TECHNISCHE UNIVERSITÄT MÜNCHEN Lehrstuhl für Produktentwicklung Supporting the Design of Management Control Systems in Engineering Companies from Management Cybernetics Perspective Fatos Elezi Vollständiger Abdruck der von der Fakultät für Maschinenwesen der Technischen Universität München zur Erlangung des akademischen Grades eines Doktor-Ingenieurs genehmigten Dissertation. Vorsitzender: Univ.-Prof. Dr.-Ing. Michael Zäh Prüfer der Dissertation: 1. Univ.-Prof. Dr.-Ing. Udo Lindemann 2. Prof. Iris D. Tommelein, Ph. D., University of California, Berkeley / USA Die Dissertation wurde am 28.09.2015 bei der Technischen Universität München eingereicht und durch die Fakultät für Maschinenwesen am 02.12.2015 angenommen. FOREWORD BY THE SUPERVISOR As the environment is becoming more volatile and unpredictable, adaptability to environmental changes has become a top priority for engineering companies. Fluctuations of customer preferences, changing legislation, constant pressure from competitors, new technologies, all these represent some of the external influences that contemporary engineering companies need to deal with dynamically. Management Control Systems (MCS) are management systems that provide mechanisms for dealing with these changes by ensuring the attainment of strategic and operational goals despite the high environmental volatility. Hence, they play a vital role in the competitiveness of engineering companies and their proper design is essential for success in the market. Although frameworks for understanding MCS exist, a systematical, method-based MCS design is still missing. This thesis takes a first step in this direction, by adopting a systemic view on MCS and by contemplating the complexity involved in MCS design. It recognizes that engineering companies are highly complex socio-technical systems, and that the design of MCS encompasses the planning, modeling and embedding of MCS into these systems. In order to tackle this complex task from systemic perspective, this thesis suggests three stages for MCS design: functional, social and organizational stage. The functional stage involves the modeling of necessary functional mechanisms that determine what needs to be accomplished. The social stage is concerned with the conceptualization of the functional mechanisms by means of social structures. The last stage, the organizational stage, involves the embodiment of the social structures into the organizational structures and their support with the right tools and incentives. The thesis claims that it is essential for the contemporary MCS not only to ensure strategic goal achievement but also to provide the mechanisms for adapting these goals to environmental changes. For this purpose, the author of this thesis departs from the mainstream MCS research that considers MCS to be simple homeostatic regulators, and adopts a more holistic systemic perspective that uses Viable System Model as a canonical model for understanding the functional structures of MCS. Based on this premise, the author introduces a method that provides a systematic support for managers in engineering companies for designing MCS at the functional level. This method is applied and evaluated in three industrial case studies along three criteria: applicability, usefulness and usability of the method. In all these evaluation criteria, the method performed well and the added-value of the method in industrial settings is confirmed. As a conclusion, it can be said that the thesis of Fatos Elezi opens a new perspective for understanding MCS and their design. This perspective is based on systems thinking, which provides a potential to address new challenges in MCS design that cannot be tackled with the existing theoretical frameworks. As such, this thesis represents a great academic and industrial contribution and paves the way for new and exciting research in the field of MCS. Garching, March 2016 Prof. Dr.-Ing. Udo Lindemann Institute of Product Development Technical University of Munich ACKNOWLEDGEMENTS This work was conceptualized and written during my tenure as a scientific research assistant at the Institute of Product Development at the Technical University of Munich (TUM) from January 2010 until February 2015. I would like to cordially thank my doctoral advisor, Prof. Dr.-Ing. Udo Lindemann, not only for the scientific mentorship provided but also for granting me research freedom and for being an avid listener of my ideas. Through his challenging observations and valuable reviews this thesis reached its current state. I am also gratefully thankful to my second doctoral advisor, Prof. Iris D. Tommelein, for her continuous support and encouragement. Her belief in my ideas and constant feedback on research topics that we tackled together through numerous publications was instrumental for the maturity of this thesis. A special acknowledgement goes to my fellow colleagues at the Institute of Product Development, many of whom have become close friends of mine through our cooperation in different research projects and learning activities. In particular, the support of Martin Graebsch, Stefan Langer, Wolfgang Bauer, Charalampos Daniliidis, Katharina Kirner, Carlos Gorbea, Nepomuk Chucholowski, Sebastian Kortler, Andreas Kohn, Florian Behncke, Arne Herberg, and Robert Orawski need to be mentioned. I want to thank also those colleagues who have helped me proofread this work, especially Danilo Schmidt and Srinivasan Venkataraman. Special mention and thanks go to all my students that greatly contributed to the maturation of this thesis. Here I would mention the members of the PE cybernetic group - Thomas Maier, Tobias Steinhäußer, David Resch, Michael Schmidt (also proofread this work), Julian Wilberg, and Sebastian Spörl, who were key student contributors to this work for which I am very grateful. Throughout my academic experience at the TUM, I came in contact with three academic organizations: the Design Society, the Institute of Electrical and Electronics Engineers (IEEE) and the American Society of Mechanical Engineers (ASME). I participated in numerous conferences organized by these organizations through the generous sponsorship of the Institute of Product Development. These conferences served as platforms for discussions with researchers and practitioners and as such provided a substantial contribution to the maturity of this thesis. Most importantly, this work would have not been possible without the support from my wife Charlynne Elezi, who always encouraged me in my work and offered patience and comprehension. I want to also thank my adorable daughter Lea, for being who she is and for filling my life with joy. Finally, I am very grateful to my Kosovar and French families. Their love and permanent support offered me the strength to reach this milestone. At the end, I would like to pay a special tribute to my mother, whose unconditional love and support has always been present in all my endeavors. Garching, March 2016 Fatos Elezi The following publications are part of the work presented in this thesis: Elezi, F.; Tschaut, R.; Bauer, W.; Chucholowski, N.; Maurer, M.: Integration of Strategic Flexibility into the Platform Development Process. In: ICoRD’15–Research into Design Across Boundaries, Volume 2, 2015. Springer p. 483-493. ISBN: 978-81- 322-2228-6. Steinhaeusser, T.; Elezi, F.; Tommelein, I. D.; Lindemann, U.: Management Cybernetics as a Theoretical Basis for Lean Construction Thinking. Lean Construction Journal, 2015. Elezi, F.; Schmidt, M.; Tommelein, I. D.; Lindemann, U.: Analyzing Implementation of Lean Production Control with the Viable System Model. IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), Kuala Lumpur, Malaysia, 2014. Elezi, F.; Resch, D.; Tommelein, I. D.; Bauer, W.; Maurer, M.; Lindemann, U.: A Viable System Model Perspective on Variant Management based on a Structural Complexity Management Approach. Risk and change management in complex systems: Proceedings of the 16th International DSM Conference, Paris, France, 2014. Bauer, W.; Chucholowski, N.; Elezi, F.; Lindemann, U.; Maurer, M.: Zyklenorientiertes Modul- und Plattformdenken - Ein Leitfaden für Praktiker. Maurer, M.; Lindemann, U.; Eigenverlag 2014. ISBN: 978-3-00-048286-1 Maurer, M.; Bauer, W.; Elezi, F.; Chucholowski, N.: Methodik zur Erstellung zyklengerechter Modul- und Plattformstrategien. In: Vogel-Heuser, B. et al. (Eds.): Innovationsprozesse zyklenorientiert managen. Springer Vieweg 2014, p. 139-154. ISBN: 978-3-662-44931-8. Schmidt, M.; Elezi, F.; Berghede, K.; Tommelein, I. D.; Lindemann, U.: Supporting Organizational Design Towards Lean With The Viable System Model. In: The Proceedings of the 22nd Annual Conference of the International Group for Lean Construction, Oslo, Norway, 2014. Schmidt, M.; Elezi, F.; Tommelein, I. D.; Lindemann, U.: Towards recursive plan-do- check-act cycles for continuous improvement. In: 2014 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), Kuala Lumpur, Malaysia, 2014. Elezi, F.; Maier, T. G.; Lindemann, U.: Engineering change management challenges and management cybernetics. In: 2013 IEEE International Systems Conference (SysCon), Orlando, 2013. ISBN: 978-1-4673-3107-4. Elezi, F.; Schmidt, M.; Tommelein, I. D.; Lindemann, U.: Enhanced Viability in Organizations: An Approach to Expanding the Requirements of the Viable System Model. In: IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), Bangkok, Thailand, 2013. Elezi,