The paradox of management control and employee empowerment by Rachael Nash, David A. Brown and Nicole Sutton Discussant: Albrecht Becker The paper deals with the "organizing paradox" between the opposing pressures for employee empowerment and for management's accountability and the role management control systems (MCS) play in creating and mitigating these paradoxical tensions. Nash, Brown and Sutton develop a typology of forms of empowerment and discuss the role MCS and accountability play in creating, enhancing, and mitigating the paradoxical tensions related to each type of empowerment. Summary of the argument Organizations face two opposing pressures: On the one hand, empowerment, understood as granting individuals discretion on decisions and/or action is seen today as prerequisite for developing organizational capabilities and thus securing long-term success of organizations. On the other hand, increased pressures for corporate accountability translates into increased management control thus restricting individual organizational members' discretion. Referring to a recent Academy of Management Review paper by Smith and Lewis (2011), Nash et al. characterize these opposing forces as "organizing paradox". An organizing paradox is defined as "contradictory yet interrelated elements that exist simultaneously and persist over time" (Smith & Lewis, 2011, p. 386). Nash et al. argue that: "It is in the design and use of management control systems (MCS) that the organising paradox is manifest" (p. 3) because in defining the level of autonomy and discretion of employees they accommodate both (the level of) employee empowerment and (the level of) restrictions on empowerment. In trying to implement MCS that facilitate both employee empowerment and management control this organizing paradox is both created and mitigated. Smith and Lewis' (2011) "dynamic equilibrium model of organizing" postulates that it is necessary for an organization's long-term survival to create a virtuous circle of dealing with paradoxical tensions. This virtuous circle comprises four stages: (i) Paradoxical tensions normally exist as latent tensions; (ii) to be dealt with fruitfully they have to be transformed into salient tensions. (iii) These salient tensions must not only be perceived but also accepted; management has to embrace them by defining them as opportunities for creativity and change. (iv) A sustainable solution for handling these paradoxical tensions is a strategy of attending to both sides of the tensions in an iterative way, attending one side without forgetting the other and keeping open to switch to a mode of attending to the other side of the tension. document1 10.02.2016.04:54 Albrecht Becker. Discussion of Nash et al. 2 The paper by Nash et al. applies this model to the paradox of empowerment and control. For analyzing this paradox further they distinguish two "dimensions" of empowerment: Structural empowerment refers to the formal decentralization of authority as instantiated in organization structure. The second dimension of empowerment is psychological empowerment comprising four cognitions of individual employees – the cognitions of meaning, competence, self-determination, and impact – which taken together will give them a feeling of empowerment and is manifested in increased intrinsic motivation and self-efficacy. Forms of accountability relations that are embedded in MCS mediate between structural and psychological empowerment. Figure 1: Alternative forms of empowerment (p. 14) These two dimensions of empowerment may be distinguished analytically and may be related in a 2 x 2 matrix to identify four distinct "alternative forms of empowerment" (see figure). Each of these four configurations provides specific conditions for applying the idea of creating a dynamic equilibrium though initiating virtuous circles. In low empowerment (the "iron cage") management control is instantiated in the hierarchical organization structure and in MCS which hold employees individually accountable through calculative practices thus establishing an individualizing form accountability (Roberts, 1991). The paradoxical tension remains latent and may therefore not be managed positively. Illusionary empowerment (the "glass cage", Yannis Gabriel) is characterized by management's attempt to psychologically empower the employees without granting structural empowerment. In this situation there is a certain amount of acknowledgment of document1 10.02.2016.04:54 Albrecht Becker. Discussion of Nash et al. 3 the paradoxical tension, but this is restrained by the impossibility to discuss the contradiction between lack of structural empowerment and proclamation of psychological empowerment. This "undiscussability" is fostered through the interplay of individualizing accountability (lack of structural empowerment) and socializing accountability (Roberts, 1991) introduced through measures of lateral accountability in team structures. The authors speak of obstructed empowerment when employees are structurally empowered but psychologically disempowered. In situations where empowerment is not wished by management but rather a necessity due to, for example, special qualifications of employees, structural empowerment may at the same time be accompanied by measures to frustrate employees' sense of meaning, competence, self-determination, and impact through the design of MCS. Then, lateral and socializing forms of accountability resulting from structural empowerment may get in conflict with individualizing forms resulting from psychological disempowerment. The paradoxical tension of empowerment and control may then be salient but it is not possible to enter a virtuous circle of creating a dynamic equilibrium. In authentic empowerment management both structurally and psychologically empowers employees. Authentic empowerment unfolds the potential of lateral/socializing accountability. This helps members of the organization to accept the tension of discretion and control and thus provides the ground to enter a virtuous circle of iterative attention to both sides of the tension. Summarizing the argument in a somewhat over-simplified and probably also polemic manner, we see that in the case of low empowerment, there is no problem with the paradox of empowerment of control because the structure of the situation is harmonious. Authentic empowerment represents the enlightened and democratic organization where conflict and paradox may be discussed openly and everyone trusts management to do the right thing at the right time. Both illusory and obstructed empowerment represent inharmonious configurations and therefore paradoxical tensions may not be transformed from latent to salient, or from salient to accepted tensions. Issues for discussion The "tensions" or contradictions between control/power/domination on the one hand and discretion/scope for action/freedom on the other are a real classic, and it is no wonder that we find Talcott Parsons' term of the iron cage, which is his translation of Weber's notion "stahlhartes Gehäuse", the shell as hard as steel, which has originally been published in 1904. document1 10.02.2016.04:54 Albrecht Becker. Discussion of Nash et al. 4 And I think we do not need to debate the relevance of this tension for MCS in principle; it is obvious. However, I think it is worth looking at the way this paradox is theorized in the paper. It is not clear to me what Nash, Brown and Sutton see as the cause or origin of the paradox. In the introduction they state that this paradox originates from contradictory external pressures: on the one hand, from "demands to facilitate the empowerment of employees" (p. 1) or "calls for greater empowerment" (ibid.) which originate in the "needs for creativity and flexibility" (p. 2) and, on the other hand, "pressure" for increased corporate accountability originating from shareholders, company boards etc. (p. 2). Both types of pressures seem to be associated with "contemporary business environments" (p. 1) and should, thus, be historically contingent. But at the same time, the underlying "dynamic equilibrium model of organizing" (Smith & Lewis, 2011) seems to clearly speak a functionalist language. The idea of an organizational equilibrium – be it static or dynamic – implies objective functional requirements of organizational survival – in this case, inherently contradictory functional requirements. If these paradoxical tensions are resolved "via iterating responses of splitting and integration" (Smith & Lewis, p 389, fig. 3) sustainability and long-term success of the organization will be achieved. Why is the question of functionalism vs. institutionalized pressures important? If we follow the functionalist reasoning, only organizations should survive in the long term that exhibit authentic empowerment. If we observe bureaucracies, glass cage organizations or obstructed empowerment the respective organizations should cease to exist in the long term. But what is the appropriate time-frame? A second issue I am struggling with is the relation between structural and psychological empowerment and how both are mobilized to distinguish four forms of empowerment. Structural empowerment has been defined as formal decentralization of authority, whereas psychological empowerment means the feeling/experience of being empowered. In this way, structural empowerment might be seen as antecedent of psychological empowerment, but the authors seem reluctant to say so when discussing this relation (p. 9); I have not really understood why. In their implications section they then provide a somewhat different story: Structural empowerment refers to the design of MCS while psychological empowerment is seen as the outcome of MCS use (p. 35). Therefore, in the cases where there is consistency between design and use – low empowerment and authentic empowerment – the paradoxical tension is either happily ignored or competently resolved. In the other cases with inconsistency between design and use – illusory and document1 10.02.2016.04:54 Albrecht Becker. Discussion of Nash et al. 5 obstructed empowerment – the paradoxical tensions should unfold their dysfunctional potential. However, I really have problems to understand this – besides the issue that it is inconsistent with the functionalist perspective behind the equilibrium model. Take the example of illusory empowerment. The MCS in this context is depicted as exhibiting tight administrative controls and the managerial discourse is characterized by the pretense of empowerment. But is this creating a false impression of empowerment adequately described by the notion of MCS use? I think not. In this case we would probably better speak about an ideological discourse. I also see problems in the construction of the 2 x 2 table of forms of empowerment. What do the two dimensions really comprise? While I can see that the y-axis depicts a high or low amount of formal delegation I did not really understand what the x-axis stands for. If we refer to the design/use dichotomy, this would imply a use of MCS (or other organizational measures) as if it would exhibit a high or low amount of structural empowerment – no matter how the MCS is designed. However, if we take the original definition of psychological empowerment, there are two possibilities: An observed/measured high or low cognition of meaning, competence, self-determination, and impact by the employees. This interpretation is probably not what the authors have in mind as they seem to assume that the value on the xaxis may be directly influenced by management's efforts. Then this dimension would comprise management's efforts at indoctrination to let the employees believe that there is a high/low amount of empowerment. I am not really satisfied with all these possibilities. Summing up my comments, maybe the paper is not at all about the paradoxical tension between management control and employee empowerment. Probably, it is rather about configurations of MCS and the organizational discourse about/around control? Or to frame it in the terminology of Malmi and Brown (2008), it is about the internal tensions between cultural controls, planning, cybernetic controls, reward and compensation systems, and administrative controls, that is the concrete forms of MCS packages and the organizational discourses about/around them. References Malmi, T. & Brown, D.A. (2008). Management control systems as a package: Opportunities, challenges and research directions. Management Accounting Research, 19, 287-300. Roberts, J. (1991). The possibilities of accountability. Accounting, Organizations and Society, 16, 355-68. document1 10.02.2016.04:54 Albrecht Becker. Discussion of Nash et al. 6 Smith, W.K. & Lewis, M.W. (2011). Toward a theory of paradox: A dynamic equilibrium model of organizing. Academy of Management Review, 36, 381-403. document1 10.02.2016.04:54