Levers of Control and Managerial Performance: The Importance of Belief Systems

  • Ancella Anitawati Hermawan Universitas Indonesia
  • Emil Bachtiar Universitas Indonesia
  • Panggah Tri Wicaksono Universitas Indonesia
  • Nia Pramita Sari Universitas Indonesia
Keywords: belief systems, levers of control, managerial performance, strategic risk, strategic uncertainty

Abstract

Belief systems, which are one of the four levers of control, play a vital role in an organization. This study is primarily aimed at examining the effects of belief systems on managerial performance. Since the four levers of control jointly function in management control systems, we extend our study by investigating whether the contingent-fit between strategic risk, strategic uncertainty, and the other three levers of control (i.e., boundary systems, diagnostic control, and interactive control) strengthens the association between belief systems and managerial performance. A survey questionnaire was distributed to the upper-level management of various companies or strategic business units in Indonesia during the fourth quarter of 2017, resulting in 81 respondents. Hypotheses testing were conducted using the OLS regression model. This research found that belief systems are positively associated with managerial performance, indicating that the implementation of effective belief systems leads to higher managerial performance. This study also found that the contingent-fit between strategic risk, strategic uncertainty, and the other three levers of control does not have any effect on how belief systems are positively associated with managerial performance. This finding indicates that although management does not adopt a fit combination between its level of strategic risk and strategic uncertainty and the boundary systems, diagnostic control, and interactive control, it can still achieve good performance as long as strong belief systems are implemented. These findings confirm the critical role of belief systems in the levers of control. Thus, management needs to ensure the establishment of more effective belief systems if the company or business unit wants to produce optimal performance.

Author Biographies

Ancella Anitawati Hermawan, Universitas Indonesia

HERMAWAN, Ancella Anitawati, is the Head of the Department of Accounting Faculty of Economics and Business Universitas Indonesia since 2014. She earned her Doctoral degree in Accounting from Universitas Indonesia in 2009. Her research interest and expertise are performance management and control systems, corporate governance, sustainability management, internal control, and risk management.  She has published several articles in SCOPUS and SINTA Indexed journals, such as  in the Risk Governance and Control: Financial Markets and Institutions, International Journal of Economics and Management, International Journal of Business and Society, International Journal of Innovation and Technology Management, International Journal of Trade and Global Markets, Research in International Business and Finance,  International Journal of Applied Business and Economic Research, and Jurnal Akuntansi dan Keuangan Indonesia.

Emil Bachtiar, Universitas Indonesia

BACHTIAR, Emil, is a lecturer at the Department of Accounting Faculty of Economics and Business Universitas Indonesia. He earned his Doctor in Accounting from Universitas Indonesia in 2020. He is also the Head of Ethics Committee of the Institute of Indonesia Chartered Accountants and the Head of Audit Committee and President/ Independent Commissioner of PT Ekadharma International. His research area primarily lies in the area of family business, corporate governance, and accounting education.

Panggah Tri Wicaksono, Universitas Indonesia

WICAKSONO, Panggah Tri, is a lecturer at the Department of Accounting, Faculty of Economics and Business, Universitas Indonesia. He earned his Bachelor of Economics in Accounting from Universitas Indonesia in 2012, and his Master of Science in International Accounting and Finance from the University of Birmingham, UK in 2015. He is currently doing a PhD in Taxation at the University of Canterbury, New Zealand. His research interest primarily lies in the area of taxation. He has a publication in the Journal of Australasian Tax Teachers Association.

Nia Pramita Sari, Universitas Indonesia

SARI, Nia Pramita is a lecturer at the Department of Accounting, Faculty of Economics and Business, Universitas Indonesia. She earned her Bachelor of Economics in Accounting from Universitas Indonesia in 2015 and her Master of Arts in Public Economics from the National Graduate Institute for Policy Studies, Japan in 2015. Her research area primarily lies in the area of public sector accounting and corporate governance. She has a publication in the Economics and Finance in Indonesia.

References

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Published
2021-07-07
How to Cite
Hermawan, A. A., Bachtiar, E., Wicaksono, P. T., & Sari, N. P. (2021). Levers of Control and Managerial Performance: The Importance of Belief Systems. Gadjah Mada International Journal of Business, 23(3), 237-261. Retrieved from https://jurnal.ugm.ac.id/v3/gamaijb/article/view/15754