The Interactive Effects of Perceived Environmental Uncertainty and Control System Type on Managers’ Willingness to Recommend Strategic Change

To remain competitive today, flatter organizations must rely more on middle management in order to adapt in response to demands in the dynamic environments in which they operate. Yet oftentimes organizations do not change even in the face of evolving markets. Using an experiment, we examine how the type of control system used by organizations can shift middle managers’ perception of environmental stability as well as influencing their willingness to recommend organizational change.

Consistent with our expectations, we find a positive association between middle managers’ perceived environmental uncertainty and their willingness to recommend organizational strategic change. This relationship is moderated by control system type, especially for those middle managers whose perceived environmental uncertainty is low. In particular, we find that relative to interactive control systems, diagnostic control systems are more effective in directing manager attention toward environmental uncertainties and increasing the willingness of those managers to recommend a strategic change. In a mediation analysis, we find that this effect is driven by middle managers’ assessment of the riskiness of the potential strategic change. Our results provide an initial step in understanding the relationships between environmental uncertainty and control systems and thus can help senior managers design and implement control systems for flatter organizations in dynamic environments where middle managers are critical to initiating adaptive strategic change.