Managing in Dynamic Business Environments

Managing in Dynamic Business Environments

Between Control and Autonomy

Edited by Katarina Kaarbøe, Paul N. Gooderham and Hanne Nørreklit

This timely and innovative book focuses on budgeting control and ongoing Beyond Budgeting trends and its consequences for the organization. Ensuring an optimal balance between individual autonomy and management control is a critical challenge for organizations operating in dynamic business environments. Too much of the former leads to chaos, and too much of the latter guarantees rigidity. This book explores the tensions that arise in seeking the best possible balance between these two dimensions. Resolving these tensions is a critical challenge for achieving competitiveness.

Chapter 10: Does managerial discretion affect learning from experience in organizations?

Bjarne Espedal and Alexander Madsen Sandvik

Subjects: business and management, corporate governance, strategic management


Every organization wants to achieve efficiency and adaptiveness. Although each of these goals is essential to the other, they might also be in opposition (March, 1991). For example, the pursuit of efficiency might trap organizations in errors of formal control to such an extent that experimentation and exploration are severely limited. As one possible solution for such errors, “Beyond Budgeting” proposes the abandonment of formal organizational control systems in favor of dynamic control systems. However, Beyond Budgeting is more than an alternative to formal control – “it is about leadership more than anything else” (Bogsnes, 2009: xii). In this regard, the purpose of this chapter is to examine the following question: How and under what conditions can leadership affect organizational adaptiveness? Leadership theory suggests that leadership can affect an organization’s ability to adapt to new demands and challenges. The theory also posits that managerial discretion is a necessary condition for intelligent adaptation to environmental demands (Yukl, 2002; March and Weil, 2005; Hambrick, 2007; Espedal, 2009; Northouse, 2010). When leadership has discretion, it has freedom of choice and, in turn, the chance (and power) to affect the organization’s capacity to become more dynamic.

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