Managing Organizational Culture for Effective Internal Control: From Practice to Theory (Contributions to Management Science)

In times of economic and financial crises, the content of this book rings true. While we often look at formal compliance procedures, incentive systems and other ‘technical’ ways to ensure effective internal control, this study emphasizes a different perspective: How do the management principles and practices influence organizational culture in order to enhance control effectiveness? New theory is provided on the way that tone at the top – leadership, sustainability, accountability, and other social control aspects – is combined with formal control. The research is based on in-depth interviews with senior-level people (e.g. executives, managers, auditors) from more than 18 renowned U.S. and Swiss companies, and theory from fields of sociology and social psychology. In contrast to contemporary accounting and control research, where culture provides a context for control, here any control mechanism can in turn influence culture. The study offers innovative insights for both academics and practitioners including: a) a new research framework for analyzing the links between culture and control; b) statements from senior-level people of eBay, Google, Hewlett Packard, Intel, Levi Strauss & Co., Microsoft, Motorola, Novartis and many more; c) a practice-oriented tool to proactively mitigate typical roots of internal control failures; d) integrated theory on social systems, personal and organizational values and organizational corruption; e) a foreword from Solomon N. Darwin, University of California at Berkeley. Physica-Verlag Heidelberg Contents 12 1. Introduction 22 1.1 Need for the Study 22 1.1.1 Current Issues in Practice 22 1.1.2 Stage of Research 25 1.2 Research Objective 27 1.3 Research Design 29 1.4 Organization of Study 32 Part I: Groundwork 34 2. Basics 36 2.1 Internal Control 36 2.2 Organizational Culture 54 2.3 Summary 64 3. Literature Review 66 3.1 Linking Control and Culture 66 3.2 Internal Control 67 3.3 Management Accounting and Control 76 3.4 Research Theses 84 Part II: Field study 92 4. Drivers for Control Effectiveness 94 4.1 Purpose of Field Study 94 4.2 Methods 96 4.3 Findings 108 4.4 Discussion and Evaluation 130 4.5 Summary 136 Part III: Theoretical explanations 138 5. Capturing Culture 140 5.1 Purpose of the Theoretical Explanations 140 5.2 Theory-Building versus Theory-Testing 142 5.3 Choice of Theories 145 5.4 Summary 147 6. The Organizational Level 148 6.1 Setup 148 6.2 Culture as the Social System 150 6.3 Transfer between Culture and Environment 156 6.4 Implications 163 7. The Individual Level 166 7.1 Setup 166 7.2 Values at the Individual Level 167 7.3 Tension between Organizational and Individual Interests 170 7.4 Implications 176 Part IV: Synthesis 180 8. A Framework for Control and Culture 182 8.1 The Framework 182 8.2 Application 192 8.3 Critical Reflection 199 8.4 Summary 208 9. Conclusion 210 9.1 Key Results 210 9.2 Contribution 213 9.3 Generalization 215 9.4 Research Opportunities 217 9.5 Final Remarks 219 Appendix A: List of Interviewees 220 Appendix B: Company Information 224 Appendix C: Data Analysis 226 Appendix D: Interview Questions 252 References 256 About the Author 266 ISBN-13:,9783790823394 In times of economic and financial crises, the content of this book rings true. Drawing from interviews with executives, senior managers and/or auditors from renowned companies (eBay, Google, Hewlett Packard, Intel, Levi Strauss & Co., Microsoft, Novartis and many others) and theory from fields of sociology and social psychology, this research study provides an understanding of how "tone at the top" imprints on an organization and why that imprint works. More specifically, it discusses how managers' principles and practices can actively shape an open-minded culture that enhances effective internal control. Front Matter....Pages i-xx Front Matter....Pages 13-13 Introduction....Pages 1-12 Basics....Pages 15-44 Literature Review....Pages 45-69 Front Matter....Pages 71-71 Drivers for Control Effectiveness....Pages 73-115 Front Matter....Pages 117-117 Capturing Culture....Pages 119-126 The Organizational Level....Pages 127-143 The Individual Level....Pages 145-158 Front Matter....Pages 159-159 A Framework for Control and Culture....Pages 161-188 Conclusion....Pages 189-198 Back Matter....Pages 200-245