Translating Organizational Learning into Performance: The Role of Management Control

Margaret Anne Abernethy
The University of Melbourne
Australia

Axel Klaus-Dieter Schulz
The University of Melbourne
Australia

Simon James Bell
The University of Cambridge
United Kingdom

Abstract:
There is considerable evidence that the best performing organizations are those where learning is deeply embedded in the culture of the firm. It is often argued that management control systems “stifle learning and personal development by severely limiting the ability of employees to exert control or change the nature of their work activities (Winter, Sarros & Tanewski, 1997, p. 9). Others argue that it is the role of senior management to select controls that will encourage workers to learn and adapt to increasingly complex organizational and market environments. This study explores the relation between a commitment to organizational learning and two control choices -- input control and output control -- and their subsequent relation with firm performance. We argue that a firm committed to organizational learning as a strategic priority will rely on the use of input controls to ensure that the ‘right’ individuals are employed, trained and socialized to accept the values of the firm. We also expect that firms will supplement input controls with the use of output control. Our hypotheses are tested using data collected from 188 manufacturing business units with profit centre responsibility. The results support the thesis that the choice of controls will not only be influenced by a firm’s commitment to learning but also will result in positive organizational outcomes.