Formal control and trust in monitoring financial accounting outsourcing in hybrid organizations – a multiple case study of municipally owned corporations

Abstract

Purpose This study explores the role of control archetypes and trust in the monitoring of established financial accounting outsourcing (FAO) in municipally owned corporations (MOCs).

Design/methodology/approach Drawing on Speklé’s control archetypes, designed to manage inter-organizational relationships in outsourcing, and the concepts of trust, we analyzed conducted interviews, contracts and other archival material in three MOCs.

Findings MOCs employ both hybrid and non-hybrid control archetypes in controlling FAO. Detailed contracts played a key role in the monitoring of FAO, but only at the strategic management level. All MOCs used hybrid exploratory control such as joint development groups, which increased the role of trust at the operational management level. The hybrid organizational form related to ownership seems to complement trust, either directly or via the owner-city. Direct ownership of SP was, however, not required for trust to substitute formal control.

Research limitations/implications Our study builds on the perceptions and experiences of accounting professionals regarding the use of control mechanisms and prevailing trust. To mitigate potential subjectivity in our analysis, we used both data and researcher triangulation.

Practical implications Both strategic- and operational-level managers are needed to balance formal and informal control in the monitoring of FAO.

Originality/value We enhance the understanding of the control practices employed by MOCs in managing their FAO in hybrid organizational forms.