The impact of management control systems on organisational change and performance in the public sector: The role of organisational dynamic capabilities

Purpose: This study aims to examine the role of organisational dynamic capabilities (strategic flexibility and employee empowerment) in mediating the relationship between management control systems (MCSs), in particular the interactive and diagnostic approaches to using controls, with organisational change and performance. Design/methodology/approach: Data were collected based on a mail survey of public sector organisations in Australia and analysed using structural equation modelling (SEM). Findings: The findings indicate that strategic flexibility and employee empowerment mediate the association between the interactive approach to MCSs with organisational performance, and strategic flexibility mediates the relationship between the interactive approach to MCSs with organisational change. Practical implications: The study’s findings inform public sector practitioners as to how to enact change within and enhance the performance of public sector organisations. Specifically, managers are advised to focus on the use of interactive controls and the development of two dynamic organisational capabilities, strategic flexibility and employee empowerment. Originality/value: The study provides an initial empirical insight into the relation between controls and dynamic capabilities and their role in enacting change and performance within the public sector. The findings suggest that the achievement of new public management ideals is reliant upon the organisational environment, with change and performance facilitated by the interactive use of controls and strategic flexibility and employee empowerment.