Management Control Systems (MCS) Change and Impact of Top Management

J Manag Control (2014) 24:267–298
DOI 10.1007/s00187-013-0182-2
ORIGINAL PAPER
Management control systems (MCS) change

and the impact of top management characteristics:
the case of healthcare organisations
Marco Morelli · Francesca Lecci
Published online: 27 December 2013

© Springer-Verlag Berlin Heidelberg 2013
Abstract The objective of this article is to answer the following research question:
how can actors implement management control systems (MCS) change processes if
their actions and rationality are conditioned by the institutions they wish to change?
More specifically: (1) how do individual variables of the top management team interact
with external dynamics? (2) how do individual variables of the top management team
interact with intra-organisational dynamics? In that respect, the article analyzes the
change process implemented by an Italian independent hospital, using a processual
research approach. The article deals with the dynamic interactions between individual
characteristics of the top management team (TMT)—as codified by the upper echelon
perspective—and the social external and intra-organisational variables identified by
institutional studies. Our findings show how leadership and heterogeneity of TMTs
interact with internal and external dynamics and play a key role in the change process
analyzed.
Keywords Management control systems · Change · Top management team ·

Hospitals · Individual characteristics
JEL Classification M41
M. Morelli (B)
Accounting, Control, Corporate and Real Estate Finance Department,
SDA Bocconi School of Management, Via Bocconi 8, 20136 Milan, Italy
e-mail: marco.morelli@sdabocconi.it
F. Lecci
Public Management and Policy Department, SDA Bocconi School of Management-CERGAS Bocconi,
Via Bocconi 8, 20136 Milan, Italy
123
268 M. Morelli, F. Lecci
1 Introduction
This research aims to contribute to the development of a process theory on management

control systems (MCS) change and the impact of top management team (TMT) char-
acteristics. The central research question is: how can actors implement MCS change
processes if their actions and rationality are conditioned by the institutions they wish
to change? More specifically: (1) how do individual variables of the top management
team interact with external dynamics? (2) How do individual variables of the top
management team interact with intra-organisational dynamics?
In the last twenty years MCS change has represented a highly debated topic both
from an academic and practitioner point of view (Scapens 1994, 2006; Burns and
Scapens 2000; Soin et al. 2002; Scapens and Jazayeri 2003; Busco et al. 2006; Lukka
2007; Van der Steen 2007). Four main streams of literature have analyzed this topic in
recent years (Dossi et al. 2012). Contingency studies (Shields and Young 1989, 1994;
Anderson 1995; Foster and Swenson 1997; Gosselin 1997; Krumwiede 1998; Ander-
son and Young 1999; Anderson et al. 2002; Baird et al. 2004)—the first stream—argue
that MCS have an adaptive nature (Maciariello and Kirby 1994), since it is possible
to identify a fit between the design of effective management accounting and control
systems and contextual variables, such as environmental, organisational and strategic
variables (Chenhall 2003). However, this research orientation has been recently criti-
cized, since it is unable to explain why change is not happening when a MCS design
is inconsistent with contextual variables (Malmi 1997). To overcome these limitations
new institutional sociology (Hoque and Alam 1999; Granlund 2001; Jarvinen 2006;
Bogt 2008; Hyvonen et al. 2009) and old institutional economics (Burns and Scapens
2000; Soin et al. 2002; Scapens and Jazayeri 2003; Busco et al. 2006; Scapens 2006;
Lukka 2007; Van der Steen 2007)—the second and the third stream—have promoted a
process-oriented perspective in order to understand how MCS change processes arise
and develop, mainly using in depth longitudinal case studies. More specifically, new
institutional sociology (NIS) tends to explore the extent to which wider institutional
arrangements influence the development of accounting practices, while the pillars of
the adoption of old institutional economics (OIE) to study MCS change are repre-
sented in Burns and Scapens’s (2000) framework, according to which management
control systems constitute stable rules and routines and, as such, potentially institu-
tionalized intra-organisational practices. Many authors (DiMaggio and Powell 1991;
Greenwood and Hinings 1996; Seo and Creed 2002; Dillard et al. 2004; Burns and
Baldvinsdottir 2005; Johansson and Siverbo 2009), in the last few years – the fourth
stream - have highlighted the need to integrate NIS and OIE into an unique frame-
work, in order to analyze the impact of both internal and external dynamics on MCS
change. However, it has recently been argued that even such integrated approaches are
incomplete, since they have not sufficiently analyzed the impact of individual charac-
teristics of the TMT members on MCS change processes (Granlund 2001; Naranjo-Gil
and Hartmann 2007; Naranjo-Gil et al. 2007). Most of the previous research on the
impact of individual characteristics on organisational outcomes (such as change) is
grounded in the upper echelon perspective (Hambrick and Mason 1984; Carpenter
et al. 2004; Hambrick 2007), that interprets organisational choices and results as a
consequence of TMT characteristics. According to these studies, TMTs are mainly
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Management control systems (MCS) change 269
analyzed in terms of demographic indicators. However, as suggested by one of the

founders of this approach (Hambrick 2007, p. 335), “the use of demographic indi-
cators leaves us at a loss as to the real psychological and social processes that are
driving executive behaviour, which is the well known black box problem”. In fact,
in the “demographic view” of TMTs, the dynamic nature of the links studied tends
to remain mysterious (Denis et al. 2001). As Pettigrew (1990) noted, there is a need
for research that directly examines the emergence, development, conduct, impact and
performance of management teams by using a processual research approach. This arti-
cle deals explicitly with the dynamic interactions between individual characteristics
of the TMTs—as codified by the upper echelon perspective—and the social external
and intra-organisational process variables identified by institutional studies. Thus, the
case study method, which involves tracing processes in their natural contexts, appears
most appropriate.
The reminder of the paper is structured as follows. Section 2 reviews the literature
on MCS change and the role of individual variables. Section 3 describes the theoretical
framework, while Sect. 4 presents the research method. Sections 5 and 6 present and
discuss the longitudinal case study. Finally, Sect. 7 provides conclusions, limitations
of the study and suggests future research directions.
2 Literature review
In a broad sense, management control systems can be defined as “the formal,

information-based routines and procedures managers use to maintain or alter pat-
terns in organisational activities” (Simons 1990, p. 5). As such, they include all the
tools and systems that managers use to ensure that the behaviours and decisions
of their employees are consistent with the objectives and strategies of the organi-
sation. More specifically, Malmi and Brown (2008) identify five types of control: the
planning, cybernetic control and reward and compensation systems represent tradi-
tional management accounting systems (MAS); cultural controls include the values,
beliefs and social norms that influence employee behaviour; and administrative con-
trol systems include organisational design and structure, governance and policies and
procedures.
Change refers to “an empirical observation of difference in form, quality of state
over time in an organisational entity” (Van de Ven and Poole 2002, p. 512), where
an organisational entity can be an individual’s job, a work group, a strategy for the
organisation, a product or service, or the overall MCS.
In the last twenty years, many authors have highlighted the usefulness of institu-
tional theories in studying MCS change. As suggested by Scott (1987, p. 493) “the
beginning of wisdom in approaching institutional theory is to recognize that there is
not one but several variants”. More specifically two main variants exist.
New institutional sociology (NIS) is mainly concerned with the relationship
between organisations and their organisational field (DiMaggio and Powell 1983,
1991; Meyer and Rowan 1977). According to these models change in organisations is
not driven by the search for efficiency but it is the result of processes that make organ-
isations “more similar without necessarily making them more efficient” (DiMaggio
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and Powell 1983, p. 147). This means that companies look for legitimacy instead of
trying to be more efficient. The concept that describes the process of homogeniza-
tion is isomorphism. DiMaggio and Powell (1983, 1991) identify three categories of
isomorphism: coercive isomorphism, related to political pressure exerted on organisa-
tions by institutions upon which organisations are dependent; mimetic isomorphism,
which occurs when organisations, in situations of uncertainty, try to imitate other
organisations that are perceived to be successful; normative isomorphism, as a result
of professionalization. Management accounting researchers who adopt NIS tend to
explore the extent to which wider institutional arrangements have influenced the deci-
sion of organisations to implement changes in their MCS; the assumption is that the
selection of MCS characteristics is not related to technical criteria alone, but also to
a cultural and political process that concerns legitimacy and power (Hoque and Alam
1999; Granlund 2001; Jarvinen 2006; Bogt 2008; Hyvonen et al. 2009).
On the contrary, Old institutionalism (OIE) places its focus on the individual organ-
isation and thus could complement NIS on analysing the complex dynamics of change.
The most cited model within this stream of literature is the framework provided by
Burns and Scapens (2000) to theorize management accounting change. According
to the authors, MCS are part of organisational rules and routines and can both be
affected by and affect institutions. More specifically, institutions are defined as “the
shared taken-for-granted assumptions which identify categories of human actors and
their appropriate activities and relationships” (Burns and Scapens 2000, p.8), while
rules and routines are defined as, respectively, “the formal management accounting
systems, as they are set out in the procedure manuals” and “the accounting practices
actually in use” (Burns and Scapens 2000, p.7). The model theorizes the existence of
an institutional realm and a realm of action. Changes in the two realms are the result
of four processes: (1) the encoding of institutional principles into rules and routines;
(2) the enactment of rules and routines; (3) the reproduction of the routines; (4) the
institutionalization of rules and routines which have been reproduced by the individ-
ual actors. OIE is used by management accounting researchers to offer insights into
micro-studies of the production and reproduction of accounting practices and its main
concern is management accounting change within individual organisations (Soin et
al. 2002; Scapens and Jazayeri 2003; Busco et al. 2006; Scapens 2006; Lukka 2007;
Van der Steen 2007).
Many authors have recently highlighted the need for more integration between
NIS and OIE in order to have a more complete framework to analyze MCS change,
since “something has been lost in the shift from the old to the new institutionalism”
(DiMaggio and Powell 1991, p. 27).
One of the most complete attempts in this direction is Greenwood and Hinings
(1996) neo-institutionalist model. In their model the authors highlight that change
processes are triggered by two interdependent external dynamics, namely market
and institutional contexts. However, how these dynamics affect single organisations
depends on some intra-organisational variables. More specifically, the external envi-
ronment is analyzed through the lens of the NIS framework provided by DiMaggio and
Powell (1983, 1991). Intra-organisational dynamics are grouped into two categories:
(1) precipitating dynamics (interest and value commitments) and (2) enabling dynam-
ics (power and capacity for action). More specifically, different functional groups
123
show different interests; so a potential origin of change arises if some of them per-
ceive dissatisfaction with how their interests are pursued within the organisation. The
value commitment—the second precipitating variable—describes the organisational
attitude towards change. They identify four kinds of value commitment: (1) status
quo commitment; (2) indifferent commitment; (3) competitive commitment; (4) ref-
ormative commitment1 . Change will occur only in presence of a competitive or refor-
mative value commitment. However, precipitating dynamics must be also associated
with enabling dynamics, namely capacity for action and power. Capacity for action is
defined as the ability to manage the change process. More specifically, it is composed
of three elements: “understanding of the new conceptual destination, having the skills
and competencies required to function in that new destination, and having the ability
to manage how to get to that destination” (Greenwood and Hinings 1996, p. 1040). In
relation to the last variable of the model—power—the authors state that “change can
only occur when either a new set of actors gains power or it is in the interest of those
in power to alter the organisation’s goals” (Greenwood and Hinings 1996, p. 1038).
Despite the high potential of this framework, only few studies have applied this or
similar models to analyze MCS change (Modell 2001, 2002, 2003, 2009; Hyvonen
and Jarvinen 2006; Bogt 2008; Kasperkaya 2008; Ma and Tayles 2009).
One of the limits of this model is that little attention is given to individual characteris-
tics of top managers in MCS change processes (Granlund 2001). The only indirect ref-
erence to individual characteristics is in the concept of capacity for action, since Green-
wood and Hinings (1996) argue that it can be associated with the concept of leadership.
Traditionally, the literature has analyzed the impact of top management characteristics
on MCS mainly using quantitative contingency studies. Many authors have tried to
verify the relationship between specific variables defining the top management team
and MCS configuration and degree of innovation. These variables are mainly derived
from the upper echelon perspective codified by Hambrick and Mason (1984), who
argue that organisational outcomes (change processes included) are the reflection of
top management values and cognitive bases. They codify the following upper echelon
characteristics that may become reflected in organisational outcomes: age, functional
background, tenure, formal education, group heterogeneity. Recently, Naranjo-Gil and
Hartmann (2007), Naranjo-Gil et al. (2007) and Pavlatos (2012) have analyzed the rela-
tionship between these variables and MCS. Moreover, many authors have tried to show
the relationship between disposition to change (Anderson 1995; Anderson and Young
1999; Foster and Swenson 1997; Granlund 2001), formal education (Anderson 1995),
role involvement (Anderson 1995; Foster and Swenson 1997), job tenure (Anderson
1995), leadership (Abernethy et al. 2010) and the success of MCS change processes.
However, these studies reflect the limitations of the contingency-based theory. Method-
ologically, in order to keep relevance, the search for contingency factors can lead to an
endless list (Malmi 1997); moreover, relationships among variables are often weak and
1 In a status quo commitment all groups are committed to the prevailing institutionalized template-in-use; in
a indifferent commitment, groups are neither committed nor opposed to the template-in-use; in a competitive
commitment, some groups support the template in use, whereas others prefer an articulated alternative; in a
reformative commitment all groups are opposed to the template-in-use and prefer an articulated alternative
(Greenwood and Hinings 1996).
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the conclusions are fragmentary (Dent 1990) and as Granlund (2001, p. 145) suggests
“one problem with the factors approach is that it sometimes does not produce much that
is new considering what has been reported in a number of studies dealing with factors
influencing information system implementation. [. . .] Still, such explanations fail to
capture the interrelationships between the factors and the inherent complexity originat-
ing in the different incentives and aspirations of the people involved with accounting
practice”.
These arguments are consistent with Hambrick (2007) call for research on what
he defines as “black box”, that is the set of social processes that mediate between
executives’ demography and their behaviours; they are also consistent with Denis et
al. (2001) claim for improved understanding of the mechanisms and processes by
which TMT characteristics shape firm outcomes. More specifically, they highlight
how such an analysis should be performed by using a processual approach.
3 Theoretical framework
The purpose of this article is to fill the gaps mentioned above by incorporating the
results of contingency-based studies into institutional models (Greenwood and Hin-
ings 1996) in order to answer the following research question: how can actors imple-
ment MCS change processes if their actions and rationality are conditioned by the
institutions they wish to change? More specifically: (1) how do individual variables
of the top management team interact with external dynamics? (2) how do individ-
ual variables of the top management team interact with intra-organisational dynam-
ics? The hypothesis is that external triggers and intra-organisational variables are not
able to explain the complex MCS change processes: individual characteristics of the
top management team are crucial in activate the internal precipitating and enabling
dynamics, while “external events can be viewed as triggers of structural transforma-
tion only to the extent that they are constructed by actors as triggers. The triggers,
then, consist of happenings that through actors’ attention to them invite to a defini-
tion or redefinition of social problems. Hence, even though critical events may—to
some extent—be seen as external to a social system, these are made to count through
actors’ enactments of them as events in the first place” (Englund and Gerdin 2011,
p. 588).
The assumption is that the integration of insights from both institutional frame-
works and contingency-based studies has high potential. In fact, as Chenhall (2003),
p. 161) highlights, “contingency-based research can provide an ordered way to inte-
grate thinking about sociological processes affecting MCS in action”.
The central idea of the upper echelons theory is that executives act on the
basis of their personalized interpretations of the strategic situation they face (Ham-
brick and Mason 1984; Hambrick 2007). So the situations faced are the trigger
of strategic change, but how organisations adapt to external pressures is a func-
tion of some TMT characteristics. Many studies (Naranjo-Gil and Hartmann 2007;
Naranjo-Gil et al. 2007; Pavlatos 2012) have applied the upper echelons perspective
to study innovations in management accounting systems, showing that disposition
to change is positively correlated to TMTs with the following characteristics: rel-
123
atively young, short tenured, with a business-oriented educational background and

heterogeneous. In addition, according to many authors (Murray 1989; Knight et al.
1999; Carpenter et al. 2004; Naranjo-Gil and Hartmann 2007), addressing institu-
tional and market changes requires a set of diversified managerial skills and com-
petencies. More specifically Naranjo-Gil and Hartmann (2007) argue that “heteroge-
neous TMTs are broader minded, are more inclined to search the environment for
opportunities and have a larger portfolio of responses to environmental demands”
(p. 738).
In Greenwood and Hinings (1996) model, a potential origin of change arises if
some functional groups perceive dissatisfaction with how their interests are pursued
within the organisation. However, the change process can be activated only when dis-
satisfaction is perceived by powerful individuals. As suggested by Finkelstein (1992)
and Hambrick (2007), the individual characteristics of TMT members better predict
organisational behaviour when the differing amount of power of TMT members is
taken into consideration. More specifically, “some executives have much more say
than others, and their biases should accordingly be given more weight when trying to
predict TMT actions” (Hambrick 2007, p. 336). In relation to heterogeneity, Carpenter
et al. (2004, p. 761) argue that “sociocognitive benefits allow heterogeneous TMTs
to manage greater complexity, but sociocognitive conflict also causes them to incur
process losses that eventually undermine the extended cooperative efforts necessary
for effective strategy execution”.
Dissatisfaction, however, does not provide direction for change. According to
Greenwood and Hinings (1996), what becomes critically important in explaining the
possibility of radical change is the pattern of value commitments within the organi-
sation. More specifically, change can occur only when a competitive or reformative
value commitment exists. In a status quo or indifferent commitment, no debate about
alternative courses of action exists. These arguments are consistent with Carpenter et
al. (2004, p. 766), according to which “teams with social interaction practices foster-
ing debate were better able to leverage the advantages of heterogeneity than TMTs in
organisations that limit debate”.
Another important variable mentioned in Greenwood and Hinings’ model is capac-
ity for action, defined as the ability to manage the change process. More specifically,
it is composed of three elements: “understanding of the new conceptual destination,
having the skills and competencies required to function in that new destination, and
having the ability to manage how to get to that destination” (Greenwood and Hinings
1996, p. 1040). The importance of capacity for action has been alluded to by many
authors, in terms of leadership (Carnall 1990; Clarke 1994; Fombrun 1992; Nadler
and Tushman 1989; Tichy 1983). Nadler and Tushman (1990) and Lega (2009), in
their discussion of leadership and change, distinguished among three sets of lead-
ership activities: charismatic (envisioning, energizing, and enabling), instrumental
(structuring, controlling and rewarding), and institutional (ensuring changes stick). So
the authors suggest that introducing simultaneously these leadership styles within the
TMT may increase capacity for action.
Given this scientific background, the theoretical framework represented in Fig. 1
can be derived. Since the study is based on a single case analysis, the framework must
123
be intended as a sensitizing tool to analyze the findings of the case study (Van de Ven
and Poole 2002; Huberman and Miles 1994).
4 Methodology
As already mentioned, in the last few years, there has been a call for research that goes
inside the “black box” of the upper echelons (Carpenter et al. 2004; Hambrick 2007),
showing the mechanisms and processes by which TMT characteristics shape firm
outcomes; as highlighted by Carpenter et al. (2004), change is one of such outcomes.
In order to answer our research question and to fill the gaps of the previous literature,
we use a longitudinal case study design (Eisenhardt 1989). This methodological choice
is consistent with Van de Ven and Huber (1990), who recommend a process theory
(typical of institutional approaches), when the objective of the study is to understand
“how” organisational change occurs. Moreover, many authors (Pettigrew 1990; Burns
and Scapens 2000; Scapens and Jazayeri 2003; Johansson and Siverbo 2009) highlight
how it is only through longitudinal case studies within individual organisations that it
is possible to extend our understanding of management accounting change processes.
The selected case is an independent hospital operating within the Italian National
Health Service. The period of observation was eleven years (2002–2012). The general
sampling strategy used follows an intensity criterion approach (Patton 2002), because
we wanted to explore an information-rich case in which there was evidence of a relevant
MCS change process. The case is also politically significant (Patton 2002), because it
is related to one of the largest and most reputed Italian public hospitals. We selected
this research setting (healthcare) for many reasons. First, it is an ideal laboratory to test
institutional frameworks, since, as suggested by Denis et al. (2001) and Abernethy and
Vagnoni (2004), power and politics are crucial in explaining the functioning of hospi-
tals: in fact, also Mintzberg (1983) argues that, given the characteristics of hospitals,
power can be considered as the dominant logic for behaviour. Second, hospitals take
the form of professional bureaucracies and, as such, they are characterized by a strong
resistance to change (Lega 2009). According to Lega (2009), change in hospitals is not
easy because of the following issues: (1) discretion and professional autonomy lead
to the search for empowerment, which in turn leads to culture clash between profes-
sionals and administrators; (2) coordination problems, enhanced by internal borders
among different specializations; (3) innovation itself, since professional organisations
tend to bureaucratise their functioning as professionals are keen to “capitalize” on
their know-how after long periods of investment in study and research; (4) triangula-
tion problems, deriving from leading professionals (especially physicians), that have
strong ties with external networks (political bodies, scientific societies, etc) that can
be activated to impose their will over the hospital management.
Given these issues, the implementation of organisational change processes in hos-
pitals requires the activation of specific individual characteristics within the top man-
agement team (Denis et al. 2001; Lega 2009).
Time is captured in our longitudinal case study through a combination of retro-
spective and real time analysis. More specifically, retrospective analysis is related
to 2002–2005; it aims at describing the context in which the innovation analyzed
123
POWER
DEPENDENCIES
Groups use favourable
MARKET CONTEXT power dependencies to
Competition pressures promote their own
force the organisations to interests
adopt the most efficient INTEREST
and the most cost SATISFACTION
effective way to organize AGE Technical boundaries
their operations between departments are
EDUCATIONAL reinforced and buttressed
BACKGROUND by cognitive boundaries
INSTITUTIONAL FUNCTIONAL
CONTEXT TRACK
Coercive
(external forces to TENURE
MCS CHANGE
conform to, eg. VALUE

Gorvernment HETEROGENEITY
COMMITMENTS
regulations) Different interests’
Normative LEADERSHIP
groups advantages and
( eg. professionalisation, disadvantages are shaped
education) by the prevailing
Mimetic template CAPACITY FOR
(copying and following
ACTION
market leaders’actions to
The organisation ability
minimize uncertainties)
to manage the transition
from one template to
another.
Precipitating Enabling
Dynamics Dynamics
INTRA-
EXTERNAL INDIVIDUAL
ORGANISATIONAL
CONTEXT (NIS) CHARACTERISTICS
DYNAMICS (OIE)
Fig. 1 The theoretical framework. Source: Adapted from Greenwood and Hinings (1996) and Carpenter et al. (2004)
123
275
was conceived. Real time analysis refers to 2006–2012. Both for retrospective and
real time analysis, empirical data were collected primarily through semistructured
interviews (Appendix 1). We interviewed 10 actors belonging to all the functions
involved in the MCS change process (Pharmacy Department, General Management,
Medical Direction, Administrative Department, Management Control Department,
Project Management, and Supply Department). Company documents, together with
informal communication techniques such as e-mail and telephone, were also used to
gather further information from the key actors in the case (Appendix). In addition, in
order to better identify TMT characteristics, the curriculum vitae of all TMT members
were gathered and analyzed.
All interviews were carried out directly by the authors. An entry interview, using a
semistructured format, was carried out with the Director of the Pharmacy Department
(owner of the project). Additional semistructured interviews with top managers were
then carried out.
Moreover, as suggested by Eisenhardt (1989), we followed the following interview
rules. Firstly, the “24-h rule” required that detailed interview notes and impressions be
completed within one day of the interview. Secondly, we included all data regardless
of their apparent importance at the time of the interview. Finally, we completed the
interview records with our ongoing impressions of each case. The researchers then
discussed any point of disagreement and, in some cases, new interviews were carried
out to clarify controversial points (Huberman and Miles 1994).
The real time analysis of the case was carried out using a temporal bracketing strat-
egy (Langley 1999).This strategy consists of decomposing the chronological data into
successive discrete time periods. These periods do not represent stages of a predictable
sequential process; they are defined to permit the constitution of comparative units of
analysis. In our case, the periods were defined by changes in the key people involved:
in fact, in Italy the top management team (General Manager, CFO and Medical Direc-
tor) of public hospitals is appointed according to a spoil system, so its composition
changes in correspondence with every change in the government composition.
5 The case
Alpha2 is a 950-bed hospital located in the North of Italy. At the time when the hospital
was put under observation, the total number of employees was 3,600—of which 534
medical doctors and 1,778 nurses. The average hospitalization was around 8 days and
the bed occupancy rate reached 80 % of total capacity. The total number of admissions
was 40,000 and outpatients were in the range of 2,700,000.
Since the mid nineties, Italian independent hospitals have been characterized by
an increasing pressure to efficiently manage resources due to four dynamics: (1) the
introduction of the DRGs; (2) the adoption of production ceilings; (3) a wide patient
mobility and; (4) the diffusion of private service providers. In this economic and
competitive context, hospitals are required to improve efficiency (as a result of the first
two dynamics) while keeping quality services (as a result of the last two dynamics).
2 Alpha is a disguised name.
123
In order to guarantee sustainability and economic survival, hospitals have recently

implemented innovations in their MCS.
In 2002, the Regional Government decided to finance projects aimed at imple-
menting innovative drug management systems to improve both quality and efficiency.
Alpha was chosen as one of the organisations involved in this project, since its Phar-
macy Department was headed by a Pharmacist who had already experienced this kind
of innovations in one of his previous work experiences in Spain.
“It’s not easy to implement such innovations in a public hospital, even in presence
of inefficiency and inability to adapt to external pressures. One of the key drivers
of change for us was the possibility to be autonomous (self-financed) thanks to
the funds we were able to gain from the Regional Government” (Pharmacy
Director).
Given these competitive and institutional settings, Alpha implemented many impor-
tant strategic initiatives. The most important one was the construction of a new building
and the reengineering of the clinical services by intensity-of-care.
This choice also required the implementation of cost management initiatives in
particular and the revision of the MCS in general. Traditionally, the operating units
were the main cost object for hospitals, however this system is not consistent with
a business model by intensity-of-care, hence the collection and segmentation of data
had to be turned around cross-functionally (across the operating units).
“At the beginning of our project we benefited from the strong support by an
enlightened General Manager. He was able to understand the renewed character-
istics of the competitive environment and, thus, to present the cost management
initiative as a key component and pilot project of a wider strategic revolution”
(Medical Director).
At that stage, a cost analysis suggested that drugs had a high incidence in the cost
structure of the organisation. Alpha, then, launched a project aimed at reengineer-
ing logistics and distribution of drugs, pharmaceuticals and medical products. The
project can be broken down into two phases: (1) the implementation of a new stock
management policy for medical devices; (2) the digitalization of drugs prescription.
The operating unit responsible for the whole project was the Pharmacy Department
under the strong sponsorship of the General Manager. The background to the cost
management initiatives was the dissatisfaction of the Pharmacy about the high lev-
els of drugs wastage and the high inefficiency of medical products stock manage-
ment. The power of the Pharmacy and its ability to suggest innovations increased
when (in 2006) it was given the formal status of Department, with formal respon-
sibility on resource planning and management. The new stock management policies
and the distribution flow re-engineering started the first year of real time observation
(2006).
“In order to enhance the legitimacy of the project within the company, the General
Manager decided to convert the Pharmacy into a formal autonomous department.
This was a strong message, since it was evident to all members of the organisation
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Table 1 Alpha Hospital: the top management team
Period Manager Role Age (Year Tenure Educational Functional track

of birth) (years) background
2006–2010 Manager A General 1951 0 Management CFO-Alpha Hospital

Manager
Manager B CFO 1950 0 Management Procurement-Alpha
Hospital
Manager C Medical 1957 3 Medicine Medical
Director Director-Alpha
Hospital
Manager D Pharmacy 1953 10 Pharmacy Pharmacy
Hospital
2011–2012 Manager E General 1958 0 Medicine Medical
Manager Director-Other
hospital
Manager F CFO 1961 0 Management Free-lance consultant
Manager G Medical 1960 0 Medicine Medical
Director Director-Other
hospital
Manager D Pharmacy 1953 15 Pharmacy Pharmacy
Hospital
that reengineering of logistics and distribution of drugs were a priority for the
top management” (Project Manager).
The other functions involved in the project were Medical Direction, Administra-
tive Department, Management Control Department, Project Management, and Sup-
ply Department. Since in Italy the top management team (General Manager, CFO
and Medical Director) of public hospitals is appointed according to a spoil system,
its composition changes in correspondence with every change in the government
composition. Given this turnover, Table 1 maps the top management team com-
position and characteristics over the seven years of real time observation (2006–
2012). Managers’ names are disguised: the only top manager involved both in the
first and the second top management team is the Pharmacy Director (Manager D).
The second variable is the role of the top manager within the company, while
age is identified by the year of birth. Tenure, the fourth variable, is measured in
terms of number of years in the specific position before the beginning of the two
observation periods (2006 and 2011, respectively). The educational background is
represented by the formal degree. Finally, the functional track describes the role
held by the manager before being appointed in the position defined in the third
column.
As far as the stock management policies are concerned, the improvements imple-
mented referred to the identification of two stock management models: the outsourcing
of low value items (i.e., bandages, syringes, etc.) management and the implementation
of an on consignment procedure for high value items (i.e., prosthesis). The manage-
123
ment of items on consignment was considered particularly helpful in streamlining

the health care delivery while improving the quality of care itself. In fact, prosthesis
are very expensive and they must be fitted to each individual patient’s need. Before
changes were introduced, doctors would have to trade-off between ordering the spe-
cific item as needed thus delaying the medical procedure (generating frustration and
dissatisfaction of clinicians about the promptness of procurement procedures), given
the lengthy and cumbersome purchasing procedure, or stocking multiple items tying
up a lot of working capital.
“Clinicians have been complaining for many years about the lack of promptness
of procurement procedures. On the other hand, the procurement department was
continuously under pressure to exploit order requests under urgency” (Pharmacy
Director).
The introduction of high value item consignment stock had to be coordinated among
operating units—responsible for defining which items need to be kept on consign-
ment; the pharmacy—in charge of setting the quality standards required; the admin-
istration department—due to issue the competitive tender; and the supplier itself.
The supplier was also made responsible for keeping adequate stock at each oper-
ational unit and checking the status of conservation of the stocked items as well.
As a result, the implementation of this stock management model allowed decreasing
the ratio Average Inventory/Purchases for high value items from 25.6 to 2.5 % over
7 years.
The re-engineering process of drugs logistic was articulated in three steps: (1)
digitalization of drug prescriptions; (2) packaging of single servings of each drug;
(3) packaging of individual patient’s servings of drugs. The reengineering project
was highly pushed by the Pharmacy Director, who wanted to import in Italy a
system already experienced in a previous professional experience in Barcelona. In
the meantime, the Pharmacy Director had also assumed an important role in the
Italian Hospital Pharmacists Scientific Association. So, the project was perceived
as a means to promote innovation also in this professional network, not only in
Alpha.
“The main impetus to the initiative came from an enlightened General Manager,
who already spoke about individual patient’s servings of drugs ten years ago.
He perfectly knew our inefficiency problems, since he was our former CFO:
as a General Manager, he had eventually the power to implement projects to
solve these problems. In addition, I had already experienced this procedure in
my previous professional experience in Barcelona” (Pharmacy Director).
With reference to the first step—digitalization of drug prescriptions—,according

to this new system, the prescriptions are forwarded electronically to the pharmacy,
which checks the availability of drugs and delivers them to the operating units for
sub-ministration to the patient. With this system the pharmacy can have a real time
monitoring of drugs inventory and consumption. Prior to the implementation of the
project, the paper prescription was checked at the operational unit stock room; if
the drug was unavailable or expired, the operating units had to place an order to the
123
pharmacy. The pharmacy would have delivered a new package of the required drug,
despite the number of servings required by the prescription would exceed the amount
of servings in the package. The waste of drugs was inevitable and sizeable.
The implementation of the new process for the drug logistic changed completely
the operating procedure for medical doctors, who initially strongly resisted the change
that was perceived as a means to tightly inspect their prescription choices.
“At the beginning clinicians and unions strongly resisted the change, because they
were worried about responsibility issues. Initially, even the General Manager and
me were unprepared to face such a resistance” (Pharmacy Director).
Inspired by the scientific literature on the topic, the Pharmacy Department decided
to introduce a new role in the organisation to manage the relationships with clinicians:
the clinical pharmacist.
“The key driver to win their resistance was the introduction of a new organi-
sational role, well known in the scientific debate: the clinical pharmacist. This
figure has been accepted because he/she is able to support the clinician, using
the same language of clinicians” (Pharmacy Director).
The clinical pharmacist supported medical doctors in the use of technology as

well as in the selection and prescription of drugs through training on new pharma-
ceutical developments and multiple interactions of drugs. The role of the clinical
pharmacists was very important because they were able to commit the clinicians to
the project. Moreover, the Pharmacy Director asked for the implementation of non
financial indicators related to the project within the performance scorecard of the
different operating units. The main economic benefits of this prescription procedure
were: decrease in average inventory levels (−30%), reduction of wrong prescriptions
and related decrease in legal arguments (−30%) and insurance costs (−4.5%). The
results of the digitalization process were highly disclosed by the General Manager also
in official external reports within the chapter “Innovative strategic projects”; actually,
these reports started to be produced and disclosed in 2006 with the advent of the
General Manager.
“This report has the objective to disclose all the relevant changes we are imple-
menting: the construction of an intensity-of care new building and, more impor-
tant, the reengineering of organisational key processes and the managerialisation
of our executives”. (General Manager, Introduction to Social and Sustainability
Report - 2006).
However, the saving potential was not fully exploited and it is not even quantifiable,
given the secondary role played in the project by the Administrative Department, as
shown in the following quotations:
“I am not able to provide you with quantitative data about the impact of new
procedures, since all the information is managed by the Pharmacy Department.
We have been involved only in a couple of meetings in which they presented the
work in progress” (Controller).
123
“I am happy to be involved in your case study analysis. Maybe you can help us
in finding ways to demonstrate that our initiative is generating a positive impact
also on the financial performance of the hospital” (Project Manager).
Moreover, in 2010 a new top management team (General Manager, CFO and Med-
ical Director) was appointed. During interviews the different actors highlighted the
decrease of the new General Manager commitment; as a consequence, the steps 2 and
3 of the project (packaging of single servings of each drug and packaging of individual
patient’s servings of drugs) hasn’t been implemented yet and the whole initiative has
increasingly assumed a “Pharmacy-specific” characterization.
“The new General Manager is a clinician. He is less sensitive to managerial
issues. Actually, he neither prevented the change process... nor actively spon-
sored it. We are free to continue, as far as we don’t ask for additional resources!”
(Project Manager).
In fact, the new top management team has also decided not to disclose anymore
the initiative in the annual social and sustainability report and not to include it in the
formal performance scorecards of operating units.
“The General Manager is the only one allowed describing the project, but now
he is really busy” (Secretary to the General Manager).
Moreover, the evolution of the management accounting system was not consistent
with the innovation in the other components of the MCS, since the main cost object is
still the operating unit, while the new prescription procedure could allow the tracing
of cost at patient level.
“So far, we haven’t changed anything in our costing system, which is designed
to measure the costs incurred by operating units” (Controller).
6 Discussion
The objective of this paragraph is to discuss the findings of the case study analysis
through the lens of the framework presented in Fig. 1 (Table 2). It is not easy to
present complex process stories succinctly. Our approach is to provide, in Table 2, a
descriptive summary of how individual characteristics interact with internal and exter-
nal variables. For each internal and external variable, the left hand column identifies
the individual characteristics involved (if any) and the right-hand column provides
extracts from interviews or other sources that illustrate the interaction described. Con-
sistently with the temporal bracketing approach adopted, the analysis is replicated for
both periods (2006–2010 and 2011–2012). As already mentioned, these interactions
must not be interpreted in the form of deterministic input–output relationships, but
only as a sensitizing tool to analyze a complex process.
As far as individual variables of the two TMTs are concerned, there are no differ-
ences either in terms of average age at the beginning of the mandate (approximately
53 years) or in terms of tenure (given the spoil system). On the contrary, the two TMTs
123
Table 2 Case discussion
282
Variable 2006–2010 2011–2012
123
Individual Interview extracts or other info Individual Interview extracts or other info
characteristics characteristics
External dynamics Market Context Charismatic leadership “At the beginning of our project Institutional “The new General Manager is
(General Manager) we benefited from the strong leadership a clinician. He is less
support by an enlightened (General Manager) sensitive to managerial
General Manager. He was able issues. Actually, he neither
to understand the renewed prevented the change
characteristics of the process… nor actively
competitive environment and, sponsored it. We are free to
thus, to present the cost continue, as far as we don’t
management initiative as a key ask for additional
component and pilot project of resources!” (Project
a wider strategic revolution” Manager)
(Medical Director)
Educational background General Manager CV Educational General Manager CV
(General Manager) background
(General Manager)
Coercive Functional track “One of the key drivers of change Not relevant
isomorphism (Pharmacy Director) for us was the possibility to be
autonomous (self-financed)
thanks to the funds we were
able to gain from the Regional
Government” (Pharmacy
Director)
Institutional leadership Pharmacy Director CV
(General Manager and
Pharmacy Director)
M. Morelli, F. Lecci
Table 2 continued
Variable 2006–2010 2011–2012
Mimetic Functional track “I had already experienced this Not relevant

isomorphism (Pharmacy Director) procedure in my previous
professional experience in
Barcelona” (Pharmacy
Director)
Pharmacy Director CV
Normative Educational background “The key driver to win their Educational “The new General Manager is
isomorphism (Pharmacy Director) resistance was the introduction background a clinician. He is less
of a new organisational role, (General Manager) sensitive to managerial

well known in the scientific issues” (Project Manager)
debate: the clinical pharmacist”
(Pharmacy Director).
Pharmacy Director CV. General Manager CV
Intra-organisational Interest Tenure (Pharmacy “Clinicians have been Educational “The new General Manager is
dynamics satisfaction Director) complaining for many years background a clinician. He is less
about the lack of promptness of (General Manager) sensitive to managerial
procurement procedures. On issues” (Project Manager)
the other hand, the procurement
department was continuously
under pressure to exploit order
requests under urgency”
(Pharmacy Director)
123
283
Table 2 continued
284
Variable 2006–2010 2011–2012
123
Educational background “At the beginning clinicians and Charismatic General Manager CV
(Clinicians vs. TMT) unions strongly resisted the leadership
change, because they were (Controller)
worried about responsibility
issues. Initially, even the
General Manager and me were
unprepared to face such a
resistance” (Pharmacy
Director)
Functional track and “He perfectly knew our “I am not able to provide you
educational background inefficiency problems, since he with quantitative data about
(General Manager) was our former CFO: as a the impact of new
General Manager, he had procedures, since all the
eventually the power to information is managed by
implement projects to solve the Pharmacy Department.
these problems.” (Pharmacy We have been involved only
Director) in a couple of meetings in
which they presented the
work in progress”
(Controller)
Heterogeneity Heterogeneity (lack
of)
Table 2 continued
Variable 2006–2010 2011–2012
Value commitment Educational background “At the beginning clinicians and Educational “The new General Manager is
(Clinicians vs. TMT) unions strongly resisted the background a clinician. He is less
change, because they were (General Manager) sensitive to managerial
worried about responsibility issues” (Project Manager)
issues. Initially, even the
General Manager and me were
unprepared to face such a
resistance” (Pharmacy
Director)
Heterogeneity Heterogeneity (lack
of)
Power Charismatic leadership “The main impetus to the Institutional “The General Manager is the
dependencies (General Manager) initiative came from an leadership (General only one allowed describing
enlightened General Manager, Manager) the project, but now he is
who already spoke about really busy” (Secretary to
individual patient’s servings of the General Manager)
drugs ten years ago”.
(Pharmacy Director)
123
285
Table 2 continued
286
Variable 2006–2010 2011–2012
123
Institutional leadership “In order to enhance the

(General Manager and legitimacy of the project within
Pharmacy Director) the company, the General
Manager decided to convert the
Pharmacy into a formal
autonomous department. This
was a strong message, since it
was evident to all members of
the organisation that
reengineering of logistics and
distribution of drugs were a
priority for the top
management” (Project
Manager)
Capacity for Institutional leadership “This report has the objective to Institutional “The General Manager is the
action (General Manager) disclose all the relevant leadership (General only one allowed describing
changes we are implementing: Manager) the project, but now he is
the construction of an really busy” (Secretary to
intensity-of care new building the General Manager)
and, more important, the
reengineering of organisational
key processes and the
managerialisation of our
executives”. (General Manager,
Introduction to Social and
Sustainability Report-2006)
Table 2 continued
Variable 2006–2010 2011–2012
Instrumental leadership “He perfectly knew our Instrumental “I am happy to be involved in

(General Manager) inefficiency problems, since he leadership (Project your case study analysis.
was our former CFO: as a Manager) Maybe you can help us in
General Manager, he had finding ways to demonstrate
eventually the power to that our initiative is
implement projects to solve generating a positive impact
these problems.” (Pharmacy also on the financial
Director) performance of the
hospital” (Project Manager)

Charismatic leadership “The main impetus to the
(General Manager) initiative came from an
enlightened General Manager,
who already spoke about
individual patient’s servings of
drugs ten years ago”.
(Pharmacy Director)
123
287
are different in terms of educational background (the first TMT is characterized by

two managerial and two operational backgrounds, while the second one is predomi-
nantly operational) and functional track. Thus, the first TMT is more heterogeneous,
at least in terms of functional track and educational background. Another relevant
difference between the two TMTs is related to the previous professional experiences,
in terms of companies: in the first TMT, all members come from Alpha Hospital itself,
whereas in the second one, apart from the Pharmacy Director, all members come from
other companies. Traditionally, the literature has portrayed market and institutional
contexts as a dichotomy; however, many authors have recently argued the need to
analyze them as two interdependent dimensions (Modell 2002, 2009; Tsamenyi et al.
2006; Hopper and Major 2007). Indeed, in the Italian healthcare industry the inter-
dependency between market and institutional contexts is characterized by a peculiar
configuration, since the Regional Government is both legislator (coercive influence),
holding of public hospitals (again, coercive influence), but also third payer and, as
such, the most important player in the market context. The case shows how the exter-
nal dynamics are built as triggers of change through the action of individuals. More
specifically, the first TMT showed a high sensitivity to both market and institutional
pressures towards efficiency. In particular, the General Manager, former CFO of the
company and with a managerial educational background, is able to cascade within the
organisation the external pressures through his charismatic leadership (he is defined
as “enlightened” in many interviews). Other key drivers mentioned by interviewed
actors to create the background to the change initiative are the desire of the Phar-
macy Director to import a solution already implemented in his previous professional
experience (mimetic isomorphism and functional track) and the ability to present the
project as “institutionally relevant”, given the funding from the Regional Govern-
ment (institutional leadership). Moreover, one of the main problems in implementing
the change initiative was the resistance of clinicians: their medical background made
them less sensitive to efficiency issues. In that respect, the creation of the clinical
pharmacist role, inspired by the scientific literature on the theme (normative isomor-
phism), was a key success factor, since it was able to act as a trait d’union between
the search for efficiency and the need to translate it into clinical processes. With
the advent of the second TMT, the impetus to change decreases. This is due to a
lower interest of the new General Manager who, given his medical educational back-
ground, was more focused on other issues than managerial ones. As a consequence
the project also disappeared from official reports (decrease in institutional leader-
ship).
Thus, the following proposition can be derived:
Proposition 1 In dynamic competitive and institutional environments, an heteroge-
neous TMT with a business-oriented educational background and functional truck has
a higher disposition to search for opportunities of MCS change.
In the Alpha Hospital case, the origin of the cost management initiative was the
dissatisfaction of the Pharmacy Department about its ability to effectively manage
the resources formally under its control. Moreover, as far as medical devices are con-
cerned, also clinicians were dissatisfied about the lack of promptness of the previous
purchasing procedures. The case shows that dissatisfaction arises from a perceived
123
contradiction (Seo and Creed 2002) between an external request for efficiency and
quality on one side, and the lack of internal tools on the other side. This contradic-
tion is mainly perceived, as shown in interview extracts, by the General Manager,
given his previous position as CFO of the company (functional track) and by the
Pharmacy Director, given his knowledge of organisational processes (tenure). The
main issue in the innovation process was the resistance of clinicians, who were wor-
ried about the impact of the cost management initiative on quality and workload.
More specifically, in the case study different configurations of value commitments
can be identified. As far as the implementation of new stock management policy
is concerned, a reformative value commitment characterizes the change process. In
fact all the operating units involved were dissatisfied about the old procedures. On
the contrary, the digitalization initiative generated a competitive value commitment,
since, at the beginning, clinicians and nurses strongly resisted the change, because
it was perceived as a means to deprive the control on drugs and to strictly moni-
tor their prescription habits, limiting their professional autonomy. The competitive
commitment was turned into a reformative one only thanks to the ability of the Phar-
macy to involve all the relevant actors in the change process. More specifically, a
new organisational figure was created (the clinical pharmacist, an example of norma-
tive isomorphism) to support clinicians, showing that the new procedure was able to
offer them additional services and to simplify their job. In this sense, the first TMT
is characterized by a high level of debate, given the need to represent different per-
spectives in terms of educational background and functional track. As suggested by
Lega (2009), the heterogeneity of these actors in terms of educational and functional
background, generated the so called “meeting of minds” (Schelling 1960), that is an
alignment of priorities allowing greater awareness on the part of all the organisa-
tion’s members of the need and direction of the innovation. As already mentioned, the
second TMT is more unbalanced in terms of educational background: more empha-
sis is put on the medical dimension of the hospital, while the new CFO lacks the
charismatic leadership to represent the administrative component; also the first CFO
is not mentioned in our interviews as a key actor, but, as already highlighted, the
first General Manager was a sort of ad interim CFO, given his previous role in Alpha
Hospital.
Proposition 2 The effect of educational background, functional track, and TMT het-
erogeneity is moderated by interest dissatisfaction (cognitive boundaries). These cog-
nitive conflicts could benefit the MCS change process but also cause process losses.
The findings of the case study analysis confirm the importance of power dynam-
ics in explaining change processes. As already mentioned, hospitals are a privi-
leged setting to study power, since they display the characteristics that allow power
to be the dominant variable for behaviour. More specifically, the power of clini-
cians within hospitals is problematic for implementing effective MCS, since they
pursue goals aimed at increasing or defending their status as professionals, even
if they could be not consistent with the objective of the organisation to main-
tain or increase the resource base of the hospital. This dynamic is evident in the
reaction of clinicians to the implementation of digitalization. All the members of
123
the first TMT were already in Alpha Hospital before 2006 and three out of four
were in the former TMT too. However, the change process started only when man-
agers perceiving the lack of efficiency gained power: more specifically, the former
CFO was appointed as General Manager, while the Pharmacy was given the sta-
tus of formal department. Moreover, the first General Manager was also perceived
as charismatic (he is defined as “enlightened”) and able to ensure change stick by
giving institutional leadership to the Pharmacy Director. In the second TMT, the
power of the General Manager is not associated with the perception of the need
for change. Actually, he has decided to use his power to centralize also the dis-
closure of information about the project, even giving less visibility to it in official
reports.
Proposition 3 The moderating role of interest dissatisfaction is increased by powerful
TMT members.
The main impulse to the whole initiative comes from the vision of the first Gen-
eral Manager (charismatic leadership). This charismatic leadership is also accom-
panied and supported by a strong instrumental leadership. Tangible manifestations
of such a leadership are: (1) the ability to involve clinicians in the project through
the creation of the clinical pharmacist and (2) the inclusion of the project in the
formal performance measurement system; (3) the allocation of financial resources
to support the implementation of the project. In addition, the case shows the rele-
vance of institutional leadership, since the first General Manager decided to iden-
tify the strategic objectives of the company with the innovation also in the official
social and sustainability report, and to give legitimacy to the Pharmacy Director
by creating the Pharmacy Department. On the contrary, the second General Man-
ager delegitimized the further steps of innovation by deciding not to disclose any-
more the project (lack of institutional leadership) and by eliminating any reference to
the innovation in the performance measurement system (lack of instrumental leader-
ship).
The Administrative Department in both TMTs is characterized by a lack of charis-
matic leadership, since it is not actively involved in the change process. As a con-
sequence, as shown by the quotations from the Project Manager, in the project team
there is a lack of instrumental leadership.
Proposition 4 Powerful TMT members increase their capacity for action in MCS
change processes when they are able to activate simultaneously charismatic, instru-
mental and institutional leadership.
7 Conclusions
The objective of the article was to understand how individual variables of the top
management team interact with external and intra-organisational dynamics in MCS
change processes. More specifically, we analyzed the “black box” (Hambrick 2007)
of the social processes driving executive behaviour.
123
In order to answer the research question, a processual approach (Pettigrew 1990;

Greenwood and Hinings 1996) has been adopted to analyze a cost management ini-
tiative within an Italian independent hospital. Contributions from the upper echelon
perspective (Hambrick and Mason 1984) and neo-institutional theories (Greenwood
and Hinings 1996) have been integrated into a unique theoretical framework.
The four propositions derived in Sect. 6 have important implications both from a
scientific and practitioner point of view. From a scientific perspective, the case study
analysis allows to improve the ability to read the processes that mediate between
executives’ demography and their behaviour, using the lens of institutional theory.
We have described how opposing forces, nonlinear relationships, and feedback loops
manifested themselves in a real organisational setting.
More specifically, in our case the external market and institutional pressures are
not sufficient to generate MCS change. These external events can be viewed as trig-
gers of change only to the extent that they are constructed by intra-organisational
actors (TMT members) as triggers. In Alpha Hospital, a key role in cascading external
dynamics (both competitive and institutional) within the organisation is played by
the business oriented educational background of the General Manager combined with
the functional track and clinical educational background of the Pharmacy Director.
This wide range of functional perspectives is associated with a strong charismatic
and institutional leadership of the General Manager. In the second TMT both aspects
disappear.
As far as the relationship between individual variables and intra-organisational
dynamics is concerned, in the specific case analyzed, how individual characteristics
act within a MCS change process can be better understood when power, interests, value
commitment and capacity for action are taken into consideration. More specifically, the
case dynamics are consistent with Abernethy and Vagnoni (2004), according to which
power is the dominant logic of behaviour within hospitals. Healthcare organisations
are a classic pluralistic setting, comprising divergent objectives (individual patient
care, efficiency and quality) and multiple actors (professionals, administrators and
politicians) linked together in “fluid and ambiguous power relationships” (Denis et
al. 2001, p. 809). In Alpha, the first top management team shows an higher level
of heterogeneity in terms of educational background (a balanced mix of business-
oriented and management-oriented educational background), tenure (two “tenured”
out of four managers) and functional track (a balanced mix between medical and
non medical functional track) if compared with the second one. This heterogeneity
fosters “debate” (Carpenter 2004) or the so called “meeting of minds” (Lega 2009)
and allows aligning all the priorities (medical and managerial) of the organisation
through a competitive or reformative value commitment, a key precipitator of MCS
change (Greenwood and Hinings 1996). Hospitals, as many professional settings, are
typically gerontocratic organisations, in which change can occur only if the innovative
impetus is supported by a reputed top management team, where reputation is generally
associated with tenure or a long experience within the organisation or the professional
network (Lega 2009). In that respect, all the members of the first TMT came from Alpha
Hospital itself. Moreover, they were able to activate leadership that is a key driver of
power within professional organisations. In our case study, one of the most cited key
success factors is the “enlightness” of the General Manager (charismatic leadership).
123
In addition, the creation of a formal department for Pharmacy, the disclosure of the
project in official external reports and the inclusion of specific performance indicators
in the operating units’ scorecards (institutional and instrumental leadership) supported
the MCS change process. In Alpha Hospital, the decrease of heterogeneity and ability
to express leadership in the second TMT, even in presence of a similar competitive
and institutional environment, is associated with the failure of the planned second
and third stage (packaging of single servings of each drug; packaging of individual
patient’s servings of drugs) of the MCS change initiative, thus confirming the relevance
of individual characteristics of the top management team in explaining how MCS
change processes evolve.
Our analysis has important implications also from a practitioner perspective. A
successful MCS change process in healthcare organisations requires the engagement
of medical staff both with formal and informal meetings and procedures, in order to
commit clinicians in promoting and implementing the innovation itself. In that respect,
in our case study, heterogeneity and leadership play in key role in dealing with the
problem of “fluid power relationships”.
Whilst the insights provided by this study are significant, they are limited by the
fact that they are based on a single case study developed in a specific setting; as such,
it contains the usual limitations regarding generalisability. So additional longitudinal
case studies are required.
Given the results and limitations of this article, it is desirable to elaborate further
possible research directions. Firstly, since in our case study the CFO has a marginal
role, it would be beneficial to investigate the impact of the CFO individual character-
istics and competencies in predicting the MCS design and use.
Secondly, given the importance of leadership and heterogeneity highlighted in this
study, future research should devote attention to further operationalize these concepts.
Thirdly, additional insights should be gained by analyzing how top management team
characteristics interact with external and internal variables within change processes in
different industries and organisational settings. Finally, the four propositions derived
from our analysis could represent the premises for theory development through later
empirical testing.
Appendix
123
Table 3 Appendix: data sources
Year Main Documents Interviews
General CFO (B) Medical Pharmacy General CFO (F) Medical Controller Project Supply
Manager Director Director Manager Director Manager Manager
(A) (C) (D) (E) (G)
2002 • National Law

405/01
• National Law
138/02
• Regional Law
VII/10246/02
2003 • Annual financial
statements
• Stock levels report
2004 • Feasibility study:
Drug distribution
reengineering
• Annual financial
statements
2005 • Annual financial
statements
2006 • Annual Social and 1 1 1 3 2 3 –
Sustainability
Report
• Organisational
Report: the new
Pharmacy
Department
123
293
Table 3 continued
294
123
(A) (C) (D) (E) (G)
statements
2007 • Annual Social and 1 1 – 2 2 2 1
Sustainability
Report
• Project Update
report
statements
2008 • Annual Social and – – – 1 1 1 –
Sustainability
Report
• Project Update
report
statements
2009 • Annual Social and – – – 1 1 1 –
Sustainability
Report
• Project Update
report
statements
Table 3 continued
(A) (C) (D) (E) (G)
2010 • Annual Social and 1 1 1 1 1 1 –

Sustainability
Report
statements
2011 • Annual Social and 1 – 1 1 2 2 –
Sustainability
Report
• Report “The new
intensity of care
hospital”
statements
2012 1 – 1 1 1 1
Total 3 3 2 9 1 1 2 10 11 2
123
295
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Management Control Systems (MCS) Change and Impact of Top Management

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J Manag Control (2014) 24:267–298

Management control systems (MCS) change

Marco Morelli · Francesca Lecci

Published online: 27 December 2013

Keywords Management control systems · Change · Top management team ·

JEL Classification M41

This research aims to contribute to the development of a process theory on management

analyzed in terms of demographic indicators. However, as suggested by one of the

In a broad sense, management control systems can be defined as “the formal,

atively young, short tenured, with a business-oriented educational background and

conform to, eg. VALUE

2 Alpha is a disguised name.

In order to guarantee sustainability and economic survival, hospitals have recently

Table 1 Alpha Hospital: the top management team

Period Manager Role Age (Year Tenure Educational Functional track

2006–2010 Manager A General 1951 0 Management CFO-Alpha Hospital

ment of items on consignment was considered particularly helpful in streamlining

With reference to the first step—digitalization of drug prescriptions—,according

The clinical pharmacist supported medical doctors in the use of technology as

Variable 2006–2010 2011–2012

Variable 2006–2010 2011–2012

Mimetic Functional track “I had already experienced this Not relevant

of a new organisational role, (General Manager) sensitive to managerial

Variable 2006–2010 2011–2012

Variable 2006–2010 2011–2012

Variable 2006–2010 2011–2012

Institutional leadership “In order to enhance the

Variable 2006–2010 2011–2012

Instrumental leadership “He perfectly knew our Instrumental “I am happy to be involved in

hospital” (Project Manager)

are different in terms of educational background (the first TMT is characterized by

In order to answer the research question, a processual approach (Pettigrew 1990;

Year Main Documents Interviews

2002 • National Law

Year Main Documents Interviews

Year Main Documents Interviews

2010 • Annual Social and 1 1 1 1 1 1 –

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