The validity of management accounting language games – A pragmatic constructive perspective

To support the development of a pragmatic practice-based theory for management accounting, practice theory offers valuable avenues for understanding the development, role, and effects of tools and techniques used by practitioners. Scholars have identified communication as a critical dimension for analysis, as discourse can govern the production of knowledge and power structures. However, previous research has mainly focused on the role of actors within static environments; how actors justify their actions and goals, compared with other actors; and how they are aligned with or justify new practices relative to existing practices. The pragmatic constructivist framework that underpins this special issue builds on this research but recognises that previous research has paid little attention to how people—when interacting within a dynamic environment—develop and create new types of constructive causality. Importantly, the necessary conditions for people's actions to construct what they intend to remain largely unexplored. Pragmatic constructivism is founded on the recognition that any theory of management accounting must include conceptual devices representing the notion of success, as well as techniques for evaluating the truth aptness of local practices of reality construction, such as those represented by managemen accounting. This special issue aims to theoretically and empirically explore the potential in management accounting for the measurement and governance of constructed causality. The central topic is the role of management accounting in supporting individual and collective actors to effectively construct causal chains that make organisations work. The three articles in this special issue adopt different approaches to combining the pragmatic constructivist framework with additional theoretical frameworks, as well as using different research methodologies. The papers' findings point to the importance of co-authorship in the creation of functioning organisational practices, and suggest that this might be threatened by information technology. Co-authorship involves language games in the form of dialogical interaction between the accountants and other involved actors. This process develops a shared understanding anchored in a fusion of conceptual models that is tied to individual collaborators' local practice.     

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.     

Framing financial responsibility: An analysis of the limitations of accounting

In organisations, accounting—understood broadly as calculative practices—is claimed to serve as a critical vehicle when introducing forms of individual financial responsibility. Whereas most prior accounting research has been preoccupied with asserting this claim, this paper opens an opportunity to examine the limitations of accounting as a technology of responsibilisation. It does so by moving the empirical focus beyond the borders of people's work settings and into the private sphere of everyday life, investigating governmental efforts to turn high school students into financially responsible citizens. The analysis, informed by framing theory, reveals that the efficiency of accounting is conditioned by people's calculative understanding. Hence, in situations where individuals are expected to lack this basic calculative competency, accounting is presumed to be inappropriate as a means of introducing financial responsibility. This has implications for re-considering how the relation between accounting and responsibility is constituted.     

The societal relevance of management accounting: An introduction to the special issue

This essay introduces the special issue of Accounting and Business Research exploring the societal relevance of management accounting and locates the individual contributions within this research agenda. In contrast to prevailing, managerialist conceptions of relevance, the discussion is guided by an over-riding ambition to turn management accounting research “inside out” to examine the effects of management accounting practices on a broader range of constituencies and interests in society and the formation of such practices beyond individual organisations. I start by charting the development of extant and emerging debates on the relevance of management accounting research and practice and then outline some pertinent research themes worthy of further exploration. In doing so, I pay particular attention to emerging research illustrating how management accounting becomes implicated in the external regulation and governance of organisations, the shaping of markets and the wider, societal consequences of such processes. I also discuss some theoretical and methodological implications of exploring such topics.     

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.     

MEETING THE CHALLENGE: ACCOUNTING FOR CHANGE

This paper examines the challenge mounted against long established management accounting practices by Kaplan (1983) and Johnson and Kaplan (1987) from a public sector perspective. It seeks to determine the extent to which this challenge to the private sector - of a lack of innovation in management accounting practice in the face of a rapidly changing environment - holds true for public sector organisations. Furthermore, by drawing on substantive studies of management change in both the private sector and the public sector, this paper assesses (a) the tsunsfeubilitv of ideas and practices from the private to the: public sector (b) the need to study process of change and (c) the potential role of strategic management accounting as an innovative practice in addressing the agenda for change which confronts the public sector.     

When global accounting standards meet the local context—Insights from an emerging economy

We investigate the translation and application of global accounting standards in a local context, with Romania as our country case study. Our theoretical framework is derived from institutional theory. We develop this by complementing isomorphism (DiMaggio and Powell, 1983) with an emphasis on the behavior of actors and with the different strategic responses that organizations enact as a result of the institutional pressures toward conformity, following Oliver (1991). We contend that local actors play a more important role in triggering organizational responses than is implied by Oliver's (1991) framework in the application of International Financial Reporting Standards (IFRS). This is because organizational responses to these global standards are conditioned by the interplay between actors, who are searching for legitimacy and the attainment of their own (mutually conflicting) interests.Contrary to earlier institutional propositions, we find that acquiescence strategies may occur even when there is a great degree of constituent multiplicity, and that avoidance may occur in entities with a smaller degree of multiplicity. We thus argue that countries are not homogeneous in terms of accounting practices. Finally we suggest that intra-organizational interests and actions are important for IFRS implementation, and future research should investigate this in depth.     

Understanding management accounting practices: A personal journey

This paper reviews the changes which have taken place in management accounting research over the last 35 years. It traces the author's personal journey as a management accounting researcher and emphasises the shift which has taken place in what it means to understand management accounting practices. It argues that to make sense of diversity in management accounting practices we need to understand the complex mish-mash of inter-related influences which shape practices in individual organisations. It outlines the contribution which institutional theories can make to understanding this mish-mash of complexity. In particular, it reviews the achievements of the Burns and Scapens framework (2000) for studying management accounting change and describes some of its limitations and extensions; viz., the interplay of internal and external institutions; the importance of trust in accountants; the impact of circuits of power; and the need to study the role of agency in institutional change. It concludes that research in recent years has provided a much clearer understanding of the processes which shape management accounting practices; but the challenge for the future is to use this theoretically informed understanding to provide relevant and useful insights for management accounting practitioners.     

Do firms’ earnings management practices affect their equity liquidity?

This study investigates the relationship between earnings management and equity liquidity, positing that as incentives arise for the manipulation of firm performance through earnings management (due partly to conflicts of interest between firm insiders and outsiders), greater earnings management may signal higher adverse selection costs. If earnings manipulation reveals aggressive accounting practices, liquidity providers tend to widen bid-ask spreads to protect themselves. The empirical results indicate that companies with higher earnings management suffer lower equity liquidity.     

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.     

Capital Allowances and the Incentive to Invest

In recent years many organisations have moved towards a total quality management (TQM) path in their quest for quality. Accounting researchers have become interested in understanding how accounting systems are implicated within a TQM environment. This paper reports on a case study of TQM adoption and changes in management accounting systems (MAS) within a New Zealand construction company. It evaluates organizational approaches to implement TQM as a strategic option and the subsequent change in MAS. The paper suggests that an organisation may initiate TQM practices to promote ‘institutional’ and ‘quality’ culture rather than for purely technical reasons. It also suggests that when an organisation adopts new management practices such as TQM, it may lead to changes in the organisation's internal control mechanisms, such as management accounting and reporting processes.     

Social and environmental accounting,organisational change and management accounting: A processual view

Consistent with calls for in-depth studies of social and environmental accounting and reporting (SEAR) intervention (Bebbington, 2007, Fraser, 2012, Contrafatto, 2012), our paper focuses on the interrelationship between organisational change and SEAR practices, as well as the involvement of management accounting in such organisational dynamics. Drawing insight from both Laughlin (1991) and Burns and Scapens’ (2000) theoretical frameworks, we explore the processes of change through which SEAR practices become elevated to strategising status, in the context of broader organisational and extra-organisational developments, but we also illuminate how institutionalised assumptions of profit-seeking limit the extent to which broader sustainability concerns become infused into day-to-day business practice. Our paper highlights the importance of management accounting in facilitating and shaping the cumulative path of SEAR practices (and sustainability more generally); however, we also heed caution against uncritical reliance upon conventional management accounting tools. The following paper extends our understanding of SEAR practices as cumulative process over time, an awareness of the potential limits to such developments in profit-seeking organisations, and stresses a need to be circumspect when involving management accounting.     

Adoption and Benefits of Management Accounting Systems: Evidence from Finland and Australia

This study provides empirical evidence on management accounting practices in Finnish manufacturing companies. It identifies the adoption of the management accounting practices, received benefits from the adoption and intentions to emphasize the practices in the future. The results indicate that financial measures like product profitability analysis and budgeting for controlling costs is likely to be important in the future, but it is also clear that greater emphasis will be placed on newer practices like customer satisfaction surveys and employee attitudes. The results of the management accounting practices are compared to the findings of a similar study based on Australian data.     

Culture and accounting in Indonesia: An empirical examination

This study examines the relationships among the cultural characteristics of Indonesian society, reporting practices of Indonesian firms, and accounting standards promulgated by the Association of Indonesian Accountants. It is argued that an empirical relation exists between the change in cultural values, as conceived by Hofstede's theory of the five dimensions of cultural values (power distance, uncertainty avoidance, individualism, masculinity, and time horizon and the change in accounting values as captures by Gray's four dimensions (professionalism, conservatism, secrecy, and uniformity). Using LISREL to evaluate data between 1981 and 1992, three of Hofstede's five cultural values (power distance, uncertainty avoidance, and individualism) have significant relationships with one or more accounting value. This limited confirmation of the culture-accounting relationships suggest that particular historical and economic configurations must be considered in longitudinal analysis. The conflicting influences of extensive government involvement in the economy and nascent market competition are a possible explanation of the Indonesian results.     

The role of performance measures and incentive systems in relation to the degree of JIT implementation

The shift to world-class manufacturing strategies has necessitated complementary changes in management accounting systems (MAS). Using survey data obtained from top manufacturing executives at 253 US firms, this study empirically examines the relationship between the level of just-in-time (JIT) practices implemented by US manufacturing firms and the performance measures and incentive systems that are incorporated in their MAS. The statistical tests provide empirical evidence that the use of non-traditional performance measures such as bottom-up measures, product quality, and vendor quality, as well as incentive systems of employee empowerment and compensation rewards for quality production are related to the degree of JIT practices implemented.     

Figuratively speaking: analogies in the accounting classroom

One of the foundational subjects comprising most Master of Business Administration (MBA) programs is an introductory accounting course, in which students are exposed to the study of financial and management accounting at a basic level. For many students accounting is arguably the most feared subject in the MBA program. Although some students embrace the challenge and opportunity to develop an appreciation of accounting, the part it plays in organisations, and its role in management decision-making, for others the prospect of entering the world of accounting is one fraught with apprehension. Frequently described as ‘the language of business’, for students with limited experience or prior instruction in accounting, engaging with this language is formidable, and the demystification of the accounting lexicon represents a major challenge to accounting educators. This paper advocates the use of analogies, metaphors, and similes in helping MBA students understand accounting principles and engage with the conceptual underpinnings of the discipline.     

Accounting,Remuneration and Employee Motivation in the New Organisation

The paper draws upon two detailed case studies of global manufacturing companies to examine the role of accounting in redesigned remuneration systems which are emerging as organisations delayer their structures, change their production methods and move to team-based systems of work and reward. In this way, changes in the content and application of accounting measures are framed within new approaches to rewarding and motivating employees that have been stimulated by efforts to develop alternative, ‘leaner’ manufacturing practices. The focus is principally upon the remuneration of shopfloor employees, but we also consider the implications of team-based reward systems for managerial staff. We argue that despite the recent complementing of financial with non-financial forms of reward (e.g. skill acquisition, improvements to health and safety), and an emphasis upon peer pressure from team members in addition to individual incentives as a source of motivation, the language and calculations of accounting remain central and pervasive in developing, justifying and mobilising support for the new reward system.     

MEASUREMENT AND HEALTH CARE MANAGEMENT

Over recent decades many health care organisations have 'modernised' their management accounting systems by using the balanced scorecard (BSC). However, public health care involves multi-dimensional goals and resolving conflicts of interest. The question is whether a management control system based on measurements is suitable in a health care context. Light can be shed on this question using a study of the application of a BSC over a ten-year period at Högland Hospital. The study shows that the BSC and measurements of output and behaviour became a way of approaching unanswered questions about processes and quality development. Medical professionals with management responsibility, in co-operation with medical professionals responsible for different specialities, determined measures and targets and the measurements were integrated into activity processes and affected activities.     

A process (re)turn?: Path dependencies,institutions and performance management in Swedish central government

Recent central government reforms have signalled a transition away from output-based governance and control to a more citizen-orientated and outcome-focused performance management ethos. Prior research suggests that this may give rise to institutional inconsistencies related to conflicting performance management logics. In this paper, we argue that rather than resulting in growing pre-occupation with outcomes and effectiveness, the emerging reform agenda may somewhat paradoxically reinforce managerial concerns with the operating processes underpinning public service delivery. Drawing on policy studies and management accounting research informed by new institutional sociology, we theorise these developments by invoking the notion of path dependency. We provide an empirical illustration based on field work in Swedish central government and adopt a multi-level approach in examining the evolution of performance management practices. While evidence of strongly constraining path dependencies is found at the overall policy level a case study in the Swedish Tax Agency shows that these may also embody an element of flexibility such that the meaning of inconsistent performance management logics is re-constructed over time. This illustrates how individual government agencies may link outcomes to operating process concerns and manage implementation problems related to conflicting and uncoordinated reform initiatives.