Central Control in a Decentralized Organization -A case study of Svenska Handelsbanken

Abstract

Background and problem: Much research has been conducted on how organizations use management control tools to optimize their business. Traditionally, centralized organizations strive for better control and the central departments are responsible for figuring out the best way of action and inform the sub units about this corporate practice. This thesis focuses on how central departments, in a decentralized organization, manage control when the sub units are empowered and have the mandate to influence the central departments’ way of action. Aim of study: The aim for this explorative thesis is to discover how a decentralized organization manages the product and service process from a central department perspective. The sub unit respondents in this thesis are not representative for any generalized opinions within the case study company. Methodology: The study was made as a qualitative study and the empirical evidence was gathered through a total of eight unstructured and semi-structured interviews. The semi-structured interviews were recorded and transcripts were made as basis for the empirical evidence and analysis. Conclusion: The most interesting conclusion is how the case company uses the accounting control system. The control system need to work both as a monitor system for the top level management to keep track of the direction the organization is heading, and as a tool for the empowered employees working out in the organization so that they can engage in self monitoring activities. The employees can in this way easily see how their part of the organization is doing and we have found that such systems encourage the employees to improve their results and it works as self regulatory. This is an interesting use of a traditional diagnostic control system where it is not used as a control tool for management, rather as a monitoring system for the whole organization. It is used in a dynamic way and provides powerful information on how every employee can alter their own way of action to enhance the performance of the whole organization. This can be seen as a reinterpretation of Simons (1994) Diagnostic control system where a sub unit in a decentralized organization can use it to improve their own results without the intention of changing anything in the organization strategy or the way of work. Suggestions to future research: Further research needs to be conducted to obtain a deeper understanding of how central departments in decentralized organizations manage to balance control with empowered influences within the organization. Which management control tools are used and how do they provide corporate information and simultaneously maintain the decentralization and empowerment in the organization?