Uncharted Waters: Exploring the Relationship between Strategy Processes and Management Control Systems in the Nonprofit Sector

• DOI: http://doi.org/10.1002/nml.21083
• Date: 01 September 2013
• Published date: 01 September 2013
• Author: Basil P. Tucker,Bruce W. Gurd,Helen Thorne

Uncharted Waters

Exploring the Relationship

between Strategy Processes and

Management Control Systems

in the Nonprofit Sector

Basil P. Tucker, Helen Thorne,

Bruce W. Gurd

University of South Australia

The way in which strategy and management control combine

has been the subject of much research attention, but rarely,

within a nonprofit context. This is surprising, not only because

of the considerable social and economic impact of this sector,

but also in view of the apparent trend toward sectoral conver-

gence in many structural and processual respects, including

strategic behaviors and approaches to control. In this article, we

explore the extent to which the relationship between manage-

ment control and strategy, as found in for-profit organizations,

may prevail within a nonprofit context. Based on questionnaire

responses from 182 Australian nonprofit organizations, we find

Correspondence to: Basil P. Tucker, University of South Australia, School of Com-

merce, UniSa Business School, GPO Box 2572, Adelaide, South Australia, 5001,

Australia. E-mail: basil.tucker@unisa.edu.au

NONPROFIT MANAGEMENT & LEADERSHIP, vol. 24, no. 1, Fall 2013 © 2013 Wiley Periodicals, Inc 109

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21083

We gratefully acknowledge the support provided by CPA (Australia) and the Insti-

tute of Public Administration Australia/University of Canberra Public Administra-

tion Research Trust Fund for their generosity in providing partial fi nancial support

for this research. We appreciate the constructive comments from attendees at the

Seventh International Management Control Research Conference in Paris, 2007,

the Strategic Management Society Twenty-Seventh Annual International Confer-

ence in San Diego, 2007, and the Global Management Accounting Research Sym-

posium (GMARS), held in Denmark in May 2009. We especially thank Professors

Kim Langfi eld-Smith, David Otley, Rob Chenhall, Mark Lyons, and Chris Chapman,

and Associate Professor Ralph Kober, for their helpful comments and advice in the

development of this article.

110 TUCKER, THORNE, GURD

Nonprofit Management & Leadership DOI: 10.1002/nml

that this relationship in nonprofit organizations is similar to

that in for-profit organizations, thereby lending support to the

“convergence” argument. We reflect on the reasons for these

similarities and advance an agenda for further research in this

area.

Keywords: management control systems, strategy, levers of control

TO WHAT EXTENT DO NONPROFIT organizations follow the strat-

egy and control practices commonplace in the for-profit

sector? This question engages with a broader debate that has

been raised by nonprofit scholars about the propensity for nonprofit

organizations to converge with or diverge from for-profit practices

(see, for example, Lindenberg 2001; Brown and Iverson 2004;

Baruch and Ramalho 2006; Beck, Lengnick-Hall, and Lengnick-Hall

2008). Our intent in this article is to contribute to this debate by

empirically testing the extent to which nonprofit organizations em-

ulate their for-profit cousins in how strategy and management

control systems (MCS) combine.

Since the 1980s, the relationship between strategy and MCS has

attracted increasing research attention, principally in the manage-

ment accounting literature. Although collectively this prior research

represents a considerable body of knowledge, its focus has been pri-

marily directed toward commercial organizations, and consideration

of its applicability to nonprofit organizations has been limited.

We find it surprising that the nonprofit sector has been largely

ignored in the discourse to date, for two reasons. First, the consider-

able social and economic impact of this sector makes an examina-

tion of how strategy is developed by nonprofit organizations, and

how they exercise control in implementing these strategies, of prac-

tical importance. Second, and of central interest to the current arti-

cle, is the perception that the lines dividing for-profit and nonprofit

organizations are becoming increasingly blurred (Beck et al. 2008).

Nonprofit organizations now operate in an environment in which

they compete for resources and are increasingly accountable to a

wide range of stakeholders to prove and improve their effectiveness

(Speckbacher 2003). This has resulted in greater pressures on them

to determine their “best” strategic direction (Stone, Bigelow, and

Crittenden 1999), and to control their efforts in pursuing this direc-

tion (Herman and Renz 1999). These observations reflect a tendency

for nonprofit organizations to adopt commercial approaches to strat-

egy processes and control—a position reflecting the theoretical

standpoint of new institutional sociology theory (NIS), which argues

that organizations have a predilection to adopt particular practices

in an attempt to conform to demands and expectations prevalent

within their external institutional environments (Meyer and Rowan

1977; Scott 2008).

Nonprofit

organizations

now operate in an

environment in

which they

compete for

resources and are

increasingly

accountable to a

wide range of

stakeholders to

prove and

improve their

effectiveness.