simons, 1995) have not explicitly and systematically
linked specific control mechanisms and control targets into control
system conceptualizations and operationalizations.
Table 3.3 describes the elements from existing control research that
we integrate to create a more theoretically grounded and empirical
L. B. Cardinal, S. B Sitkin, and C. P. Long
64
Table 3.3 Comparing control systems and control targets
Categories
Description
Control systems
Control targets
• Market
• Bureaucratic
• Clan
• Integrative
Controls systems are
configurations of formal
and informal control
mechanisms. Control
systems are classified
according to the
predominant control
mechanisms used.
Agency theory
• Input
• Behavior
• Output
Controls mechanisms are
classified according to the
transformation processes
they target.
Organizational theory
Underlying
theoretical
perspective
Cardinal (2001)
Illustrative
Jaworski et al. (1993)
Lebas and Weigenstein (1986) Eisenhardt (1985)
authors
Kirsch (1996, 1997)
Ouchi (1979, 1980)
Roth et al. (1994)
Merchant (1985)
Ouchi (1977, 1979)
Snell (1992)
configurational approach. The second and third dimensions for our
configurational model include the formality of the control mechanisms (the relevant subdimensions are formal and informal) and the
targets of control (the relevant subdimensions are input, behavior, and
output). The most extensive body of empirical work on organizational
control has focused only on the application of formal input, formal
behavior, and formal output control mechanisms (Cardinal, 2001;
Kirsch, 1996; Long et al., 2002; Merchant, 1985; Snell, 1992), while
ignoring informal control mechanisms and how specific control mechanisms are configured into control systems.
Table 3.2 organizes the four types of control systems with their
corresponding configurations of the control mechanisms and targets
associated with each system to form a complete configuration. The
A configurational theory of control
65
four types of control configurations are: market, bureaucratic, clan,
and integrative. Within each control configuration, control mechanisms were classified according to whether they were formal or informal and whether the control mechanisms were applied to inputs,
behaviors, or output targets. The single control mechanisms are represented in our configuration based on the relative emphasis on six
control mechanisms: formal input, formal behavior, formal output,
informal input, informal behavior, or informal ~utput control.
Market configuration. The "market control system" has been
described in the literature as exhibiting low levels of both formal
and informal control (e.g., Ouchi, 1979; Wilkins and Ouchi, 1983;
Williamson, 1975). We predict in a market configuration that high
levels of both formal and informal output control would be exhibited.
Free market control mechanisms described by Williamson (1975) and
Ouchi (1979) would be expected to take the form of output controls
(e.g., 100 percent commission).
A striking and a potentially valuable aspect of our framework is that
even though this departure from the literature on market control
seemed like a very sensible way to depict a market system, market
systems were not typically or explicitly described in the control literature in this way before.
Bureaucratic configuration. Though Ouchi (1980) and Ouchi and
Price (1978) describe pure markets as having no rules, rules are the
fundamental mechanism for control in a bureaucracy. For bureaucratic control rules exist for employees on how to behave, how and
when work will be completed, and what quality and quantity of
outputs should be produced. Further, managers monitor activities,
outputs, skills, and training standards for employees, which can be
related to their retaining their employment. Our conception of the
bureaucratic control configuration fits quite neatly with the descriptions of Ouchi (1977, 1979, 1980, 1981) and Roth et al. (1994). That
is, bureaucratic control is high on all types of formal control and low
on all types of informal control.
Clan configuration. Most work on clans (e.g., Jaeger and Baliga,
1985; Ouchi and Price, 1978) depicts clans as near-pure informal
control settings. In fact, much of the work on informal, clan-like
control has stressed that low levels of formality are an essential feature
of the clan configuration (e.g., Jaeger and Baliga, 1985; Makhija and
Ganesh, 1997; Ouchi and Price, 1978). However, observations by
66
L. B. Cardinal, S. B Sitkin, and C. P. Long
Roth et al. (1994) and Sitkin and George (2005) that all formal
organizations are more formal than has sometimes been recognized,
suggest that it is highly unlikely to find a uniformly low level of formal
control. Thus, we would expect to see some use of formal control,
even in clan configurations.
Integrative configuration. In contrast with the historical treatment
of bureaucratic and clan control systems as opposite ends of the
formal-informal continuum, researchers have begun to treat formal
and informal control as independent constructs (Cardinal et al., 2004;
Jaworski et al., 1993; Roth et al., 1994). This simultaneous examination of both formal and informal controls creates a fourth, less wellunderstood system: the integrative system. Integrative control systems
utilize high levels of both formal and informal control mechanisms
(Jaworski, 1988; Jaworski et al., 1993; Lebas and Weigenstein, 1986;
Roth et al., 1994 ).
Driving the configurational approach to a greater level of specificiry. Our configurational approach highlights two substantial changes
in the way theorists have traditionally viewed control in organizations. First, scholars need to better reflect how managers direct both
formal and informal mechanisms at specific control targets. Second,
our configurations demonstrate that the control system and control
target typologies should not be viewed as mutually exclusive, but as
part of a more integrated configurational approach. Third, we have
tightened the concepts and definitions used in the control literature so
that we could consistently develop our configurational approach, thus
helping move the control literature toward conceptual consensus
while also facilitating future empirical operationalization of key constructs. Fourth, instead of viewing when and why managers choose to
focus on single control targets (i.e., singularity) as the most critical
factor in control research (Eisenhardt, 1985; Kirsch, 1996; Ouchi,
1977, 1979) our configurational approach suggests why scholars
might benefit from investigating how combinations of control mechanisms affect organizational processes and effectiveness.
It is our hope that this broader configurational approach is more
descriptively valid, more inclusive, more useful, and more empirically
testable because of its specificity and external validity. Control
mechanisms rarely exist in isolation, and considering combinations
provides a more realistic picture of how control is applied in
organizations.
A configurational theory of control
67
We show how control mechanisms and control targets are systematically linked to different control systems in a way that is both
theoretical and practical - giving managers tools and giving researchers better descriptive and explanatory power. Distinguishing mechanisms of control through their targets also gives us the ability to ground
our understanding of control systems in specific patterns of control
3
mechanism use and non-use.
Perspectives on the evolution of control systems
One of the benefits of our configurational approach to·organizational
control is that, by clarifying how the components of control systems
interact, we are able more directly to focus attention on issues related
to control system development and, thereby, address the fourth problem we identify with the control literature. By highlighting the importance of these issues, we anticipate that control researchers will be
encouraged to move past their current emphasis on variance theories
in mature firms (Mohr, 1982), to formulate process theories that
explain "how things evolve over time and why they evolve this way"
(Langley, 1999: 692).
To be clear, we are not saying that there are no process studies
in the literature that can be related to the study of control. For
example, research on divisional corporate strategy (Hoskisson et al.,
1991) or strategy implementation (Govindarajan and Fisher, 1990;
Govindarajan and Gupta, 1985) provide very useful insights that
speak to the control systems used by organizations. In addition, several entrepreneurship researchers (Covin and Slevin, 1990; Hanks
et al., 1993; Kazanjian and Drazin, 1990) have studied selective
aspects of control systems longitudinally. However, because most
control research has been focused primarily on mature control systems
in large corporations and because such process work in strategy has
remained entirely untapped by mainstream control research, scholars
have not, as yet, generated a sufficient level of knowledge about the
formation of control systems or how such developmental processes
facilitate adaptations of fledgling new firms (infancy) to become more
established firms (adolescence). 4 Our perspective, however, provides a
basis for integrating this research with traditional control research to
provide a more complete picture of how control systems develop and
change over time (Cardinal et al., 2004).
68
L.B. Cardinal, S. B Sitkin, and C. P. Long
Three models of control evolution
Although this research is very general and has only recently become
the subject of more critical evaluations (Cardinal et al., 2004 ), we
have identified three core theories regarding control system development or control adaptation and change that have been proposed in the
literature. Figures 3.la, 3.lb, and 3.lc depict the sequences suggested
by each of these theories.
The first model, represented by Ouchi (1979, 1980) and shown in
Figure 3.la, utilizes Williamson's (1975) market failures framework to
describe how organizations that initially employ market control
systems eventually adopt more formal, bureaucratic control systems
in response to rising transaction costs. The theory suggests that bureaucracies then fail when performance evaluation becomes overly ambiguous, thus bringing about the adoption of clan systems. To accommodate
the need for ambiguous management, "clans differ fundamentally from
bureaucracies in that they do not require explicit auditing and evaluation" (Ouchi, 1980: 137). Although they are better at functioning
Integrative
system
• High formal
• High informal
Market
system
Bureaucratic
system
•Low formal
• Low informal
• High formal
• Low informal
Figure 3.1a Control system sequencing described by control theorists
69
A configurational theory of control
Clan
system
• Lowformal
• High informal
Bureaucratic
system·
• High formal
• Low informal
Figure 3.1b Control system sequencing according to Barker (1993)
Clan
system
Integrative
system
•Low formal
• High informal
• High formal
• High informal
Market
system
•Low formal
• Low informal
Figure 3.1c Control system sequencing described by life-cycle theorists
70
L. B. Cardinal, S. B Sitkin, and C. P. Long
under ambiguous conditions, clans lack the explicit price mechanism of
the market and the explicit rules of the bureaucracy. 5
A second approach reflects the current emphasis of critical theorists
(e.g., Delbridge, Chapter 4; Jermier, 1998), who note that control
mechanisms, which at first appear non-coercive, may, over time,
become coercive and more powerful than traditional bureaucratic controls (e.g., Barker, 1993; Jermier, 1998). Barker (1993) presents this
perspective in his examination of self-managing teams, which examined
the development of several newly formed, self-managing teams in a
traditional hierarchical organization. Consistent with the sequence
posited by critical theorists, the teams he observed developed through
several phases: (a) in phase 1, the teams experience value consensus and
formed a clan-like system; (b) in phase 2, the teams began to develop a
bureaucratic control system by increasingly codifying each team's
values as rules or guidelines to be followed; (c) in phase 3, the rules
were stabilized and became even more formal and rationalized.
The highly institutionalized control systems Barker observed in phase
3 actually exerted tighter control than the bureaucratic hierarchy that
predated the installation of the self-managing teams (Figure 3.lb).
In the third model (Figure 3.1c), life-cycle theorists (e.g., Adizes,
1979, 1989; Greiner, 1972; Kimberly, 1979) and entrepreneurship
researchers (Covin and Slevin, 1990; Hanks et al., 1993; Kazanjian
and Drazin, 1990) draw upon life-cycle theory to address broader
issues of organizational evolution and propose another model that
treats control as one of many components in the evolution process.
Even though there are many variations of the life-cycle model,
existing models suggest that organizations progress through similar
stages (Quinn and Cameron, 1983; Van de Ven and Poole, 1995). 6
Life-cycle theorists suggest that organizations first evolve through a
creativity or entrepreneurial phase where founders employ market
control systems and enact the "control of activities ... [in response
to] immediate marketplace feedback" (Greiner, 1972: 42) in the
form of market and customer demands (Adizes, 1979, 1989). As
organizations then evolve through a collectivity stage, managers
develop a clan control system and direct employees using interpersonal communication and informal control mechanisms. This
creates high cohesion and commitment toward the founder and
the organization. Eventually, organizations move through a formalization and a control stage. During these stages, managers
A configurational theory of control
71
attempt to create efficiencies and direct employees by codifying
some norms as rules using a variety of control mechanisms (Adizes,
1989).
Challenging and synthesizing the three approaches
Though many firms may follow a sequence specified by one of the
schools of thought that were described, a more recent study (Cardinal
et al., 2004) found that control sequencing in newly founded firm
developed differently than any one of these models alone predicted. In
their study, the founding firm exhibited four distinctly different configurations in the use of control mechanisms that closely matched the four
control systems (market, clan, bureaucratic, and integrative) discussed
in the literature (see Figure 3.2 for the sequencing of control systems):
In its early development, the firm quickly evolved from a market
control system (phase 1) into a clan control system (phase 2) that
retained some selected market control characteristics. Then, instead
of retaining the informal control mechanisms from phase 2, as
a
Clan
system
Integrative
system
•Low formal
• High informal
• High formal
• High informal
~
0
Cl>
:5
0
.:::c:
0
0
Market
system
Bureaucratic
system
•Low formal
• Low informal
• High formal
•Low informal
Figure 3.2 The applicability of different theories in explaining the evolution
of organizational control
72
L. B. Cardinal, S. B Sitkin, and C. P. Long
would be predicted by developmental theories, the firm's
management completely renounced its use of informal control mechanisms and, in phase 3, adopted a rigid bureaucratic system. This is
at variance with developmental theories, which would suggest that
informal controls are retained while formal mechanisms are overlaid
on them to create an integrative control system. Instead, the firm's
development of an integrative control system was to take place only
after a period in which the now-latent elements of its clan control
system virtually disappeared and its market control system partially
disappeared.
Cardinal et al. (2004) could only explain what they observed in the
founding firm by drawing upon a combination of all three perspectives discussed previously. Specifically, they found that Ouchi's
(1979) perspective addressed shifts from one control system to
another as each system failed; life-cycle theory accurately predicted
the shift from an initial market control system to a clan control
system; and Barker's (1993) critical theory study helped to explain
the shift from a clan system to a more bureaucratic one and then the
shift within a bureaucratic system to a more legalistic bureaucratic
system that became punitive. Because the firm they studied followed
a path different than that described by control, critical, or life-cycle
theorists, their findings highlight some blind spots in the traditional
perspectives on control system development. For instance, by suggesting that every organization develops its control system according
to a pre-set, defined pattern presents a limited and incomplete view
of control system development. In addition, by suggesting that managers merely add new control mechanisms to existing control mechanisms fails to acknowledge that managers often temporarily or
permanently set aside some control mechanisms before implementing
others in their place.
Our focus on control configurations provides a way of more
closely examining the dynamics of control system development over
time. Because we disaggregate control systems into their component
parts, we are able to examine changes in the emphasis on specific
components as well as how critical combinations of changes actually result in substantial shifts in the composition of control
systems. As a result, we open up the black box of control system
evolution to more clearly discern why different development patterns might exist.
A configurational theory of control
73
Implications of a dynamic, configurational approach
to organizational control
Our configurational approach highlights several suggestions for
improving the way theorists have traditionally viewed control in
organizations. First, scholars should better reflect how managers use
combinations of formal and informal mechanisms and direct them
selectively at specific control targets. Second, our configurational
approach demonstrates that control system and ~ontrol target configurations should not be viewed in a mutually exclusive way, but as a
more complex, integrated theory of organizational control. Third, we
have tightened the concepts and definitions used in the control literature so that we could consistently develop our configurations, thus
helping move the control literature toward conceptual consensus
while also facilitating the empirical operationalization of key constructs. Fourth, instead of viewing when and why managers choose
to focus on single control targets as the most critical factor in control
research, our configurational approach suggests that scholars might
benefit from investigating how combinations of control mechanisms
affect organizational processes and effectiveness cross-sectionally and
over time.
Conclusion
Organizational control is in practice a complex and dynamic phenomenon. This chapter has tried to draw on the extensive prior work on
control and put it into a broader, more integrative, more specific, and
more dynamic configurational framework. If more empirical research
is to be done in a cumulative way, it is necessary that researchers'
theories of organizational control allow for both the systematic
incorporation of specific control mechanisms and targets; they should
also recognize that individual pieces of the control puzzle do not
operate in isolation. If organizational control research is to be more
practically relevant, those conducting it must take account of the
complexity and dynamism that organizations and their members actually confront. Finally, unless clearly hypothesized paths of implementation and change are built into organizational control theories, it will
be difficult to build a better understanding of how controls emerge,
are designed, and fail in organizational settings. Thus, this attempt at
74
L. B. Cardinal, S. B Sitkin, and C. P. Long
building an infrastructure and scaffolding for control theory and
empirical research is done in the hope that the structure can rise
quickly and cumulatively when it is grounded in a common frame
and language.
Notes
1 Our definition reflects the management science tradition and its emphasis
on organizational goals and managerial intentionality. Control definitions
based on critical theory or developmental approaches to control would
not adopt a similar definitional stance.
2 A recent exception includes Cardinal et al. (2004).
3 While we do not draw on the concept "mode of control" in this chapter,
we differentiate mode of control from control mechanisms, targets,
systems, and configurations. Modes of control are roughly equivalent to
a row or a column through which control configurations are composed.
They are isolated from the whole pattern that comprises a control configuration focusing on either a single row or a single column of control mechanisms. For example, a formal mode would use all formal control
mechanisms and a behavior mode would use all behavior control mechanisms. For further information see Kirsch and Choudhury (Chapter 10).
4 Aldrich (1999) describes the stages of nascent entrepreneurship as having
three transitions and four periods: adult population (conception), nascent
entrepreneur (gestation), fledging new firm (infancy), and established new
firm (adolescence).
5 Though Ouchi (1979, 1980) occasionally refers to organizational
blending of these control systems, his core argument emphasizes the
shedding of one configuration of control attributes as the next type of
control system is adapted.
6 Some theories suggest more stages, while others are concerned with the
transitions from a single unit firm into a multi-division firm and issues of
corporate centralization and decentralization (Quinn and Cameron,
1983). Adizes's (1979) theory on life-cycle is the most complete theory;
it is the most fine-grained, and it is the only life-cycle theory that deals with
decline and death (Quinn and Cameron, 1983 ). Because it is more detailed,
it also provides better coverage of the early entrepreneurial phases.
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