Management Accounting Section Midyear Meeting

The Effect of Discretionary Controls on Voluntary Employee Efforts in Nonprofit Organizations

• In Event: Management Control in Nonprofit Organizations

Abstract

Prior research documents that controls can signal distrust and reduce voluntary employee efforts in settings where managers benefit directly from employee efforts. We develop theories to suggest that controls can signal managerial value congruence and increase voluntary employee efforts in settings where managers and employees collaborate to advance a social mission but do not directly benefit from their collaborative efforts. In these settings, we predict and find that employees are more likely to exert a high level of voluntary effort when managers impose a control that enforces a minimum level of employee effort than when managers do not impose such a control. In addition, the presence or absence of a control does not influence voluntary employee efforts when the manager does not have control discretion and a computer program randomly assigns the control. Process evidence confirms that the positive effect of discretionary controls is driven by perceived managerial value congruence. Because our setting is a characteristic of many nonprofit organizations, our results suggest that controls imposed at managers’ discretion may increase voluntary employee efforts and lead to more effective collaboration between managers and employees in these organizations.

Authors

• Laura W. Wang, University of Illinois at Urbana-Champaign

• Li Yang, University of Illinois at Urbana-Champaign

• Huaxiang Yin, Nanyang Technological University