How Top Managers Use the Entrepreneurial Gap to Drive Strategic Change

European Accounting Review, 2020

45 Pages Posted: 29 Jul 2020

See all articles by Robert Simons

Robert Simons

Harvard University - Business School (HBS)

Tony Davila

University of Navarra - IESE Business School

Date Written: June 26, 2020

Abstract

Prior research provides strong evidence for the association between business strategy and the design and use of management control systems. We complement this research by examining the role of management control systems in situations of strategic change. We report the results of an in-depth longitudinal field study of Henkel, a German multinational company, from 2008 through 2013. During this period, the company declared a new strategy. To implement this strategy, senior management purposefully misaligned span of control and span of accountability — labeled the entrepreneurial gap — to stimulate individual initiative and higher levels of performance. Our description of how top managers enacted change suggests a strong relationship between management control systems, organizational structure, and cultural norms that together support desired outcomes. In addition, we provide evidence on the timing and sequencing of actions by top management. By the end of our study period, Henkel was a top performer in its various markets and was leading the German blue-chip index in stock returns.

Keywords: Management control, performance evaluation, performance measurement, strategy, strategic change

Suggested Citation

Simons, Robert and Davila, Antonio, How Top Managers Use the Entrepreneurial Gap to Drive Strategic Change (June 26, 2020). European Accounting Review, 2020, Available at SSRN: https://ssrn.com/abstract=3642478

Robert Simons

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Antonio Davila (Contact Author)

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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