A Study of the Operations of Formal and Informal Controls in a Multinational Subsidiary in Nigeria

Purpose – This paper reports on the results of a case study that investigates the operations of formal and informal controls in a multinational-subsidiary in Nigeria. Design/methodology – Data has been gathered by way of semi-structured interviews, observation, document analyses and a focus group discussion. Findings – Findings suggest that although issues relating to budgets, performance evaluation and rewards, staff recruitment and other formal aspects of controls were built on the platform of formality, these systems operated alongside informal controls in the organization. We suggest that beliefs systems, values and norms existing within the local community where the subsidiary is located could have a controlling effect and influence the formal organizational controls. Forms of informal controls such as trust were found to be prominent in the organization where superiors in certain instances assigned responsibilities to members of their teams not on the basis of their abilities or skills possessed by the member but because the member could be trusted. Implications – The findings as reported here have significant implications for understanding the design of management controls in less developed countries (LDCs).