Nondyadic control systems and effort direction effectiveness: Evidence from the public sector

One of the main themes in the current management control literature is the study of systems of control practices. While several studies have examined pairwise (‘dyadic’) complementarities in control practices to investigate whether a control system exists, control systems may also be comprised of more than two control practices (‘nondyadic systems’). We examine whether organizations use a complementary system of three performance measurement uses to mitigate the control problem of effort direction. We illustrate how a nondyadic control system can be modeled and empirically examined using data from 162 organizational units in the public sector. Our findings are consistent with our hypothesis that operational, incentive-oriented, and exploratory uses of performance information are complementary and combine in a single system in a low contractibility setting. We also show that the intensity of use of this nondyadic control system is significantly correlated with effort direction effectiveness in conditions of low contractibility. In contrast, and consistent with our theory, we find that when contractibility is high, the combination of the three uses of performance measures is not correlated with effort direction. Jointly, our results suggest that multiple performance measurement uses combine as a nondyadic system to guide effort direction in a low contractibility setting, yet not in a high contractibility setting.