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Qualitative Research in Accounting & Management
Unpacking the package: Management control in an environment of organisational

change
Mark Evans Basil Phillip Tucker
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Mark Evans Basil Phillip Tucker , (2015),"Unpacking the package", Qualitative Research in
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Unpacking the package
QRAM
12,4
Management control in an environment of

organisational change
346
Received 22 January 2015
Revised 18 August 2015
Accepted 21 August 2015
Mark Evans and Basil Phillip Tucker

School of Commerce, University of South Australia, Adelaide, Australia
Abstract
Purpose The purpose of this paper is to explore the ways in which both formal and informal control,
operating as a package, are implicated in responding to organisational change arising from the
introduction of the Australian Federal Governments Clean Energy Act (2011).
Design/methodology/approach This investigation is based on a review of archival data, and
semi-structured interviews conducted with 15 staff at different hierarchical levels within an Australian
renewable energy company.
Findings Although formal management control systems and informal control both played
important roles in the organisations reorientation to organisational change, it was the latter form of
control that predominated over the former. The influence of the prevailing organisational culture,
however, was pivotal in orchestrating both formal and informal control efforts within this organisation.
Originality/value This study contributes to management control theory and practice in two ways:
first, it provides much needed empirical evidence about the ways in which management controls act as
a package; second, it offers insights into the relative importance of the components of a management
control package in the context of a particular organisational change. In addition, it responds to
Laughlins (1991) call for empirical flesh to be added to the skeletal framework he advocates to make
this conceptualisation of organisational change, more meaningful.
Keywords Organisational change, Management control, Informal control,
Management control package, MCS
Paper type Research Paper
1. Introduction
The pivotal role of management control in organisational change has been
well-established in management accounting research. Studies that have directed
attention to examining control under conditions of organisational change have been
based in a diverse range of contexts including:
strategic change (Simons, 1994);
market competition (Bromwich, 1990; Khandwalla, 1972);
environmental hostility (Otley, 1978);
mergers and restructures (Kober et al., 2003, 2007); and
environmental uncertainty (Chapman, 1998).
Qualitative Research in
Accounting & Management
Vol. 12 No. 4, 2015
pp. 346-376
Emerald Group Publishing Limited
1176-6093
DOI 10.1108/QRAM-07-2015-0062
The ready co-operation of the staff of Enviros is gratefully acknowledged. In particular, the CEO
must be thanked for his ongoing assistance in gaining organisational access and securing relevant
data. The authors also thank Cheryl McWatters, Deryl Northcott, Christine Helliar, John Burns,
Bill Nixon, Lee Parker and Aldonio Ferreira for their valuable comments and suggestions on
previous versions of the paper.
Such research has primarily centred on investigating how formal management control
systems (MCS) are implicated in responses to such change. However, often neglected in
this research is the influence of informal control in the overall control efforts in such
dynamic scenarios.
If the management control package of an organisation comprises the complete set of
control practices in place (Grabner and Moers, 2013, p. 408 italics added), then the risks
associated with neglecting one or other of these elements in the control package are, by
definition, likely to be considerable. Such risks include the potential for model
under-specification (Chenhall, 2003), difficulties in attributing particular outcomes with
particular controls (Otley, 1980) and challenges in assessing the relative effectiveness of
particular types of control (Merchant, 1985). Moreover, failing to view control as a
package as comprising both formal and informal elements makes it difficult to identify
how findings may be integrated and assimilated; how they refute, complement or extend
existing theory; and how our knowledge of control in a context of organisational change
has advanced in a gradual progression with one study building on another. The need to
view control as a package rather than isolated (formal) procedures, or as informal
practices, provides the overall motivation for this study, the central aim of which is to
explore the respective roles played by formal MCS and informal control in managing
organisational change. In so doing, it contributes to management control theory and
practice by providing much needed empirical evidence about the ways in which
management control acts as a package, and in particular, in offering insights concerning
the relative importance of the components of a management control package in light of
organisational change.
To achieve this studys aims, our investigation draws on interview and archival data
from an Australian renewable energy company that faces changes in its operating
environment arising from the introduction of the Australian Federal Governments
Clean Energy Act (2011), widely referred to as the carbon tax. A form of carbon
pricing, the carbon tax is one of many potential public policy directions that
governments can impose in their efforts to reduce greenhouse gas emissions, caused by
the combustion of fossil fuels. At a macro-economic level, the introduction of the carbon
tax has been argued to represent one of the most significant structural economic reforms
in Australias history (Tang and Luo, 2011); at an organisational level, it brings a need
for an increased attention on issues pertaining to compliance requirements and
environmental liability in affected firms (Blacconiere and Northcut, 1997). Thus, the
carbon tax represents not only a potentially appreciable organisational change, but also
possesses very real control ramifications in organisations participating in energy
markets. The current study explores the control practices of one organisation operating
in this market, and how these practices influence and are influenced by the change it had
experienced as a consequence of the introduction of the carbon tax. As a consequence,
the current study also responds to the call for research to explore and gain insights into
the adequacy the role and functioning of accounting in the environmental and
sustainability spheres (Hopwood, 2009, p. 439), adding to the inventory of literature on
this topic as it engages in contexts of control and organisational change (Contrafatto and
Burns, 2013).
To examine the nature of the change, and its repercussions, we utilise Laughlins
(1991) model of organisational change to provide a means by which the nature and
processes of any given organisational change may be conceptualised and, to an extent,
Management
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348
diagnosed. Within this change context, control is examined through the use of Simons
(1995) levers of control (LOC) framework, as well as studies in the management control
literature that have directed their attention, theoretically and empirically, to the role,
form and nature of informal control (Berry et al., 2009; Chenhall, 2003; Langfield-Smith,
1997; Malmi and Brown, 2008; Otley et al., 1995).
The remainder of this paper is structured as follows. The second section provides a
review of the relevant management control literature around control packages, as well
as a summary of relevant prior literature that has considered the relationship between
management control and organisational change. Following this, an explanation of the
data collection and analysis procedures is provided to explain how the study was
conducted, and how the research was approached. Next, the case study organisation and
the participants involved, as well as an explanation of the organisational change is
outlined, followed by a presentation and discussion of the case findings. The final
section presents the conclusions and limitations of the study, and suggests directions for
further research.
2. Relevant prior literature
2.1 Management control as a package
A common theme underlying reviews of the control literature published over the past
two decades (Otley et al., 1995; Langfield-Smith, 1997, 2005, 2007; Chenhall, 2003;
Merchant and Otley, 2007; Berry et al., 2009) points to the need for control research to
embrace a more holistic perspective incorporating both formal MCS as well as informal
control processes, collectively operating as a package (Otley, 1980, 1999). As Chenhall
et al. (2010), observe, the essential difference between formal MCS and informal controls
is that the former are deliberately articulated controls, whereas the latter are
characterised by less well-defined practices, social relationships, links or loose
connections between individuals that facilitate free-flowing open and flexible
communication and structures and decision processes.
The idea that formal MCS and informal control can and do work in tandem
recognises that control mechanisms may be formal, informal or a mixture of both (Otley,
1980; Falkenberg and Herremans, 1995), and that different formal and informal control
configurations may be used simultaneously within an organisation, in different
combinations, at different times and to different extents (Ferreira and Otley, 2009). Such
multiple means of control may not only complement each other but also act as
substitutes (Abernethy and Chua, 1996), or potentially in opposition (Chenhall et al.,
2010). Moreover, it has been argued that equal control of activities can be achieved either
by informal control practices (Huikku, 2007) or by different formal control system
configurations (Gerdin, 2005). Together, these formal MCS and informal controls
represent the complete set of control practices in place, collectively reflecting the
organisations overall control environment. Just as firms do not rely on singular formal
control systems, but rather rely on a compendium of formal controls (Widener, 2014),
managers can and do exercise control through reference to a broad framework of
control, comprising formal procedures, and informal processes based on hierarchical
and horizontal social interaction (Frow et al., 2005).
It is fairly well-established that formal MCS and informal controls are likely to
combine with each other, and that their interactions affect organisational outcomes
(Abernethy and Brownell, 1999). It is, however, often difficult to separate the influence of
formal MCS and informal controls. Indeed, although formal MCS both shape and are
shaped by informal controls (Burns and Scapens, 2000), the notion of a control package
acknowledges that formal and informal controls often work loosely together without
management being necessarily fully aware of their combined effect (Pfister, 2014).
Moreover, as Linsley and Linsley (2014) argue, the relationship between both the design
and use of formal accounting-based controls will also be impacted by the strength of the
informal dynamics and processes prevailing within the organisation. Thus, in viewing
control as a package, the relationship between formal MCS and informal control may be
seen to be symbiotic and often entangled (Frow et al., 2005).
Although extricating the relative influence of formal and informal control can be
problematic for researchers (Nixon and Burns, 2005), the potential risks of control
studies that do not acknowledge or incorporate the effects of both formal and informal
control have been well-documented. Focusing exclusively on formal controls could lead
to an under-specification of an organisations control system (Otley, 1980), a point
subsequently reinforced by Chenhall (2003, p. 131):
A difficulty in studying specific elements of MCS in isolation from other organisational
controls is the potential for serious model under-specification. Thus, if specific controls are
systematically linked with other organisational controls, studies that exclude or do not control
for these elements within the research method may report spurious findings.
Such under-specification makes it difficult to identify how findings are linked and how
the studies refute, complement or extend existing theory. Moreover, studies which fail to
incorporate the links between various MCS and informal control processes implicitly
assume that management control practices can be examined independently (Grabner
and Moers, 2013). Such a reductionist approach is likely to lead to erroneous conclusions
(Fisher, 1995).
However, in spite of these cautions and their implications for management control
research, the ways in which control operates as a package is a topic that remains
empirically underexplored. As Malmi and Brown (2008, p. 287) observe:
[] the idea of management control systems (MCS) operating as a package has existed for over
30 years []. Despite this there has been little explicit theorising or empirical research on the
topic.
2.2 Management control and organisational change

The ways in which control may facilitate or impede organisational change processes
under conditions of change has been the topic of some empirical consideration, with a
number of studies providing useful insights into the ways in which management control
is implicated in various organisational change settings. These setting include, for
example:
strategic change (Abernethy and Brownell, 1999);
mergers and restructures (Kober et al., 2003, 2007);
environmental uncertainty (Parker, 2001, 2002);
financial pressures (Norris and ODwyer, 2004);
increasing competitive environments (Baines and Langfield-Smith, 2003);
commercialisation (Tyrrall and Parker, 2005);
Management
control
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350
entrepreneurial environments (Collier, 2005);

start-up firms (Strauss et al., 2013);
public sector reform (Batac and Carassus, 2009); and
lean manufacturing environments (Fullerton et al., 2013).
In addition to research that has examined organisational change in terms of formal MCS,
some studies, albeit to a lesser extent, have investigated the ways in which informal
control processes are embedded in the change process (Tyrrall and Parker, 2005; Batac
and Carassus, 2009; Parker, 2001, 2002; Collier, 2005). Nevertheless, despite the
contention that control is designed to ensure that organisations adapt to changes in their
environment (Lowe, 1971), rarely has the package of both formal MCS and informal
control, and its influence on organisational change been overtly investigated within the
same study. Although some studies have noted the inter-relationship between formal
MCS and informal control in managing and responding to organisational change
(Parker, 2001, 2002; Kober et al., 2003, 2007; Norris and ODwyer, 2004), the gap in our
knowledge of how organisational change may be assisted or hindered by the formal and
informal components comprising a control package remains an under-researched area
(Baines and Langfield-Smith, 2003; Collier, 2005). It is towards informing this gap that
this research seeks to contribute.
3. Conceptual frameworks
3.1 Management control
The LOC framework (Simons, 1995), has provided a rich description of and considerable
insights into the use of control in a variety of diverse settings and contexts[1]. Predicated
on the argument that it is not the design, configuration or mix of controls available to
organisations that are important, but how those particular controls are used, the LOC
framework argues that management control could be understood as a combination of
four control systems or levers of control: beliefs systems, boundary systems,
diagnostic control systems (DCS) and interactive control systems (ICS) that
simultaneously operate both individually and interactively, but for different purposes
within organisations. Beliefs systems are used to enhance core values related to
business strategy and to inspire the search for new opportunities in line with these
values. Boundary systems reduce risks by setting limits to strategically undesirable
behaviours. DCS communicate and monitor critical success factors. ICS are used to
identify strategic uncertainties and develop strategic responses to a changing
environment.
The LOC framework, however, describes the formal, information-based routines
and procedures managers use to maintain or alter patterns in organisational activities
(Simons, 1995, p. 5, italics added). Simons states that the role played by informal control
mechanisms are, [] excluded from this analysis (Simons, 1987, p. 358), yet it has long
been recognised in the management control literature that formal MCS are only part of
a broader set of organisational controls (Abernethy and Chua, 1996; Marginson, 1999;
Collier, 2005; Merchant and Van der Stede, 2006).
The combination of formal with informal controls has been identified as central to
understanding how management control operates to achieve desired organisational
outcomes (Chenhall and Morris, 1995; Simons, 1995; Ahrens and Chapman, 2004; Henri,
2006; Widener, 2007), and consistent with the notion of management control operating
as a package, the effectiveness of formal controls may be dependent on the extent and
effectiveness of informal controls that are also in place (Otley, 1980; Flamholtz, 1983;
Langfield-Smith, 2007), making the inclusion of informal control an intrinsic component
of management control investigation.
Integrating the concept of informal control within empirical control research,
however, is somewhat problematic due to the diffuse and inherently nebulous nature of
such means of control. Unlike formal MCS, an accepted, established and definitive
understanding of informal control is surprisingly absent in the management control
literature, and operationalising this form of control remains a challenge. Insofar as the
current study is concerned, we use a provisional definition of informal control as:
The non-formalised information-based routines, procedures and practices that collectively
generate and transmit information through vertical and lateral interpersonal relationships
prevailing within an organisation, to influence, maintain, or alter patterns in organisational
activities (Tucker, 2011, p. 10).
Tucker does not purport to provide a conclusive understanding of informal control.

Rather, his portrayal of this construct is based on a number of the common attributes
that have been used to describe this form of controls in previous empirical and
theoretical investigations (Berry et al., 2009; Chenhall, 2003; Langfield-Smith, 1997;
Malmi and Brown, 2008; Otley et al., 1995). With its emphasis on non-formalisation and
interpersonal relationships, without inference as to why such practices may be
preferred, and obvious attempt to build on and extend Simons definition of formal MCS,
it provides, for the purposes of this study, a working understanding of how informal
control may be conceptualised.
3.2 Organisational change
The area of organisational change has been extensively researched in the academic
literature. With in excess of 109,300 Google Scholar citations on the subject (based on the
search terms, organisational change and accounting and organisational change
and accounting), a comprehensive review of this literature is far beyond the scope of
this investigation. Although considerable accounting research has engaged with the
organisational change literature in seeking to understand how accounting may
influence, and be influenced by various aspects of organisational change within a
variety of contexts, and from diverse methodological perspectives (Abernethy and
Brownell, 1999; Burns and Scapens, 2000; Burns and Vaivio, 2001; Baines and
Langfield-Smith, 2003; Broadbent and Laughlin, 2005; Chenhall and Euske, 2007), a
detailed appraisal of such research is not necessarily relevant for the purposes of the
current study. As our primary concern in this enquiry relates to the response to change,
a framework that permits the conceptualisation of the nature and extent of
organisational change, and the pathway invoked by this change, in a relatively
unrestricted way, is of foremost priority.
One perspective that has been frequently used to provide coherent insights into not
only the change process, but also its likely ramifications for control is Laughlins (1991)
model of organisational change. Laughlins conceptual approach is premised on the
notion that understanding organisational change can be achieved by tracing the
process, track or pathway that a change takes through an organisation. Laughlin
classifies organisational responses to change (or disturbances), as either first order, or
second order, where each change type has various implications on an organisations
Management
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interpretive schemes, design archetypes and sub-systems, which in turn explains the
extent of the change facing the organisation:
Interpretive schemes operate as shared fundamental (though often implicit) assumptions
about why events happen as they do and how people are to act in different situations []
sub-systems are tangible elements such as buildings, behaviours, machines, persons, etc. The
design archetypes (intangible structures, information systems, etc.) guide and provide
coherence to the organisation through a series of underlying values that make up the
interpretive schemes (metaphors, beliefs, values, rules, mission statements) which operate as
shared fundamental assumptions about the functioning of the other elements of the
organisation (Laughlin, 1991, pp. 211-212).
The relationship between interpretive schemes, design archetypes and sub-systems is

depicted in Figure 1.
An organisations interpretive schemes, design archetype and sub-systems are at
any point in time at some sort of equilibrium, and it is only an environmental
disturbance which will shift the inert characteristics of the organisation (Laughlin,
1991, p. 213). That is, organisations have a tendency to maintain their existing control
systems and processes, unless compelled to change that state by exogenous events
impressed on them (Tucker, 2013).
First-order changes are caused by disturbances that may involve shifts in the
sub-systems elements and changes in the design archetype (Laughlin, 1991, p. 214);
Figure 1.
The relationship
between interpretive
schemes, design
archetypes and
sub-systems
however, they do not affect interpretive schemes[2]. In contrast, disturbances of a second

order involve shifts in both the subsystems elements, as well as changes to both the
design archetype and interpretive schemes. As suggested by Laughlin (1991), the net
effect of such changes to the organisational inertia may be manifested in one of four
alternative paths: rebuttal, reorientation (first-order or morphostatic changes),
colonisation or evolution (second-order or morphogenetic changes). The
characteristics of morphostatic and morphogenetic change as described by Laughlin are
presented in Table I.
Laughlins models of change have been applied in a number of empirical
investigations (Broadbent, 1992; Slack and Hinings, 1994; Gray et al., 1995; Kikulis et al.,
1995; Richardson et al., 1996; Larrinaga-Gonzalez et al., 2001; Mir and Rahaman, 2007;
Tyrrall and Parker, 2005; Fraser, 2012; Contrafatto and Burns, 2013). Common to each of
these studies is the use of Laughlins framework to conceptualise how an organisations
control practices and procedures respond to change. In view of its emphasis on the
ramifications of change, rather than the nature of the change itself, Laughlins
framework is adopted in this study as a means by which organisational change, or more
correctly, the effects of organisational change, may be meaningfully understood.
Although Simons (1995) LOC framework and Laughlins (1991) framework of
organisational responses to change derive from quite different methodological
positions, our decision to use these particular standpoints is based on the argument that
the principal phenomena of interest (organisational change and management control), in
the context of the current study, represent quite different objects of inquiry. On the one
hand, our investigation of organisational change seeks to identify what has occurred
within the organisation. On the other hand, our examination of management control is
intend to unpack how formal and informal components of the management control
package have been enacted in response to the organisational change. The phenomena
are independent at the conceptual level, thereby requiring their depiction, analysis and
Type of organisational change

First order
Rebuttal
Reorientation
Second order
Colonisation
Evolution
Management
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353
Characteristics of the change response

The change cannot be rebutted
Involves minor changes, primarily in the design archetypes
Change may revert once the disturbance has been rebutted
Affect both the design archetype and sub-systems
The change has to be accepted and internalised into the workings
of the organisation, but in such a way that the real heart of the
organisation is basically unaffected
Change initially leads to change in design archetype, then to both
the subsystems and interpretive schemes
Forms a new underlying ethos for the organisation as a whole
Involves major shifts in the interpretive schemes, but assumes
that it is chosen and accepted by all the organisational
participants freely and without coercion
Source: Adapted from Laughlin (1991)
Table I.
Alternate responses
to organisational
change
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interpretation in fundamentally different ways (Covaleski et al., 1996). Far from an

attempt to mix oil and water, methodological pluralism is applied in the current study
in a spirit of combining different research traditions in ways that bypass
epistemological and ontological positions (Malina et al., 2011) in favour of painting a
credible, trustworthy picture of events or phenomena (Hoque et al., 2013) occurring or
witnessed in a particular context (De Loo and Lowe, 2012).
4. Study design and methods

A case study method was used in this study because of its propensity to provide the rich
understanding and contextually informed view of the processes and relationships
implicit in both organisational change and the control implications of such change
(Ahrens and Chapman, 2007; Malmi and Brown, 2008; Otley, 1999).
4.1 Research site and context
The organisation selected for this study, Enviros[3], is one of Australias leading carbon
abatement and renewable energy companies. Enviros is a privately owned and operated
organisation. Its primary purpose is the capture and extraction of landfill gas from
waste management facilities across Australia, utilising this gas to generate and export
electricity to the national grid. In the year 2000, Holding Corp Ltd[4] became a major
shareholder of Enviros. At the time of the study, Enviros employed over 100 employees
across all states in Australia.
4.2 The nature of the exogenous change impacting upon Enviros
The emergence of global warming and carbon emissions as a topic of public debate has
put social and environmental accountability research in the international spotlight, and
begun to attract the attention of an increasing number of researchers, journals and
funding bodies (Schaltegger and Burritt, 2010). However, in addition to its relatively
recent status as an area of accounting research interest, environmental sustainability,
and in particular, the corporate role in greenhouse gas emissions, has become a priority
for policymakers around the world, including Australia. The importance afforded to this
concern has been the development of numerous strategies to reduce national carbon
footprints assuming prominence in the Australian public policy debate (Akter and
Bennett, 2011), in an effort to mitigate the purported effects of climate change.
The carbon tax was an emissions trading scheme that put a price on Australias
carbon pollution, requiring organisations to pay pre-set price per ton on carbon
emissions that exceeded a certain threshold. Prior to the introduction of the carbon tax,
Enviros created its carbon credits under the New South Wales Greenhouse Gas
Abatement Scheme (NSW GGAS), which was introduced on the 1st of January, 2003.
Under this scheme, the NSW state government issued New South Wales Greenhouse
Gas Abatement Certificates (NGAC) and Greenhouse-Friendly (GHF) credits, which
were types of carbon credit that could be on-sold to organisations that had exceeded
their carbon emission thresholds. When the Australian Government passed the Carbon
Farming Initiative (CFI) in August 2011, the NGAC and GHF credits were no longer
valid or necessary, as the CFI provided brought with it its own carbon credit, the
Australian Carbon Credit Unit (ACCU).
Although the carbon tax and the CFI were two separate schemes, when the carbon
tax was implemented, it created an increased market for the trading of carbon credits,
and the credits that Enviros now earned were the ACCUs. Enviros created carbon
credits by converting methane gas from landfills into a renewable energy source, and
accordingly, were eligible to receive ACCUs for their operations. To avoid undue
taxation, organisations could purchase the carbon credits from Enviros, or employ them
to construct a renewable energy facility to convert gases on site.
As seen in the timeline of Australias carbon pricing history presented in Figure 2, the
legislative developments and successive policy amendments have provided challenges
for organisations such as Enviros that operate under a business model that
is necessarily policy-sensitive. This variable policy environment has, in turn, seen
Enviros subject to appreciable organisational change, particularly in terms of the
controls necessary to ensure compliance with government policy and legislative
requirements. The introduction of the carbon tax had the potential to cause a significant
disruption in Laughlins terms, a disturbance, kick or jolt to Enviros established
business and control practices. The ramifications of these changes and the ways in
which Enviros formal MCS and informal control processes were implicated in their
management form the basis of the current investigation.
Management
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355
4.3 Data sources

Data were collected from both primary sources, in the form of semi-structured
interviews, and secondary sources, through a review of archival documentation. The
study commenced with a review of archival materials, including:
a Strategic Growth Options Paper;
the organisations Financial Framework Management Strategy;
government policy statements;
sustainability reports;
company newsletters;
website pages; and
articles.
Organizational change period
January 1st2003
December 2007
New South Wales

Greenhouse Gas
Abatement Scheme
introduced.
This was the worlds first
mandatory emission
management scheme.
23rd August, 2011
July 1st 2012
Nov 13 2013
NSW GGAS ended, Carbon

Tax Begins.
State based scheme replaced by
Australias first national carbon
pricing scheme, the Clean Energy
Act 2011 (the Carbon Tax).
Carbon Farming Initiative

(CFI) Introduced.
Australia ratifies Australian Labour government
introduced CFI to create
the Kyoto Protocol
carbon credits from landfill
(International
based and waste industry
agreement on
actions that reduce emissions
climate change)
17th July 2014
Carbon Tax Repealed
Prime Minister Abbott

introduces legislation into
Federal Parliament to repeal
the carbon tax
Figure 2.
Carbon policy in
Australia a timeline
of major events
QRAM
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An assessment of the annual reports of Holding Corp Ltd (the major single owner) for the
financial years ending 30/6/2012 and 30/6/2013 also formed part of the archival review,
providing an initial understanding of how Enviros was affected by the change in
government policy. A summary of the archival data used can be found in Appendix 1.
In the interviews, a semi-structured interview format was used which was organised
around specific themes, but which permitted the interviewer the freedom to follow the
respondents train of thought and to explore tangential areas that might arise in the
discussions (Kvale and Brinkmann, 2009; Rubin and Rubin, 2012). Follow-up and probe
questions were used when we felt the need for clarification, examples, further detail or
elaborations of interviewees initial responses (Bailey, 2007). Rich additional
information and understandings were gleaned from following up the interviewees
course of conversation with such qualitative interview probe questions (Ling and
Horrocks, 2010). The broad purpose of the interviews was to gain insights into how the
introduction of the carbon tax affected Enviros, and the control procedures used to
manage the change resulting from this legislation. Participants selected for interviews
ranged from senior executives to operational employees. The length of employment of
interviewees ranged from 2 years to 18 years, and framing of the questions took into
account the expected knowledge and experience of individual respondents. A copy of
the interview guide used is presented in Appendix 2.
Having developed in conjunction with the commercial manager, a list of employees
most qualified to discuss the control procedures in response to the policy and
operational changes as a result of the carbon tax, employees were emailed with an
invitation to participate in the study, and to follow-up by phone if required. In total, 15
interviews were conducted. Interviews were recorded and transcribed in full within two
days of the interview. The duration of interviews, ranged from 23 to 42 minutes, with an
average of 34 minutes. Information about interviewees, including their position title,
duration of interview and length of time in current position, is included in Appendix 3.
4.4 Data analysis
In common with other forms of data analyses, the process we used involved data
reduction or summarisation, classification and interpretation. The interview data were
analysed with the aid of the software package, NVivo7. This enabled a meaningful and
systematic identification of patterns in the data (Bisbe et al., 2007) and the rapid retrieval
of specific quotes based on various search criteria (Lillis and Mundy, 2005), and helped
to prevent the selective choice of data in developing the studys findings (Abernethy and
Brownell, 1999). The coding of transcripts was undertaken by the researchers to ensure
consistency and uniformity in interpretation of the transcripts. Several checks were put
in place to promote research trustworthiness, namely, those to establish credibility,
confirmability and dependability (Lincoln and Guba, 1985). Credibility was
promoted through peer debriefing, where the researchers discussed the coding process
in an effort to understand the significance of the themes and patterns emerging from the
interviews. The transcripts with their coded results were returned to the interviewees
for checking and verification, so as to ensure confirmability of the data (Lincoln and
Guba, 1985). Dependability was fostered by the verbatim transcription of interviews,
and the maintenance of adequate records of contacts, interview dates, times and venues
(Gelman and Basbll, 2014).
5. Findings
This section presents the evidence from the interviews, following the two broad themes
pursued in this investigation, namely, the nature and extent of the organisational
change experienced by Enviros as a result of the introduction of the carbon tax, and the
ways in which Enviros control processes responded to this change.
Management
control
5.1 The nature and extent of the organisational change

The overall disruption to Enviros as a consequence of the introduction of the carbon tax
on Enviros operations overall was perceived by all interviewees to be relatively
minimal:
357
We had organisational change forced upon us because of the carbon tax. The core business
activity of Enviros has not really changed; Enviros is still aiming to be Australias leading
renewable energy company (Commercial Manager).
Nevertheless, some parts of the company were significantly affected by the introduction
of this legislation:
Id say the majority of the people in the company havent been affected at all as they are busy
doing day-to-day work, but as far as a corporate side that (the Commercial Manager) and I look
after, the effects that have been huge (CFO).
The introduction of the carbon tax meant that organisations would have to either reduce
their total emissions, or purchase carbon offset units from renewable energy companies
such as Enviros to avoid taxes levied under the act. These organisations could also
employ renewable energy companies to design and install a waste management facility
at their production site to reduce their greenhouse gas emissions, thereby providing
companies such as Enviros with opportunities to provide additional services to their
existing customers, and to (potentially) expand their existing customer base. Although
Enviros customer base was not anticipated to change appreciably, it was envisaged
that current customers would now be more inclined to purchase carbon credits from
Enviros to avoid the imposition of a carbon tax:
The commodities we produced did change; we no longer created NGACs or Greenhouse
Friendly carbon credits, but now created Australian Carbon Credit Units (ACCUs) under the
Carbon Farming Initiative (CFI) which we were able to sell to liable entities under the carbon
tax (Commercial Manager).
The creation of ACCU certificates certainly had positive outcomes for Enviros, by
providing them with an expanded revenue base generated through the trading of carbon
credits:
Obviously its a positive thing for Enviros (the introduction of the CFI and carbon tax), its a
part of our generation of carbon credits that we can sell on the market to other entities that have
a carbon liability (Management Accountant).
In addition to these financial benefits, another consequence of the introduction of the

carbon tax was that of a minor organisational re-structuring accompanied by a
modification of the duties and responsibilities of some staff. Enviros Chief Generations
Officer explained the role of these new organisational arrangements:
We do have a lot of things put in place over the last couple of years that we didnt have in
regard to being able to monitor these things [] weve put some things in place in the last
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couple years because of the carbon tax, to ensure we are compliant across the whole company
(Chief Generations Officer).
Unsurprisingly, the introduction of the carbon tax did invoke feelings of uncertainty
among some employees:
358
Definitely there was a bit of stress theres always going to be a bit of strain and apprehension
surrounding changes. So I guess in that way it would have strained relationships a bit more
and made people more anxious in general (Chief Financial Officer).
In response, management endeavoured to ensure that employees were well-informed

about how the change would affect them, and to allay fears about future operations and
directions of the company:
I think there was a phase where people were worried about their jobs, and as senior managers
we actually made a very focused effort to get around to all the individual groups to talk about
what was happening (Commercial Manager).
Efforts undertaken by management included formal measures, primarily through

seminars and workshops, and the publication of a weekly electronic update to all
employees on the carbon tax and the initiatives planned by Enviros in response. These
formal efforts, however, were also supplemented by more informal means:
We made a point of chatting to people informally and keeping them up to speed about what
was happening and what we were doing about it (Communications and HR coordinator).
In summary then, the introduction of the carbon tax, although not significantly altering
the nature of Enviros business, did involve changes to Enviros primarily in relation to
the market opportunities and expanded opportunities for revenue growth. Enviros
management also recognised a need to manage apprehension and concern of staff
arising through the organisational restructuring and communication program that
occurred as a direct response to the change. These efforts in effect preserved the
interpretive schemes within those parts of the organisation most affected by the
introduction of the carbon tax, and had the effect of ensuring that the ramifications of
the disturbance were restricted to changes to the design archetypes. The changes also
had definite control implications in the organisation, and it is towards a deeper
consideration of the ways in which Enviros formal and informal controls responded to
these changes that our attention now turns.
5.2 The role of formal MCS in responding to the change
The different ways in which diagnostic, beliefs, boundary and interactive systems were
implicated in the change process at Enviros are described as follows.
5.2.1 Diagnostic control systems. The diagnostic use of control was central in
Enviros efforts to ensure compliance with the regulatory requirements of the carbon tax
legislation:
There are a lot of external controls that are put on us through the audit process and
methodologies and the ways we must do things. [] there are two different sides to the coin
here our own controls versus controls that are imposed upon us externally as well (CFO).
Under the CFI, Enviros had to alter a number of its projects to be able to create ACCUs,
as distinct from the carbon credits required under the previous legislation. This
transition was expensive and time-consuming. It involved changing data collection
processes, meeting new compliance criteria and modifying operational functions (such
as certifying the calibration and metering of componentry more regularly). Importantly,
the introduction of the carbon tax brought with it, an obligation under the act for
increased auditing of Enviros operations by external auditors:
Under the previous scheme we still had audits, but the requirements of the carbon tax
legislation were a lot more stringent. The audit requirements are now a lot higher and they
happen every time we claim ACCUs (Commercial Manager).
As part of the compliance process, all spreadsheets which determined the number of
ACCUs to be created at each site had to be recreated to comply with the new rules and
regulations of the CFI. This process was described as very intense (Communications
and HR Manager), involving several complex formulas which took considerable time to
develop:
The spreadsheets are quite complicated, with lots of formulas used to determine the number of
ACCUs to be created for each site. These spreadsheets will need to be replaced/changed when
the Emissions Reduction Fund is implemented. Hence, there is a lot of detailed work involved
[] (Communications and HR Manager).
Prior to external auditing, these changes and the reports and audit trail generated were
discussed between the managers responsible for these particular areas (Gas Manager,
Engineering General Manager, Construction Manager, Operations General Manager
and the CFO) to understand variances, and ensure the accuracy of the reports generated.
The focus on monitoring and correcting deviations from pre-set standards of
performance represents a traditional role of MCS used in a diagnostic fashion; however,
the expanded reliable revenue source and a greater market for the trading of carbon
credits through the creation of ACCU certificates also necessitated the use of control in
a diagnostic manner:
It has been financially very positive and beneficial to us, because we were selling NGACs from
anywhere from $5-$15, and suddenly were getting $23 for the ACCUs (Corporate Counsel and
Company Secretary).
Despite the changes introduced in response to the new legislation, the staff interviewed
generally believed that the transition and associated changes to the diagnostic role of
MCS was a relatively easy and undisruptive one, due to the fact that Enviros was
already in the carbon market, and the perception that the current budgeting and
forecasting procedure was fairly robust and thorough:
Fundamentally, everything we already had in place, so we could address procedurally what
was required. That was certainly a distinct strategy; we didnt want to change what we did
what this new scheme needed was to as much as possible fit how we already did business
(Environmental and Compliance Officer).
5.2.2 Boundary systems. The effect of boundary systems augmented that of the
feedback information flows that were facilitated by the diagnostic use of control. One
particularly evident boundary control frequently conveyed in the interviews as a
nonnegotiable related to how the organisation traded ACCUs. Enviros employees
signing the contract for the sale of ACCU were expressly prevented to transfer the
credits. The transfer of credits was the responsibility of the Commercial Manager, and
Management
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this separation of duties was designed to prevent potential fraudulence, and also acted
as a means of validation:
When we trade ACCUs, I will sign the contract but I will not transfer the credits. There is
always that separation otherwise it gets very easy for fraud to occur (Commercial Manager).
360
A second boundary control resulted from the fact that the ACCUs created were now
deemed a financial instrument. Because Enviros was now eligible to participate in the
trading of ACCUs, they had to obtain an Australian Financial Services License, and
comply with the Anti-Money Laundering and Counter-Terrorism Financing Act (2006):
The carbon credits actually became a financial product, which was then regulated - so you
need an Australian Financial Services License to be able to trade them, talk about them, and
give advice on them. We had to make sure that employees had that proper training (Business
Development Manager).
Consequently, to demonstrate compliance with the Act, Enviros was particularly careful
to ensure that only those individuals who had received this training were permitted to
discuss the trading of ACCUs with actual or potential customers. In so doing, the
organisation sought to minimise, if not entirely avoid, exposure to legal risks in this area
of the business. Noticeably, apart from these two instances, there was little evidence of
boundary control designed to constrain or limit behaviour of employees specifically in
relation to the introduction of the carbon tax.
5.2.3 Interactive control systems. Over the change period, the CEO made numerous
visits to managers and employees across the company in various states, to discuss the
implications of the carbon tax for the business. The primary purpose of these visits was
to resolve anxiety in employees who were uncertain about what it meant for the
direction of the company in light of the introduction of the carbon tax, and the
considerable political debate on this issue and resultant media attention it had attracted
in Australia:
The CEO and our lawyer went and spoke to all the groups to explain what had happened and
that jobs were quite secure (Financial Controller).
In addition to providing a mechanism to allay the fears and concerns of employees, these
visits represented a vehicle for the exchange of information concerning the
opportunities and threats encountering the organisation in positioning itself to respond
to the new legislation.
The budgeting process also acted in an interactive fashion. In addition to the
traditional and diagnostic-oriented exception reporting through discussions of
variances, the budgeting of revenues associated with ACCUs involved a continual
exchange between the senior management team and lower levels of management, as
well as interactions within various levels of management across functions:
We budget every year and then theres also a forecast that goes out as well. The whole finance
group get involved and drive the process, but there are also a lot of regular team meetings with
regard to that too (Commercial Manager).
This interaction involved not only participation between subordinates and superiors in
the budget setting process, but also an ongoing dialogue between organisational
members across hierarchical levels, as to why budget variances occurred, how the
system could be adapted and whether any action might be taken in response to these
variances. It is this on-going dialogue that differentiated the interactive from the
diagnostic use of budgets. More than a performance report or forecast, the budgeting
system became a means to facilitate a means by which the organisation was able to
adapt and re-engineer their processes in response to the change in their operating
environment, and in so doing, provided a vehicle for organisational learning, integral to
the interactive use of MCS (Kloot, 1997).
5.2.4 Beliefs systems. Of all the formal control mechanisms in place at Enviros, the
beliefs system was most prominent in facilitating the organisations response to change
resulting from the introduction of the carbon tax.
The formal manifestations of Enviros corporate values, purpose and direction were
embodied in and brought to the attention of managers and employees in two ways. First,
Enviros senior management group developed a document, The Three Pillars
framework, which articulated the companys overall vision, values and strategy they
seek to uphold.
The Three Pillars framework, as mentioned below, which is available to all
employees via the Company website, underpinned an overarching belief system that
represents the core values of Enviros, designed to influence the behaviour of
employees:
(1) Vision: Enhance and grow a world-class renewable energy company. Our vision
is unchanging. We aspire to be the best.
(2) Values: Maintain a culture promoting safety, integrity, fairness and trust. Our
shared values are timeless. These are the core principles distinguishing our
culture.
(3) Strategy: Focus on people, continuous improvement and excellence. Our
strategy is progressive. We are performance-driven to achieve sustainable
success (Source: Enviros company website).
One interviewee explained the considerable significance of these core values in guiding
the change agenda:
We have our vision, values and strategy that pretty much guide employees and signal where
we are going, what we value, and what we strive to achieve (Communications and HR
Coordinator).
The core values as articulated in the Three Pillars framework were reinforced in the
organisations Financial Management Framework Strategy document (see below),
which outlined the responsibilities and expectations underlying the organisations
approach to formal control.
An important part of financial control requires managers to take both financial and
non-financial responsibility for the performance of the areas for which they are
accountable.
To successfully facilitate, this there must be:
a culture of ownership of the corporate performance;
a supportive reporting framework and system which provides managers with the
information they require to enable them to monitor their business unit
performance and report against; and
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362
a structure/process whereby managers are held accountable for the performance

of their areas and are required to regularly report performance against a
benchmark, i.e. budget/forecast, business plan, strategic proposal, etc.
As with the Three Pillars Framework, the Financial Management Framework Strategy
constitutes a type of beliefs systems insofar as it expresses, in a formal fashion, the
organisations core values, broad purposes and strategic directions that senior
management seeks to communicate formally and reinforce to organisational members.
As they are typically, and quite deliberately articulated in broad, value-laden terms,
beliefs systems may arguably be criticised as representing little more than motherhood
statements or tokenistic platitudes. If, metaphorically speaking, the proof of the
pudding is in the eating, then the formal communication of core beliefs of fundamental
importance to the organisation is important only insofar as it is acted upon. The
significance of the beliefs system can be evaluated in terms of not only how it served to
reinforce the organisations basic values and direction in general, but also its influence in
guiding the organisations response to the introduction of the carbon tax. This influence
was most overtly seen in the informal control processes evident at Enviros, and it is
towards an account of how this form of control operated that our attention now turns.
5.3 The role of informal control in responding to the change
Despite the above evidence illustrating the roles of formal MCS, it was the informal
control processes at Enviros that were most influential in responding to the change
associated with the introduction of the carbon tax. The designation of informal control
included informal meetings between managers and between employees and managers,
open channels of communication, ease of informal access to the senior management
group, consensus and participative decision-making, tolerance of mistakes and
consequent learning and sharing of lessons about preparing for and positioning the
organisation to respond to the introduction of the carbon tax. These practices, not based
on formal procedures, are more aptly described as informal processes. Consistent with
Tuckers (2011) arguments, they represent non-formalised, information-based routines,
procedures and practices, and collectively generate and transmit information through
vertical and lateral interpersonal relationships prevailing within the organisation. As
shown above, a number of, what we have labelled, informal practices were raised
repeatedly in the interviews as means by which employees were able to, in the words of
the Commercial Manager, manage beyond the formal controls to get things done
(Figure 3).
Clearly, a simple count of the number of times particular descriptor terms are raised
in interviews does not provide compelling evidence of the presence or absence of a
particular phenomenon. However, these terms do reflect a general theme that ran
throughout our discussions; the pre-eminence of informal means of control in the overall
control package of the organisation. To contextually situate this general theme, we
recount the voices of interviewees in relation to these aspects of informal control.
Informal meetings were commonplace, particularly as they related to resolving or
clarifying issues surrounding Enviros strategy in responding to the carbon tax
legislation:
Management
control
20
18
16
No. of times
mentioned by
participants
14
12
10
8
363
6
4
2
0
Informal meengs
Open channels of
Ease of informal
Consensus and
communicaon access to the senior
parcipave
management group decision making,
Tolerance of
mistakes
Learning and
sharing of lessons
Informal Control Characteristic
Problems that arise are usually solved pretty quickly from informal discussions. [] 99 per
cent of the time problems are solved pretty quickly and easily (Business Development
Manager).
Such informal meetings occurred between employees at the same level, but also between
levels, and did not necessarily follow the reporting relationships shown on the official
organisational chart:
Down through the senior manager level, all managers are very good at effective listening. Its
a consultative decision-making process; there is no real structure to it, its just constant
interaction and communication, and its on a very personal basis. Its not authoritarian, its
very collaborative and I think that works well (Engineering General Manager).
The common practice of internal networking (Chief Project Officer) reflected the open
channels of communication prevalent within the organisation:
There is that interaction where you get senior management that will quite happily talk and
liaise with people all throughout the business on a very informal level. Doors are always open
(Engineering General Manager).
The emphasis placed on collaboration and a team approach to problem-solving was

instrumental in fostering such informal communication:
We like to have management involvement and have people feeling free to talk to management
with a lot of dialogue between and a lot of talking. [] were not sitting in some ivory tower
(CFO).
The downside of such informal approaches to problem-solving, however, was also

recognised:
Weve got a saying that as senior managers if someone is acting in the best interest of the
Company and they make a mistake, they will be supported by senior management. So we
encourage people to try and make the right decision at times we have been caught out (Chief
Projects Officer).
Nevertheless, the tolerance of potential mistakes was seen as a cost of learning

another aspect of the organisational culture that was prominent throughout the
organisation, and fostered by the senior management group, and especially the CEO:
Figure 3.
Informal control
characteristics
described by
interviewees
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364
What we are not about in this organisation is finger pointers when we are wrong []. Id rather
someone have enough courage to walk in to the office and say theyve made a mistake. If they
come in a month later and theyve made the same mistake then weve got an issue, but as long
as we learn from them, we try to move on as soon as we can (CEO).
Individually and collectively, these informal practices were consistent with, and
supportive of, the formal MCS described above. On the evidence presented through the
interviews, however, it was quite apparent that while the formal MCS assisted in
communication and matters of compliance, managers and staff exhibited a definite
predilection to a control style characterised by informality and face-to-face contact. It
was within the context of this informal control regime that formal MCS were used.
6. Discussion
In this section, we first interpret, through the lens of Laughlins (1991) model of
organisational change, the nature and extent of the change to which Enviros was
subject. We then proceed to consider the respective roles of formal MCS and informal
control process and their combined influence in this specific change context.
6.1 The nature and the extent of the change
The introduction of the carbon tax clearly represented what Laughlin might term, an
environmental disturbance, jolt or kick, and one in which rebuttal was not
possible. Quite literally, the carbon tax represented a rule of law for the organisation,
and as key player in the renewable energy market, one which had the potential to
appreciably affect the organisation.
Although Enviros design archetypes were changed to some extent, the sub-systems,
as with the interpretive schemes, remained largely untouched. Thus, in terms of
Laughlins framework, despite the potential to change the fundamental nature of the
business, the organisation was able to absorb the disturbance represented by the
introduction of the carbon tax, and as such, the change pathway undertaken represented
one of reorientation.
Enviros response to the change represented by the introduction of the carbon tax
resonates with the findings of prior empirical investigations that have demonstrated the
propensity for organisations to pursue reorientation pathways in particular change
contexts. These contexts include those in which the jolt cannot be successfully rejected
(Larrinaga-Gonzalez et al., 2001). For example:
in organisations in which the comparative strength of interpretive schemes is
high (Tyrrall and Parker, 2005);
where operations and accountability are primarily focused on compliance (Mir
and Rahaman, 2007); and
where not all systems will necessarily have to respond to the disturbance
(Broadbent, 1992).
Other instances in which external jolts cannot be readily or easily be dismissed have
been observed in situations in which the explicit purpose of the response to the change
is to reinforce the equilibrium of the company, based on conventional business concerns
of economic efficiency (Gray et al., 1995), and most recently, where broader
organisational impact and influences have been brought about by the development of
(and changes to) social and environmental reporting practices (Contrafatto and Burns,
2013). As illustrated in the preceding section, all of these contexts were shown to be
applicable at Enviros.
In essence then, the organisations response to the introduction of the carbon tax was
essentially one of internalising the problem, but in such a way that it did not radically
affect the central core of the organisation. Rather, the disturbance was steered and
guided primarily by the prevailing interpretive schemes of the organisation, but with
changes to the design archetypes in the form of formal control processes, also
contributing to Enviros response to the change.
Management
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365
6.2 The role of the control package in reorientation

Reorientation pathways can be likened to what Broadbent and Laughlin, (2005, p. 17)
metaphorically describe as, punching a sponge. Indeed, the analogy of punching a
sponge closely reflects how control processes were implicated in responding to the
introduction of the carbon tax. Design archetypes represent a particular object of
managerial concern in effecting organisational change (Tyrrall and Parker, 2005), and
as summarised in Table II, the influence of design archetypes in the organisations
Predominant influence
in terms of Laughlins
framework
Form of control
used
Design archetypes
Diagnostic
Boundary
Interpretive schemes
Beliefs
Interactive
Informal processes
How used to manage change

Used on an exception basis to monitored
progress towards the achievement of
specified (budget-related) goals
Directed behaviour according to select
plans, strategies and policies
Delineated the acceptable domain of
activity for organisational participants,
in terms of positive ideals deemed by
the Senior Management Group to be
important
Facilitated ongoing (two-way)
communication about the carbon tax
between top management, middle
management and staff
Loose structures and open
communication encouraged free flow of
information throughout the organisation
Flexibility to encourage adaptive
decision-making and to foster
interactions within the organisation,
characterised by informal access to all
Table II.
Relative influence of
managers, consensus and participative
the design
decision-making, tolerance of mistakes,
archetypes and
consequent learning and sharing of
interpretive schemes
information between employees across
in guiding the control
hierarchical levels
processes used by
Mission and vision implicitly defined
Enviros
and reinforced organisational culture
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response to change was displayed in the diagnostic and boundary uses of formal MCS
(relating principally to internal policy, budgetary or financial reporting) to ensure
compliance through the creation of specialised (accounting or administrative) work
groups. In this way, the design archetypes through the use of such diagnostic and
boundary systems played the role of mechanisms that served to absorb the shock of
the introduction of the carbon tax.
Although as Laughlin (1991, p. 217) notes: any interpretive scheme [] [may accept]
a number of different design archetypes without the coherence of organisational life
being substantially challenged, this is not to say that the interpretive schemes
prevailing within the organisation played a passive, insular role in responding to the
change. Our evidence indicates quite the contrary. As shown in Table II, the influence of
Enviros interpretive schemes was evident in the interactive uses of control, beliefs
systems and the informal control processes. Indeed, both formal and informal control
practices were largely driven by and derived from the interpretive schemes. At the heart
of the use of these controls were the underlying value and belief structure of the
organisations culture, which stressed a sense of common purpose based on the ideals of
openness, ownership of performance and collaboration.
6.3 Culture as a common denominator between formal and informal control?
The pivotal role played by culture in management control has been repeatedly observed
in the management control literature in relation to both formal MCS as well as informal
control processes. Indeed, as Ferreira and Otley (2009, p. 267) explicitly assert, culture
pervades the entire control system. However, empirical studies that unpack the
relationship between formal MCS and organisational culture are sparse (Henri, 2006;
Bhimani, 2003), with culture typically regarded as a contingent variable that may
influence the role and function of an organisations MCS (Ferreira and Otley, 2009; Henri,
2006). In addition to the influence that culture may have on control, however, the use of
formal MCS also contributes to the overall culture and ethos of the organisation. Thus,
the relationship between organisational culture and formal control may be seen as
recursive (Scheytt and Soin, 2005). If we adopt the broad conceptualisation of control as,
the foundation of shared values and assumptions prevailing within an organisation
(Merchant and Otley, 2007, p. 797), then the role of beliefs systems as a manifestation of
organisational culture becomes crucial.
Central to Simons beliefs system are the mission and vision statements and
statement of values that senior management wish to communicate formally and
reinforce systematically to organisational members. However, there is considerable
evidence that such beliefs systems may not be effective unless strongly supported by
alternative mechanisms (Marginson, 2002). For example, top management may
implement a beliefs system (vision, mission and values) reinforced by management in
their daily interaction with employees, specifically intended to encourage certain
behaviour, but the behaviours actually exhibited by employees may, in reality, differ
from those communicated by the beliefs system (Tuomela, 2005). In short, what is
broadcast and proclaimed by the beliefs system may be decoupled from the reality of
how employees behave and how the organisational culture may manifest in practice.
The propensity for such decoupling is important. Although formal vision and mission
statements project an image of rationality, reinforce an organisations efforts to produce
cohesion and can outwardly and consistently present appearances of professionalism
(Parker, 2007), it has also been argued that they can also be symbolic window-dressing
that largely represent exercises in image management (Grant, 2003), with little or no
impact on the processes of management (Scapens, 2006), or the thinking of managers
(Langfield-Smith, 2007).
At Enviros, it was difficult to discern any evidence whatsoever that suggested such
decoupling[5]. In the majority of interviews, the beliefs system as articulated in the
Three Pillars framework, Financial Management Framework Strategy or the Strategic
Growth Options Paper was repeatedly stressed in our interviews as significant in
guiding the behaviour of staff, irrespective of their level in the organisation, in their
formal and informal relationships, interactions and problem-solving efforts. The
informal control processes within the organisation were repeatedly reported as
consistent with the norms, core values and tenets of the organisation as articulated in
Enviros corporate documentation. The primacy of the organisations beliefs systems in
orchestrating formal and informal control efforts therefore reflected what might quite
appropriately regarded as a strong culture. This finding provides empirical support
for the contention that organisational culture can represent means rather than mere
premises of control (Merchant and Van der Stede, 2006), particularly in contexts of
change (Sandelin, 2008).
6.4 The predominance of informal control
The findings of the current study add to the growing management control research that
has documented a predominance of informal control processes over formal MCS in a
range of quite diverse contexts and settings (Marginson, 1999, 2002; Parker, 2001, 2002;
Norris and ODwyer, 2004; Collier, 2005).
As with these studies, the current investigation illustrates that although formal MCS
and informal control operate simultaneously, the latter form of control often
predominates over the former by virtue of the propensity for social interaction,
self-regulation and orchestration (Hkansson and Lind, 2004; Mouritsen and Thrane,
2006). This finding is consistent with prior research that has concluded that in
environments of uncertainty, as is the case at Enviros, informal controls assume a
significant profile (Cooper, 1981; Granlund and Taipaleenmki, 2005). Indeed, the
pre-eminence of informal control and its role in managing and orchestrating change
resonates with the contention of Otley and Soin (2014), who note the necessity of
organisational change to be accompanied by a change in formal MCS. However, as Otley
and Soin suggest, in environments characterised by change whether they stem from
internal or external changes it is likely that formal control, may be always catching up
with the changes that surround it (Otley and Soin, 2014, p. 7). This, they argue, is due to
the unavoidable time-lags inherent in updating formal control systems. Such time-lags
were identified in the efforts of the organisation to adapt to the changes necessitated by
the introduction of the carbon tax. They also provide a potential explanation for the
dominance of informal control processes over the formal MCS at Enviros; although
formal MCS were developed (and subsequently successful) in response to the
introduction of the carbon tax, the heterogeneous and distinctive organisational culture
was found to be instrumental in painting the big picture of how control is enacted by
providing a backdrop whereby the pixels of formal MCS were given greater resolution
by the subtle, yet more pervasive and foundational influence of informal control.
Management
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7. Concluding comments
This paper set out to explore the respective roles played by formal MCS and informal control
in managing organisational change. Our findings indicate that formal MCS and informal
control played complementary roles in the organisations response to change. Formal MCS
provided a means by which compliance with the carbon tax could be achieved, but it was
informal control that enabled Enviros to, in the words of one of our informants, get things
done. Change environments such as the one within which Enviros is operating are
characterised by a high degree of ambiguity and uncertainty (Otley and Soin, 2014). This
environment was counteracted with a culture that encourages and genuinely values
participation, co-ordination and open communication across geographic, hierarchical and
functional boundaries, and this culture has provided both the genesis and evolution for
formal MCS, but more markedly, informal control within the organisation.
The primary theoretical contributions offered by this study relate to a deeper
understanding and articulation of one setting under which formal MCS and informal control
processes combine in a complementary way to manage organisational change, the centrality
of informal control in this process and the principal influence of organisational culture on
both formal and informal components of the overall control configuration of an organisation.
Our study provides a local example of empirical flesh that Laughlin (1991, p. 210) calls for
to make the more invariant skeletal model he advances, more meaningful.
As with all research, the current study is subject to limitations. First, the study required
Enviros managers and employees to recall the management controls and their influence
over a period spanning several years. Such a retrospective approach exposes this study
subject to various kinds of recall biases due to the possibility of ex post rationalisation, and
this could represent a threat to the integrity of the data. Second, the nature of the
investigation may have encouraged participants to present a more rational and idealised
characterisation of management control procedures than may actually exist. Although our
data collection protocols attempted to minimise this risk, it is possible that a social desirability
bias may have distorted our findings, suggesting a need for caution in interpretation.
Despite these limitations, the findings of this study suggest avenues for further enquiry.
This investigation provides empirical evidence about the ways in which formal MCS and
informal control processes implicated in the management of organisational change. In
Enviros, the nature of the change experienced was one of reorientation. However, it is
necessarily silent on the ways in which formal MCS and informal control processes are
implicated in organisations that have undertaken change pathways of rebuttal, colonisation
or evolution. Further research that compares and contrasts the operation of management
control packages under these quite different change pathways would provide additional
insights into the operation of management control as a package, and in so doing, further
contribute to further theory development in this area.
A second opportunity for further research is the exploration of how management control
packages are configured in large organisations. How the control package is constituted at
different organisational levels in such contexts would also serve to refine and develop
management control theory, as would investigations that examine how control packages
relate to each other across organisational units, and at different organisational levels.
Finally, the question of why informal control appears so influential in organisations
control constructions, perhaps leading to a more robust and accepted conceptualisation
of informal control, would appear to be a topic worthy of empirical investigation, and
one which is arguably long overdue.
Notes
1. For example, the relationship between MCS and strategy (Marginson, 1999, 2002; Kober et al.,
2003, 2007); the effect on product innovation (Bisbe and Otley, 2004); budgetary control and
strategic adaptation (Frow et al., 2005); management control practices in new economy
firms (Granlund and Taipaleenmki, 2005); the introduction and use of performance
measurement systems (Tuomela, 2005; Henri, 2006); the effect of top management team
heterogeneity on strategic change (Naranjo-Gil and Hartmann, 2007); in response to
strategic risk and uncertainty Widener (2007); the creation of dynamic tension Mundy
(2010); and relation between leadership styles and use of the planning and control system
(Abernethy et al., 2010).
2. It should be stressed that numerous scholars have drawn attention to the different labels
attributed to the phenomena labelled by Laughlin (1991 as interpretive schemes. These
include, ideology (Brunsson, 1985), cognitive schemata (Bartunek, 1984) and culture
(Smircich, 1983). Following Mir and Rahaman (2007) and Tyrrall and Parker (2005), we use
these terms interchangeably in this paper.
3. For confidentiality purposes, the pseudonym Enviros is used to identify the case organisation.
4. A pseudonym used for confidentiality reasons.
5. Although readers adopting a more critical epistemology may find this claim dubious, in spite
of our best efforts, we found (surprisingly) no evidence in our discussions that contradicted
this assertion. We return to this point in the limitations section of this paper.
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Appendix 1. Summary of archival data
Strategic Growth Options Paper
This paper, written in December 2011, provided a summary of Enviros future growth
opportunities and their proposed strategy.
Financial Management Framework Strategy
This paper details Enviros Financial Management Framework (FMF), including proposed FMF
strategy and the elements of that strategy, corporate governance discussions and the growth
issues facing the organisation.
Emissions from Landfill Facilities Fact Sheet
This paper, provided by the Australian Government, explains landfill emissions and carbon
pricing, and how they might apply to local governments and other operators. This paper was
useful in gauging a preliminary understanding of what the carbon tax is about. It discussed which
companies will be liable under the carbon price, how to measure and report landfill emissions and
information about the CFI and the Renewable Energy Target.
2012 and 2013 Holding Corp Ltd. Annual Report
The financial reports of Holding Corp Ltd. from 2012 and 2013 provided information about
Enviros financial performance, and the information they disclosed about the carbon tax.
Holding Corp Ltd. 2013 Sustainability Report
This report provided information about Enviros and the carbon tax.
Enviros Renewable Energy Target Review September 2012
This document was sent from Enviros to the Climate Change Authority of the Australian
Federal Government. The paper outlines the organisations responses to a host of questions
regarding the Renewable Energy Target.
Organisational chart
This was a basic organisational chart outlining employees, positions and reporting relationships.
Enviros eNews company newsletters
This company document, published monthly, reports on all aspects of the business, including
safety reports, strategic plans, site performance and company goals and objectives.
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Appendix 2. Interview questions areas of inquiry

1. Could you tell me a little bit about your role and how long you have been at the
organisation?
2. What is the carbon tax? What does it mean for the organisation? How does it affect your
position?
3. What were the implications/effects of the introduction of the carbon tax on the
organisation? Who was affected by it? How were they affected? What did the introduction
of the carbon tax mean for everyday processes, procedures, operations, what people did/
do/will do? Can you provide examples?
4. What is the organisations position on the current legislation? How does the organisation
manage the uncertainties surrounding the future of the carbon tax, and the potential
Direct Action Plan that is set to take over?
Appendix 3
Table AI.
Participant
information
Duration of
interview (minutes)
Participant tenure of
employment (year)
4 August 2014
4 August 2014
4 August 2014
4 August 2014
42
36
23
38
18
4
16
2
4 August 2014
7 August 2014
28
36
2
3
7 August 2014
33
7 August 2014
7 August 2014
7 August 2014
25
38
39
2
18
16
8 August 2014
41
8 August 2014
8 August 2014
8 August 2014
15 August 2014
31
37
41
24
6
2
5
12
Position title
Date interviewed
Chief Executive Officer

Corporate Administration Manager
Chief Project Officer
Management Accountant
Environmental and Approvals
Officer
Business Development Manager
Compliance and Documentation
Coordinator
Corporate Counsel and Company
Secretary
Financial Controller
Chief Generation Officer
Environmental and Compliance
General Manager
Communications and Human
Resource Coordinator
Engineering General Manager
Commercial Manager
Chief Financial Officer
Corresponding author
Basil Phillip Tucker can be contacted at: basil.tucker@unisa.edu.au
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Unpacking the package

Management control in an environment of

Mark Evans and Basil Phillip Tucker

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2.2 Management control and organisational change

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entrepreneurial environments (Collier, 2005);

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Tucker does not purport to provide a conclusive understanding of informal control.

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The relationship between interpretive schemes, design archetypes and sub-systems is

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however, they do not affect interpretive schemes[2]. In contrast, disturbances of a second

Type of organisational change

Characteristics of the change response

Source: Adapted from Laughlin (1991)

interpretation in fundamentally different ways (Covaleski et al., 1996). Far from an

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4. Study design and methods

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4.3 Data sources

New South Wales

23rd August, 2011

July 1st 2012

NSW GGAS ended, Carbon

Carbon Farming Initiative

17th July 2014

Carbon Tax Repealed

Prime Minister Abbott

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5.1 The nature and extent of the organisational change

In addition to these financial benefits, another consequence of the introduction of the

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In response, management endeavoured to ensure that employees were well-informed

Efforts undertaken by management included formal measures, primarily through

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a structure/process whereby managers are held accountable for the performance

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Informal Control Characteristic

The emphasis placed on collaboration and a team approach to problem-solving was

The downside of such informal approaches to problem-solving, however, was also

Nevertheless, the tolerance of potential mistakes was seen as a cost of learning

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6.2 The role of the control package in reorientation

How used to manage change

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