Ritual legitimation, de-coupling and the budgetary process: managing organizational hypocrisies in a multinational company |
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| Authors: | Luis Fernandez-Revuelta Perez Keith Robson |
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| Affiliation: | aUniversidad de Almeria, Departamento de Direccio@a3n y Gestio@a3n de Empresas, Can@a7ada de San Urbano s/n, Almeria, 04120, Spain.;bUMIST, Manchester School of Management, P.O. Box 88, Manchester, M60 1QD, U.K. |
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| Abstract: | ![]()
The study of participation in the budgetary cycle has formed a prominent part of the research literature concerned with the budgetary process. More recently there has emerged a body of literature concerned with exploring the political and symbolic nature of the budgetary process. The paper reports upon the outcomes of an empirical study of the introduction of `budgetary participation' in a division of a European subsidiary of a large North American car manufacturer. We detail the long process of consultation and negotiation within the subsidiary, and between it and the European Headquarters. The study provides a revealing instance of the roles of formal budget participation as a ritual of control and legitimation without the substantive involvement of middle managers and suggested to us the introduction of de-coupling and organizational hypocrisy alongside the introduction of budget participation. The study pays close attention to the contingent effects of the wider political context of the division and the relationships between the division, its organizational context and organizational environment, and how this context played upon the budgetary process in the division. The outcomes that we analyse at `Delta' reflect the de-coupling strategies and organizational hypocrisies commonly found in public sector organizations. In this wider setting the corporation persists with the ritual of `tight' budget negotiation and target setting and apparent underachievement in performance. Yet we conclude that the complex technological and political context to the formation and siting of Delta continued and may continue to support its existence.$g0 |
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| Keywords: | budgeting participation de-coupling organizational hypocrisy legitimation.@911. Introduction@21The study of participation in the budgetary cycle has formed a prominent part of the research literature concerned with the budgetary process since Argyris (1952) produced the first major empirical study of the effects of budget participation in organizations. And since then many researchers have attempted to account for, in organizational terms, the apparent `beneficial effects', or otherwise, of budgets, through, for example, the theory of cognitive dissonance (Foran and DeCoster, 1974) or psychological theories of motivation (Stedry, 1967). The assumption that the involvement of managers in the process of budget setting improves organizational control has both a long history and a powerful place among the theories that `practitioners espouse' (Argyris, 1977).$PIn contrast to much of the conventional model of budgetary control and decision making that underlies many studies of the productive efficiency of budgetary participation, more recently a body of literature concerned to explore the political and symbolic nature of the budgetary process has emerged (Covaleski and Dirsmith, 1988 Brunsson, 1989). Following Argyris (1952) and Cyert and March (1963), as we argue below, the budgetary process has long been explored in terms that stress its role in the exercise of power and the reproduction of relations of power: in short, budgeting has been conceived of as an aspect of an organizational, social and political `reality' that is constructed through social action, rather than viewed simply as a neutral or technical process of rational planning or decision-making. It is this conceptual approach that we apply in the course of this study, with particular reference to the politics of the process of budgetary participation in a study of the subsidiary of a multi-national company. We explore the context to the introduction of a new participative approach to budget setting and its implications and consequences for organizational hypocrisy (Brunsson, 1989) during the first year of operation.$PThe paper reports upon an empirical study of the introduction of `budgetary participation' in a division of a European subsidiary of a large North American car manufacturer. We detail the long budget setting process of consultation and negotiation within the subsidiary, and between it and the European Headquarters as it provides a revealing instance of the roles of formal budget participation as a ritual of control and legitimation. The study suggested to us the introduction of organizational hypocrisy and de-coupling in the subsidiary alongside the new budget participation (Brunsson, 1989, 1993). While in Argyris' terms our study could be seen to explore an example of pseudo-participation in the budgetary process, our study rather pays attention also to the contingent effects of the wider political context of the division and the relationships between the division, its organizational structure and organizational environment (in particular, the European headquarters and governmental agencies who contributed to the financing of the division). We explore how this context played upon the budgetary process in the division (which in the paper is called Delta) and influenced the production of organizational hypocrisy in a budgetary context (Brunsson, 1989).$PIn the next section of the paper we survey relevant aspects of the literature on budgetary participation and outline the contribution of an organizational analysis of the issue. In doing so we pay particular attention to organizational theories of hypocrisy, legitimation, de-coupling and ritual. The succeeding section documents the empirical evidence gathered by the researchers. Finally, there is a theoretical analysis and conclusion.@912. Budgetary participation and organizational environments@21Accounting and `management control' textbooks have ceaselessly attempted to clarify the concepts of decision making and control, and to relate them to the operation of rational accounting techniques (cf. Anthony et al., 1988 Emmanuel et al., 1990). In conventional terms accounting techniques have been affirmed as mechanisms for reconciling talk and action by programming decisions for the attainment of organizational control. Common assumptions as to the causal relationship between talk and action have corresponded to the norms of goal directed, rational decision theory, norms that accounting and other management techniques celebrate (Meyer, 1983). In this paper we draw upon the work of Brunsson in order to make sense of the somewhat complex relationship between the formulation of the budget, the views of those to whom the budget was intended to relate and the actions of the organizational members once the budget was set.2In short, what Brunsson (1989) has termed the prevalence of organizational hypocrisy. |
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