The Heterogeneity of Control o

François-Régis Puyou
THE HETEROGENEITY OF CONTROL OVER SUBSIDIARIES WITHIN BUSINESS GROUPS:

CAUSES, TOOLS AND CONSEQUENCES I
received in december 2013 / accepted in october 2014 by Nicolas Berland
The heterogeneity of control
Document downloaded from www.cairn-int.info - Rédaction CCA - - 203.56.241.2 - 21/09/2019 03h50. © Association Francophone de Comptabilité
over subsidiaries within
business groups: causes,

tools and consequences
Heterogeneite du contrôle
des filiales dans les groupes
de societes : causes, outils
et consequences
François-Régis PUYOU*
Abstract Résumé
This article focuses on how management Ce travail porte sur les usages du contrôle de
control is used to resolve tensions between gestion dans la résolution des tensions entre auto-
autonomy and integration of subsidiaries in nomie et intégration des filiales au sein des grands
large corporate groups. Practices that shape groupes de sociétés. Les pratiques sont observées
the type of control exerted on subsidiaries are empiriquement au travers des efforts déployés par
observed empirically through the efforts of the les acteurs du reporting dans le but de définir le
actors involved in reporting mechanisms. The type de contrôle exercé. L’article défend l’idée que
paper argues that intermediate-level manag- les managers des échelons intermédiaires qui se
ers, who are simultaneously in the position of trouvent à la fois en position de salariés d’une
* Associate professor, Audencia Nantes Ecole de Management

II CAUSES, TOOLS AND CONSEQUENCES
parent company and subsidiary, seek to legiti- filiale mais aussi en position de maison mère
mize their position within the firm by dem- vis-à-vis d’échelons encore inférieurs, sont sou-
onstrating “group management” skills. Such cieux de légitimer leur contribution au sein des
initiatives trigger reactions from leaders of sub- groupes. Ces derniers témoignent alors de leurs
sidiaries that range from outright opposition compétences en « gestion des groupes » par une
to more or less deliberate endorsement. As a très grande implication dans la mise en œuvre du
result of those interactions, different types of contrôle sur les filiales. Ces initiatives entrainent
control arise from one group level to another des réactions de la part des dirigeants de filiales
as well as between subsidiaries of a given par- qui vont de l’opposition franche à l’adhésion plus
ent company. ou moins négociée. De ces interactions naissent
des types de contrôle différents d’un échelon du
groupe à un autre aussi bien qu’entre filiales
d’une même maison mère.
Keywords: business groups – Mots-clés : groupes – management
management accounting – parent control – maison mère – subsidiaries –
companies – subsidiaries – case study étude de cas
Correspondence: 8 route de la Jonelière – BP 31222

44 312 Nantes Cedex 3, France
Telephone: (33) 2 40 37 46 29
frpuyou@audencia.com
Acknowledgements: I would like to thank Simon Alcouffe and the participants at the 2010 convention of the
Association Francophone de Comptabilité 2010 for their advice on preliminary versions
of the article. I am also very grateful to the reviewers of the Journal for their constructive
comments that have resulted in many improvements.
Introduction
Groups of firms that by definition include at least one parent company and one or more subsidiaries,
which have been labelled as “business groups” (Granovetter 1994), “parenting organizations” (Goold
& Campbell 2002) or “multidivisional organizations” (Mintzberg 1999), have long been a central
focus of research on organizations. Such organizations are widespread, and create much of the added
value produced in France (sources INSEE 2007).
A central characteristic of groups of firms is the capacity of parent companies to move their sub-
sidiaries along a continuum ranging from full autonomy to total integration (Catel-Duet 2007). This
prerogative that allows holding companies to exercise a broad range of more or less advanced forms
of controls partly explains the success and longevity of these organizational structures that must adapt
to their context (Delarre 2005). The scope of possibilities available to managers of parent companies
CAUSES, TOOLS AND CONSEQUENCES III
nonetheless raises a major difficulty: How does one balance autonomy and control of operational
entities? On this point, the researchers cited above, and many others, including Beddi (2011), have
strived to show the complexity of control systems put in place by the head office to judiciously manage
subsidiaries. One difficulty common to all research on this theme is nonetheless how to empirically
capture the richness of interactions in a system of actors that is at least tripartite (managers of parent
companies, management controllers, and leaders of subsidiaries). This difficulty can be overcome by
studying reporting practices as scenes that illustrate the tension resolution mechanisms among actors
precisely where the groups are managed: at the interfaces between parent companies and subsidiaries.
This paper seeks to clarify “how” management control helps mitigate tensions around the shar-
ing of tasks between corporations and groups. It notably identifies tools (e.g. information systems,
indicators, procedures) and management concepts (e.g. risk management) used for this purpose. This
approach brings to light struggles and cooperation between managers issuing from diverse levels and
professional groups, including operational teams of subsidiaries and the head offices of parent compa-
nies. The second question that arises concerns the reasons why actors from various horizons engage in
defining different types of control of subsidiaries, even sometimes when it lead to conflict. To explore
“why” actors in groups act this way, we draw on the concept of “jurisdiction,” as used by Abbott
(1988). We argue that one motive behind the dynamics of subsidiary control lies in the quest taken up
by various actors to preserve, and in some cases acquire, legitimacy that rests on their contribution to
the effective functioning of the group. This paper thus empirically aims to shed light on the causes of
the tensions concerning the type of control exerted in groups. We can thus better understand “how”
and “why” various actors work to put in place and advance mechanisms that ensure partial integration
of subsidiaries.
Lastly, scant studies in management control explore the difficulties related specifically to the char-
acteristic stacking of managerial levels in groups. Accordingly, each group is headed by a holding com-
pany, one of whose characteristics is that it is the only entity whose capital is not owned in majority
by another corporation. Aside from the lowest-ranking subsidiaries, there are also most often many
corporations known as “intermediate,” that both control subsidiaries and are themselves subsidiaries
of a parent corporation. Groups are generally schematically represented as a multilevel pyramid, with
a holding company atop the tree. This centralizing hierarchical structure is a backdrop for multiple
original configurations. The third and final objective of this paper is therefore to explain the stacking
of different control mechanisms as a consequence of the battles for jurisdiction between actors at dif-
ferent levels of groups.
Below, we will first discuss some of the contributions of the academic literature regarding uses of
management control in the definition of types of control exerted on subsidiaries. Elements of Abbot’s
sociology of professions (1988; 1995) will also be briefly introduced and be used to structure the
presentation of the case. The context of the field study and the research methodology will be explored
in the second section. The third section is dedicated to the case study and the presentation of the
results. It is followed by a discussion that states the three main contributions of the article. First, the
actors in middle levels of groups endeavor to take part in the definition of the type of control exerted
on subsidiaries, notably because of their own quest to legitimize their contribution to the overall
functioning of the group to the immediately superior hierarchical levels. Second, these actors issu-
ing from different professional worlds manipulate management control tools and concepts related to
IV CAUSES, TOOLS AND CONSEQUENCES
their “trade” prerogatives to impose their will during these arguments over jurisdiction. Third, these
oppositions consequently favor a mosaic of different types of control in groups, either between levels
within a group, or between subsidiaries on the same level.
1. The use of management control to resolve tensions
between autonomy and control of subsidiaries
A central question for group managers is to choose between largely delegating or tightly control-
ling the operations of subsidiaries (Goold & Campbell, 2002). Evidently, this question, which the
literature in the theory of organizations and in management considers as a fundamental problem of
management, cannot be solved by a simple answer. We will briefly review some of the research find-
ings on this subject. First we will see how the different types of control may be construed as possible
responses to different contexts (1.1.) before delving into the question of the role of management
control in resolving tensions arising from contradictions between autonomy and control (1.2.), and
specifying the nature of the oppositions between control actors with reference to the sociology of
professions (1.3).
1.1. The quest for a fit between types of control and structures
A major stream within research dedicated to the control of subsidiaries by parent companies sees this
control as the expression of a strategic choice incumbent on higher levels (e.g. Goold & Campbell
1987, 2002; Mintzberg 1999). This research, rich with lessons in the functioning of large businesses,
dominates the discourse of top managers who advocate control strategies that objectively take into
account the goals pursued and the particular characteristics of activity sectors to increase managerial
efficiency and create value. Recommendations to find equilibrium between centralization and decen-
tralization thus take into account the strategic or operational nature of the responsibilities delegated,
along with the fairly diversified or specialized activity portfolio, the measurable or non-measurable
nature of the objectives pursued, etc. (Ouchi 1980). The role of parent companies is therefore to adapt
the forms of control they use to the circumstances by following recommendations for optimal fit in
terms of performance, evaluated most often by value creation for shareholders. The possible types of
control1 can be placed on a continuum ranging from complete integration of peripheral activities to
total absence of intervention of the parent corporation in the management of subsidiaries (Catel-Duet
2007). Two styles of control defined by Goold and Campbell (1993) illustrate these extreme positions:
the first is “strategic planning,” marked by heavy involvement of the center in formulating strategies
pursued by subsidiaries, and the second is “financial control,” which rests on a posteriori follow-up of
indicators associated with short-term objectives to assess the performance of decentralized entities.
“Financial” control thus views subsidiaries as profit-generating assets. In this case, financial indicators
summarize the important information, and the authority of the parent corporation is mainly exer-
cised through trade-offs between different investments. Converse to this model are relations marked
by heavy involvement of managers of parent companies in their subsidiaries’ activities. This “strategic
planning” establishes close ties between shareholders and subsidiary leaders. Parent corporations are
CAUSES, TOOLS AND CONSEQUENCES V
involved far upstream of projects developed jointly, and the level of profit does not tell the whole story
about performance.
An indispensable task of groups consists of finding equilibrium in the choices of one or the other
of these models.2 On this topic, the academic literature unanimously argues that actors and manage-
ment control tools play central roles.
1.2. Management control as a condition of centralized management

Management control is considered an indispensable component of the constitution and growth of
large companies (Chandler 1977, 1991). It is inseparable from the invention of top management,
whose balancing work between centralization and decentralization rests on the forward-looking cal-
culation of costs and receipts (ibidem). This use of management control allows the possibility of opti-
mal organization. Adopting a very prescriptive approach, Goold and Campbell (2002) present, based
on interviews done with top managers, a few principles that support the strict sharing of responsibili-
ties between levels of groups based on exclusive competencies. The underlying idea is that know-how
should be distributed among specialized entities arranged in a structure in which redundancy is elimi-
nated by a central, sole legitimate body that rules on the prerogatives of each entity. Business units
that are considered efficient are those that allocate resources toward the most efficient investments,
that get involved in organizational design to unambiguously resolve the question of task sharing, and
that control the economic efficiency of each of the components of the group (Goold & Campbell,
2002). Indicators such as net value created can determine the perimeter of the group by eliminating
levels that have not shown proof of a sufficient contribution. The main suspects are entities issu-
ing from “power politics,” “personal ambitions,” “management succession” or “accidents of history”
(ibidem). For groups of firms, management control becomes an indispensable tool that allows parent
companies to assess the return on investments in subsidiaries. One limitation of the work of Goold
and Campbell is that occasionally it suggests that management control is an objective evaluation tool
that can flawlessly detect deficient subsidiaries. This idea is nonetheless dispelled, including by Goold
and Campbell (2002), who acknowledge that all large businesses are shackled by economic, social and
political interdependence.
Many studies show that it is illusory to try to separate economic decisions from political games
and historical ties (e.g. Hopwood 1983). One important, long-standing academic stream emphasizes
how management control is not neutral; it must be understood as a lever used by powerful interest
groups. These works, informed in France notably by the strategic analysis of organizations (Crozier
1964; Crozier & Friedberg 1981), and by critical approaches in management (see review by Morales
& Sponem 2009), are explicitly interested in social factors of control. They convey the richness and
complexity of power relations within dyads that oppose the hierarchical authority of the head office
and the subordinates in the subsidiaries. These studies are advantageously supplemented by others
that specifically address the means applied in control relations. For example, they discuss the indis-
pensable role played by managerial tools to coherently hold in place the “moving structures” such as
groups of societies (Meyssonier & Pourtier 2013 p.121). The “management control” set that encom-
passes both tools and people is derived much more from Calder’s logic of mobiles than that of pure
and simple alignment of objectives (Bouquin & Fiol 2007). Hence the justification for this article’s
VI CAUSES, TOOLS AND CONSEQUENCES
specific interest in the empirical translation of the means through which management control can ori-
ent relations between parent companies and subsidiaries, along with the reasons why different actors
embark in negotiations.
1.3. When several professions share management control responsibilities
Several studies underline the way that management accounting contributes to giving large groups for-
malized objectives and guides for action based on a shared language (e.g. Hopwood 1983; Merchant
1998; Mintzberg 1999; Bouquin 2004). Although the production of reports is often concentrated
in the hands of accounting professionals within dedicated departments, their mobilization goes well
beyond the restricted circle of management controllers. Despite its quality of common language,
reporting certainly does not ensure the convergence of viewpoints; rather it provokes discussions
(Simons 1994; Mundy 2010). The debates that arise around management control production,
including those on achieving a balance between autonomy and control of subsidiaries, are not the
monopoly of any profession understood in the classic sense of an “identity” built around a profes-
sional corporation, a classification of a trade or a clearly defined specialization (Dubar & Triper
1998). The definition of the type of control wielded over subsidiaries is more similar to what Abbott
(1988) refers to as “jurisdiction,” namely work whose responsibility falls on no particular profession.
For Abbott (1988 p. 3), when a jurisdiction is vacant or contested, either new professions appear
to seize it, or old ones extend their prerogatives to the tasks to carry out. These conflicts around
jurisdictions clarify the conditions of opposition at the frontiers between professions that remain
imperfectly defined, and thus illustrate how the landscape of legitimate responsibilities is redesigned
(Abbott 1995).
When drawing on the sociology of professions, we must carefully avoid portraying professionals
as uniquely striving to satisfy disincarnate social needs; rather, they are actors who impose the defini-
tion of their needs, and the solutions to satisfy them, on their “clients” (Abbott 1995). The present
article therefore examines how professionals in groups, i.e. leaders of subsidiaries, managers of par-
ent companies and management controllers, act as indispensable actors in balancing the autonomy
and control of subsidiaries. We demonstrate that tension exists between intermediate-level managers
and leaders of subsidiaries around the definition of types of control to put in place. Using a case, we
notably describe the relations between the populations of managers on both sides of the reporting
framework conveyed by management controllers.
Abbott (1988; 1995) recommends that field data be presented along two complementary lines.
He argues that the evolution of the profession results from the way a professional group controls its
knowledge both theoretically and practically. It is then important to observe combinations between
technical mechanisms (notably the use of specific tools) and abstract knowledge (concepts, issues and
missions) specific to each actor engaged in defining the type of control exercised over subsidiaries.
This is what we propose to do in the remainder of this article, particularly in the presentation of the
results derived from the case study (section 3).
CAUSES, TOOLS AND CONSEQUENCES VII
2. Presentation of the case and the methodology

In this section, we will first discuss how the information was gathered at the interfaces of firms in
groups (section 2.1.). We will then describe the data analysis process (section 2.2.).
2.1. Capturing control practices at the interfaces of entities in a group

This research involved a data collection process that mainly includes 11 semi-structured interviews.
They were done at Panam,3 a French listed group that specializes in public works, energy and com-
munity services. Specifically, the interviewees all work in the Panam Energie Services (PES) division
and are employed by subsidiaries of Ebel, the company in charge of all activities linked to production
and distribution of gas and electricity in Europe. From among the subsidiaries of Ebel, we focus on
the companies Tractopel and BTP, which specialize in engineering, and on Ebel France and Ronelec,
which carry out hydroelectric production for the group (see figure 1). In total, four relations between
parent companies and subsidiaries are studied; they illustrate the issues and mechanisms linked to the
evolution of the type of control exercised.
Figure 1
Excerpt from the legal organization chart of Panam group
Panam
100%
Panam Energie Service (PES)
100%
Ebel
100% 100%
Tractopel Ebel France
100% 100% 49,9%
BTP Pyrelec Ronelec
100% 100%
Ronelec-Eolien Ronelec-Immo
*Several regional authories share the rest of the capital
Companies visited for interviews

VIII CAUSES, TOOLS AND CONSEQUENCES
Leaders of subsidiaries and managers of parent companies in charge of supervising the subsidiaries
were interviewed, in addition to management controllers. The viewpoints of the main producers and
users of internal financial documents were therefore systematically considered. All interviews lasted
between one and two hours, and were transcribed exhaustively. The data analysis included frequent
alternation between the discourse gathered and the interpretations put forth to clarify inconsistencies
and weaknesses in our conclusions. The distribution of interviews by function of the respondent is
shown in table 1 below.
Table 1
Distribution of interviews by type of respondent
Controllers or finance directors Leaders of subsidiaries Middle-level managers Total

4 3 4 11
Despite the limited number of relations studied, the case of Panam is particularly instructive
owing to the diverse types of control observed. For instance, the relation between Ebel and Tractopel
exemplifies the efforts by the parent company to exercise more strategic control over the activities of
its subsidiaries. This case points to greater involvement of upper levels in strategic and operational
decisions. Conversely, the relation between Ebel and Ronelec illustrates the quest by the parent com-
pany to enforce financial controls only. In each case, the position of subsidiary leader is characterized
by different stances. Lastly, management control tools like reporting indicators and documents are
omnipresent at Panam partly because of the use of integrated management software at all levels of
the organization. The Panam case is therefore amenable to a detailed study of situations that combine
management control tools and differentiated types of control to clarify the issues, means and conse-
quences of the actions of the stakeholders involved.
2.2. Identifying highlights in the dynamics of control

To gather the discourse around some key examples, only the situations that present striking evolutions
in reporting practices between parent companies and subsidiaries were retained, from among the data
gathered. These changes that translate efforts to advance control practices are identified on a contin-
uum bound by two “ideal forms” (Weber 1992): “financial” control and “strategic” control, defined
in line with the work of Goold and Campbell (1993). We are not trying to empirically validate an
existing typology or precisely place our observations on this continuum. The concepts of “Financial”
and “strategic” control are intended solely to characterize the pertinent dimensions of the changes in
the nature of control. These two extremes thus let us identify situations that, from the materials col-
lected, are most informative of the logics of the actors that propel the evolution of forms of control.
These movements along the continuum also clarify some issues that underlie the efforts of actors who
want to either advance or preserve the status quo concerning control practices.
This article is inspired by the sociology of professions (Abbott 1988; 1995), yet does not system-
atically adopt the explanations put forth by the American sociologist. Abbott emphasizes the impor-
tance of conflicts over jurisdiction, and thus offers an angle of attack to study the complexity of the
CAUSES, TOOLS AND CONSEQUENCES IX
management of tensions at the interfaces where levels of groups with populations with very different
profiles meet: middle-level managers, leaders of subsidiaries and management controllers. Abbott
also argues for observation of actors’ practices through their mastery of “techniques” and “concepts”
specific to the practice of their profession. Through these theoretical recommendations, the associa-
tion between uses of certain “tools” (most often related to management control) and some “concepts”
associated with the specific professional expertise of middle managers and of leaders of subsidiaries
was retained to structure the presentation of the observations in the field.
3. The exercise of control by “group managers”:

observations and results
The case study illustrates the use of management control tools particularly related to the concepts
and responsibilities specific to different professional universes, in order to orient the dynamics of
types of control over subsidiaries. First (section 3.1.), we describe initiatives taken by actors at par-
ent companies who support their authority regarding procedures and reporting tools through the
concepts of “risk management” and “strategic alignment,” which are their almost exclusive preserve.
The second section (section 3.2.) analyzes the strategies of leaders of subsidiaries, who deliberately
separate reporting practices from the effective conduct of business to preserve the conditions of their
autonomy.
3.1. Conveying the vision of the head office to subsidiaries: use of tools
and concepts by middle levels
Whether it be through the reconfiguration of organizational charts and the change of indicators (sec-
tion 3.1.1.) or the putting in place of new risk management procedures (section 3.1.2.), the two sub-
sections below describe the association of tools and concepts mobilized by actors of parent companies
in the definition of the type of control wielded over subsidiaries.
3.1.1. ORGANIZATION CHARTS AND INDICATORS AS STRATEGIC

ALIGNMENT TOOLS
Situations where one group takes control over another represent prime opportunities to reshape the
relations between companies. They also clarify the issues that underlie relations of control. For exam-
ple, Panam’s buyout of Ebel group led to a profound overhauling of the sharing of responsibilities
between the companies. Before its acquisition by Panam, Ebel, a former group holding, maintained
relations with its many subsidiaries that rested primarily on evaluation of financial performance.
Managers and management controllers in place at the time explained that:
“Ebel focused on more financial information like the EBIT, EBITDA, net results and other
indicators such as ROCE, Cash, BFR, etc.” (Manager, Ebel)
“Our subsidiaries had great autonomy. We just confirmed [with them] that we had an ongoing
interest in their sector, that they were profitable, and that they were managed by competent
X CAUSES, TOOLS AND CONSEQUENCES
people. In the end, we made few requests for information to see what was happening in detail”
(Deputy CFO, Ebel)
Financial reporting was central to the evaluation of peripheral entities, and the strategic orientations
defined by Ebel encouraged sustained external growth together with the diversification of operations.
The financial indicators listed by the Ebel manager served to evaluate the contribution of each entity to
the group’s results. Reporting offsets head office managers’ lack of knowledge of subsidiaries’ activities.
At the time of our study, Panam had acquired all of the capital of Ebel, which was now led by the
PES division. This majority holding stripped the Ebel top managers of the prerogatives they needed
to carry out an effective acquisition strategy. The era where Ebel decided on its own investment
policy was over. PES effectively forced Ebel to curtail its acquisition projects. Ebel consequently set
about aligning its organization chart with the group’s priorities. This evolution was accompanied by
a reorganization of services at the Ebel head office. Specialized business units with the status of sub-
sidiaries now grouped a few operational firms around hubs like nuclear energy, gas or engineering.
For instance, the newly created company Tractopel oversees all subsidiaries that design and execute
large civil engineering work. A subsidiary like BTP specializing in project leadership for nuclear power
plants stations, large hydraulic dams or railways was placed under the control of Tractopel alongside
other companies with expertise in the design of heavy infrastructure like ports and canals. Through
entities organized by trade, Ebel thus acquired the means to become more involved in operations.
“Now there is a very profound change. They want to know the origin of impacts and variations.
They realize that the information they get is not detailed enough, and they are tightening con-
trol over the subsidiaries [...] We are now sliding toward more operational reporting.” (Deputy
CFO Tractopel)
Ebel’s missions are therefore evolving toward managerial problems. It is modifying its control
over subsidiaries by considering more operational elements. In doing so, it reassures PES, which can-
not directly manage its many subsidiaries. Ebel thus exercises control over operations on behalf of
the shareholder. It acts as a middle level to ensure “that the activities of subsidiaries are aligned with
the group’s strategy” (Deputy CFO Tractopel). To do so, it uses its prerogatives in organization to
reconfigure the group’s organization chart into coherent subsets based on activities that facilitate the
deployment of the group’s strategy.
The same tools that reconfigured organizational structures were also used elsewhere in the group,
to support “strategic” and at times “financial” control. Therefore, at Ronelec, the separation of activi-
ties reflects the quest to adapt the type of control to the stage of development of the subsidiaries.
Minimal measures of control affect recent companies like that in charge of wind energy, which have
received exceptions to allow less detailed reporting, or more flexible transmission dates for financial
statements. Older subsidiaries with greater economic weight, like Ronelec Immobilier, which man-
ages the entire real estate park along the river bank, are subject to closer scrutiny. Smaller companies
are therefore not necessarily aligned with all of the group’s reporting requirements. Ronelec offers
them conditions that favor their development (financial support, credibility of the group, contact
with suppliers, etc.) without their having to bear the weight of the procedures in place at the parent
company. In this case, the fragmentation and compartmentalization of activities allow differentiated
styles of control to be put in place to maintain local strategies adopted.
CAUSES, TOOLS AND CONSEQUENCES XI
3.1.2. PROCEDURES AND IS AS FINANCIAL RISK MANAGEMENT TOOLS

In the case of Tractopel, the creation of specialized authorities by trade was concomitant with the
implementation of new reporting elements. In parallel with their efforts to orient their contribution
to the effective functioning of the group toward more strategic control, the Ebel and Tractopel manag-
ers put in place mechanisms intended to control risks related to investment decisions. This evolution
rests on diverse arguments, including that of subsidiaries that had been permitted to act for too long
beyond the control of the head office. “Problems” like those encountered by an LNG tanker construc-
tion subsidiary were mobilized to support the reforms carried out. This subsidiary, since sold, serves
as an example to justify the regulating intervention by the parent company intended to reinforce the
involvement of Ebel team managers.
“The problem in question incurred a few million dollars in losses, and was not anticipated at
the parent company […] They realized that they should have been informed earlier to have
enough time to change course. This means they need better knowledge of the activities of the
subsidiary.” (Deputy CFO Ebel)
To increase the information gathered from the subsidiaries, the parent company introduced new
reporting procedures. Tractopel put in place “risk sheets” examined by a committee formed of Ebel
representatives who would approve or reject the main calls for tenders on which subsidiaries like BTP
would bid. These sheets, fully automated by a new operational reporting tool chosen by the Deputy
CFO of Tractopel, briefly summarize the nature of the project and the amounts involved, and specify
the risks identified and the expected returns from each project. The criteria that designate “risky”
operations are sufficiently restrictive to ensure that Tractopel has a sufficiently large number of pro-
jects to evaluate. In principle, only projects crucial to the survival of an entity must be validated in
advance. In practice, all contracts signed by BTP exceed the threshold of €2 million, beyond which
Tractopel requires that a risk sheet be produced. These new procedures grant the parent company an
indispensable role in the risk analysis process. However, no precise threshold concerning the evalua-
tion criteria for the prohibitive risk level is transmitted to the subsidiaries. Ebel therefore has consider-
able latitude in its judgment. As a relay of the interests of Panam, refusals to subsidiaries are justified
by lack of ambition, excess optimism or by a lack of fit of the project with the strategic objectives of
the group, depending on the case.
IT equipment and reporting procedures are also used as levers to implement centralized control
in the group. At Pyrelec, the argument that consists of harmonizing IS in place grants the leaders of
this newly acquired entity little latitude. For example, the work of the management control director
of Ebel France includes implementing the SAP financial module in the subsidiary. The equipment
deployed mirrors that of the other Ebel companies, and gives Pyrelec the technical means to respond
to the requirements of the parent company. The management control director of Ebel France insists
on the pedagogical virtues of this software:
“We started with only the finance module to report results and balance sheets, pay suppliers
and cash invoices, manage fixed assets and cash. This model considers the group’s require-
ments like putting in place analytical accounting, which people had never heard about before
at Pyrelec. However, they must accept it and learn to use it so that it can become reliable and
logical, and they realize its purpose.” (Project Manager, Ebel France)
XII CAUSES, TOOLS AND CONSEQUENCES
The choice of IT equipment is dictated entirely by the parent company. As a result, newly acquired
companies are gradually aligning with all of the requirements of the group. This evolution feeds the
image of homogeneous reporting that is supervised efficiently by the middle-level relays at the inter-
face of the holding company and the operational staff.
3.2. Highlighting the conditions of operational expertise: use of tools

and concepts by subsidiary leaders

This section analyzes the practices of subsidiary entities. We can observe concepts that run counter
to those of the parent company concerning risk management, along with comparable approaches to
influence the definition of control over subsidiaries’ activities. In the first subsection (3.2.1.), we will
see that operational activities may be little impacted by the initiatives of the parent company owing
to decoupling of local and central tools. In contrast, subsection 3.2.2. describes how the parent com-
pany’s objectives concerning financial performance control are sometimes fully endorsed.
3.2.1. REVOLT AND DECOUPLING AS AUTONOMY TOOLS

Some reforms undertaken by Ebel and Tractopel, like the introduction of risk sheets, have sparked
resistance by the BTP leaders. They bristle at the multiplication of what they consider “formalities”
that hinder their autonomy. The parent company was accused by the subsidiary of lacking the perti-
nent skills to ensure real complementarity between levels. It was notably criticized for overstepping its
role as a depository of shared resources.
“[Tractopel] doesn’t help us at all. The interventions by the parent company are not at all effec-
tive because they are totally irrelevant.” (BTP CEO)
The BTP CEO argues that the procedures put in place by the group respond to concerns that
are far removed from the company’s problems. The motives and justifications put forth by Ebel and
Tractopel are perceived as being detached from commercial constraints, as the BTP CEO emphati-
cally recounts:
“And so one day we learn that finally we don’t have to respond [to the call for tenders]. So
there’s the finest moment of ‘mister no go.’ They don’t give a darn about lost time! […] It’s
typically the opposite of a proactive approach where you take an interest in the customer, listen
to them, etc. A customer approach is not saying “no go” the day before the tendering! […]
[Ebel] flaunts its customer approach without knowing the customers or spending five minutes
in their shoes.” (PDG BTP)
The decisions made by Ebel are not irrevocable, however. BTP management can have them
adjusted if they react dramatically enough.
“[To pursue the project] we simply blow our stacks and say ‘are you friggin kidding?’ You don’t
give a darn about people? It’s not serious! You’re going to get us ‘black listed,’ etc.’” (BTP CEO)
Such uses of force by subsidiaries are not exceptional. The assistant director of the BTP confirms
that decisions by the parent company are regularly questioned:
CAUSES, TOOLS AND CONSEQUENCES XIII
“There has never been definitive opposition from Ebel. Their risk analyses are based only on
forms. [Ebel] is not ready to make decisions. If the matter is really hopeless we also know it.
It shows, and so we make a decision beforehand and don’t refer it to Ebel.” (Vice-CEO BTP)
Nonetheless, the control that Ebel exercises is not merely a formal exercise. First the parent com-
pany rules on questions on which it sees only the results in figures. Managers at the summit reply
to the data transmitted by subsidiary leaders with arguments in favor of protecting the interests of
the group and the mutualization of risks. Managers of parent companies are nonetheless hesitant
to take responsibility for hindering the development of activities about which they know little and
that contribute directly to the realization of economic objectives. When the leaders of BTP vocifer-
ously expressed their disagreement, the “well understood” interest of those in charge of signing deals
prevails.
Ebel and Tractopel therefore do not unilaterally impose their vision of reporting on their subsidiar-
ies. Local leaders also express their preferences regarding the content of reporting. For example, the
BTP management complies fairly willingly with the expectations of financial reporting but is cat-
egorically opposed to sharing its managerial prerogatives. The leaders of BTP clearly strive to remain
perceived in practice as being the head of an asset to be made profitable even when the form of control
takes a more strategic turn, under the impetus of the parent company. Ultimately, the aspects of finan-
cial control are not eliminated, far from it. The contribution of the Ebel subsidiaries to the results of
the group still occupies an important place in the evaluation of executives. The BTP CEO thus feels
“very free as long as (Ebel) can pump […]k€ of dividends in the month of May each year.”
In the case of BTP, the relations point to important power plays, but the impact of the summit on
the effective practices of the subsidiary is apparently limited. The unavoidable nature of operational
knowledge channeled into improving financial performance guarantees that the leaders of subsidiaries
will be heard by their interlocutors at the top. The exercise of risk control by the parent companies is
consequently much less rigid in practice than it would seem. Informally, the actors agree to decouple
form and content to preserve the conditions of effective management.
3.2.2. COMPROMISE: AN OPERATIONAL RISK CONTROL TOOL

Ebel, very present in thermal and nuclear electricity production, uses a reporting format common to
all subsidiaries, which focuses on monitoring production costs. Yet the very concept of production
cost is not very meaningful to Ronelec, whose raw material, specifically rainwater to drive turbines, is
procured at no charge. Ronelec mainly employs engineers and technicians dedicated to maintaining
and operating a vast hydroelectric fleet. The prime uncertainty that influences the company’s results
is rainfall, on which production directly depends. Everyone understands, including the manage-
ment controllers of Ebel, that Ronelec’s results are explained largely by climate conditions. However,
although the Ronelec leaders communicate unabashedly about the causes of the random nature of
their results, their company is not exempt from delivering stable and foreseeable performance. The
Ebel managers hear the arguments put forth by the subsidiary leaders but do not abandon the pursuit
of objectives specific to listed companies: increase the accuracy of financial forecasts despite opera-
tional uncertainties. The parent company therefore absolutely and solely governs the selection of
relevant reporting indicators. However, the responsibility for finding the means to make forecasts
XIV CAUSES, TOOLS AND CONSEQUENCES
more reliable falls on actors at the subsidiary. The Ronelec leaders consequently developed particu-
larly effective control levers. Uncertainty over future production volume thus hinders the ability to
make precise forecasts. Yet, the assistant general manager of Ronelec explains that the company’s
main expenses are maintenance costs whose dates can easily slide from one year to another. If the
year is particularly rainy and profitable, maintenance projects foreseen for the following year can be
moved up and reduce the results of the current fiscal year. Inversely, it is possible to defer part of the
maintenance program to a later date and thus inflate the results of a dry year. We therefore observed
a strong coupling between the expectations expressed by the parent company and the management of
maintenance programs to align the timetable of dam management operations to the imperatives dic-
tated by financial markets. The search for a compromise is jointly carried out by maintenance experts
in charge of risk assessment related to dam maintenance and the financial staff of Ronelec, who con-
vey the expectations of the parent company. Constrained to assume management of contingencies
internally, the Ronelec teams combine management control tools like the profit/loss forecast with the
dam maintenance timetable to find reasonable compromises that take into account both financial
objectives and safety imperatives. The highly “financial” control implemented by Ebel engenders a
profound evolution of practices in the Ronelec management as a whole.
4. Discussion and conclusion

In this section we will see how initiatives taken to evolve subsidiary control practices are attributable
to the quest by various actors to assert themselves in task sharing (4.1.). Ensuing arguments over juris-
diction that oppose actors from different professional horizons around the work of “group managers”
show that these actors use tools and concepts particular to their respective expertise (4.2.). The con-
sequence of these struggles is fragmentation of the types of control in place simultaneously in groups,
with several gaps between the practices formally espoused and those effectively implemented (4.3.).
4.1. Why do actors fight over the definition of the type of subsidiary
control?
For managers of middle-level companies, being stripped of clearly identified exclusive managerial
responsibility heightens their fear of being accused of redundancy: a synonym for inefficiency and waste
(Goold & Campbell 2002). A formidable challenge for group actors is consequently the risk of exclu-
sion for those who cannot justify their contribution to the effective functioning of the organization
overall. There are no definitively established “job descriptions,” and the distribution of responsibili-
ties is subject to negotiations between actors who may compete to extend or preserve their preroga-
tives. This phenomenon is particularly remarkable when the parent corporations suddenly see their
missions profoundly impoverished. For example, when their company was acquired by Panam, the
Ebel managers, stripped of their former responsibilities and of their directly operational competencies
over the short term, redefined the content of their missions and became more involved in managing
subsidiaries. Ebel thus compensates for the economic decision by developing its operational respon-
sibility in a bid to regain its legitimacy, notably by multiplying the procedures that visibly attest to its
CAUSES, TOOLS AND CONSEQUENCES XV
action, such as risk sheets. In this case, the definition of the type of control to wield over the subsidiary
was translated by tensions arising from the conjunction of the challenges of middle-level managers
with those of local leaders. Given the fact that subsidiaries do not willingly abandon their autonomy,
middle-level managers execute management controls to position themselves as indispensable partners.
Management control is used here as a tool not only to orient behaviors and influence the thought
processes of executives, but also (and perhaps mainly) to obtain tasks that are visible and recognized
by even higher levels. The quantity of work considered useful for the conduct of groups is therefore
not immutable, and the sharing of tasks between leaders and managers is far from a zero-sum game.
The existence of middle-level companies deprived of directly operational activities spawned new
expertise in coordination. Knowing how to balance centralization and autonomy has become “a group
management” competency, which Goold and Campbell would argue is the main competency (1987,
p. 164). This jurisdiction in the sense of Abbott (1988) is shared between representatives of differ-
ent levels and is not specific to a particular trade. Exercising this responsibility nonetheless primarily
mobilizes managers at the interfaces between highly operational levels and more financial ones. This
article confirms the existence of conflicts between professional groups, and notably between those
who hold financial power and others (Morales & Pezet 2010). It shows that beyond management
controllers, middle-level actors in groups also mobilize management control tools and concepts to
legitimize their positions, and that to do so they draw on expertise specific to their functions. This
approach parallels the “integrators” studied by Lawrence and Lorsch (1967). Like integrators, middle-
level actors endeavor to impose their will in operational decisions despite a lack of competency. This
necessarily fragile position justifies efforts to undertake a deliberate slide from one type of control
to another in order to consolidate the legitimacy of their positions. This article shows that the uses
of management control tools and concepts by group managers is partly linked to their professional
universe, and to the quest to preserve a recognized jurisdiction.
Lastly, our observations in the field reveal actors’ quest to preserve not only their place in the work
division, but also the conditions for the survival of the group. A threat common to all managers is the
death of the group due to economic inefficiency. Financial performance or any other concern is never
the sole focus. This explains the need for tension mitigation through the use of mechanisms that we
will now describe.
4.2. Sharing tasks among “group managers”

Section 1.2. affirmed that management control is never the simple reflection of strategic objectives
defined by a handful of leaders (Bouquin 2004; Bouquin & Fiol 2007). Despite the hierarchical
power conferred on upper levels, the situations observed show that the game is not solely in the hands
of the executives at the parent company; it is also influenced by the leaders of subsidiaries. In case of
conflict, the last word therefore does not necessarily go to the actors at the top; operational expertise
occasionally prevails over hierarchical power. Negotiations that arise from tensions around task shar-
ing are a broadly covered theme, notably by the sociology of professions. For instance, Abbott (1988)
highlights the competition that professional bodies wage to extend and preserve their respective juris-
dictions. Therefore, although situated at the center of groups’ organization charts, middle levels have
no de facto access to the information they consider necessary to carry out their duties. Nonetheless,
XVI CAUSES, TOOLS AND CONSEQUENCES
information is instrumental to the responsibility of actors stripped of other resources like capital or
technical expertise.
In this article, “contests for control” (Scapens & Roberts, 1993: 25) between operational units
(subsidiaries) and middle levels (parent companies) were scrutinized. Sometimes favoring confronta-
tion over reconciliation, management control can be mobilized authoritatively to create new relations
of interdependence, such as the introduction of risk sheets. Through the renewal of management
control tools and procedures, the Ebel managers compensated for the loss of their role as strategic
decision makers, and embraced the position of coordination agents serving the holding company.
Management control necessitates the circulation of data that grants managers power. For Tractopel,
showing that it can summarize what happens on the periphery thus became expertise recognized and
appreciated by Panam. This case study illustrates the importance of tools in groups that let managers
define the effective perimeter of the control wielded by the center, as described by Meyssonier and
Pourtier (2013). It also provides an overview of the role of the circulation of information as a legitimi-
zation mechanism. The distribution of competencies and responsibilities tends to follow rather than
precede the circulation of information. Management control tools thus participate in legitimizing
middle-level centers as decision-making bodies, and provides them with the data required to control
the periphery effectively.
This article identifies matchings between concepts and tools specific to different levels, which
enable the actors to partly appropriate the group management work. According to their position in
the group, some actors embody the persona of the “client” (at BTP notably by raising the risk of being
“blacklisted”), and others act as strategic decision makers (like Ebel employees in charge of manag-
ing risks for the group). Still others focus on knowledge of operational risks (at Ronelec, regarding
dam maintenance). In addition to the pursuit of personal interests and the influence of professional
cultures (Oriot 2004), the position in the group dictates how actors use management control tools
and practices. All of the actors make every effort to have their prerogatives recognized as legitimate
and useful, yet they use different tools and concepts. Reciprocally, the same tools may serve different
aims. For instance, IS partly centralize risk management in the sense of more strategic involvement
of Tractopel in BTP, and conversely they serve to relay decidedly financial controls in their deploy-
ment at Pyrelec. Similarly, the reconfiguration of organization charts serves to increase empowerment
within Ronelec, and, in contrast, implements more extensive centralization at Ebel with the creation
of Tractopel. Invariably, management control tools are adapted to the concepts and expertise specific
to the different levels to shape the definition of types of control put in place at subsidiaries.
4.3. How do fights for jurisdiction affect group structure?

In general, regardless of the hierarchical level observed, actors’ attention and efforts are largely directed
at satisfying the expectations of higher hierarchical levels. As a result, most of the control of subsidiar-
ies is oriented toward meeting the expectations conveyed by the top. Therefore it is not surprising that
the financial requirements that fall on holding companies are felt down to the operational levels. One
risk is then ignoring the needs of operational managers and systematically increasing control practices
to their detriment. This approach is generally met with resistance by the operational staff (Morales &
Pezet 2010).
CAUSES, TOOLS AND CONSEQUENCES XVII
Leaders of subsidiaries are key actors whose fundamental strategic freedom is to decide if they
should oppose or embrace the initiatives issued by the parent companies. In case of conflict with their
parent company, power relations are asymmetrical but rarely crushing. Leaders of subsidiaries retain
maneuvering room, and willingly express themselves about the elements that they believe should be
used in their evaluation (Boussard 2001). This explains why the management control style adopted
by a subsidiary does not necessarily correspond to that initially conceived by the parent company.
Notably, this type of control may be “conveyed,” but not truly applied. For example, we have seen that
the control wielded by Tractopel became more strategic in form, yet its content remained essentially
financial.
The types of control in place are also subject to evolution, illustrated by the dynamics of con-
trol observed in a group like Panam. These changes are very visible in the case of the integration of
Ronelec, a subsidiary quickly brought to order concerning reporting, and which subsequently had
to modify its practices. By jointly considering Tractopel, BTP, Ronelec and Pyrelec, we can notice
the simultaneous existence of numerous control styles, be it between entities at different the levels
of the same group, or between subsidiaries at the same level. The entanglement of several modes of
control within specific services (e.g. purchasing, see Donada & Nogatchewski 2008) is also affirmed
here at the group scale. The principle of economy that prevails in firms nonetheless limits the possible
inflation of control tools and measures by requiring the contribution of each level to be assessed by
a higher level. All of our respondents thus claim that they avoid emulating the adjacent levels and
constantly ensure that their missions are distinct from those taken on by the parent company or their
subsidiaries. Nonetheless, the groups present a mosaic of different types of control.
5. Conclusion
This research illustrates the complexity of ties between professional strategies, organizational struc-
tures and uses of management control in groups of companies. The causes of the tensions over the
definition of types of control over subsidiaries include actors’ quest to preserve a legitimate place in
group management. More generally, the evolution of control of subsidiaries rests not only on objec-
tive economic criteria, but also on interdependence between actors and fears of marginalization, even
exclusion. Middle-level managers stripped of exclusive responsibility for strategic and operational
matters are most anxious and most active about sharing responsibilities. They are effectively con-
fronted both by the risk of redundancy between the levels and the risk of being deemed incompetent
because of the lack of expertise in the “field.”
Among the means implemented as actors at different levels strive to define the control of subsidi-
aries, reporting tools figure prominently. Middle-level actors orient management control practices to
acquire and conserve singular responsibilities: that of a distinct professional group described here as
“group managers.” In this context, management control is more than a measurement instrument: it is
also an arena to highlight concepts and responsibilities specific to different levels. Management con-
trol tools are thus adopted by middle managers who actively intervene in financial risk management
or the execution of strategic orientations, and by leaders of subsidiaries who use reporting as a screen
to keep the managers of parent companies at a distance from operational considerations (BTP), and
XVIII CAUSES, TOOLS AND CONSEQUENCES
as a mirror of local constraints (Ronelec). Invariably, the transformations that lead to changes in the
exercise of control result from ongoing organization work and local power relations. Lastly, this article
underscores that a consequence of the resolution of conflicts over jurisdiction at middle levels is the
significant heterogeneity of types of control observable either between levels of the same group, or
between subsidiaries of the same parent company.
CAUSES, TOOLS AND CONSEQUENCES XIX
Notes Chandler, A. D. (1977). The visible hand: The mana-

gerial revolution in american business. Cambridge,
1. Many typologies present a range of possible Massachussetts: The Belknap Press of Harvard
choices. Resarchers distinguish two styles (Collis
University Press.
& Montgomery 1998); three styles (Goold &
Chandler, A. D. (1991). The functions of the HQ unit
Campbell 1987) or five styles (Denis & Tannery
in the multibusiness firm. Strategic Management
2002) of control.
Journal 12: 31-50.
2. The early works by Goold and Campbell suggest
Collis, D. J., Montgomery, C. A. (1998). Creating

three control styles: “strategic planning”; “finan-
corporate advantage. Harvard Business Review:
cial control” and “strategic control” (not examined
71-83.
here), marked by both strong decentralization and
by close monitoring of strategic performance indi- Crozier, M. (1964). Le phénomène bureaucratique.
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(1993). Some of their works propose a continuum Les contraintes de l’action collective. Paris: Editions
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“hands-off” policies (2002). Delarre, S. (2005). La reproduction des groupes
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Denis, J.-P., Tannery, F. (2002). L’architecture des sys-
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François-Régis Puyou

THE HETEROGENEITY OF CONTROL OVER SUBSIDIARIES WITHIN BUSINESS GROUPS:

The heterogeneity of control

business groups: causes,

* Associate professor, Audencia Nantes Ecole de Management

Correspondence: 8 route de la Jonelière – BP 31222

1.2. Management control as a condition of centralized management

2. Presentation of the case and the methodology

2.1. Capturing control practices at the interfaces of entities in a group

Tractopel Ebel France

100% 100% 49,9%

BTP Pyrelec Ronelec

*Several regional authories share the rest of the capital

Companies visited for interviews

Controllers or finance directors Leaders of subsidiaries Middle-level managers Total

2.2. Identifying highlights in the dynamics of control

3. The exercise of control by “group managers”:

3.1.1. ORGANIZATION CHARTS AND INDICATORS AS STRATEGIC

3.1.2. PROCEDURES AND IS AS FINANCIAL RISK MANAGEMENT TOOLS

3.2. Highlighting the conditions of operational expertise: use of tools

and concepts by subsidiary leaders

3.2.1. REVOLT AND DECOUPLING AS AUTONOMY TOOLS

3.2.2. COMPROMISE: AN OPERATIONAL RISK CONTROL TOOL

4. Discussion and conclusion

4.2. Sharing tasks among “group managers”

4.3. How do fights for jurisdiction affect group structure?

Notes Chandler, A. D. (1977). The visible hand: The mana-

Collis, D. J., Montgomery, C. A. (1998). Creating

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