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