Everything Under Control?

Victor van Pelt - 23. November 2023

Tips for Practioners

Managers implement various controls, such as monitoring, formal procedures, and guidelines, to ensure employees stay on the right track. Although abundant research and knowledge exist on how managers make control decisions (and how employees respond to them), little is known about what happens afterward. How do their control decisions develop over time? How do managers revise control decisions they have made in the past?

Understanding how managers revise control-related decisions is crucial because many external factors warrant change. For example, as technology becomes more sophisticated, strict control becomes much cheaper to implement, as indicated by the recent emergence of dashboards to monitor performance. Elsewhere, many jobs have evolved and require specific knowledge, more flexibility, and more creativity—key factors that are hampered by strict controls.

So, this begs the question: How do aspiring managers revise control decisions they made in the past? A recently published study uses a powerful yet simple design to provide some answers. Aspiring managers were asked to make a series of decisions on how strongly to control the decision of another person. The study varied whether the cost of controlling the decision of the other person decreased or increased at different moments in the study.

Ideally, managers should be equally willing to decrease their level of control when costs increase as they are to increase control when costs decrease. However, consistent with psychology-based predictions, the results exhibit an asymmetric adjustment pattern. Managers decrease their control less when control costs increase than they increase their control when control costs decrease.

What drives this reluctance to decrease their level of control? The findings reveal that the asymmetric adjustment pattern diminishes when managers experience the change in control costs earlier rather than later. Thus, the length of prior controlling experience is a crucial driver behind managers’ disproportionate reluctance to let go of control. The longer they have exerted control over other people’s decisions, the more reluctant they are to relinquish their control.

These findings offer a cautionary note for firms, regulators, and institutions. Those in a position of power may quickly increase the degree of control at the workplace but not reduce it with the same conviction. Also, those responsible for the controls in the real world may lack or even actively avoid information that would help them rethink past decisions. Accordingly, introducing new and perhaps stronger controls may lead to what is known as “control creep,” wherein the degree of control is allowed to progressively increase over time.

This documented asymmetry in how managers update their controls is also consistent with regulatory changes. For example, it is frequently argued that the strength of the controls in corporate and institutional settings has increased over time. Commonly cited reasons include stricter regulations and lower control costs due to advancements in information technology and AI. However, the results of this study suggest that those responsible for making and revising control decisions also play an important role in increasing the degree of control. To prevent unnecessary control creep from spreading, firms and institutions may want to consider imposing time restrictions on those responsible for calibrating controls. In addition, implementing a rotating schedule can ensure that no single person is responsible for the same control-related decisions for too long.

Literature reference and methodology

In the study "Asymmetric Adjustment Control", aspiring managers made a series of decisions on how strongly they felt it necessary to control the autonomy of another person. The associated costs of controlling that other person decreased or increased at different moments during the experiment.

• Van Pelt, V. F. J. (2023): Asymmetric Adjustment of Control, in: Contemporary Accounting Research, July 10, 2023. https://doi.org/10.1111/1911-3846.12886.