Research Of Innovative Management Control System In The Network Organization

In the era of new economy, the environment is full of more complexity, uncertainty andcompetition than before. To be more competitive in the market, a flexible structure to adapt tothe market change quickly, an effective management control system to meet the strategictarget and the entrepreneurship of employee is crucial to the company. The hierarchicalstructure and traditional formal management control system based on command and controlare not appropriate for the environment of new economy. As a result, many companies adoptthe structure of network organization, and it is necessary to design new management controlsystem based on network organization.Firstly, this paper discusses the issues of the hierarchical structure and traditionalmanagement control system in the environment of new economy, and then analyses thecharacteristics of network organization and its challenge to the traditional managementcontrol system. This paper discusses a new kind of network organization structure in whichthe cross-boundary autonomous team act as the knot and strategic block of the networkorganization and its member cooperate crossing the internal and external boundary oforganization to satisfy the customer. This paper raises the concept of entrepreneurial businessteam as a new kind of team with entrepreneurship. The network organization designs anintegrated platform to provide resources, information, operation mechanism and culture etc. tothe teams to enable the strategic alignment of the organization.Secondly, this paper studies the design, operation mechanism, contingency and theoryframework of innovative management control system in the network organization. This paperdiscusses the target, system, role and types of management control in the context of networkorganization. It discusses the redesign and operation of budget system, performancemeasurement system, incentive system, belief system and boundary control system in thenetwork organization based on autonomous team. This paper uses the case study of a Chinesecompany Haier Group to introduce Haier’s network organization structure based onautonomous team and its innovative management control system which is internally called“win-win model of employee-customer integration” to support the theory.This paper designs a broader management control framework in the network organizationwhich integrating the strategy formulation, strategy implementation and operation, aligning theformal control system and informal control system, and incorporating the environment,strategy, structure, culture and information system. This paper argues that the strategy renewal,organization change and management control system innovation should be matched andinteracted with each other dynamically. This paper argues that it is very important to design the management control system in thenetwork organization from the perspective of employee rather than the perspective of managerto encourage employee entrepreneurship. The traditional top-down control system should betransformed to self-management system of employee. This transformation will encourage theemployee to act as owner with characters of self motivation, self control, self decision makingand they create value, innovate and control the risk on their own basis. The target of employeewill be more congruent with the target of organization.The innovative management control system in the network organization has newcharacters. The target of management control system in the network organization is broaderwhich not only focusing on the compliance and performance management, but also aiming forimproving the self-adaption and innovation of the organization. It focuses more on theinformal control system and self control of employee rather than the formal control system. Itencourages trust and cooperation based on social network which decreases the conflict of thetraditional agency system. It focuses more on the lateral coordination and cooperation ratherthan the vertical control. It integrates different mechanism including self control, marketcontrol and social control which is quite different from the hierarchical control. The role ofmanagement control focuses more on enabling rather than constraining the employee.Finally, based on the theory research and case study, this paper designs a new theoryframework of the innovative management control system in the network organization. Thenew framework includes four parts. The first is the adaptive system to enable the strategyrenewal, organization change and information interaction to adapt to the environment changedynamically. The second is the performance management system which encourages the teamto create value and meet the target of strategic performance and operational performanceproactively. The third is belief system to improve the goal congruence, share the core value ofthe organization and encourage the employee entrepreneurship. The last is boundary controlsystem which encourages self-control of employee to avoid strategic and operational risk ofthe organization effectively. Different parts of management control system are integrated basedon the value of stakeholder.As for the innovation of this paper, there are mainly three points. The first is that thispaper studies the structure and characteristics of network organization and its challenge to thetraditional management control system. Then this paper studies the design, operationmechanism, practices and theory framework of innovative management control system in thenetwork organization which is quite different from the traditional management control systemin the hierarchical structure. The management control system in the network organization isdesigned more from the perspective of employee to encourage employee entrepreneurship. Onthe contrary, the traditional management control system is designed more from the perspectiveof manager based on top-down control and command. The second is that this paper studies themanagement control of cross-functional autonomous team including budget, performancemeasurement, incentive and informal control which is quite different from the traditionalmanagement control based on responsibility center. The third is that this paper studies the new mechanism of management control system in the network organization which focused moreon market control, self control, lateral control and informal control. As contrast, the traditionalmanagement control system is mainly based on hierarchical control, extrinsic control andformal control.