THE ROLE OF ACCOUNTING IN ORGANISATIONAL CHANGE: PROMOTING PERFORMANCE IMPROVEMENTS IN THE PRIVATISED UK WATER INDUSTRY

Privatisation has been one of the most important and controversial policy initiatives to emerge in the U.K. over the last decade. Yet despite its prominence, little so far is known about its impact on those centrally involved in its implementations: senior management. This paper will investigate the ways in which senior management within one of the major privatised industries, the Water Industry, have sought to give effect to the strategic change involved in the transformation of a public sector Water Authority into a private sector Water plc. Although the monopoly character of the supply of Water services has remained intact, managers in the new Water plcs have had to respond to new expectations and assessments of corporate performance from shareholders, investors and financial analysts; from customers; and from a new economic regulatory regime operated by the Director General of the Office of Water Services. The Director General, in addition to operating price controls, is committed to developing “yardstick” competition which will provide the opportunity to make comparative judgements about performance levels achieved by each of the new Water plcs. In pursuit of improvements in efficiency and profitability, senior managers have engineered a variety of restructurings of corporate organisation to give more focus to achieving new business objectives, and to move away from a public sector bureaucratic management style with its traditional tall-pyramid structure to flatter and less hierarchical management structures. Although many of the changes have been justified in terms of empowerment and providing more autonomy for local managers, the paper argues that the experience of change for these managers has largely consisted of being subjected to much greater accountability for their performance through greater emphasis on the achievement of financial targets, more systematic monitoring of performance, the introduction of individual performance appraisal, and performance-related pay. Central to this intensification of the scrutiny of performance have been changes in accounting information systems and how they are used. In examining how these changes have functioned in their organisational context, the paper seeks to contribute to an understanding of the role of accounting in processes of organisational change     

Instructional case: Blue Ridge Revisited—Integrating ABC and OROS Quick® software

Blue Ridge Manufacturing Company produces customized towels for the US sports market. Recently, competitive pressures motivated the company to institute an activity-based costing (ABC) system for allocating manufacturing support costs to its major product lines. Management is pleased with the manufacturing cost information that the ABC system is providing and is beginning to use the ABC data to drive process improvements. To secure additional gains, management is now interested in conducting a customer profitability analysis. Currently, the company allocates its Selling, General, and Administrative (SG&A) costs to products and/or customers on the basis of sales volume (units). The question posed to you, in your role as a member of a team of managerial accountants, is whether the SG&A costs can be more accurately assigned to customer groups (“large,” “medium,” and “small,” as determined by sales volume). To this end, you have been asked to build and interpret the results of an ABC model that assigns SG&A costs to each of these three customer groups. Blue Ridge has recently implemented a new software system that includes an ABC module (called OROS Quick®), which you will use to build your cost assignment model and to respond to a number of managerial questions based on the cost analysis you perform.     

Accountants as “new guard dogs” of capitalism: Stereotype or research agenda?

Drawing inspiration from the theses of the regulation school, Gerard Hanlon analyses the socialisation process in the “big six”. For accountants are, according to him, the new “controllers” of “a process of flexible accumulation”, one that goes hand in hand with a heightened international division of labour. Unfortunately, his research site remains too limited to confirm—or disconfirm—his ambitious hypotheses. Moreover, the transposition of neo-marxist theories leads him to underestimate the whole work of construction of social credibility of accounting knowledge, as well as the complex play of interaction—and not only of opposition—between these “multinational service conglomerates” and the local or national dignitaries who continue to represent the core of the field of practice.     

Taking the customer into account: Transcending the construction of the customer through the promotion of self-accounting

The importance that businesses have accorded their customers during the past thirty years has not, as yet, been fully matched by the development of accounting for the customer. A range of customer-related techniques has emerged, including customer profitability analysis, the balanced scorecard and several strategic management accounting approaches. In large part these can be characterised as attempts to construct the customer in a very conventional manner, one which serves the interests of business rather than customers. Similar emphases can also be identified in the marketing management literature, which in recent years has shown worrying signs of becoming focused on the adoption of a form of hard number accounting. The purpose of this paper is to provide a review and critique of extant customer accounting techniques and approaches, as well as identifying some of the fundamentals of a more appealing attempt at ‘taking the customer into account’.     

Valuing customers and loyalty: The rhetoric of customer focus versus the reality of alienation and exclusion of (de valued) customers

The accounting practice of customer valuation ostensibly emerged from the so-called “customer revolution" of the 1980s. Early conceptions centred around notions such as customer focus and providing value to customers, but these ideas have latterly given way to calculation of the financial value of customers to an organisation. Integral to customer valuation are the reconstruction of the customer as an asset (or liability) of the organisation, the segmentation of customers into identifiable groups, and the treatment of customers as dollars rather than people. Whilst rhetoric of “the customer is king" persists, accounting for customer valuation brings its own transformative terminology and has become a means for organisations to selectively focus on particular customers, rather than the customer in general. The paper examines the health insurance and banking industries as exemplars of the affects of customer valuation, and discusses pivotal issues of access, equity, alienation, and social exclusion. Customer valuation is shown to have become a means to increase shareholder income and wealth, almost inevitably at the cost of (further) marginalising the poor and disadvantaged.     

How the Internet affects output and performance at community banks

Internet web sites have become an important alternative distribution channel for most banking institutions. However, we still know little about the impact of this delivery channel on bank performance. We observe 424 community banks among the first wave of US banks to adopt transactional banking web sites in the late-1990s, and compare the change in their 1999–2001 financial performance to that of 5175 branching-only community banks. Whereas today virtually all viable community banking franchises offer the Internet banking channel, studying this earlier time period allows us to make clean comparisons between subsamples of “brick-and-mortar” and “click-and-mortar” community banks. We find that Internet adoption improved community bank profitability, chiefly through increased revenues from deposit service charges. Internet adoption was also associated with movements of deposits from checking accounts to money market deposit accounts, increased use of brokered deposits, and higher average wage rates for bank employees. We find little evidence of changes in loan portfolio mix. Our findings suggest that these initial click-and-mortar banks (and their customers) used the Internet channel as a complement to, rather than a substitute for, physical branches.     

Exploring customer’s mobile banking experiences and expectations among generations X,Y and Z

Customer’s adoption of mobile banking portrays tremendous growth in developing countries. However, it seems that there is a lack of studies about customer’s experiences and expectations on mobile banking services, and more research is needed considering generational differences between mobile banking customers in Iran. The purpose of this study is to explore the customer’s mobile banking experiences and expectations among generations X, Y, and Z in a developing country context, Iran. Twenty-seven in-depth interviews were conducted from active users of mobile banking services with a generational split in Iran. A qualitative content analysis was employed to understand customer’s mobile banking experiences and expectations. This study identified specific features of different generations regarding their experiences and expectations of mobile banking services. Each generation displayed distinct characteristics of mobile banking. Generation X customers perceive mobile banking as complicated; generation Y customers prefer to use mobile banking for quick payments, while generation Z customers want to have more customized services and ranked mobile banking as a spontaneous solution. Every generation expects different features to focus on: generation X expects to have more user-friendly functions; generation Y prefers to have an online transaction tracker while generation Z appeals to have enhanced the user interface. This study offers a detailed strategic starting point for management to tailor dynamic customer expectations among different generations.     

Using student response systems in the accounting classroom: Strengths,strategies and limitations

A Student Response System (SRS), often referred to as a “clicker,” enables students to individually answer instructor questions on a real-time basis using individual mobile devices, and have the aggregate responses displayed as feedback to the class at the instructor’s discretion. A mobile device can be a proprietary, vendor-specific remote, or a multi-purpose item such as a smartphone or computer. While SRSs have been used in education for some time, we perceive the adoption rate in accounting classes as still being quite low. This paper is a “how to” and “why” guide for accounting faculty who are considering using SRSs, and for experienced users who seek to refine or expand their SRS use.     

Price discovery in currency markets

This paper examines the price discovery process in currency markets, basing its analysis on the pivotal distinction between the customer (end-user) market and the interdealer market. It first provides evidence that this price discovery process cannot be based on adverse selection between dealers and their customers, as postulated in standard models, because the spreads dealers quote to their customers are not positively related to a trade’s likely information content. The paper then highlights three factors familiar in the literature – fixed operating costs, market power, and strategic dealing – that may explain the cross-sectional variation in customers’ spreads. The paper finishes by proposing a price discovery process relevant to liquid two-tier markets and providing preliminary evidence that this process applies to currencies.     

Price setting in forward-looking customer markets

If consumers form habits in individual goods, firms face a time-inconsistency problem. Low prices in the future help attract customers in the present. Firms, therefore, have an incentive to promise low prices in the future, but price gouge when the future arrives. In this setting, firms benefit from “committing to a sticky price.” If consumers have incomplete information about costs and demand, the firm-preferred equilibrium has the firm price at or below a “price cap.” The model therefore provides an explanation for the simultaneous existence of a rigid regular price and frequent “sales”.     

Regulatory flexibility and management opportunism in the choice of alternative accounting standards: an illustration based on large French groups

Due to the flexibility of domestic accounting regulations, French groups are entitled to refer to international or American standards for their consolidation. The objective of this research paper is to focus on the choices made by the 100 largest French companies during the last 16 years (1985-2000). In practice, apart from the French rules, three “alternative” sets of standards are used: the International Accounting Standards (IAS), “international principles,” and the U.S. GAAP. The percentage of companies referring to alternative (i.e., non-French) standards rose in the first part of the period, then fell. Additionally, while the number of companies choosing U.S. GAAP increased over the period as a whole, the number preferring IAS or “international principles” has been in sharp decline since 1994-1995. Our results show that in this voluntary move towards international accounting harmonization, the choices made by French companies have clearly varied according to developments in French accounting regulations and the changing power balance between the International Accounting Standards Committee (IASC) and the SEC-FASB. This indicates a certain degree of opportunism by the management, who clearly keeps one eye constantly on the cost-benefit trade-off.     

Discourses surrounding the evolution of the IASB/FASB Conceptual Framework: What they reveal about the “living law” of accounting

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) recently published the final version of Chapter 1 of their joint Conceptual Framework for Financial Reporting (IASB/FASB, 2010). In this article, we focus on two of the key issues addressed in Chapter 1: stewardship and the definition of the primary user groups of financial statements. To address the discourses surrounding the evolution of Chapter 1, we introduce the concept of “living law” from sociological jurisprudence into accounting scholarship. We first trace the role of stewardship/accountability in the evolution—from antiquity to the present day—of the living law of accounting. We then explore the origin, nature, and implications—from a living law perspective—of the moral traditions associated with stewardship/accountability. Our analysis suggests that stewardship has been, and continues to be, embedded in the living law of accounting—notwithstanding the formal pronouncements of standard setters. We also examine the social accounting project from a living law perspective and we suggest that such an analysis provides new possibilities for addressing core social accounting concerns. We conclude by arguing that, particularly in light of the far reaching impact of the neoliberal agenda, there is an urgent need for scholars in both contemporary “social” and “mainstream” accounting to recognize and build upon their shared living law heritage rooted in the age-old traditions of stewardship/accountability.     

CONNECTING ACCOUNTING AND EDUCATION IN THE UK: DISCOURSES AND RATIONALITIES OF EDUCATION REFORM

In this paper we analyze the processes which have structured the emphasis upon budgeting and accounting in the Local Management of Schools initiative by outlining the inter-relations between the discourses of neo-liberal government and economics, and the apparent “need” for the expansion of accounting and budgeting systems in the public sector and particularly education in the UK during the past six years.At the heart of our analysis is the contention that accounting and budgeting systems have been promoted throughout the UK public sector by connections to a discourse of managerial enterprise and economic rationality. The intersections between accounting techniques, and economic and managerial notions of decision making, responsibility and market organization have provided the complex discursive formation within which the accounting and budgeting innovations introduced under LMS have been presented and represented as “necessary” elements of proper public sector organization. The colonization of accounting into the education sector has been made possible by a series of seemingly unquestioned linkages, associations and reductions, upon which we offer a commentary, between the discourse of economic rationality and the techniques of accounting.     

‘In the end, we have the Gatling gun, and they have not’: Future prospects of indigenous knowledges

Charles Taylor argues the superiority of Western technology demonstrates the epistemological superiority of Western science over indigenous knowledges. I argue Taylor's “might makes right” argument lacks deductive and inductive cogency, begs significant questions against indigenous knowledges, and confounds military subjugation with philosophical refutation. Polycentric global epistemology represents one possible future of indigenous knowledges. It consists of a variety of dialogues between mutual epistemological “others”. Participants ask, “how may this or that knowledge practice be brought into the service of human well-being?” It admits all varieties of knowledge practices ranging from rational argument and experimentation to dance, song, and ritual performance. It establishes a trading zone for mutual sharing, borrowing, and learning as well as collaborative projects.     

Online banking in India: An approach to establish CRM

Technology is fast altering the business servicescape. Its role in improving customer service levels is being used strategically and increasingly by service organizations. The service attributes and quality can be enhanced by deployment of technology. The Internet has facilitated convenience in customer interactions and transactions with the banks. Online banking is currently emerging as a new approach in India for providing improved accessibility and expediency to customers. Most banks have their own websites for improving the customer interface and offering online services. The article studies the applicability of online banking in India and its role in fostering relationships with customers and giving them more value. The research was conducted on customers familiar with online banking in India, and their perceptions about online banking were studied. The findings reveal that customers are using the services but are skeptical about the financial transactions and service quality dimensions.     

HISTORICAL ALLEGORIES: LET US HAVE DIVERSITY

This paper points out that differences between “old” and “new” accounting history are not resolvable at the level of evidence because history is a form of allegory–a “true” allegory. In addition, it cautions against an overly zealous evangelization of particular “new”/critical faiths and argues instead for a “celebration of difference” in the telling of historical stories.     

A history of Japanese accounting reforms as a microfoundation of the democratic socio-economy: Accountics Part II

Immediately after WWII, unlike statisticians’ reforms, accountants failed to establish the Cabinet-controlled Accounting Committee and Accounting Law which were originally envisaged as the key to successful “Accountics”: the management of the socio-economy through standardized accounting (Part I). Nevertheless, July 1948 is regarded as the beginning of Japan’s accounting revolution, as academic accountants accomplished a series of fundamental reforms. Part II examines the process through which micro financial systems were swiftly developed as a microfoundation of the new “democratic” socio-economy. First, academics implemented new accounting for large companies in order to dilute the Zaibatsu- and Imperial-centred regime; followed by censored and standardized accounting education for SMEs and the public in order to change the public perception of the roles of businesses in society. The foci of examination are the political manoeuvres of reformers, the consequences of new accounting, and pragmatic philosophy of the academics in action. Towards the end of the paper, some implications of this history are considered in relation to the impacts of the IAS/IFRS on today’s international socio-economy.     

Relate management accounting research to managerial work!

This article argues that management accounting research should be more aligned with managerial work. Managers work with words. This means that managerial conversation and the use of accounting information in such conversation should be studied. Methodology is developing rapidly in other areas of social science where a “linguistic turn” has made an impact. Managerial work, characterised by “brevity, variety, and fragmentation,” provides the context in which accounting information is used. Management is thus described as a co-operative game where communication is central to attention direction as well as problem solving. An illustration is given of the kind of studies deemed necessary for management accounting research to progress towards managerial relevance.     

Reining in auditors: On the dynamics of power surrounding an “innovation” in the regulatory space

In the aftermath of Enron and the collapse of Arthur Andersen, new “independent” institutions were created to oversee financial auditing. Based on a modified version of Lukes’ multidimensional model of power, we first investigate how the creation of the Canadian Public Accountability Board (CPAB) has affected the dynamics of power among the main players enlisted in Canada’s regulation of public accounting. Our findings strengthen the view that a “form of allegiance” was, at the time of data collection, developing between CPAB and the largest Canadian accounting firms. Through a second analytical movement, we extend the boundaries of our argument, showing that patterns of resistance against the logic of arm’s length regulation operate in a variety of audit regulatory sites. Our conclusion points, in particular, to the spatial gap - and incidentally the limitations - of any attempt to control and supervise a globalized industry from a national or regional perspective.     

“Holier-than-thou” perception bias among professional accountants: A cross-cultural study

Theoretical conceptions of culture in accounting research are controversial, ranging from highly deterministic, quantified and componential perspectives (such as Hosfstede's five dimensional model) to those that suggest continual changes in cultural values brought about by forces of acculturation. This paper makes a contribution to cross-cultural accounting research by examining the influence of competing theoretical perspectives of culture and acculturation on “holier-than-thou” perception bias. “Holier-than-thou” perception bias leads to individuals perceiving themselves as acting more ethically than comparable others when confronted with ethically uncertain work-related behaviours. This study contributes to cross-cultural accounting research by surveying Australian and Indian professional accountants from big four accounting firms. We firstly seek to establish the prevalence of “holier-than-thou” perception bias in both cultural settings. Secondly, we examine the differential and competing influences of culture and acculturation on perceptions of accountants from the two countries on measures of this bias. Data was collected through a survey questionnaire administered to samples of senior accountants from the big accounting firms in Australia and India. The questionnaire comprised an auditor-client conflict and two whistle-blowing scenarios and used two questions to measure the magnitude of the bias. The results show that “holier-than-thou” perception bias exists among accountants within each of the two countries. However, the magnitude of the bias was not significant between the countries. The results support the theory of acculturation in big accounting firms. Our findings have implications for accounting research where the presence of “holier-than-thou” perception bias needs to be considered in cases where respondents are questioned on socially sensitive issues. The findings may be useful to accounting researchers, managers of multinational enterprises in general, and big-four accounting firms in particular. Our conceptual framework applied in this study is innovative and provides a template for assessing current controversies in cross-cultural accounting research.