Accounting, hybrids and the management of risk

This essay addresses the implications of accounting and hybrids for the management of risk. We argue firstly and most generally for a definition of hybrids that extends beyond organisational forms. The existing literature, we suggest, has been too focused on organisational forms, and has largely neglected the hybrid practices, processes and expertises that make possible lateral information flows and coordination across the boundaries of organisations, firms, and groups of experts or professionals. Secondly, we argue that the management of organisations is rapidly being transformed into and formalised around the management of risk, while much of the management of uncertainty occurs through a variety of hybrids that reside beyond the formalised practices of risk management. Thirdly, we argue that accounting practices are central to these issues, in so far as accounting is constantly engaged in a dual hybridisation process, seeking to make visible and calculable the hybrids that it encounters, while at the same time hybridising itself through encounters with a range of other disciplines. We address these issues in three main stages. The first section considers the ‘discovery’ of hybrid organisational forms by researchers on management and organisations over the course of more than two decades. The second section examines the ways in which economists, lawyers and other social scientists have considered the issue of hybrids. Here, the preoccupation with hybrid organisational forms largely continues, with its attendant neglect of hybrid practices, processes and expertises. The third section considers the discovery of a wider range of hybrids by researchers in accounting, and examines two specific arenas in which the hybridising of accounting expertise has been central: the microprocessor industry, and the various encounters between medical and financial expertise in the context of the ‘New Public Management’ reforms. The essay concludes with a discussion of the implications of this broader definition of hybrids for accounting and the management of risk.     

Walking the talk? Supply chain accounting and trust among UK supermarkets and suppliers

This paper examines the way in which calculative practices are implicated in the constitution of trust in the UK retail sector. In the sector, where trust receives much attention in declarations of intent, the notion of category management – a framework for orchestrating collaborative buyer–supplier relations based on dualistic modes of information exchange – has become widely adopted. Drawing on Giddens’ conceptualization of trust in abstract systems, it is argued that regimes of calculative practices embedded in the category management framework played an integral role in constituting system trust in category management and enabled its rapid diffusion across the sector. However, modes of supply chain accounting can also be deployed as a mechanism to further particular interests behind a veil of talk about trust. This paper presents a longitudinal field study where management accounting practices pursued under the banner of category management operated to dissemble a variety of self-interested actions and trust was deployed largely as a discursive resource which ultimately resulted in distrust and cynicism. This paper presents a framework for conceptualizing the relationship between accounting and inter-organizational trust and provides insights into the way that accounting techniques such as open booking accounting and joint performance management introduced amid ‘trust talk’ can act to undermine trust in buyer–supplier relations.     

The role of organisational concern for workplace fairness in the choice of a performance measurement system

Prior studies linking performance management systems (PMS) and organisational justice have examined how PMS influence procedural fairness. Our investigation differs from these studies. First, it examines fairness as an antecedent (instead of as a consequence) of the choice of PMS. Second, instead of conceptualising organisational fairness as procedural fairness, it relies on the impression management interpretation of organisational fairness. Hence, the study investigates how the need of senior managers to cultivate an impression of being fair is related to the choice of PMS systems and employee outcomes. Based on a sample of 276 employees, the results indicate that the need of senior management to cultivate an impression of being fair is associated with employee performance. They also indicate that a substantial component of these effects is indirect through the choice of comprehensive performance measures (CPM) and employee job satisfaction. These findings highlight the importance of organisational concern for workplace fairness as an antecedent of choice of CPM. From a theoretical perspective, the adoption of the impression management interpretation of organisational fairness contributes by providing new insights into the relationship between fairness and choice of PMS from a perspective that is different from those used in prior management accounting research.     

Accounting for time: managing time in project-based teamworking

In this paper, we investigate time management in project based teamworking, a form of work that is seen as becoming a significant feature in many organisations, and consider its implications for accounting control. The analysis is based on a perspective on time in organisations which, drawing on time-geography, considers the management of time in project-based teamworking organisations as part of the organisational actors' ongoing active production and reproduction of their social context. We grounded this perspective in a longitudinal ethnographic study of project-based teamworking, which examined the development process of computer-based management information systems for top executives in a large multinational company. The extended time-geography perspective presented in this paper offers a theoretical framework within which various organisational practices may be explained and provides a better understanding of the social dynamics of time management than is provided by traditional accounting approaches. The implications of this perspective for the use of accounting practices in the management of time in project-based teamworking are discussed.     

Creating dynamic tensions through a balanced use of management control systems

This paper explores how organisations balance controlling and enabling uses of management control systems (MCS), and how this balance facilitates the creation of dynamic tensions and unique organisational capabilities. By employing Simons’ (1995) levers of control framework in a case study setting, the paper investigates the challenges faced by senior managers when they use MCS simultaneously to direct and empower. The findings indicate a number of factors – internal consistency, logical progression, historical tendency, dominance, and suppression – that impact the capacity of organisations to balance different uses of MCS. The interactive lever of control also plays a significant role in achieving and sustaining a balance between controlling and enabling uses of MCS, and its impact on the other levers is seen to constitute a unique organisational capability in its own right. The findings from this study offer an elaboration of how dynamic tensions are created through managers’ attempts to balance controlling and enabling uses of MCS.     

The Deepwater Horizon explosion: non-technical skills,safety culture,and system complexity

The explosion and destruction of the Deepwater Horizon (DH) was a watershed moment for safety management in the US oil and gas industry. The 2011 National Oil Spill Commission investigation identified a range of operational behaviours and underlying safety management problems that were causal to the mishap. Yet, to date these have not been systematically considered within a human factors framework. To achieve this, we draw upon two applied psychology domains that are highly influential within safety research. First, we apply non-technical skills (NTS) (social and cognitive skills that underpin safe performance in complex work environments) theorem to understand operational activities in the lead-up and occurrence of the well blowout. NTS research is used to develop interventions for training and observing safety behaviours (e.g. decision-making, teamwork). Second, we apply safety culture theory to understand how the organisational and industry environment shaped the management of risk. Safety culture research is used to understand and change the socio-technical constraints and enablers of safety activity in high-risk workplaces. Finally, to integrate these perspectives, we take a systems-thinking perspective to understand the mishap. A common critique of accident narratives is their failure to systematically consider how the components of an incident interact together to escalate risk. From a systems-thinking perspective, understanding the interactions leading to the DH mishap is crucial for ensuring interventions are effective in preventing future mishaps. We develop an accident model that captures the various interactions and system factors leading to the blowout.     

Failures to enact the future—A social practice perspective

To be successful, organisational foresight requires a multitude of perspectives and faculties. We have adopted a social practice perspective, which we base within an interpretative world view, to better understand how organisational foresight is enacted. This offers a reading of the phenomena, of which the essential contribution is that organisational foresight is more than an organisational property; it is something that reflective people do as they engage with various inputs from the outside and as a result of the continuous interaction between activity systems and their constituting elements. A longitudinal case study illustrates the importance of understanding the construction of collective and individual meaning in working with organisational foresight. The study shows how the inherent rigidity of the existing activity system and the weak ties between these diverse subsets of the organisation may block the interaction between emerging social practices and organisational intentions resulting in ongoing failures of understanding and enactment. A model is developed to include these parameters in an augmented activity systems model. Based on this we have identified the linking of organisational levels as one of the key dimensions to be considered for which the social practice perspective holds significant explanatory strength.     

The usefulness of inaccurate models: Towards an understanding of the emergence of financial risk management

Is the growth of modern financial risk management a result of the accuracy and reliability of risk models? This paper argues that the remarkable success of today’s financial risk management methods should be attributed primarily to their communicative and organizational usefulness and less to the accuracy of the results they produced. This paper traces the intertwined historical paths of financial risk management and financial derivatives markets. Spanning from the late 1960s to the early 1990s, the paper analyses the social, political and organizational factors that underpinned the exponential success of one of today’s leading risk management methodologies, the applications based on the Black–Scholes–Merton options pricing model. Using primary documents and interviews, the paper shows how financial risk management became part of central market practices and gained reputation among the different organisational market participants (trading firms, the options clearinghouse and the securities regulator). Ultimately, the events in the aftermath of the market crash of October 1987 showed that the practical usefulness of financial risk management methods overshadowed the fact that when financial risk management was critically needed the risk model was inaccurate.     

Management Controls in Public–Private Partnerships: An Analytical Framework

Drawing on transaction cost economics and organisational theory, this paper proposes a framework to analyse management controls in Public–Private Partnerships (PPPs). The paper contributes to the related literature at a conceptual level by showing how three control archetypes, namely market, bureaucratic and clan, in conjunction with two control strategies, namely performance evaluation and trust‐based strategies, could be used by public partners to minimise relational and performance risk, thereby achieving value for money. Practitioners could also use the linkages identified in this paper to develop management control systems for PPPs.     

ORGANISATIONAL CONTROL, DIFFERING PERSPECTIVES: THE MANAGEMENT OF UNIVERSITTES

Designing an accounting and information system (ACS) for a university is difficult, and whilst there is substantial evidence that formal systems can have dysfunctional effects, it is necessary to precede any design or critique of an ACS by clarifying the underlying managerial perspective that is being applied to the organisation. In this paper a number of managerial perspectives are developed and illustrated in relation to the management of universities. The approach is also contrasted with the management of health authorities. It is demonstrated that some authors provide a critique of the Jarratt proposals without illustrating the managerial perspective from which this is being done, and that whilst their organisational analysis may be insightful it does not add to the debate on how to manage universities or health authorities.     

Humpty Dumpty's guide to tax law: Rules,principles and certainty in taxation

Tax systems are, most commonly, rules-based. This gives the impression of techno-rationality in the interpretation of the numbers from which tax bills are derived. In fact, uncertainty and complexity in tax rules are seen as promoting tax avoidance behaviour, as avoiders exploit this complexity. Some authors have advocated that this can be combated by replacing rules-based tax legislation with principles-based legislation, giving tax authorities and the courts the power to interpret legislation purposively.This paper demonstrates by reference to a number of UK tax cases that rules-based legislation already embodies the hidden operation of state power as judges have considerable discretion in the interpretation of rules. The paper goes on to argue that principles-based legislation would further empower the state vis-à-vis the citizen. While this might be intuitively appealing to the vast majority of taxpayers not engaged in tax avoidance, it brings with it the hidden danger of a fundamental alteration of the balance of power between the state and all citizens, and should therefore be treated with caution.     

The risk organisation: or how organisations reconcile themselves to failure

Over the last decade, the ideas, concepts and tools of risk management have colonised the way that organisations frame potential adverse outcomes associated with their activities. Intended as a means of optimising the tolerance, rather than elimination, of adverse organisational outcomes, risk management has been promoted as a means of challenging organisational practice, particularly in the context of heightened accountability pressures that can readily make organisations risk averse. Relatively little attention, however, has been paid to the extent to which risk ideas are able to challenge traditional organisational ways of understanding and responding to adverse outcomes. In this article, therefore, we examine the implementation of risk management practices in two contrasting organisational contexts; the UK Department for the Environment, Farming and Rural Affairs (Defra) and the English university sector. Our studies suggest that risk management processes can be readily filtered and reinterpreted through a series of ideological, methodological and organisational mechanisms to reflect and reinforce organisational understandings and practices. We build on this analysis to point to what might tentatively be termed ‘Risk Organizations’, which are distinctive, at least in principle, by the way in which they seek to identify, but also come to terms with, failure. As such, rather than providing a means of organisational challenge, the systematic application of risk management practices tends to act as a conservative force of organisational continuity.     

Is accounting for sustainability actually accounting for sustainability…and how would we know? An exploration of narratives of organisations and the planet

The emergence of sustainable development as the complex notion through which social and environmental issues must be addressed – whether at policy, personal or organisational levels – has had a growing influence in the accounting literature. In addition to explorations of what sustainability may mean for accounting and finance, we have experienced a growth in both critiques of sustainability reporting (sic) and in experiments and speculations on how accounting for sustainability might advance. This growth – as with social and environmental accounting before it – has very properly attracted critique. One convergent theme in that critique has been a challenge that much of the realist and procedural baggage associated with conventional accounting is no longer apposite when seeking to account for sustainability. What may be required, is a more nuanced understanding of what ‘sustainability’ actually is and how, if at all, it can have any empirical meaning at the level of the organisation. This essay seeks to initiate an auto-critique of accounting for sustainability via an examination of meanings and contradictions in sustainable development which, in turn, leads towards a suggestion for the development of multiple and conditional narratives that whilst no longer realist or totalising, explicitly challenge the hegemonic claims of business movements in the arena of sustainability and sustainable development.     

The paradoxes of risk management in the banking sector

This paper uses empirical evidence to examine the operational dynamics and paradoxical nature of risk management systems in the banking sector. It demonstrates how a core paradox of market versus regulatory demands and an accompanying variety of performance, learning and belonging paradoxes underlie evident tensions in the interaction between front and back office staff in banks. Organisational responses to such paradoxes are found to range from passive to proactive, reflecting differing organisational, departmental and individual risk culture(s), and performance management systems. Nonetheless, a common feature of regulatory initiatives designed to secure a more structurally independent risk management function is that they have failed to rectify a critical imbalance of power - with the back office control functions continuing to be dominated by front office trading and investment functions. Ultimately, viewing the 'core' of risk management systems as a series of connected paradoxes rather than a set of assured, robust practices, requires a fundamental switch in emphasis away from a normative, standards-based approach to risk management to one which gives greater recognition to its behavioural dimensions.     

Organisational control as cultural practice—A shop floor ethnography of a Sheffield steel mill

Field studies of management control and accounting have tended to study organisational meaning through practices. We identify three strands of practice research on organisational control (viz., governmentality, actor network theory, and accountability) and propose a forth: cultural practice. The study of control as cultural practice is grounded in observation because it conceives of cultural knowledge as practical and largely extra-linguistic. It conceptualises organisational control as an effect of the actions and ideas of organisational members beyond the ranks of management, thus widening the field of empirical inquiry. It also makes studies of steady state organisations more attractive thereby opening the possibility that the assemblages of people, purposes, and technologies, which give rise to specific forms of organisational control, may be understood as less ephemeral than, particularly, studies of governmentality and actor network theory have suggested. Our ethnography of a steel mill in Sheffield is based on 11 months of participant observation on the shop floors of the hot and cold departments. We argue that the subcultures of different shop floors were constituted in practices of control which enabled organisational members to pursue diverse objectives that were related to their various wider cultural aspirations. Organisational control practices relied on diverse accountings and accounts of organisational actions and purposes. Whilst we found considerable diversity between subcultures, we also found that individual subcultures, and the tensions and contradictions within them, exhibited much continuity. The ability of studies of organisational subcultures to bring out the diversity as well as continuity of practices holds considerable potential for our understanding of organisational control.     

The use of management control mechanisms by public organizations with a network coordination role: A case study in the port industry

Our paper addresses two gaps in the literature on management control mechanisms in the context of inter-organizational relationships. Firstly, several studies have focused on one-to-one relationships, but few take a network perspective which analyses the deployment of management control mechanisms in the context of networks involving multiple interactions between organizations. Secondly, even fewer studies have specifically tackled the use of these mechanisms in the context of mixed-type networks, where a public organization acts as the network coordinator responsible for key governance activities. This is the position in Ports, which are collectives of several related organizations and in which one organization – the “port authority” – assumes the role of network coordinator. In this paper we report the results of a case study, the aims of which were: to identify the management control mechanisms deployed, or relied upon, by the Portuguese Port Authority in the Port of Aveiro in the exercise of its coordinating role; and to discern – on the basis of theoretical reasoning and empirical evidence – the factors explaining the nature and use of these mechanisms.Several conclusions emerged from the study. A general conclusion was that our prior literature-based theorization is generally consistent with the case observations. That is, in mixed-type networks, the nature and use of management control mechanisms by the public organization acting as a network coordinator seems to be shaped by its assessment of motivations to cooperate and of the contribution to network performance of the various organizations involved in the network. Other more specific conclusions are encapsulated in a “coordination framework”, which relates those assessments to specific features of the management control mechanisms. Crucially, our results provide insights into the roles of public organizations acting as network coordinators in the context of mixed-type networks, and, in general, on the nature of the numerous such public organizations in today's economy and society.     

Divestment and the Control of Divisionalised Firms

Increasing attention has recently been devoted in the accounting literature to the control of divisionalised firms. The general thrust of this literature is to take a uni-directional view of the development of organisations, so that adequate control requires finding an optimal divisionalisation of existing activities.

This paper shows that this approach misses an important managerial decision variable. Hence, rather than striving to develop increasingly complex systems, a solution to the control problem may be aided by the divestment of ill-fitting activities. The paper analyses the conditions where divestment may be an appropriate course of action for organisational management.     

Management accounting as practice

In this paper we outline a distinctive practice theory approach to considering the role of management accounting in the constitution of organizations. Building on [Schatzki, T.R. (2002). The site of the social: a philosophical account of the constitution of social life and change. University Park, PA: Pennsylvania State University Press] notion of arrays of activity we emphasise the ways in which organisational members actively reconstitute their management control systems by drawing on them as a shared resource. By tracing the skilful practices through which social actors in a restaurant chain understand and mobilise accounting to contribute in specific ways to what they regard as the objectives of their organisational units, we develop a notion of situated functionality. Situating the interrelationships between technical and interpretive accounting processes in the wider field of organisational practices we elaborate the ways in which management control systems as structures of intentionality both shape and are shaped by shared norms and understandings.     

Organisational change, outsourcing and the impact on management accounting

New empirical evidence is presented on organisational change, outsourcing and the impact on management accounting in three types of organisations: private sector companies, the National Health Service and Local Authorities. Spearman rank correlations are used to examine three propositions: that (i) change in organisational form exists and may be related to an increased use of outsourcing or subcontracting; (ii) outsourcing is expected to improve organisational flexibility and/or the service of an activity, to lead to cost savings, or to allow the organisation to focus more clearly on its core business; and (iii) outsourcing promotes change in management accounting. Statistical support is found for each of our three propositions. This is further supported by reference to three illustrative case studies. Overall, we conclude that organisational change, as effected by the use of outsourcing, is related to specific changes in the organisations' management accounting systems.     

The Implementation and Adaptation of the Balanced Scorecard in a Government Agency

Despite considerable progress in understanding the adoption and practice of the Balanced Scorecard (BSC) as a performance management tool in government organisations, how a well‐designed BSC can become a sustainable organisational practice remains under explored and of central importance. Through a qualitative field study carried out within a government agency (Alpha), this paper demonstrates that Alpha's senior management implemented a BSC framework because they believed it would benefit the agency to realise its broader organisational and socio‐economic goals, namely sustainable organisational efficiency and social status. We conclude that an organisation's performance management systems can travel across internal organisational boundaries over time and could be assimilated by organisational actors to become a sustained internal control mechanism in a complex socio‐political setting.