The interrelationship between management control mechanisms and strategy

This paper examines the interrelationship between management control system (MCS) mechanisms and strategy. The traditional view is that the MCS is shaped by organisational strategy. More contemporary viewpoints, however, suggest that there may be a two-way relationship between the two variables. That is, MCS shapes, and is shaped by, strategy. We develop two research questions that describe the interrelationship between MCS and strategy, and test them using a public sector entity that experienced a strategic change. A retrospective longitudinal study, spanning five years and involving archival data, interviews and a questionnaire, was adopted. The analysis confirms the existence of a two-way relationship between MCS and strategy. We find that the interactive use of MCS mechanisms helps to facilitate a change in strategy, and that MCS mechanisms change to match a change in strategy.