role of information communication technology in … · goals. earlier researchers such as chenhall...

Sahel Analyst (AJOM): ISSN 1118- 6224 02

ROLE OF INFORMATION COMMUNICATION TECHNOLOGY IN

THE DESIGN OF MANAGEMENT CONTROL SYSTEMS IN A HIGH

PERFORMANCE DEPOSIT MONEY BANK IN NIGERIA

Akinniyi, K.O.1

Abstract

The primary objective of this study is to appraise the role of technological

advancement in the design of management control systems (MCS) in a typical

deposit money bank in Nigeria. In order to gain a comprehensive

understanding of the extent to which technological advancement in the form

of Information Communication Technology (ICT) influences the design of

MCS in a high performance deposit money bank in Nigeria, this study adopts

a qualitative research design by way of structured interview, using purposive

sampling technique to select a branch manager from the head office of a high

performance deposit money bank in Nigeria. Views gathered from structured

interview shows that a management control system is relevant for the

activities of a non-manufacturing entity such as a deposit money bank. In the

design of MCS, organisational objectives are communicated to members

through the use of intranet, email and office communicator. Furthermore,

performance appraisal is performed using appraisal work flow and

marketing performance. It was deduced that the benefit of investing in ICT

outweighs the cost incurred. It was concluded that ICT played an important

role in the design of MCS. The practical implication of this study is that

technology is not only the prerogative of manufacturing entities.

Keywords: Information communication technology, Management control

system, Deposit money banks, Nigeria.

Introduction

Technology is described as a discipline concerned with how human

capabilities and organisational functions can be enhanced (Ramey, 2013).

Many studies in the field of management accounting have focused on how

technology affects manufacturing processes (Bruggeman & Slagmulder,

1995; Maria do Céu & Alves, 2010). In the view of Messner (2016)

management accounting practices are industry specific. This position

reinforces the focus of this study, to examine how technology advancements

affect the design of management control systems in a service industry. In a

service industry such the banking industry in Nigeria, technology

1 Dept. of Accounting, University of Maiduguri, Maiduguri, Borno State.

[email protected] +234 8035973594

African Journal of Management (Vol.3, No.4 2018), Business Admin. University of Maiduguri

Sahel Analyst (AJOM): ISSN 1118- 6224 Page 103

advancement has brought about a tremendous transformation of operations. A

very noticeable aspect of the transformation; is the present day online-real

time banking, which has replaced the traditional banking practice of using

tally number. This transformation in operation has transformed the frontier of

retail banking in Nigeria. A notable attribute of organisations in the banking

business is that they often consume more of information communication

technology (ICT) (Giraldo, 2010).

Information technology (IT) (often used in place of information

communication technology) is the use of computers to store, study, retrieve,

transmit, and manipulate data or information. According to Dechow,

Granlund and Mouritsen (2006), information technology is a pre-requisite for

control in modern day business because it has the power to connect people in

and outside, to the organisation. Information technology in the field of

accounting has evolved from the use of bin cards to modern day sophisticated

accounting software and hardware as well as artificial intelligence. As a

result, technological advancement infers that the manner in which

organisational routines are performed has become transformed with

improvement in prior period technologies so that there is improved speed and

efficiency. Information technology has evolved tremendously over the years.

The metamorphosis of IT from what it used to be in the 1940’s to what it is

today can be described as technology advancement, though, The extent of

deployment of information technology will vary according to organisational

needs.

From a contingency theory perspective, information technology has the

capacity to influence organisational sub-systems, such as management control

systems (MCS) (Chenhall, 2007). According to Bhattacharyya (1971),

management control is a dicotyledonous paradigm, comprising of formal

planning systems and management reporting systems. Management control as

a system, in the opinion of Siska (2015) comprises of a set of controls at the

disposal of managers for steering an organisation towards predetermined

goals. Earlier researchers such as Chenhall (2003) describe MCS as a broad

application of a system that provides both financial and non-financial

information on both internal and external factors, to managers for the

purposes of control and decision-making. Based on a meta-analysis, Siska

(2015) espouses that early authors in the field of management accounting

regarded MCS to mean the same thing as management accounting and control

systems (MACS). However, this perception has been expunged because

MACS is now seen as a component of MCS. Though MACS is perceived as a

broad continuum of control system used to achieve organisational objectives

by stimulating the right behaviour, monitoring performance and

recommending sanction against managers and employees (Macintosh &

https://en.wikipedia.org/wiki/Computer

https://en.wikipedia.org/wiki/Data_(computing)

https://en.wikipedia.org/wiki/Information

Role of Information Communication Technology in the Design of Management Control

Systems in a High Performance Deposit Money Bank in Nigeria


Quattrone 2010, Atkinson, Banker, Kaplan and Young, 2001), it is a

mechanism which seeks to ensure that organisations strive to achieve

organisational objective.

Reiterating on the position of Cugueró-Escofet and Rosanas (2012), that the

dysfunctionalities of MCS has been responsible for series of corporate

failures, it becomes imperative to study how deposit money (DMBs) in

Nigeria have deployed information communication technology in the design

of their MCS in order to resolve these dysfunctionalities. This is because, the

periods between 2001 and 2008 witnessed many high profiled cases of

corporate failures associated to fraud and mismanagement among deposit

money banks in Nigeria. Activities that define a typical deposit money bank

in Nigeria include taking deposits, advancing loans, and financing

investments. These functions must work in harmony with the overall

objective of the business. This can only be achieved with an articulate MCS.

As such the primary objective of this study is to appraise role of technological

advancement in the design of management control systems in a typical

deposit money bank in Nigeria. The remaining parts of this paper proceeds as

follows; Conceptual framework and research questions, method, result and

discussion, the last section focuses on Summary and Conclusion.

Conceptual Framework and Research questions

Management Control System

Management control system can be described as an arrangement within an

organisation, whereby executive managers seek to influence lower level

managers and employees to behave in congruence with organisational goals.

According to McCosh, Rahman, and Earl (1981) it is a set of administrative

procedures that ensures the decisions of top management are executed by

lower level managers. Though numerous definitions of MCS abound in

literature, Pollari (2011) suggests that a better understanding of this concept

can only be achieved from studying MCS as a package. This is because MCS

is an embodiment of Planning, cybernetic, reward and compensation,

administrative and cultural controls (Sovalainen, 2013). These components

often thrive better in a symbiotic relationship with each other rather than in

isolation of one another (Abernethy & Brownell, 1999). This suggests that a

typical organisation can only continue to survive and perform well, with a

smoothie of these components in its MCS.

Recapitulating the different definitions of MCS, Siska (2015), opines that

MCS is an end concerned with direction. Direction in this context means that

getting organisational resources to behave in a manner deemed appropriate in

the best interest of the organisation. This suggests that MCS in a banking

sector will be concerned with ensuring that people in the organisation behave



in a manner that is in tune with organisational objectives. The dynamism and

evolution of business environments has brought about a transformation of

MCS from being a composition of traditional mechanistic control techniques

(budgeting and standard costing) (Sisaye, 2005) to being a synthesis of

informal and organic control (Chenhall & Moers, 2015). Organic control also

referred to as clan control relies on trust with minimal supervision (Lewis,

Goodman, Fandt & Michlitsch 2007). An organic MCS encourages free flow

of information and interaction among different levels of management as well

as with employees in an informal and unstructured organisational setting by

recognizing the position of sociological and psychological variables such as

culture, while mechanistic MCS comprising of cybernetic and formal tools,

focused on accounting information systems (Carneys, 2012). It thus becomes

imminent to ascertain if organisations have a combination of these two

distinct types of MCS, and in what manner of combination, since the modern

day business must strike a balance between them. As such the question below

is raised;

RQ1: Is information communication technology relevant in the operation of

MCS in a typical deposit money banks in Nigeria?

Design of Management Control System

The ambiguity of contingency theory has made it difficult to have a precise

definition for MCS design; as such there are only prescriptions of what a

MCS design should comprise (Elezi, 2015). Though, Bhattacharyya (1971)

had earlier suggested that the blueprint of a typical MCS comprises of formal

planning and performance management, Malmi and Brown (2008) are of the

opinion that there is no definite elements for the design of a MCS. Rather

MCS design must suit the conditions prevailing in each organisation bearing

in mind the importance of having a package of Planning, cybernetic, reward

and compensation, administrative and cultural controls (Sovalainen, 2013).

This study adopts a package approach to the design of MCS because of the

synergetic result of the whole together, rather than effects of each component.

Reflecting on the essence of MCS, Toluwalope (2015) recommends that the

design of a MCS must depend upon what is desired by the organisation, in

terms of making it possible for employees to have a clear definition of

organisational work-goal; as well as a concise prediction of employee

motivation; which will allow for prompt observation of any variance between

anticipated outcomes and actual outcomes. By implication, it implies that the

design of MCS must first convey organisational mission and vision.

Secondly, motivation technique must be such that stimulates employees.

Motivation can be steered using financial or non-financial parameters.

Thirdly performance measurement must be able to measure performance




appropriately. Fourthly, information flow between senior level managers and

lower level managers must be uninterrupted and must fit organisational

structure in existence. The interplay between these four components will

allow for proper variance evaluation. In the views of Toluwalope (2015), the

smaller the variance, between desired organisational goals and observed

performance, the more effective the design of MCS is; which is what every

organisation must strive to achieve.

The meta-analysis by Siska (2015), allows for the design of MCS to be

observed from two dimensions of either a positive MCS or a negative MCS.

The positive MCS is interactive and works on the belief system of employees.

In this type of system, intrinsic motivators will be more relevant than

extrinsic motivators. On the other hand, a negative MCS design is

characterised by boundary system, and diagonistic system. Thus the following

research questions are advanced;

RQ2 How are goals of a typical DMB in Nigeria conveyed to employees

using ICT?

RQ3 What motivating factors exert the most influential on employees in

the design of MCS?

Technology Advancement

Technology in a non-manufacturing business entity will naturally be

concerned with information communication. Information communication

technology according to Adeoti (2005) involves the use of the internet and

modem connections to disseminate information, as well as perform

organisational processes. Apart from being a combination of hardware and

software ICT is known to directly affect how managers perform decision

processes (Agbolade, 2011) as well it has the potency to help organisations

achieve institutional goals (Yusuf, 2010). Before the era of technological

advancement operations in deposit money banks required tedious paper work,

long queues, and long waiting time. This attribute has however changed with

the continuous developments in the world of information technology. Though

ICT has the ability to enhance organisational performance, continuous

reforms in the banking sector of Nigeria has further accentuated the need for

increased investment in ICT by these deposit money banks (Luka & Frank

2012).

In banks, ICT is deployed in the areas of customer focus, core bank

operations as well as employee focus (Ghaziri, 1998).With regards to

operations in typical deposit money banks in Nigeria, ICT takes the form of

Bankers Automated Clearing Services, Automated Payment Systems and

Automated Delivery Channels (Agboola, 2002). Productivity, innovation



dynamics, market structure, and value chain characteristics are the peculiar

dimensions for evaluating ICT of deposit money banks in Nigeria (Luka &

Frank, 2012). While productivity can be observed in terms of increase in

customers associated with a shrink in operations staff and office space,

innovation dynamics is concerned with newer approaches to dealing with

customers such as internet banking, POS, and mobile banking platforms.

Business combination options and asset reclassification are notable features

of market structure while value chain characteristics reflects the ability of

deposit money banks to meet expectation of customers in terms of quality and

speed of services.

Some benefits derivable from using ICT include better decision making,

enhanced productivity, improved customer service and financial performance

(Linton, 2017). Despite these benefits, deployment of ICT in deposit money

banks in Nigeria has had several down sides such as the huge capital cost of

deploying the ICT, asset redundancy caused by restructuring of office space

and buildings, laying off employees that do not fit into the ICT workplace

which has magnified the already high rate of unemployment (Ugochukwu,

2016).

Despite the enormous amounts invested in IT as well as the life changing

implications aspects of IT such as ICT on organisational outcome variables

there appears to be paucity of empirical evidence to support the possible

relationship between IT and organisational systems (Chou, Weng & Wu,

2014). This implies that there is also dearth of empirical evidence to support

possible relationship between ICT and organisational system such as

management control system. As such, the following question are sought to

be resolved in this study:

RQ4: To what extent can DMBs measure the benefit of investment in ICT?

Research Method

In order to gain a comprehensive understanding of the extent to which ICT

influences the design of MCS in a typical deposit money bank in Nigeria, this

study adopts a qualitative research design by way of structured interview.

Questions raised in the questionnaire were adapted after the framework of

Ferreir and Otley (2009). The framework was modified by introducing some

of the views of Toluwalope (2015) and some information communication

questions.

By, qualitative research design was used to gain insight into how a typical

DMB designs its MCS. In addition qualitative research design was also

adopted to obtain understanding from senior management personnel, about




how money invested in ICT is directed towards influencing MCS.

Furthermore, explanations given by senior management staff was used to

ascertain if at all ICT influenced the design of MCS. Using purposive

sampling technique, one of the first five high performing deposit money

banks in Nigeria was selected for the purpose of providing answers to raised

research questions. The selected deposit money bank was selected because of

its international presence and reputation in the banking industry of Nigeria.

The name of the bank is however withheld in accordance the desire of the

respondent no to disclose the identity of his employer.

Result and discussion

Response obtained from the interview is presented in Table 1. Research

Question

Question statement Observation

RQ1: Is information

communication

technology relevant in

the operation of MCS in

a typical deposit money

banks in Nigeria?

Respondent confirmed the use of ICT in communicating organisational

mission and vision to employees. Ability to communicate

organisational vision and mission is identified as an important

ingredient is the design of MCS. In particular email, intranet and office

communicator are deployed in communication these aspects of MCS

design.

These dimensions of ICT are deployed in the communication process

which is an integral aspect of MCS design. Respondent confirmed that

though participation is encouraged across all levels in the organisation,

communication process is more of feed-forward in nature.

RQ2

How are goals of a

typical DMB in Nigeria

conveyed to employees

using ICT?

Organisational goals are conveyed in terms of areas of performance

indicators. In this high performance deposit money bank, in their order

of importance, customer satisfaction, profitability and balance sheet

size are the three most important indicators for meeting organisational

goals.

These goals have a high expected level of performance and the

challenge level is quite high. Information communication technology is

very important in this aspect of MCS design.

In order to ensure that organisational goals are achieved, performance is

appraised using a combination of quantitative and opinion assessment

as follows:

Level frequency of appraisal

Individual weekly

Group quarterly

Organisation annual

Appraisal workflow and marketing performance are the types of ICT

used in performance appraisal.

RQ3 What motivating factors

exert the most

influential on

employees in the design

of MCS?

Since MCS is expected to influence behaviour, in order to achieve

organisational objectives, it was observed that financial reward was the

most motivating factor in this organisation.

RQ4: To what extent can

benefits of investment

in ICT be measured?

Respondent confirmed that there is a frequent upgrade of the ICT of his

organisation. This upgrade comes with its associated cost but the

benefit derived outweighs the cost of the upgrade. A notable benefit

derived is increase in income level and enhanced efficiency. This may

be why this deposit money bank is regarded as a high performing

organisation.



Conclusion and Recommendation

In order to continue to be relevant in the ever competitive business

environment, business entities must ensure they continue to be value relevant.

In order to ensure that the going concern of an organisation is not in doubt,

and that it continues to be relevant, it is imperative to have a system in place

that ensures employees and managers work towards achieving organisational

objective. The system that enables organisations achieve organisational

objectives, which are workable organisational mission statements, is the

management control system.

In designing a management control system, ability to convey organisational

mission and vision is the first thing to consider. This is to ensure that

employees are able to key into organisational goals. Once employees have

adequate understanding of organisational vision and mission, the next issue is

performance measurement, followed by identifying what adequately

motivates employees. Finally, pattern of communication which may be

participative or non-participative should be given proper consideration.

In order to ascertain the extent to which information technology advancement

influenced the design of management control system, this study adopted a

qualitative research design using structured interview. The interview was

conducted via a phone call. Questions used for the interview were adapted

from the framework of Ferreir and Otley (2009) as well as the views of

Toluwalope (2015).

Outcome of the interview shows that the deposit money bank studied deploys

information communication technology in the design of MCS. It was deduced

that ICT is being reviewed frequently. Though the frequent review has

significant cost implications, the benefits derived out weights the cost

incurred on ICT.

The implication of the outcome of this study for practice is that ICT is an

indispensable aspect of business life, particularly high performance

organisations. Since the benefits derived surpasses the cost of deploying the

ICT, decision makers may wish to consider value derivable rather than cost of

setting up the MCS.




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