Risk management and calculative cultures

Enterprise risk management (ERM) has recently emerged as a widespread practice in financial institutions. It has been increasingly codified and encrypted into regulatory, corporate governance and organizational management blueprints. A burgeoning literature of regulatory and practitioner texts is indicative of the apparent diversity of ambitions, objectives and techniques that constitute the ERM agenda. Making sense of these developments is a challenge. This paper presents field-based evidence from two large banking organizations suggesting that systematic variations in ERM practices exist in the financial services industry. The cases illustrate four risk management ideal types and show how they form the ‘risk management mix’ in a given organization. Further, drawing on the literature of the roles and uses of management control systems (MCS), the paper explores how ERM achieved organizational significance in the studied settings. The findings are indicative of the current co-existence of alternative models of ERM. In particular, two types of ERM models are postulated: one driven by a strong shareholder value imperative (ERM by the numbers), the other corresponding to the demands of the risk-based internal control imperative (holistic ERM). This paper explains the differences in the two risk management mixes pointing towards alternative logics of calculation [Power, M.K., 2007. Organized Uncertainty—Designing a World of Risk Management. Oxford University Press, Oxford], which I conceptualise and describe as different calculative cultures. The study suggests that calculative cultures, which in these cases shaped managerial predilections towards ERM practices, are relevant, albeit so far neglected, constituents of the fit between MCS and organizational contexts.     

A practical guide to social networks

Saying that networks are important is stating the obvious. But harnessing the power of these seemingly invisible groups to achieve organizational goals is an elusive undertaking. Most efforts to promote collaboration are haphazard and built on the implicit philosophy that more connectivity is better. In truth, networks create relational demands that sap people's time and energy and can bog down entire organizations. It's crucial for executives to learn how to promote connectivity only where it benefits an organization or individual and to decrease unnecessary connections. In this article, the authors introduce three types of social networks, each of which delivers unique value. The customized response network excels at framing the ambiguous problems involved in innovation. Strategy consulting firms and new-product development groups rely on this format. By contrast, surgical teams and law firms rely mostly on the modular response network, which works best when components of the problem are known but the sequence of those components in the solution is unknown. And the routine response network is best suited for organizations like call centers, where the problems and solutions are fairly predictable but collaboration is still needed. Executives shouldn't simply hope that collaboration will spontaneously occur in the right places atthe right times in their organization. They need to develop a strategic, nuanced view of collaboration, and they must take steps to ensure that their companies support the types of social networks that best fit their goals. Drawing on examples from Novartis, the FAA, and Sallie Mae, the authors offer managers the tools they need to determine which network will deliver the best results for their organizations and which strategic investments will nurture the right degree of connectivity.     

Organizational and decision characteristics and personality as determinants of control actions: A laboratory experiment

This paper investigates how choice of control actions (or behaviours) is affected by the controller's personality and perceptions of organizational and decision characteristics. In a simulated work setting (n = 172) it was found that persons working in mechanistic organizations chose significantly different control tactics than those working in organic organizations. The present findings also suggest that controllers are more likely to choose extrinsically (rather than intrinsically) motivating controls when they are faced with important decision situations. The implications of the findings are discussed. Multivariate models of choice of control tactics in organizations are suggested as being more powerful.     

(Re)presenting ‘sustainable organizations’

This paper investigates how organizations represent themselves in relation to sustainable development in 365 publicly available corporate reports from 1992 to 2010. This period of reporting captures the emergence and development of corporate reporting on sustainable development within the context of the study, New Zealand. Laclau and Mouffe’s discourse theory is employed to frame the analysis and interpret the findings. In particular Laclau and Mouffe’s conceptualizations of discourse, identity and group formation, and their theorization of hegemony are drawn upon. The analysis uncovers a changing organizational identity over time. Three distinct identities which capture key organizational representations over time are highlighted: environmentally responsible and compliant organizations; leaders in sustainability; and strategically ‘good’ organizations. The paper demonstrates through an analysis of these evolving identities and their effects, how organizations have maintained a ‘right to speak’ within the sustainable development debate, despite the fundamental challenges and hegemonic threat that a broader reading of sustainable development might imply.     

Learning in Public Organizations in 2010

The theme of this article is the future of learning in public organizations. It outlines a way of thinking that might underpin learning, and argues that, by the year 2010, public organizations could develop a radical approach to organizational learning that would make the concept more meaningful in their everyday practice. This approach is based on various shifts in the ways in which management is thought about and enacted. These changes are a movement away from the idea of 'the public manager' to a more relational notion: 'management in public'. The author explains what 'management in public' means, and discusses how it can be put into practice in order to transform learning in public organizations.     

A comparative analysis of the evolution of a taxonomy for best practices: a case for ‘knowledge efficiency’

Taxonomies play an increasingly important role in knowledge management of business best practices, providing a basis by which to index, find and communicate knowledge. However, knowledge continues to evolve over time. As a result, taxonomies must also continue to evolve as organizations innovate and change. Reportedly, firms customize best‐practice taxonomies to meet their unique organization needs. Accordingly, we might expect organizations to generate dissimilar best‐practice taxonomies. However, taxonomies must also reflect the state of knowledge in the area being categorized, and thus are likely to be similar in many ways in different organizations. The purpose of this paper is to study how taxonomies change in different organizations and how they stay the same. In order to explain the parallels in organizational taxonomies, the notion of ‘knowledge artefact efficiency’ (or knowledge efficiency) is suggested to capture the concept that new knowledge is rapidly adopted by many organizations in their knowledge management systems. Copyright © 2009 John Wiley & Sons, Ltd.     

The new boundaries of the "boundaryless" company

In an economy founded on innovation and change, one of the premier challenges of management is to design more flexible organizations. For many executives, a single metaphor has come to embody this managerial challenge and to capture the kind of organization they want to create: the "corporation without boundaries." According to Larry Hirschhorn and Thomas Gilmore of the Wharton Center for Applied Research, managers are right to break down the boundaries that make organizations rigid and unresponsive. But they are wrong if they think that doing so eliminates the need for boundaries altogether. Once the traditional boundaries of hierarchy, function, and geography disappear, a new set of boundaries becomes important. These new boundaries are more psychological than organizational. They aren't drawn on a company's organizational chart but in the minds of its managers and employees. And instead of being reflected in a company's structure, they must be "enacted" over and over again in a manager's relationships with bosses, subordinates, and peers. In this article, Hirschhorn and Gilmore provide a guide to the boundaries that matter in the "boundaryless" company. They explain how these new boundaries are essential for both managers and employees in coping with the demands of flexible work. They describe the typical mistakes that managers make in their boundary relationships. And they show how executives can become effective boundary managers by paying attention to a source of data they have often overlooked in the past: their own gut feelings about work and the people with whom they do it.     

DOES ORGANIZATION MATTER? A STUDY OF PHYSICIANS' IDEAL ORGANIZATION

It is a known phenomenon that it is difficult to make organizational changes within professional organizations. One recurring observation and experience from health care studies is that it is difficult to discuss the last organizational change with professionals because the most recent change is always perceived as the worst. In order to avoid this routine response, the authors of this article asked 56 senior physicians from the Swedish health care sector what their ideal organization looks like. The authors note that there is a strong institutionalized idea among the physicians of how health care should be organized. The image is not particularly complicated: the organization should be based on the meeting between doctor and patient. One conclusion in the article is that professionals dislike change, but nevertheless, they still want it. Actual change is not the problem – only changes that are not in compliance with the professionals' opinions of organization and management.     

How to implement a new strategy without disrupting your organization

Throughout most of modern busi ness history, corporations have attempted to unlock value by matching their structures to their strategies: Centralization by function. Decentralization by product category or geographic region. Matrix organizations that attempt both at once. Virtual organizations. Networked organizations. Velcro organizations. But none of these approaches has worked very well. Restructuring churn is expensive, and new structures often create new organizational problems that are as troublesome as the ones they try to solve. It takes time for employees to adapt to them, they create legacy systems that refuse to die, and a great deal of tacit knowledge gets lost in the process. Given the costs and difficulties involved in finding structural ways to unlock value, it's fair to raise the question: Is structural change the right tool for the job? The answer is usually no, Kaplan and Norton contend. It's far less disruptive to choose an organizational design that works without major conflicts and then design a customized strategic system to align that structure to the strategy. A management system based on the balanced scorecard framework is the best way to align strategy and structure, the authors suggest. Managers can use the tools of the framework to drive their unit's performance: strategy maps to define and communicate the company's value proposition and the scorecard to implement and monitor the strategy. In this article, the originators of the balanced scorecard describe how two hugely different organizations--DuPont and the Royal Canadian Mounted Police-used corporate scorecards and strategy maps organized around strategic themes to realize the enormous value that their portfolios of assets, people, and skills represented. As a result, they did not have to endure a painful series of changes that simply replaced one rigid structure with another.     

In praise of hierarchy

Hierarchy has not had its day. After 3,000 years as the preferred structure for large organizations, managerial hierarchy is still the most natural and effective organizational form that a big company can employ. Now, as in the past, the key to organizational success is individual accountability, and hierarchy preserves unambiguous accountability for getting work done. Unfortunately, hierarchy is widely misunderstood and abused. Pay grades are confused with real layers of responsibility, for example, and incompetent bosses abound. As a result, many experts now urge us to adopt group-oriented or "flat" structures. But groups are never held accountable as groups for what they do or fail to do, and groups don't have careers. The proper use of hierarchy derives from the nature of work. As organizational tasks range from simple to very complex, there are sharp jumps in the level of difficulty and responsibility. Surprisingly, people in hundreds of companies in dozens of countries agree on where these jumps take place. They are tied to an objective measure-the time span of the longest task or program assigned to each managerial role-and they occur at 3 months, 1 year, 2 years, 5 years, 10 years, and 20 years. As the time span increases, so does the level of experience, knowledge, and mental stamina required to do the work. This increasing level of mental capacity lets companies put people in jobs they can do, it allows managers to add value to the work of their subordinates, it creates hierarchical layers acceptable to everyone in the organization, and it allows employees to be evaluated by people they accept as organizational superiors. Best of all, understanding hierarchy allows organizations to set up hierarchies with no more than seven layers-often fewer-and to know what the structure is good for and how it ought to perform.     

Analysing the Institutional Logic of Late DRG Adopters

Abstract: This study investigates how institutional logics that are prevalent in an organizational field influence change in management accounting. More precisely, we examine the institutional logics of late DRG adopters through which organizations attempt to address the pressures imposed by the institutional field of health care. Specific attention is also paid to the way in which organizations operate at different institutional levels and what kinds of interrelationships exist between these levels. Such developments may at least partially explain why the implementation and adoption of DRG–based accounting systems in Finnish health care took almost twenty years.     

Assessing corporate social performance: Strategies of legitimation and conflicting ideologies

Our study started with an action research project carried out within an organization specialized in the assessment of corporate social performance (CSP), in a French context: we were asked to achieve a critical analysis of the rating grid used by this organization for the domain of corporate governance. Assessing CSP has become in France an issue around which an organizational field has emerged in the mid 90s. The quest for legitimacy appears as a powerful driver for all the organizations in this field, but the strategies that social analysis and rating organizations deploy to achieve this aim differ significantly. Using a Weberian methodology, we have identified two ideal types of strategy: conservative (perpetuating the societal status quo) and activist (trying to impel change). We argue that these differences in strategies reflect ideological oppositions. Here also we have typified two opposite ideologies: utilitarian and non-utilitarian. Conservative strategies appear to be embedded in a utilitarian ideology; in the short term, they may seem more successful than activist strategies, but in the long term, their future appears more uncertain.     

The ten deadly mistakes of wanna-dots

Increasingly, it seems, there are just two types of companies left in the world: dot-coms, born on the Internet, and "wanna-dots," established organizations that are seeking to incorporate the Internet into their businesses. Some wanna-dots manage the deep mind-shift required to cross the digital divide. These are the pacesetters--the first movers and fast followers that exhibit organizational curiosity and the desire to innovate. But most wanna-dots are laggards; they don't rise to the challenge with the same resolve. In a global research effort involving more than 800 companies, the author uncovered so many wanna-dots making the same kinds of mistakes that it almost seemed they were following a How Not to Change guide. In this article, Kanter creates just such a guide, offering ten pieces of antiadvice that expose the tendency of wanna-dots to make only cosmetic changes when deep transformation is required. Beyond delineating what not to do, Kanter serves up two examples of wanna-dots that got it right. First, Williams-Sonoma, which successfully made up for a slow start to create a strong Web presence. Second, Honeywell, a pacesetter led by e-believers from the start, which still found the road to the Web a challenging one. For companies not born digital, the fundamental problem is change. And the real place to look for change is not on the Internet but inside your company--at your own organizational culture and your attitude toward change.     

Environmental accounting as workplace activism

Drawing on a case study of a Canadian City Council, the paper argues for the utility of a ‘social movements in organizations’ perspective [Zald MN, Berger MA. Social movements in organizations: coup d’etat, insurgency, and mass movements. American Journal of Sociology 1978;83(4):823–61; Zald MN, Morrill C, Roa H. The impact of social movements on organizations: environment and responses. In: Davis GF, McAdam D, Scott WR, Zald MN, editors. Social movements and organization theory. Cambridge University Press; 2005. p. 253–79] in environmental accounting research. It demonstrates how environmental accounting is used by employees to build an organizational response to environmental issues, and argues that beyond conventional legitimacy or organizational change perspectives, there is a further analytical possibility: environmental accounting as ‘workplace activism’ [Creed D, Scully M. Songs of ourselves: employees’ deployment of social identity in workplace encounters. Journal of Management Inquiry 2000;9(4):391–412]. The findings raise questions about how we evaluate environmental accounting interventions, and about a role for research in helping environmental movement adherents on the inside of organizations to stay engaged and avoid premature capture.     

Cooperative Knowledge Processing: The Key Technology for Future Organizations

Drawing from the challenges organizations are faced with today, there is a growing understanding that future market success and long-term survival of enterprises will increasingly be related to the effectiveness of information technology utilization. This, however, requires us to intertwine much more seriously organizational theory and research in information processing than previously. In this paper we approached this aim from the perspective of radically decentralized, computerized enterprises. We further assume that organizations are increasingly process-oriented, rather than applying to structuring organizations based on task decomposition and assignment. This scenario reveals that, due to the inherent autonomy of organizational units, the coordination of decentralized organizational activities (workflows, processes) necessitates a cooperative style of problem solving. On this basis, the paper introduces the research area of cooperative knowledge processing, with a particular focus on multi-agent decision support systems and human-computer cooperative work. Finally, several important organizational applications of cooperative knowledge processing are presented that demonstrate how future enterprises can take great advantage from these new technologies.     

Inherent risk assessment and audit firm technology: A contrast in world theories

Breaking from traditional thought, it has been increasingly argued that the observers of organizational action and the organizations that they observed are inextricably linked rather than independent of one another. Following this position, the world theories adopted and related root metaphors employed by these observers serve as an image of the structural relations that underlie human activities and are thus a mediating factor between the observer and the observed. It is positioned that world theories are not only reflective of reality, but also constitutive of it. This article considers the role of the mechanistics and organic world theories, along with their corresponding root metaphors and language, in shaping the independent audit with reference to a five-phase field study of how auditors assess inherent risk. Implications for research are considered.     

Virtuous capital: what foundations can learn from venture capitalists

U.S. foundations and nonprofits work diligently on behalf of society's most needy and yet report that progress is slow and social problems persist. How can they learn to be more effective with their limited resources? Foundations should consider expanding their mission from investing only in program innovation to investing in the organizational needs of nonprofit organizations as well. Their overemphasis on program design has meant deteriorating organizational capacity at many nonprofits. If foundations are to help nonprofits be assured of making payroll, paying the rent, or buying a much-needed computer, they must develop hands-on partnering skills. Venture capital firms offer a helpful benchmark. In addition to putting up capital, they closely monitor the companies in which they have invested, provide management support and stay involved long enough to see the company become strong. If foundation officers familiarize themselves with such practices, they can begin to build organizational capacity in the nonprofit sector. Foundations can hire organizational experts to assist grantees; they can lengthen grant terms to allow nonprofits to build up organization strengths; and they can create new classes of grants that allow for organizational effectiveness. Nonprofits in turn should articulate their organizational needs when applying for grants; they should apply to foundations known for longer-term grants; and they should create plans that justify long-term support from foundations.     

The use of performance measurement systems in the public sector: Effects on performance

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.     

Discourse and institutional change: ‘Giving accounts’ and accountability

This paper examines the impact of the implementation of Local Management of Schools (LMS) in the UK on the discursive practices that help construct institutions of ‘accountability’ in a particular organizational field. The paper examines the institutionalization of accountability processes by analyzing discourses on accountability in the education field. It explores the extent to which the focus on financial discourses of accountability introduced by state legislation, and underpinned by the promotion of the market ethos, mediates the enactment of non-financial understandings and beliefs about the institutionalized accountability of schools and their staff. We focus upon two discourses of accountability: those introduced by organizations requirements under recent legislation to legitimate themselves within their field (regulatory institutions of accountability) and how organizational actors legitimate themselves with each other in the enactment of their everyday activities (‘folk’, or old, institutions of accountability). The paper argues that, in their strategic response to regulatory institutions of accountability, school staff struggled to disentangle the ‘rational’ or ‘legitimate’ notions of their accountability from the folk, tacit or private institutional norms to which they have held themselves accountable in the past. Although different informants have tended to emphasize different dimensions of accountability, discourses of financial accountability were the key rationale for the explanations of conduct, even when informants were discussing seemingly non-financial or ‘folk-based’ institutions of accountability.     

Disruptive change. When trying harder is part of the problem

When a company faces a major disruption in its markets, managers' perceptions of the disruption influence how they respond to it. If, for instance, they view the disruption as a threat to their core business, managers tend to overreact, committing too many resources too quickly. But if they see it as an opportunity, they're likely to commit insufficient resources to its development. Clark Gilbert and Joseph Bower explain why thinking in such stark terms--threat or opportunity--is dangerous. It's possible, they argue, to arrive at an organizational framing that makes good use of the adrenaline a threat creates as well as of the creativity an opportunity affords. The authors claim that the most successful companies frame the challenge differently at different times: When resources are being allocated, managers see the disruptive innovation as a threat. But when the hard strategic work of discovering and responding to new markets begins, the disruptive innovation is treated as an opportunity. The ability to reframe the disruptive technology as circumstances evolve is not an easy skill to master, the authors admit. In fact, it might not be possible without adjusting the organizational structure and the processes governing new business funding. Successful companies, the authors have determined, tend to do certain things: They establish a new venture separate from the core business; they fund the venture in stages as markets emerge; they don't rely on employees from the core organization to staff the new business; and they appoint an active integrator to manage the tensions between the two organizations, to name a few. This article will help executives frame innovations in more balanced ways--allowing them to recognize threats but also to seize opportunities.