How Top Managers Use the Entrepreneurial Gap to Drive Strategic Change

Robert Simons and Antonio Dávila

European Accounting Review, 2021, vol. 30, issue 4, 583-609

Abstract: Prior research provides strong evidence for the association between business strategy and the design and use of management control systems. We complement this research by examining the role of management control systems in situations of strategic change. We report the results of an in-depth longitudinal field study of Henkel, a German multinational company, from 2008 through 2013. During this period, the company declared a new strategy. To implement this strategy, senior management purposefully misaligned span of control and span of accountability – labeled the entrepreneurial gap – to stimulate individual initiative and higher levels of performance. Our description of how top managers enacted change suggests a strong relationship between management control systems, organizational structure, and cultural norms that together support desired outcomes. In addition, we provide evidence on the timing and sequencing of actions by top management. By the end of our study period, Henkel was a top performer in its various markets and was leading the German blue-chip index in stock returns.

Date: 2021
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DOI: 10.1080/09638180.2020.1792959

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