Institutionalization of management control system practices in a local-government-owned water supply company in Indonesia

The Management Control System (MCS) is a tool and an organisational device to ensure that strategies planned by the organisation could accomplish its goals. To date, research regarding MCS focuses more on profit-oriented companies. There has been a lack of studies investigating the MCS application in a firm that balances its orientation of profit and social mission. To fill this gap, this study investigates how MCS is applied and institutionalised in a local government-owned company to control its operation. In addition, this research explores how learning is involved in the process of MCS institutionalisation to build a control culture. This research utilises an ethnographic case study. Primary data was gathered through interviews and observations while secondary data was collected by reviewing the company's documents. Semi-structured interviews were conducted with 14 respondents. Meanwhile, observations were conducted from 2012 to 2018, during which time the researcher was assigned as the Board of Controller at the company. To corroborate data from interviews and observation, few relevant documents of the company were reviewed. It is found that management control practices in this water supply company is institutionalised in organisational culture by adapting collaborative learning throughout the business processes. There are four important foundations which are crucial when management control practices are institutionalised in organisational culture; they are collective culture, reward orientation, culture control, and learning environment. This research contributes in developing a conceptual framework of learning-based institutionalisation. It is believed by people in the organisation that learning-based institutionalisation will produce stronger control culture. Finally, directions for future research were discussed