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RELATÓRIO TÉCNICO CIENTÍFICO

Projeto

RELACIONAMENTOS ENTRE INDICADORES, TÉCNICAS E

DESEMPENHO: A CONSTRUÇÃO DE UMA FERRAMENTA DE

AUTO-DIAGNÓSTICO PARA USO PELOS PROFISSIONAIS.

29 de março de 2018

PROF. DR. JOSÉ CARLOS TIOMATSU OYADOMARI LÍDER DO PROJETO

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1 1. INTRODUÇÃO

Este relatório tem como objetivo descrever os resultados científicos derivados da execução do projeto intitulado Controle gerencial em empresas brasileiras: Geração de conhecimento a partir dos práticos.

Agradecemos ao apoio do Mackpesquisa, que possibilitou recursos que contribuíram para viabilizar esta pesquisa.

Dois objetivos foram definidos para esse projeto

Primeiro Objetivo: Responder a seguinte questão de pesquisa: Quais são os relacionamentos entre Alinhamento de Objetivos e Indicadores, Técnicas de Controle Gerencial e Desempenho? Segundo Objetivo: Tornar esse conhecimento público, por meio de uma ferramenta interativa que forneça um autodiagnostico ao respondente, situando a organização versus a média da amostra e comparando com as empresas com melhor desempenho. A ferramenta interativa irá ainda fornecer uma lista sugerida de técnicas de controle gerencial, que se implementada teria maior impacto no desempenho da organização.

2. CRÍTICAS, COMENÁRIOS E SUGESTÕES DOS PARECERISTAS Transcrevem-se as modificações solicitadas por cada parecerista.

Parecerista 1:

O projeto submetido tem a perspectiva de grande apelo comercial, especialmente voltado aos gestores e analistas do desempenho organizacional. A análise e avaliação do desempenho organizacional está¡ entre os temas de maior interesse acadêmico e empresarial, no intuito de entender os resultados do passado e projetar os resultados futuros. A análise de desempenho contribui no alinhamento dos interesses dos investimentos com os resultados esperados/realizados. A perspectiva teórica apresentada é condizente com o problema proposto, articulando importantes produções da literatura nacional e internacional. Contudo, as justificativas poderiam ser pontuadas de modo mais explícito, indicando os benefícios atrelados a cada uma. A equipe possui relevantes experiências associadas ao projeto, gerando também expectativas de avanços científicos importantes no campo gerencial. O cronograma apresenta coerência entre as etapas, tempo previsto para cada etapa e vinculação dos membros da equipe proponente. Em relação ao orçamento, chama a atenção que cerca de 44% dos valores requisitados estão atrelados A viagem, deslocamentos e diárias. Contudo, o gasto está¡ condicionado a aprovação de produção científica em evento internacional, gerando destaque institucional caso haja a confirmação. Além disso, outro aspecto diz respeito a não vinculação de recursos com o desenvolvimento da ferramenta desejada. Não resta claro se todo o desenvolvimento tecnolÃ³gico ficará¡ a cargo da equipe proponente, embora pareça implícito pela não indicação de recursos para tal atividade. A partir do exposto, em que pese algumas considerações que poderiam ter sido melhor explicitadas, o parecer é favorável a aprovação do

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2 projeto para a construção de uma ferramenta de auto- diagnóstico para uso pelos práticos, analisando os relacionamentos entre indicadores, técnicas e desempenho em virtude das Perspectivas observadas hipótese: compreender, criticar espaço urbano requer meta-projeto

Parecerista 2: Pontos Fortes

. O projeto apresenta uma proposta de pesquisa interessante.

. O proponente e a equipe apresentam capacitação para desenvolvimento do plano de trabalho proposto.

. Fez-se um bom levantamento de estudos científicos afins sobre o tema.

. A ideia de se desenvolver uma ferramenta interativa, que forneça um autodiagnostico ao respondente da pesquisa é uma ideia interessante e pode-se avaliar associá-la à instituição financiadora do projeto

Pontos Fracos

. O projeto carece de uma revisão na definição de seus elementos fundamentais e, em alguns pontos, na exposição das ideias.

. O título não expressa o efetivo conteúdo do projeto. Falta a ele menção a um dos elementos-chave do trabalho: objetivos organizacionais. A falta desse elemento faz com que o título não remeta ao efetivo conteúdo do trabalho. É estranho o uso do termo práticos (que é adequadamente substituído pelos termos profissionais no destaque dos dados gerais do trabalho, no site Mackpesquisa).

. Alguns termos carecem de melhor definição, tais como uso diagnóstico, uso interativo, artefatos de controle gerencial etc.

. A questão de pesquisa (objetivo implícito) carece de melhor definição e delimitação. Falta referência aos profissionais [profissionais das áreas de Controladoria e Finanças, conforme se indica na Metodologia].

. O projeto carece de maior detalhamento sobre como se pretende desenvolver a pesquisa.

. O projeto já deveria indicar população e amostra, e a forma como se pretende aplicá-lo. . Buscar melhorar a inter-relação entre Hipóteses de Pesquisa e Operacionalização do Questionário, de forma a assegurar que aquelas serão testadas.

. Em alguns pontos, o projeto carece de melhoria na exposição das ideias.

. Faltou melhor detalhamento da ferramenta de autodiagnostico que se pretende desenvolver.

Observações Importantes:

. Por desconhecer os critérios de concessão de recursos pela instituição, optei por indicar que o orçamento é parcialmente adequado. Por exemplo, valor relevante do montante do orçamento se destina à apresentação de trabalho no exterior, com solicitação de recursos para viagem e hospedagem.

3. COMENTÁRIOS E SOLUÇÕES EM RELAÇÃO ÀS CRÍTICAS E SUGESTÕES DOS PARECERISTAS

Apreciamos os comentários e críticas dos pareceristas. A seguir procuramos endereçar os principais pontos:

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3 A produção da ferramenta foi feita pela equipe da Faculdade de Computação e Informática da Universidade Presbiteriana Mackenzie, por meio de um aluno de graduação (bolsista do projeto) e sob supervisão de uma professora.

A apresentação do artigo foi feita na Performance Measurement and Management Control Conference em Nice, uma das mais importantes conferências internacionais sobre o tema. Na ocasião o pesquisador líder se reuniu com o Prof. Dr. Ricardo Malagueño da University of East Anglia – Reino Unido, onde foi definido o modelo conceitual da ferramenta.

O público-alvo usuário da ferramenta são gestores de empresas, profissionais de controladoria e finanças que poderão utilizar essa ferramenta sem nenhum ônus.

4. PRODUÇÕES DERIVADAS DESTE PROJETO 4.1 Artigo acadêmico apresentado no em congresso

OYADOMARI, J.C.T; DULTRA-DE-LIMA, R.G. AGUIAR, A.B., ALVES, C.S. PERFORMANCE MEASUREMENT SYSTEM AND MANAGEMENT CONTROLS: INFORMATION OVERLOAD AND ROLES OVERLAP. 9th Conference on Performance

Measurement and Management Control Proceeding No anexo, o artigo é transcrito.

4.2 Ferramenta de AutoDiagnóstico

Oyadomari, J.C.T; Malagueño, R. ; Cunha, D. V. ; Silva, G.A.S ; Mendonça Neto, O.R; Teste de Alinhamento de Objetivos e Ferramentas de Controle Gerencial. São Paulo, Universidade Presbiteriana Mackenzie, 2018.

Acesso pelo link http://201.6.243.44:3005/controladoria

No anexo são apresentadas as telas da ferramenta.

5. CONSIDERAÇÕES FINAIS

O projeto obteve êxito ao gerar duas produções, uma em âmbito acadêmico e outra no âmbito profissional. Espera-se que essa ferramenta possa ser útil para a comunidade e sociedade. Tivemos um grande aprendizado por meio desse projeto, e ficamos felizes que já tenha influenciado um segundo projeto, também suportado com recursos do MackPesquisa. Essa abordagem de pesquisa engajada, também chamada de engaged scholarship, está aderente com os recentes movimentos de pesquisadores mais interessados em movimentos relacionados com a comunidade profissional

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4 Anexos

Oyadomari, J.C.T; Malagueño, R. ; Cunha, D. V. ; Silva, G.A.S ; Mendonça Neto, O.R; Teste de Alinhamento de Objetivos e Ferramentas de Controle Gerencial. São Paulo, Universidade Presbiteriana Mackenzie, 2018.

Figura 1 – Página Inicial do Autodiagnóstico de alinhamento de indicadores e controles gerenciais

Figura 2 – Líder de pesquisa - referência

Situação 1: Alto número de funcionários na empresa; muita concorrência; até 10% de variação em vendas mensais nos últimos meses; objetivos com notas baixas.

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5 Figura 3- Situação 1 - Página 1

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6 Figura 5- Situação 1- Página 3

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10 Figura 13- Situação 1- resultados a curto prazo

Figura 14- Situação 1- resultados a longo prazo

Situação 2: Baixo número de funcionários na empresa; pouca concorrência; Mais de 30% de variação em vendas mensais nos últimos meses; objetivos com notas altas.

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11 Figura 15- Situação 2 – Página 1

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16 Figura 25- Situação 2 – Resultados a longo prazo

Situação 3: número médio de funcionários na empresa; média concorrência; Entre 11% e 30% de variação em vendas mensais nos últimos meses; objetivos com notas variadas.

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21 Figura 35- Situação 3 – Resultados a curto prazo

Figura 36- Situação 3 – Resultados a longo prazo

Situação 4: Baixo número de funcionários na empresa; média concorrência; Mais de 30% de variação em vendas mensais nos últimos meses; objetivos com notas variadas.

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22 Figura 37- Situação 4 Página 1

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27 Figura 47- Situação 4- Resultado a longo prazo

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28 Performance measurement system and management controls: information overload and roles overlap

Abstract

Implementing and maintaining a performance measurement system (PMS) and management controls consumes resources and the time of executives and employees at various levels. From the practical point of view, there may be an excess of controls and information overload, which can hinder decision making. From the point of an academic view, there may be an overlap of constructs, particularly with two constructs, PMS and management control system (MCS). Our study aimed to study whether the alignmentt between objectives and indicators is sufficient for the company to influence performance (short and long-term) positively. And if with the inclusion of planning and cost controls, these relationships would change, that is if only the controls would be enough or if it would be necessary to maintain the set of indicators and management controls. Based on a survey of 89 companies located in Brazil and using Partial Least Squares Structural Equation Modeling (PLS-SEM), our results show that when analyzed in isolation, the fit between goals and indicators influences positively on organizational performance (short and long-term). Our findings show that with the inclusion of planning and cost controls in the full model, the fit between short-term objectives and monetary indicators and the effect on performance appears no significant. This finding can suggest that the cost controls become more important than the alignment of short-term objectives with monetary indicators, and may be sufficient as control instruments. These findings show that in some cases there is an overload of information, increasing the cost of attention (Widener, 2007), which can impair cognitive decision-making (Helfalt & Martin, 2015). These findings suggest for the practitioners that the simplification of the processes can improve the effectiveness of the controls. Another possibility concerns a potential overlap in the specification of constructs, especially on PMS and MCS.

Keywords: Fit, alignment, performance measurement system, cost controls, planning controls,

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29 1. Introduction

Companies invest vast sums of resources in implementing and maintaining a performance system, beyond the management controls that are present in organizational routines. These activies consumes resources, the time of executives and managers, and may incur in the phenomenon called in the literature of the information overload (Gimbert, Bisbe & Mendonza, 2010, Helfalt & Martin, 2015). Additionally, the decision-making structure canb be slow, with the loss of flexibility, which is considered as an important agenda in management accounting (Franco-Santos, Lucianetti & Bourn, 2012). Abernethy and Lillis (1995) identified that the decrease in the use of measures of performance was related to the increase of the commitment of the organizations with the strategy of flexibility.

On the other hand, there is a questioning regarding the quantity of new constructs or dimensions of the artifacts in the knowledge field called management accounting or management control (Spékle & Kruiser, 2014). Hansen (2010) identified that the budget has four roles, but in their research, these functions seem to overlap. The lack of consensus has led to the emergence of several frameworks and constructs, such as the balanced scorecard (Kaplan & Norton, 1996), strategic performance measurement system (Chenhall, 2005), MCS as a package (Malmi & Brown, 2008, Ferreira & Otley (2009).

Our study proposes to examine two aspects defended in the academic and business literature. The first is the aligment between objectives and KPIs, which is usually subject of an performance measurement system. The second are two types of controls such as the planning controls and the cost controls, which are part of management control systems frameworks, and often with some different terminologies. Our point of view is that, if only the alignment between objectives and indicators would be enough to influence on organizational performance, or if would also need, besides the alignment between objectives and indicators, the use of management controls. Our inquiry is based on research results that controls emerge over time (Malmi & Brown, 2008), as well as in the studies that have used configurational theory such as Bedford and Malmi (2015), which demonstrated a configurational approach to controls based on the previous work of Malmi and Brown (2008), Grabner and Moers (2013), and in the qualitative study of Sandelin (2008), among others.

In the field of strategy, the issue of the alignment between organizational objectives and business unit objectives is a subject that, although reminiscent of Skinner's work of 1975, still arouses interest from both practitioners and academics (Joshi, Kathuria, & Porth, 2003). The interest in understanding strategic fit, that is the alignment between organizational strategy and structure, is due to its potential implications in organizational performance (Lindow, Stubner, & Wulf, 2010). The strategic fit can be defined as the "degree of linkage or consistency between its competitive priorities, operations strategy, and delivery system" (Hill, Cuthbertson, 2011, p.991). And can be divided in external when "all of its actions and interests are focused on their key goals ... " and internal when "all employees from the different levels and functions... agree on what is the most important for the business... if its operations strategy matches to each other" (Hill, Cuthbertson, 2011 p.992). Therefore, the center point is the alignment between strategy and structure.

Differently in the management accounting field, the question related to the alignment occurs between strategies and performance measurement systems (PMS) (Van der Stede, Chow & Lin, 2006), under the contingency theory. However, with the launching of management systems based on performance indicators such as balanced scorecard (Kaplan & Norton, 2009), the alignment issue started to be discussed in a particular way. That is, how the performance indicators are aligned with organizational or business unit objectives, and even with departmental objectives. Micheli and Manzoni (2010) state that "for performance measurement to be used as an effective tool for power" it is important that performance indicators are linked to strategy (Micheli & Manzoni, 2010, p.473).

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30 Although they admit that there should be such an alignment, Kaplan and Norton (2009) acknowledge that despite the growing adoption of balanced scorecard-based strategy management systems, there are still gaps between formulation and execution at different organizational levels. They attribute this phenomenon to the great number of tools launched in recent years for strategic formulation and operational improvement (Kaplan & Norton, 2009).

According to Cuguero-Escofet and Rosanas (2013), the role of the MCS is "to achieve the greatest possible goal congruence, i.e., a situation in which by pursuing personal goals, people are pursuing organizational goals". Based on the literature review on performance measurement systems, Franco-Santos et al. (2012) mention that PMS that adopt various performance indicators are classified as "contemporary performance measurement systems", as they provide the indicators that are related to organizational strategy, that is, in an implicit reference to the issue of alignment.

In recent work, Melnyk et al. (2014) also report that this alignment issue is important. Based on the literature, the authors point out that the performance measurement systems have some problems, for example, they are responsible for undermining manufacturing competitiveness and fostering the absence of a strategic focus. These authors defend the need for the fit between the elements of business strategy, organizational culture, and external environment. Therefore, there is a fit between what is being measured and communicated as important, and the important goals indeed.

Therefore, it is possible to note that this theme is recognized as important by academics and also important by practitioners. Consider the case of a salesperson who manages the rebates and earns a variable compensation calculated as a percentage of revenue when the organization's goal is to improve margins. Consider the case of a company that seeks to improve long-term performance, but managers are measured by ROI. These are small examples that elucidate how the issue of alignment is critical for achieving performance and are still present in organizations. Based on the arguments cited, this article proposes to answer the first question of research: is the alignment between objectives and indicators enough to achieve performance?

With the emergence of several techniques of management control such as balanced scorecard, strategic management accounting, the controls from the area of operations, and so forth, the organizations experience the dilemma of adoption and even abandonment of certain techniques of management control. Although the literature states that the performance is influenced by several variables, some of them are difficult to operationalize to be captured through survey researches. But the studies such as Cadez and Guilding (2008) show that controls related to strategic management accounting influence on performance. The studies in the area of strategy generate inconclusive results on the impact of planning on performance. In spite of these several finding in research, this question of the association of control artifacts or management accounting remains inconclusive, and the second research question arises: are planning and cost controls enough to achieve performance?

The conception of our research starts from the rational premise that an organization has goals and to achieve these goals it chooses performance indicators to induce managers. These managers should make use of controls to make decisions about planning (it means for achieving those goals) and costs (it means for diagnosing the opportunities for interventions). Therefore, a company with a proper fit and who make use of controls should get better performance as measured by the degree of alignment of those goals. On the other hand, regarding that, there may be an overlap of these tools which generates an overload of information. Thus, it makes sense to investigate whether the fit between objectives and indicators would be sufficient to obtain performance, or whether it would be necessary to use controls or vice versa.

In order to answer these two research questions, a survey research was carried out with 89 professionals from the areas of control and finance of Brazilian companies. The results were analyzed using the structural equations modeling (SEM) technique through Smart-PLS. The

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31 results confirmed the hypothesis that the alignment between short-term objectives and monetary performance indicators positively influences on performance, which was measured by monetary indicators. And also that a greater alignment between long-term objectives and non-monetary performance indicators positively influences on performance, which was measured by non-monetary indicators.

Then we tested the full model by including the cost and planning controls. The results surprised us, because in the full model the relationships between the fit of the short-term objectives and monetary indicators and its impact on performance have become non-significant. And the only fit between long-term objectives and non-monetary indicators emerges marginally significant, which influences on performance.

These results lead us to some potential discussions. The first is that there may be an overlap of control instruments, that is, the sample organizations could choose between using the indicators aligned with the objectives or even use only the planning and cost controls. Based on our results, the fit between the short-term objectives and indicators could easily be replaced by cost controls. This result is relevant to the practice because of the implementation, use, and maintenance of a PMS that consumes resources and time from the managers.

Our article has important contributions to literature.The first which concerns the operationalization of the constructs, since we operate the fit concept by the difference between the mean of the objectives and the mean of the use of indicators. We also divide the fit into the short and Long-term. Finally, we have included the planning and cost controls in the full model. The second aspect concerns the operationalization of the constructs, that is, these two PMS and MCS constructs, particularly planning and cost controls may be superimposed (Spékle & Kruis, 2014). Our results are relevant for organizations due to they suggest that the company can choose between maintaining an aligned PMS or opting for a set of management controls techniques to achieve performance, and saving time and resources.

The study is structured in five parts, including this introduction. Following are presented two theoretical model, hypotheses, methodology, analysis and discussion of the results, and finally the final considerations.

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Figure 2 – Full conceptual model of research

H1: Companies with the greater fit between short-term objectives and monetary indicators have higher monetary performance.

H2: Companies with the greater fit between long-term objectives and non-monetary indicators have higher non-monetary performance.

H3: Strategic fit between short-term objectives and monetary performance indicators are positively associated with short-term performance in full model.

H4: Strategic fit between long-term objectives and non-monetary performance indicators are positively associated with long-term performance in full model.

H5: Cost control is positively associated with short-term performance.

H6: Planning controls are negatively associated with short-term performance. H7: Planning controls are positively associated with long-term performance.

2. Hypotheses Development 2.1 Organizational Objectives

Several scholars argue that there is a certain prioritization of objectives, such as Crossan, Rouse, Fry, and Killing (2009), which state that the different organizational objectives must be put in some order of priority, also called goal structure. It is important due to avoid conflicts and confusion among them. Other scholars such as Hitt, Ireland, and Hoskisson (2001) argue that the primary objective is to achieve profit above average returns. On the other hand, considering the existence of different stakeholders, the organization would be expected to have different organizational objectives and consequently different performance (Ferreira & Otley, 2009); however, but they must be aligned.

One way to operationalize the objectives, which also are called priorities, is to define what priorities are organizational concerns that can be observed by the attention and resources employed (Harlez & Malagueño, 2016). These priorities are defined regarding the rational goals categories (productivity and efficiency), internal processes (communication and information sharing), open systems (flexibility), and political support (cohesion, morality for the human resources development) (Harlez & Malagueño, 2016). The complexity and variety of strategic priorities influence on the greater diversity of indicators, as it makes it harder to identify the expected outcomes, as well as the way and the time horizon to reach these strategic priorities (Abernethy & Mundi, 2014).

Another terminology on strategic objectives is presented by Ferreira and Otley (2009), who propose a performance measurement system model. In this model, they suggest that one of the stages of the PMS is the definition of critical success factors, which include the activities, attributes, competencies, and are prerequisites for the firm's success. In another step of the model, Ferreira and Otley (2009) discuss the definition of the key performance indicators such

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33 as monetary or non-monetary, under which, the critical success factors were being achieved. An important dimension concerns what the literature called the time horizon (Abernethy and Mundy (2014) which defines when the objectives should be achieved.

2.2 Short-Term Objectives

The short-term objectives are related to the achievement of goals established in the budget or to those goals committed to investors. Regarding the different stages of organizational life cycle (Moores & Yuen, 2001), these objectives can vary in importance to be adherent to each stage.

The sales growth is one of the most important objectives in the initial stage, which is when the company needs to gain market share so that its product can occupy spaces, as described by Davila and Foster (2007). It also shows the company's ability to gain market share, and if there is a good acceptance of the products and services sold by the company to customers.

At another stage, the objective of improving product margins may be important, especially when the organization seeks to improve these margins through offering new products (Mouritsen, Hansen, & Hansen 2009). It also reflects the competence in efficiency in production/operation, as well as in offering the differentiated products, or in accordance with the strategy of dilution of unit fixed costs through increasing the volume.

According to the case presented by Wanderley and Soeiro (2016), the costs and expenses reduction is a mandatory item in the recent agenda of Brazilian companies due to the country has experienced a scenario of GDP decrease in the years 2015 and 2016. In addition, cost reduction is a competence valued mainly with the ascension of 3G Capital and the diffusion of the management practices adopted by the group.

The process improvement reflects the understanding that processes or activities such as distribution, sales, marketing, and collection consume resources, as demonstrated by Smith (2005), beyond the organizational knowledge because are people who perform these activities (Roberts, 2017). By contrast, it can also be seen as a competence due to the “…absorptive capacity is viewed as a dynamic capability embedded in a firm's routines and processes…” (Zahra & George, 2002, p.186).

The potential cash generation is also a very present objective in the organizations because it is a proxy for the company’s cash generation and also the economic value. Despite some critiques about EBITDA (Stumpp, 2000, Frezatti, & Aguiar, 2007), this measure has been widely used by organizations around Brazil. For instance, Wanderley and Soeiro (2016) have studied a case of unsuccessful implementation of the balanced scorecard and report that the causes of the failure were the excess of short-term objectives such as profit improvement, costs and expenses reduction, and EBITDA improvement. The EBITDA also is a number that is used in covenants, and most publicly traded companies have EBITDA guidance.

The profitability improvement is considered a short-term objective, which is important because profit is a key indicator for top management (generally, the director´s bonus is linked to profit, and for owners and investors who influence on the dividends payment).

The return on invested capital (ROIC) improvement also is a relevant measure in the Brazilian setting, where the cost of capital is very high. In the long-term, ROI needs to be higher than the weighted average cost of capital (WACC) for that some companies have positive operating margin and positive ROIC. But sometimes it is not enough to have a positive net income, or a positive economic value added (Anthony & Govindarajan, 2006).

Another objective more related to survival is the debt monitoring, by which becomes more important as many Brazilian companies are in financial recovery due to the current economic crisis. Thus, the debt reduction is an important subject in the agenda of these companies. Ghosh and Jain (2000) found that financial leverage of combined firms increases significantly following mergers.

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34 Several of these objectives were not found as indicators or variables in survey questionnaires, but they are present in the academic literature. Part of these objectives is shown by Baxter and Chua (2008), on the routine of a CFO, particularly, debt-to-equity ratio, profitability, cash flow, and inventory turnover.

2.3 Long-Term Objectives

The long-term objectives are present in the strategic planning process, but the most commented, mainly with the advent of value-based management, is the value creation to the shareholder. Although it is necessary to create value to the shareholder, it also is necessary to consider the risk. Other qualitative objectives are important as obtaining a good corporate reputation, organizational efficiency, employee motivation and morale, organizational growth, or providing public (Anthony & Govindarajan, 2006).

Another long-term objective is to enter new markets. Crossan et al. (2009, p. 25) described the matrix product/market scope developed by Igor Ansoff in 1987. This matrix indicates that companies can choose for selling new products to new markets, or new geographic territories (Harlez & Malagueño, 2016), or in the extreme side, the existing products to existing markets. In turbulent times for surviving, several companies include in their goals the innovation. Innovation is a critical enabler for firms create value (Chen & Huang, 2007). Notably, Bisbe & Otley (2004, p.711) state that product innovation refers to the product development and launching, which is in some respect, unique or distinctive from existing products.

Another long-term objective is growth. For achieving this goal, several companies adopt the strategy of growth by acquisition (Barney, 2007). Additionally, Silvola (2008) described a case study that a company had grown by acquisitions of other companies.

2.4 Performance indicators

Mainly in the business literature, it is prevalent to refer to performance indicators as metrics, but in the view of Melnyk et al. (2014), there is a distinction between metric and performance measure. For them a metric has three elements: (1) it quantifies what is happening, (2) there is a standard index or objective that indicates what is considered good or bad and directs organizational actions, and (3) the consequences of being below or above the goal. There is also a highlight for the performance measure to be informative, while the metric is critical, to some extent contains a value judgment. This question is also addressed by Ferreira and Otley (2009) when stating that for each performance indicator chosen, there is a next step that is the definition of the goal, which would be in our understanding what Melnyk et al. (2014) are called metrics. The literature also uses performance indicators such as financial or monetary and non-financial or non-monetary. Ferreira e Otley (2009, p. 271) states that “key performance measures are the financial or non-financial measures (metrics) used at different levels in organizations to evaluate success in achieving their objectives.” And they complement that there is evidence that alignment between performance measures and strategy affect performance.

This discussion of non-monetary performance indicators becomes more pressing with the advent of the balanced scorecard by Kaplan and Norton (1996) whose the main innovation was to include non-monetary performance indicators. Mainly as a response to decreasing propensity for a focus excessive in short-term performance caused by the use of remuneration systems based solely on financial performance (Ittner, Larcker, & Mayer, 2003). Specifically, managerial myopia manifests itself when the focus is on increasing short-term performance without concerning about long-term business continuity (Merchant, 1990). Additionally, the advent of the balanced scorecard approximated the field of operations with the scope of management control (Otley & Soin, 2014).

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35 The adoption of different measurement perspectives tends to balance strategic priorities that compete with each other, and specifically non-monetary indicators can translate the strategy into operational terms, besides being considered better predictors of future performance and less manipulable than monetary indicators (Dossi & Patelli, 2010).

For achieving the long-term objectives, it is necessary for the organization to make investments, as well as the expenses for research and development, training, marketing, or administrative structures. These investments and expenses worsen the monetary performance indicators, especially ROI, profit, and margins. Thus, it is expected that the organization that has long-term objectives and use a range of non-monetary performance indicators because the monitoring of these indicators may signal that the long-term objectives are being achieved. In summary, monetary performance indicators may be worse in the short-term, but in the long run, they may be better because once the long-term objectives have been achieved, the effects are expected to be on the monetary performance indicators. Some examples may be cited such as training and employee development expenses, which in the short run reduce profit and worsen the operational efficiency, but in the long run is expected the organization's ability to maintain updated and maintain sales and profits, or even investments in research and development, with the same bias. This assumption was confirmed by Verbetten and Boons (2009) that collected survey data from Dutch firms to confirm that “strategic priorities (i.e., the importance of market/customer orientation, innovation, and personnel development) tend to be associated with the use of non-financial performance measures.” (Verbetteen & Boons, 2009).

Overall, financial performance measures, such as profit measures, are perceived as capturing managerial attention and effort dedicated to long-term tasks only after some time delay (Sliwka, 2002). Then financial indicators are regarded as lagging indicators that are not able to provide information about the future performance creation (Kaplan & Norton, 1996; Farrel, Kadous, & Towry, 2008). The accounting literature has provided empirical evidence showing that the backward-looking nature of financial measures motivates a focus on short-term performance at the expense of future performance (Farrel et al., 2008; Abernethy, Bouwens, & van Lent, 2013). In order to mitigate the short-term focus caused by the sole use of lagging performance indicators, it has been proposed the inclusion of additional measures characterized as being leading performance indicators. These are the forward-looking measures that capture the long-term effects of managers’ current actions (Kaplan & Norton, 1996; Dikolli, 2001, Dutta & Reichelstein, 2003).

The empirical evidence has supported the idea that the inclusion of leading performance indicators increases managers’ attention to the long-term consequences of their actions and future firm performance (Farrel et al., 2008; Abernethy et al., 2013).

One example of indicators that can be classified as a good proxy for the long-term performance is market-base measures. These measures are less influenced by the managerial manipulations that may result in short-term distortion (Lin, 2014). By using the same measurement concept, the enterprise value can be calculated by the sum of market value added and the book value of debt (Lin, 2014). The result is divided by the EBITDA and used as a proxy to calculate if the enterprise value is underpriced or not.

The income statement provides several profitability indicators. We choose some of them based on textbooks (Horngren et al. 1999, Garrison et al. 2007). The first indicator is the contribution margin, which is a good indicator that shows the capability of the products to cover fixed costs and expenses. This indicator is used to monitor if the planned products mix is selling or for controlling the price discounts. The second indicator is the gross margin profitability that represents the capability of the products and services to generate results to cover operational expenses. This indicator is used to assess what products are above of the firm’s average gross margin or above of the targeted gross margin. This information is useful for decision-making by the managers about product prices, mix, discounts, and manufacturing processes. The operational expenses influences on the net income. In the income statement, this third indicator

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36 is labeled as SG&A, an abbreviation of selling, general, and administrative expenses. Some of them, particularly G&A expenses are manageable, and generally, the fixed expense is chosen to be reduced. The fourth indicator is EBITDA that represents a controllable measure, particularly because it does not consider depreciation and amortization that are considered to be less controllable expenses. The fifth indicator is the net profit that captures all of the dimensions of operational capabilities, financial, and taxation. This measure is relevant because it affects the payment of dividends.

Other dimensions of financial indicators are the financial leverage and the cash flow indicators. The net debt divided by EBITDA is a widely used indicator to measure the company's leverage in relation to EBITDA. Considering that the enterprise value can be estimated in numbers of EBITDA, the limit of indebtedness of a company can also be estimated in the same way. The cash cycle is a short-term indicator as it affects the size of the working capital investment, and consequently the ROI. Additionally, it influences on the operating cash flow. The cash cycle management is very present in the presentations to the financial market, and it demonstrates the initiatives that companies are doing to run their cash flow better. On the other hand, the ROI and EVA are short-term indicators because they take into account historical profits.

2.5 Relationships between alignment and performance

The agency theory shows that there is a conflict of objectives in which both the principal and the agent wish to maximize their benefits. Therefore, one of the expected roles of the MCS is to align these objectives in what is called goal congruence, which is when employees pursuing their goals are in line with the organizational goals (Cugueró-Escofet, & Rosanas, 2013).

The strategic alignment is presumed to be a positive contributor to business performance and misalignment is presumed to be a negative contributor (Schniederjans & Cao, 2009). However, the empirical results are not conclusive. For instance, Joshi, Kathuria, and Porth (2003) pioneered of the alignment of strategic priorities with the performance but focused on the manufacturing dimension. The results demonstrated that there was no positive relationship between these two variables. In the same study, the authors suggest to include the contingency variables to elucidate the results.

Van der Stede et al. (2006) find partial support for the hypothesis that the alignment between indicators and strategy has a positive relationship with performance. Verbeeten and Boons (2009) in a study with Dutch firms did not find evidence that alignment between PMS and strategic priorities affects the performance positively. Dossi and Patelli (2010), with another focus, affirm that the association between non-monetary indicators related to performance evaluation and interactive use foster the dialogue between headquarters and their subsidiaries. Baird (2017) tested with Australian firms whether an alignment between indicators and strategies produced greater effectiveness of the performance measurement system, but this hypothesis has not been validated.

Aguiar (2011) developed the typology of the temporal orientation of the managers. And later in Aguiar and Frezatti (2013), the results showed contrary to what was expected, that the use of a short-term evaluation period combined with the use of the financial performance indicators may be more effective in inducing such managers to make decisions with long-term financial effects.

Upadhaya, Munir, and Blount (2014) based on financial services sector in Nepal showed that non-financial indicators and feedback are tightly intertwined with organizational effectiveness. The findings provide managers with valuable insights about the role of non-financial performance measures and the importance of feedback in improving organizational effectiveness, which could assist them in (re)aligning their performance measurement practices.

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37 Micheli and Mura (2017) show that different strategies lead to the use of different types of performance indicators. Specifically, a comprehensive PMS positively mediates the effect of differentiation strategy on organizational and innovative performance, and the cost leadership strategy on organizational performance.

These studies did not focus specifically on the fit between objectives and indicators. The form of the fit measurement was made by the difference of the mean between short-term objectives and monetary indicators and between long-term objectives and non-monetary indicators, according to the procedure of Lindow, Stubner, and Wulf (2010).

Based on the empirical studies, even with non-conclusive results, the first hypotheses are stated:

H1: Companies with the greater fit between short-term objectives and monetary indicators have higher monetary performance.

H2: Companies with the greater fit between long-term objectives and non-monetary indicators have higher non-monetary performance.

2.6 Management Control Techniques and Performance

The management controls can be studied in the components dimension such as a package (Malmi & Brown, 2008), where cyber controls and planning controls are highlighted for this study, which is more related to the planning processes and performance evaluation.

2.6.1 Planning Controls

The planning controls have the characteristic of being ex-ante and function as a control mechanism (Malmi & Brown, 2008). One of these processes is strategic planning, which has a positive relationship with the company performance, although the effectiveness of this technique decreases as environmental uncertainty increases (Dibrell, Craig, & Neubaum, 2014). Malmi and Brown (2008) classify the balanced scorecard and the budget as cyber controls, but in our view, these two controls could alternatively be classified as planning controls because the balanced scorecard and the budget are used to define the strategic objectives, and the main numbers to be achieved. Gimbert, Bisbe, and Mendoza (2010, p. 478) exemplify the balanced scorecard as strategic performance measurement systems that "were primarily conceived as tools for the successful implementation of the strategy."

The strategic planning encompasses the following aspects such as vision, the mission, the strategies and long-term goals, the scenarios, the long-term operating plan (Frezatti, Aguiar, Guerreiro, & Gouvea, 2011). This technique consists of the use of the scenario analysis technique such as SWOT analysis (Anthony & Govindarajan, 2006).

After the strategic planning, the company prepares the budget, which the literature suggests that it performs at least four roles such as operational planning, performance evaluation, communication of goals, and strategy formation (Hansen and Van der Stede, 2004). The budget usually begins with the definition of the premises and ends with the projection of the financial statements (Frezatti, Aguiar, Guerreiro, & Gouvea, 2011). Despite a lot of criticisms about the influences of budget use, Libby and Lindsay (2010) show that budgets continue to be widely used in the USA and Canada. More recent studies have shown that in contemporary organizations there is a greater tolerance for budget variations, provided explanations are based on strategic choices, especially with long-term performance (Marginson and Ogden, 2005). Other reports show that qualitative nature goals have a certain way of subjectivity in performance evaluation and are important to promote alignment and empowerment (Kolehmainen, 2010), which is being the probable reasons for the usefulness of the budget according to as presented by Libby and Lindsay (2010).

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38 But the balanced scorecard is used as a strategic management system because it organizes strategies in different dimensions, with the proposal of translating vision and mission into measurable goals, providing a visual map of the causal link between initiatives and achievement of objectives (Norreklit & Mitchell, 2017). Companies use it more as a planning control because it connects strategic planning with the budget process, but with a broader view of the dimensions beyond the financial. In spite of several criticisms about the lack of a conceptual rigor of the artifact, BSC is one of the most widespread managerial tools in organizations, and “could and should be recognized as an appropriate form of framing for strategic decisions.” (Harris, 2014, p. 173).

Prior empirical studies have documented that the inclusion of aligned of non-financial performance indicators has positive effects on current and future financial performance. For instance, Said, HassabElnaby, and Wier (2003) show that firms that combine financial and non-financial indicators have higher non-financial and market performance and that the positive effect of the non-financial indicators on current and future firm performance depends on the alignment with the firm’s characteristics. HassabElnaby, Said, and Wier (2005) provide further evidence on the positive effects on performance of taking into account the appropriate match between performance measurement system, which includes both financial and non-financial performance indicators and firm´s characteristics.

The rolling forecasting (Hansen, 2011) or continuous budgeting (Frow, Marginson, & Oden, 2010) has as main characteristic that the organization updates the budget by adjusting the planning period and by replacing the months already incurred, not being attached to the concept of the calendar year (Frezatti et al., 2012, Henttu-Aho & Järvinen, 2013). In this way, the organization can be more flexible in planning; although this technique has been pointed out as an element of the traditional budget. In the view of Østergren and Stensaker (2011), rolling forecasting is at the heart of the beyond budgeting process, replacing traditional budget planning functions and constituting a process apart from goal setting. In turn, Pitkänen and Lukka (2011) affirm that rolling forecasting operates in two temporal dimensions such as ex-ante for planning and forecasting and ex-post when there is a monitoring of the results achieved.

2.6.2 Cybernetic Controls and Cost Controls

The cybernetic controls have as a fundamental characteristic the comparison of the results achieved vis-à-vis the planned results, often coming from the company's budget or the system of goals and can be divided into monetary, non-monetary, and hybrid (Malmi & Brown, 2008). The monetary ones involve the analysis of the results versus the budgeted ones, generally focused on profitability indicators, as well as sales targets and/or market share. This type of control concentrate the main criticisms because the budget has the main negative points as the sub-optimization of the performance through a game in the definition of the goals, constituting the classic budgetary reserves, besides generating dysfunctional behaviors (Merchant, 1990).

It occurs that not all results achieved have planned results, which means that although there are strategic guidelines such as cost reduction and improved profitability, for instance, not all the existing controls can be considered cybernetic, in a more restricted sense. Thus, we chose to use the terminology of cost controls because these have the function of providing information about processes and cost of activities (Taticchi & Balachandran, 2008) and have the role of improving productivity and performance (Mahama & Cheng, 2013).

We prefer to call this cost control construct instead of cyber controls due to not all of these tools have a target number and are often not in planning. Additionally, to develop this construct, we start from the premise that several tools are developed by practitioners as reported by Kasanen, Lukka, and Siitonen (1993). And are often not captured by the academic literature as well as by the textbooks. We also consider the influence of operations management techniques

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39 on cost controls, especially of the six sigma, lean manufacturing, kaizen, and total quality management.

The visual management works "as a directive tool, in addition to visualizing information, visual management tools are used to display requirements, set directions, and guide actions (Eaidgah, Maki, Kurczewski, & Abdekhodaee, 2016, p.191). These controls when connected with continuous improvement programs have impacts on the pursuit of performance improvement through corrections of actions. In that way, it works as a peer monitoring (Loughry & Tosi, 2008) as the organization as a whole adopts, and is visual to anyone in the department. The expenses matrix management uses unit cost to measure and compares expenses of the company, one person is responsible for controlling one type of expenses, and other is responsible for controlling the consumption of the resources by the department. The information used to compare the cost along with the company is unit cost, for instance, rent expenses per squared meter, phone expenses per employee, gas expenses per kilometer, expenses per employee or expenses per day. The idea is combining resources with the driver cost, similar to the activity based costing (ABC) methodology. This technique is originated from zero-based budgeting, but it is usually used to control expenses during the execution of the budget.

The analysis of the segments as prescribed in the textbooks (Garrison et al., 2007; Horngren et al., 1999) is a control more present in corporations, where revenues are aggregated by divisions (Dossi & Patelli, 2008). And more than that, it is very common for the large corporations to report not only revenues but operating profits and ROI by segment, especially those who are required for the IFRS purposes and is considered a contingency variable for purposes of the contingency theory (Reid & Smith, 2000).

The products and services margin is a good technique to control products that have the lower margin or below what was planned. For controlling this margin, the management can follow the discounts policies and the cost of the products and services. If the fixed costs allocation criteria were consistent with the production process, this information could be used to make decisions about products mix, price, and costs (Garrison et al., 2007; Horngren et al., 1999). In some cases, activity based costing can eliminate the errors of fixed cost allocation criteria (Smith, 2005), particularly when these processes are not oriented to volume.

The activity based costing is recognized useful technique for companies that have high complexity level processes, and they need to control the costs of these processes e making decisions about processes, particularly in improving processes or activities, and eliminate or charging their customers. Roberts (2017) has an interesting understanding about cost driver and cost allocation criteria. For him, they “can have a double role in assisting both management accounting and knowledge management” (Roberts, 2017, p.325).

The customer profitability analysis is considered as a technique from strategic management accounting (Cadez & Guilding, 2004) and also taught in textbooks such as Smith (2005) and Horngren et al. (1999). According to Fish, Miller, Becker, and Persnteiner (2017, p. 2) “This information may then be used to turn unprofitable customers into profitable customers by improving processes to lower service costs through activity-based management and also substantiate the need for customized pricing policies.” And this issue remains descriptive or normative research. This subject is also studied in the marketing field, for instance, Helgenson (2005).

2.7 Relationship between Controls and Performance

Mahama and Cheng (2013) have shown that when the operational managers perceive the benefit of using the MCS, they use the cost system more intensively and it indirectly affects the performance of the task (Mahama & Cheng, 2013). Uyar and Kuzey (2016) with the Turkey Companies found that the cost system design has a positive impact on the utilization of management accounting practices, and contribute positively to performance. Hadid (2017)

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40 found an indirect relation between the ABC and financial performance, by influencing positively on Lean practice in a study in the UK service firms. Additionally, in a study with factory managers in the United States, Maiga, Nilsson and Jacobs (2014) investigated the interaction effect of cost control and information technology systems on the financial performance of the plant. The results suggest that factories will reap the greatest financial performance benefits from investment in activity based cost control systems when combined with information technology integrations.

Rudd, Greenley, Beatson, and Lings (2008) point out that there are opposite findings of the effects of strategic planning on organizational performance. Some papers showed that there are positive effects, but others showed that the relationship does not exist. Hardan and Tareq (2013), in a telecom industry survey in Jordan, identified a positive and significant relationship in the adoption of the activity based costing and expense reduction, with a consequent improvement in the performance of the companies studied.

James and Abdalla (2010) studied the relationship between costing systems and performance management systems and their combined effect on performance under the alternative of competitive strategies in the various industry sectors in Australia. They have identified that the cost leadership companies that use a combination of activity based costing and the balanced scorecard have higher organizational performance, customer performance, and innovation performance compared to companies that differentiate from their application. Additionally, they found that cost-effective companies that use a combination of activity based costing and the balanced scorecard have improved their innovation and financial performance more than if they are using the tools separately.

Considering the arguments above, we declare the following hypotheses: H5: Cost control is positively associated with short-term performance.

H6: Planning controls are negatively associated with short-term performance. H7: Planning controls are positively associated with long-term performance.

3. METHODOLOGY

From the results of the qualitative phase based on a single case study, where nine interviews were done in a Brazilian multinational subsidiary with supervisor, managers, and director, we planned the quantitative research based on the survey questionnaire. In this second phase, we analyzed the relationship between the following eight constructs: Short-Term Objectives (OBCP), Long-Term Objectives (OBLP), Monetary Performance Indicators (IDMO), Non-Monetary Performance Indicators (IDNM), Planning Controls (CPLA), Cost Control (COCU), Short-Term Performance (PECP), and Long-Term Performance (PELP).

Before collecting the data, we performed a pre-test with 2 experienced researchers in quantative studies and 1 accounting manager to validate the survey questionnaire. They suggested small corrections to the final questionnaire. In collecting the data, we use the multi-item measurement scales with multi-items defined and adapted from the literature based on 7-point Likert scale to assess the constructs under study. Our respondent focus was the manager that works for financial, accounting, and controllership department with at least three years of experience. We collected data by electronic survey questionnaire from August 1 to October 25, 2016 from the database of ANEFAC database (the Brazilian Association of Finance, Administration, and Accounting Executives) and through personal contacts in social network, we obtained 89 responses. As the unit of analysis is the strategic fit between objectives and indicators, we do not define a specific sector for collecting data; therefore, several economic sectors participate in this research.

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41 For assessing the data, first of all, we calculated the reverse scale of all responses and their mean. To estimate the strategic fit we calculated the difference between the mean of OBCP and IDMO, and between OBLP and IDNM (Bontis & Crossan, 1999; Bontis, Crossan, & Hulland, 2002). The new constructs were used for assessing the impact on Performance. Additionally, we use a combination of statistical procedures, which provides both testability and context and increases the robustness of the results (Kaplan & Duchon, 1988), and a synergistic process (Eisenhardt, 1989). For example, we use the Harman’s single factor for testing the common method variance (CMV) (Bagozzi, Yi, & Phillips, 1991; Podsakoff, MacKenzie, Lee, & Podsakoff, 2003; Podsakoff, MacKenzie, & Podsakoff, 2012) and for using the two samples collected from the two sites such as ANEFAC database and social network, we performed the one-way ANOVA to validate them. Our results indicate that the two samples come from the same population and there is no major problem working with them. Finally, we use the structural equation through Smart-PLS 2.0 for testing the measurement model and the relationship between the constructs. In both qualitative and quantitative analysis, we maintained the confidentiality interviewees and company names.

3.1 Demographic Profile of Sample

We observed that 77.5% of the respondents work for financial and accounting department (Tax, Accounting, Controllership, and Finance). Approximately 64% of them work in Coordinator positions or above (Manager, Director, Shareholder), and 52.8% have more than three years of experience. It was at least the minimum experience required from the respondents; thereby, our sample is adequate for our research.

Most respondents (66.3%) work for middle and large size companies. Regarding the firm identification, 37.1% are multinational companies and 39.3% are family controlled companies. 3.2 Data Analysis

Regarding the missing values, we notice that they are not major problems in our data collection. We had eleven missing values in only one key variable and distributed in a random way. Therefore, we replace them by the average of their original variables (Corrar, Paulo, and Dias Filho, 2009, p. 38; Hair Jr. et al., 2009, p. 65). We analyzed the outliers following the recommendations of Chebyshev’s theorem (Sweeney, Williams, and Anderson, 2013, p. 114) that suggests working with standard values for outliers detection. According to this theorem, in the case of the standard values above or below 3, they are considered potential outliers (Clark-Carter, 2004; Corrar, Paulo, and Dias Filho, 2009; Kline, 2011, p. 54). In our sample, we only detect eight potential outliers according to this theorem. But following Hair Jr. et al. (2009, p. 79) that suggest working with standard values until ± 4 for the sample above 80, we only detected one potential outlier and decided to maintain it in the sample.

As we collected data through 7-point Likert scale, the statistics tests showed that our data are not normally distributed. But following Kline (2011, p. 63) that suggested to work with the cutoff value of 3.0 for absolute skew and 10.0 for absolute kurtosis, we find that our sample has only 1.963 and 4.442 for the absolute value of skew and kurtosis, respectively. As a result, there is evidence that our data are approximately normally distributed.

Before the analysis of the model through structural equation, we examined the common method variance (CMV) (Bagozzi et al., 1991; Podsakoff et al., 2003, 2012) through Harman’s single factor test. The results showed the only single factor extracted was responsible for 30.74% of the total variance; therefore, CMV is not a problem because the variance extracted is below 50% and no correction is needed in our model.

4. RESULT DISCUSSIONS 4.1 Structural Equation Modeling

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42 To evaluate the relationships between the constructs: short-term objectives (OBCP), long-term objectives (OBLP), monetary performance indicators (IDMO), Non-Monetary performance indicators (IDNM), planning controls (CPLA), cost control (COCU), short-term performance (PECP), and long-term performance (PELP) of the structural model, the technique of structural equation modeling (SEM) and confirmatory factor analysis (CFA) were used through the software Smart-PLS.

The use of this software has some advantages, for example, is suitable for smaller sample (Smith & Langfield-Smith, 2004) and with few indicators to measure (Chin & Newsted, 1999, p. 313). On the other hand, the technique of PLS path modeling (PLS-PM) does not have adequate indicators capable for assessing the model fit (Tenenhaus, Vinzi, Chatelin, & Lauro, 2005), an example of LISREL and AMOS. However, it is appropriate to maximize the explained variance of the dependent variables (Chin & Newsted, 1999, p. 312; Hair, Ringle, & Sarstedt, 2011; Oyadomari et al., 2014). Hair et al. (2011) also states that the PLS-SEM is suitable when one wants to contribute to the development of the theory.

The conceptual models below (Figures 1 and 2) and their relationships between the latent variables were evaluated based on the suggestions of Fornell and Larcker (1981), Tenenhaus et al. (2005), Wetzels, Odekerken-Schröder, and van Oppen (2009), and Hair et al. (2011). The PLS model figures, as well as several tables are not presented here due to lack of space, but can be obtained with the authors

Measurement Model Analysis

We assessed the measurement and structural model based on the indicators of CFA (Miller, Rainer Jr., & Harper, 1997). The measurement of convergent validity through factor loadings initially exhibited very low loading for some indicators (all below 0.50), for example: Cost Control (COCU3, COCU4, and COCU6) and for planning controls (CPLA3). These variables were removed and the measurement model was redefined. Therefore, the factor loadings on a particular common factor shows convergence to a common point (Hair et al., 2009).

Cost Control Fit Objectives-Mon. Performance Fit Objectives-Non-Mon. Performance Long-Term Performance Planning Controls Short-Term Performance

Short-Term Partial Model

Fit Objectives-Mon. Performance 1.0000

Short-Term Performance 0.2396 0.8701

Long-Term Partial Model

Fit Objectives-Non-Mon. Performance 1.0000

Long-Term Performance 0.2191 0.7838

Full Model

Cost Control 0.7318

Fit Objectives-Mon. Performance 0.2414 1.0000

Fit Objectives-Non-Mon. Performance 0.1253 0.4759 1.0000

Long-Term Performance 0.3845 0.1673 0.2179 0.7845

Planning Controls 0.6873 0.3877 0.1570 0.3738 0.7164

Short-Term Performance 0.2960 0.2100 0.1411 0.5334 0.2338 0.8778

Table 1 - Latent Variable Correlation (Square root of the AVE on the diagonal)

Another way to assess the construct validity and reliability is through variance extracted (AVE). Table 1 shows that the analysis of variance extracted (AVE) between those constructs that exhibit adequate convergence and their coefficients are above of 0.50 (Fornell & Larcker, 1981; Hair Jr. et al., 2009). As we observe, all AVE coefficients are above of the cutoff value of 0.50, which means the constructs present adequate convergence.