Toward a theory of relational control: how relationship structure influences the choice of controls

Abstract

Greg Milstead, the operations manager of a four-store John Deere dealership, wants employees at his stores to meet specific sales and marketing targets. Traditionally, he would set monthly targets and assess, at month-end, whether employees met the targets. Employees themselves would have only a general sense during the month of whether they were on track to meet the goals. As a control system, this approach has its limitations as the ability to take corrective action during the month is constrained by the lack of information for the manager and his employees. Recognizing a need for a better control system, Milstead championed the implementation of an information system to provide the employees with real-time information about how well they were progressing toward the monthly goals. The system proved a great success in providing employees precise knowledge of goals and their progress. In addition, it facilitated an unexpected change in the way in which control is enacted. Control no longer rests solely with the manager. Employees have become much more proactive in determining how to achieve the goals, and in ensuring that the goals are reached. Moreover, given the transparency provided by the information system, employees now can see how their peers in other stores are progressing against the same targets. This visibility has become a mechanism for encouraging desired behavior, as employees who see they lag behind others have become more motivated to determine how to improve their own performance. Thus, employees and manager have become partners in the exercise of control.

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