· Features

How to stop management controls leading to misconduct


Management controls, such as performance management or compensation systems, used to align strategies and employee performance, are too often perceived as threatening. We examine how employees who consider those controls to be restrictive and punitive could develop dysfunctional and negative responses to their place of work including observable and unobservable forms of misconduct.

A one-size-fits-all approach to management controls could have unintended effects on employees.

What’s new

The need to succeed in an ever more dynamic and competitive environment has elevated the managerial need to enhance the monitoring and management of employees’ behaviours.

Norms, rules, codes of conduct, and standardised procedures and practices are used to guide employees’ behaviours toward achieving desirable organisational outcomes.

Despite this effort, recent evidence shows that employee misconduct is pervasive across companies and countries. Explicit examples of misconduct include acts of hostility, theft and sabotage. Regardless of how it manifests, misconduct harms the organisation and its employees.

Research and practice have focused too much on managers’ intentions rather than employees’ perceptions of management controls and their subsequent behavioural consequences.

Employees may perceive management controls as either a motivator or a threat. The consequences of employees’ perception of management controls as a motivator are associated with behaviours that support organisational goals. In contrast, the consequences when employees see management controls as a threat are still an open question.

Our research focuses on the latter to help leaders understand the effects of management controls on employee behaviour, so that they may be aware of the consequences of their companies’ current practices and design controls that foster growth rather than conflict.

In particular, our research looks into observable and unobservable responses to menacing management controls.

Most employees’ responses might be observable, this includes absenteeism, reducing effort, daydreaming and taking longer breaks, all known as ‘workplace deviance'.

Unobservable forms of misconduct are also possible. Evidence indicates ‘deliberate ignorance’ could be an unobservable response to discomfort in the workplace.

Commonly referred to as ‘turning a blind eye’, deliberate ignorance goes beyond a lack of knowledge and consists of intentionally being blind to or unaware of something likely to be well-known.

It can result from action, such as refusing information offered, or inaction, for example, not searching for further information. Both workplace deviance and deliberate ignorance have costs and pose a real economic hazard to organisations.

We also want to shine a light on how employees can behave differently when faced with threatening management controls. Under the flag of fairness management controls are frequently standardised without much consideration of employees’ idiosyncrasies.

This happens even though evidence shows that employees at different organisational levels might perceive and respond to such practices differently.

Taking this into account, we carried out a survey among staff of public and private hospitals, including administrative staff, nurses, pharmacists and physicians.


Key findings

We found that management controls that came across as threatening could have different behavioural consequences depending on the employee’s degree of job autonomy.

In employees with a low level of job autonomy, the perception of threat leads to desirable behaviours when it is mild. However, when the perception of threat becomes excessive, and employees with a low degree of autonomy perceive managerial controls as being overwhelmingly restrictive and rigorous, workplace deviance is expected.

Our results also show that the perception of threatening controls among employees who require higher levels of autonomy (skilled workers or employees at higher levels) is commonly associated with deliberate ignorance.

In other words, non-skilled workers will accept threatening controls when the threat (and associated punishment) is perceived as mild. However, when it is seen as excessive, it will lead to workplace deviance. Finally, menacing controls will trigger deliberate ignorance among skilled workers.


From research to reality

What should managers consider in practice? And what should they do when designing and implementing controls?

First, managers should be aware of the potential adverse effects of management controls that could be perceived as threatening. Coercive forms of control are commonly used as mechanisms to improve coordination and organisational efficiency. However these forms of control might be an effective way to prevent observable forms of misconduct, they could promote less observable forms of misconduct among certain employees.

With this in mind, managers should avoid over-emphasising forms of control that are punitive and restrictive. Whenever possible, employees should be involved in the design of performance evaluation and compensation policies.

Second, the results of our study have the potential to help managers understand that staff who require a high level of professional autonomy may use deliberate ignorance as a way to regain a feeling of control and to reduce conflict when faced with threatening managerial practices. Managers therefore should ensure that a variety of management controls are used to monitor and motivate different staff.

A one-size-fits-all approach does not work and can damage an organisation. Managerial awareness in this area will drive better understanding of the costs and consequences of employees’ perceptions of controls, and the design of controls that are customised for different types of employees.


About the authors

Ricardo Malagueño is an associate professor of management accounting at the University of East Anglia, Norwich Business School. He studies the behavioural consequences of management control systems.

Ernesto Lopez-Valeiras is an associate professor of financial economics and accounting at the University of Vigo. His areas of interest include the use of accounting information and its consequences on performance.

Jacobo Gomez-Conde is an associate professor of accounting at Universidad Autónoma de Madrid. His research focuses on the managerial use of control systems.

David Naranjo-Gil is a full professor of financial economics and accounting at University Pablo de Olavide at Seville. He is interested in research on the design of performance systems and their impact on organisational behaviour.


The full piece of the above appears in the January/February 2023 print issue. Subscribe today to have all our latest articles delivered right to your desk.