Specialisation: Management control systems, performance measurement, cost management, field study methods in accounting research
Australia’s economic and social well-being depends on having organisations that are well managed. Performance measurement and reward systems are at the heart of management. Many recent examples of fraud, misconduct and governance failure result from the way behaviours are rewarded in organisations. Managers understand the importance of management control, and constantly redesign their performance metrics to find the elusive ‘holy grail’ of a performance measurement system that aligns employee actions and decisions with organisation-level interests and values. My research is situated within this domain, focusing on the design and behavioural consequences of performance measurement and management control systems.
My most significant recent work examines subjectivity within complex performance measurement and reward systems across four large global organisations in very different industries. Drawing on the unique advantages of field study data, this study exposes layers of hidden subjectivity in apparently formulaic bonus schemes. We articulate the interplay between performance measurement and other bureaucratic processes within firms and highlight the positive role of subjective assessments in limiting the firm risk associated with reliance on objective performance metrics to drive behaviour. This is important because these firms use controlled subjective judgments to broaden the assessment of employee behaviours, rendering them less subject to manipulative behaviour driven by incomplete, incongruent objective measures of performance.
My research also extends into cost management practice. We observe firms making a range of cost management decisions with significant social consequences, including across-the-board cost cuts, downsizing and off-shoring. However, we have little understanding of the ways in which management accounting facilitates or impedes good cost management decisions. My ARC-funded study with Shannon Anderson (University of California, Davis) delves into the relatively unexplored world of cost management practice. Curious as to how some firms manage costs consistently over time and others fall prey to reactive cost management in boom and bust cycles, we asked the question as to whether firms vary in ‘frugality’. We draw on our field and survey data to articulate the dimensions of a corporate frugality construct as a way of distinguishing the efficacy of cost management practices over time. As part of this project we also explore in some depth the way managers understand and incorporate adjustment costs in their decision making. Both corporate frugality and adjustment costs are important concepts in management control and decision making, yet they were completely absent from the management accounting literature.
My broader research agenda explores performance measurement and management control in complex settings such as hospitals, manufacturing firms focused strategically on flexibility and responsiveness, and organisations engaged in strategic alliances as a critical dimension of their value chain. As illustrated in the above examples relating to subjectivity in performance measurement, frugality and adjustment costs, my aim is always to draw on field-based observations to refine and build theory about both the critical constructs we study in management control, and the inferences we make about their determinants and consequences in practice.
- Lillis, A.M., Malina, M.A. and Mundy, J. Rendering Subjectivity Informative: Field study evidence of subjectivity and bias mitigation in performance measurement and reward systems, Working paper, University of Melbourne.
- Anderson, S.W. and Lillis, A.M. 2011. Corporate frugality: Theory measurement and practice, Contemporary Accounting Research, v28(4): 1349-1387.
- Grafton, J., Lillis, A.M. & Widener, S. 2010. The role of performance measurement and evaluation in building organizational capabilities and performance, Accounting, Organizations and Society, V35(7), pp. 689-706.
- Phua, Y.S., Abernethy, M.A. and Lillis, A.M. 2011. Controls as exit barriers in multi-period outsourcing arrangements. The Accounting Review, 86 (5) : 1795-1834.
- Grafton, J., Lillis, A.M. and Mahama, H. 2011. Mixed methods research in accounting, Qualitative Research in Accounting and Management, 8(1), pp.5 – 21.
Email: alillis [at] unimelb.edu.au
Work Phone: 03 8344 5351