The use of management control systems in social enterprises

Abstract

Social Enterprises (SEs) have progressively grown, filling gaps where government and the market fail; that is, when public-sector goods/services are unsatisfactory to support social needs, and for-profit organizations cannot make sufficient profit in providing those goods/services (Austin, Stevenson, & Wei-Skillern, 2006; Haugh, 2005). SEs have emerged to tackle persistent and complex social problems. In Southeast Asia, many social problems (i.e. poverty, unemployment, social and economic inequality) have long been recognised and they persist overtime, especially since the Asian financial crisis in 1997, with SE being introduced in Southeast Asia after the crisis (Defourny & Kim, 2011; Kerlin, 2010).

SEs are neither purely profit-seeking nor purely not-for-profit organisations; the uniqueness of SEs is that they seek both social impacts or benefits for beneficiaries, as well as their own profits and involvement with many stakeholders who have different in demands. Therefore, SEs tend to have conflicts between their dual goals when they attempt to simultaneously maintain the dual mission with limited resources. SEs must manage the dual missions of financial sustainability and social goals (Doherty, Haugh, & Lyon, 2014; Ebrahim, Battilana, & Mair, 2014; Mair & Martí, 2006; Santos, 2012), and therefore require good management if they are to grow and have a larger impact on society. One tool for goal achievement used by management is Management Control (MC). This research questions whether the MC can be used to manage the tension between SE dual mission of SE.

Anthony and Govindarajan (2014) define MC as a process which is used by higher level managers to ensure that the lower-level managers will implement the organisation’s strategies to achieve organisation’s goals. Simons (1990) investigates companies with different strategies and states they will use MC differently. A company utilising product differentiation uses MC interactively more than a company with a cost leadership strategy. For example, the long-term planning process in the product differentiation company is used for debates among staff and revisited yearly, which is more frequent than in the cost leadership company (Simons, 1990). However, Simons’s (1990) investigation, like much literature on MC, is in the for-profit area. Extending his theory to SE is likely to be challenging as there are different goals and strategies within the same organisation. Some literature implies the use of MC to manage the tension between dual missions but most of them apply an individual MC (Arjaliès & Mundy, 2013; Bagnoli & Megali, 2011; Battilana & Dorado, 2010; Chenhall, Hall, & Smith, 2015; Kraus, Kennergren, & von Unge, 2017). Some literature provides empirical evidence to use MC in the SE context but not for managing the dual mission tension. Instead, the literature mainly investigates how MC affects social capital in SE (Chenhall, Hall, & Smith, 2010; Vieira, Ha, & O' Dwyer, 2013).

The success of SEs depends partly on how the dual goals are managed, especially when there is a tension. This research explores how MC is used to manage the tension of SE. It draws on Tessier and Otley’s (2012) MC framework. The framework is a revised version of Simon’s Levers of Control (LOC) to improve ambiguities in the LOC. This dissertation reports on qualitative research, using data from four Thai SE cases. The research reveals both theoretical and practical contributions. The theoretical contribution extends literature on the use of MC frameworks which has previously mostly investigated either for-profit or not-for-profit organisations. The result shows that a comprehensive MC framework is preferable to an individual MC framework to investigate SE. A modification of Tessier and Otley’s (2012) MC framework is also provided. The practical contribution is drawn from the findings that SEs face tension even though an appropriate strategic planning approach is selected. The residual tension is resolved by MC - social control, the belief system in particular. Drawing from the results, it is preferable to used interactive MCs and intrinsic rewards in SEs. Lastly, the dissertation suggests that the MC should operate as a system rather than a package to manage dual mission conflicts.