Management Accounting Section Midyear Meeting

Formalizing the Informal: Adopting a Formal Culture-fit Measurement System in the Employee Selection Process

• In Event: Control Systems IV

Abstract

Many organizations rely on formal management control systems that align employee values with organizational values (i.e., culture-fit) to shape organizational culture. Yet, this role of formal management control systems is understudied in prior research. This paper contributes by examining the employee performance consequences of adopting a formal culture-fit measurement system in the employee selection process using proprietary data from one company. I exploit the staggered feature of the adoption of the system, and find that, on average, employees selected with the system perform significantly better than those without the system. However, the performance consequences of adopting the culture-fit measurement system exhibit significant variation depending on (1) the interaction with the existing subculture, (2) the extent of shared responsibility among employees in the work environment, and (3) the noise in the measurement of culture-fit due to the gaming behavior of applicants. Taken together, this study has important implications for the design of formal management control systems that can facilitate the diffusion of organizational culture.

Authors

• Suzanne Mullinnix, AAMVA

• Wei Cai, Harvard University Business School