*2.1. Management Control*

Management control is the process that managers use to aid the decision-making of the members within an organization. This eases the application and alignment of chosen strategies on the organization, thus achieving the pre-established objectives and benefiting the firm's overall performance [2–4]. Management control systems influence human behavior so that they are aligned to the goals, i.e., companies ensure that the individual's actions to achieve personal goals are aligned with the institution's corporate goals [17].

Among the various managemen<sup>t</sup> control models, the most prominent ones are the closed cycle model from execution premium [4], which is mostly used in large and complex organizations, and the levers of control model [11], which segments managemen<sup>t</sup> control into four levers to ensure effective managemen<sup>t</sup> control within the organization. Diagnostics systems are used to monitor goals, which help monitor the progress of indicators, and if these are aligned with the plan, include tools such as budget, control panel, information systems, cost systems, among others. The diagnostic control by itself is not adequate to achieve effective control as tampering actions can be done to achieve objectives. This can be a risk to the organization, hence the need to couple diagnostics with other control systems [11].

Belief systems attempt to articulate organizational values with direction so that employees accomplish the objectives. They must inspire and promote behavior that aligns with the organizational values, mission, and vision [11]. In addition, boundary systems control all the behavior that workers should refrain from by defining limits and avoiding risky or negative practices (i.e., manuals, policies, contracts, documentation process, among others) [11]. Interactive control systems are used when managers obtain employee information mainly through informal means to explore the impact of certain practices, strategies, or programs to take advantage of possible opportunities. [11] Exposes the dynamic tension between the four control levers, where all must be in balance to bring forth organizational performance. Hence, there must be a holistic approach in the four levers to promote better organizational performance [11,18].

#### *2.2. Management Control in Small and Medium Enterprises*

Despite the importance of the role of SMEs in developing and growing economies, little is known regarding the use of managemen<sup>t</sup> control tools in them [9,14], as most are used in large companies, or utilize specialized tools such as balanced scorecards and indicators to improve financial performance [18]. In addition, there is scarce research that studies managemen<sup>t</sup> control tools as a holistic packet (which has now gained importance in the literature).

Studies regarding the influence of control tools in SMEs have mainly been elaborated in Australia, Canada, and Asia [14,19]. Research analyzing the situation in Australia, Hong Kong, Malaysia, and Singapore shows the limited use of managemen<sup>t</sup> tools in SMEs [20]. The most utilized tools are environmental analysis tools (Strength, Weaknesses, Opportunities, Threats, Policies, Environment, Society, and Technology), forecast tools, cost-benefit tools, and budget tools.

Research reveals that the existence of control in SMEs affects different parts of the company by maximizing opportunity, operational efficiency, profit, reliability of administrative information, and finances [10]. After studying 165 industrial firms in New Zealand, [21] it was proven that applying managemen<sup>t</sup> control improves profitability. The findings in [6] also support the idea that using managemen<sup>t</sup> control tools has a positive impact on corporate performance, which is consistent with the literature. A study of 151 microenterprises in Malaysia discovered that performance and success in small firms are significantly affected by managemen<sup>t</sup> initiatives [22], further adding that microenterprises should implement managemen<sup>t</sup> training.

Medium-sized businesses use more control lever tool groups than smaller companies, which can increase their performance as indicated by the practical and theoretical hypotheses [4,11,17] and other related studies [6,10,14,20,21]. The main difference between small and medium-sized companies lies in the use of the diagnostic lever on the non-financial side (the use of strategic maps, control panel indicators, balanced scorecards, etc.). What is usually employed to plan operations from the organizational strategy [4] is coherent with the growth of companies and the literature.

There is a study elaborated by CIMA (Chartered Institute of Management Accountants) in the United Kingdom [23] that explains the practices of SMEs in the region. The results show that the use of managemen<sup>t</sup> tools tends to be used mainly to control information rather than to make decisions. In addition, it reveals that in small companies, control tools are managed by the owners and/or managers, making it a high opportunity cost for the firm.

Literature evidence also identifies the difference in employing managemen<sup>t</sup> control tools between family-run and non-family-run firms. In the former, managemen<sup>t</sup> tends to use informal and subjective control systems rather than formal systems [6], largely due to the fact that family-SMEs also possess non-economic objectives. The theory also suggests that family-run businesses are based on goals that surpass financial aims, focusing on non-financial goals which influence the control methods that they employ [23]. Further evidence shows that control systems in family-run firms are mostly informal and subjective in nature [24]. The aforementioned study [6] analyzed 900 Spanish companies, of which 70.4% were family-run, and proved the hypothesis that family-run companies used inferior levels of control systems in comparison to non-family-run firms as the organizational objectives between these two differ at their core.

#### *2.3. Management Control Research in SMEs with Fuzzy Logic*

Based on fuzzy sets literature on managemen<sup>t</sup> and performance control, it has been demonstrated that SMEs are still unsure of the value of managemen<sup>t</sup> tools, and they still do not possess the necessary resources to be competitive in this field of knowledge. In addition, a negative relationship has been found between the number of managemen<sup>t</sup> tools employed and the intensity (level) of their use [25]. Another fuzzy analysis in business was elaborated from the perspective of innovation and entrepreneurship, where a positive relationship

between innovation and company growth was found [26]. As further evidence regarding Knowledge Management Performance Measurement shows the lack of research in this area, 49 metrics have been validated to evaluate knowledge and performance managemen<sup>t</sup> through fuzzy methodology. This is appropriate as SMEs act in uncertain environments, and fuzzy analysis has better reach for this type of study [27]. There is literature on fuzzy analysis indicators in the Supply Chain Management of SMEs in Iran, who find themselves in an uncertain position [1]. Data suggests that SMEs in Iran take into account financial and non-financial indicators ye<sup>t</sup> lack a universal consensus in the use of a balanced scorecard that is incomplete and inconsistent in its metrics and indicators. Furthermore, the correct number of metrics to effectively monitor SMEs is poorly understood. Scarce literature has been found on fuzzy analysis for the monitoring of a holistic managemen<sup>t</sup> control system in SMEs, which happens to be the focus of this study.

#### *2.4. Development of Hypotheses*

Management control theory indicates that it has a positive influence on performance. In addition, various studies in SMEs show a positive influence of the use of managemen<sup>t</sup> control tools on organizational performance. Henceforth, the hypothesis of the investigation is the following:

**HT.** *The use of management control tools has a positive influence on the organizational performance of SMEs.*

Common managemen<sup>t</sup> tools analyzed in the literature include budget, long-term planning, decision-making support systems, and financial and non-financial performance support systems [7,8]. There is little literature that groups the tools in control levers to explore how each influences organizational performance in SMEs. Based on [11] control lever model where each of the four levers is defined (beliefs, boundary, diagnostics, interactive), we expect to find strong positive influence in financial and non-financial organizational performance through the use of control tools on each lever.

Thus, four additional hypotheses to analyze how each control lever affects organizational performance in SMEs will be employed:

**Hypothesis 1 (H1).** *The beliefs lever is present as a management control tool in SMEs.*

**Hypothesis 2 (H2).** *The boundary lever is present as a management control tool in SMEs.*

**Hypothesis 3 (H3).** *The diagnostics control lever is present as a management control tool in SMEs.*

**Hypothesis 4 (H4).** *The interactive control lever is present as a management control tool in SMEs.*

The development of each lever will be analyzed by measuring the degree of use of certain tools that are assigned to each lever. The measurement model is shown in Figure 1.

**Figure 1.** Theoretical model. Based on Simons, R. (1995) and Ittner and Larcker, 1998; Green and Welsh, 1988; Duréndez et al., 2016; Voss and Brettel, 2014.
