Diagnostic Control Systems and Overall Firm Performance of Sugar Firms in Western Kenya

Abstract

Diagnostic control systems are the backbone of traditional management control, designed to ensure predictable goal achievement. Unfortunately, managers typically pay little attention to these feedback systems to improve the implementation of strategic plans and organizational performance. Further, establishing the strategic control-performance relationship has been problematic, suggesting failure by researchers to consider contingent variables. This study used data,  collected during the period November 2008 to May 2009 from 109 senior managers in a census survey of 45 firms in the sugar value-chain in western Kenya, to examine the relationship between diagnostic control systems and overall firm performance.  Descriptive statistics and bi-variate regression analysis were used to analyze data.  The findings revealed diagnostic control systems positively and significantly related to overall firm performance (β = 0.358, p < 0.01).  The results of this study suggest that urgent measures are required by the firms in the study to design diagnostic control systems to cope with the changing business environment.  The study contributes to validation and upgrade of the existing strategic control theory.  For managers, the study sheds light on the design and use of diagnostic control systems and also for public sector managers in guiding the strategic change.  It is recommended that future studies focus on the specific firms in sugar value chain and adopt longitudinal case-study designs to establish causal relationships among variables.