This article addresses a critical question: How may management control systems (MCS) contribute to organizational inertia and decline?
Drawing on a longitudinal case study of Nokia, the article shows that MCS can, indeed, have a critical influence on inertia – the inability to enact internal change in the face of significant external change – and on consequent organizational decline.
The influence on inertia via persistent managerial cognitions – developed during a time of organizational success – is twofold: first, by reinforcing prevailing cognitions and hence preventing management from realizing a need for change; and second, by moderating the impact cognitions have on actions by delaying actions based on renewed cognitions. Both ways may be fatal, especially in hyper-competitive contexts.
Reference:
Malmi, T., Kolehmainen, K., Granlund, M. 2023. Explaining the Unintended Consequences of Management Control Systems: Managerial Cognitions and Inertia in the Case of Nokia Mobile Phones. Contemporary Accounting Research, 40 (2), pp. 1013–1045.
