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to produce rich and deep understandings of how managers and employees in organizations understand, think about, interact with, and use management accounting and control systems. (Macintosh, 1994, p. 4) Preston (1995) described the social constructionist model of behaviour not as a rational process but a product of the ‘creative individual’. Individuals act towards things on the basis of the meaning that things have for them. Preston described the critical process that takes place between encountering a situation or event and interpreting it, in which the individual constructs a meaning of the situation or event and acts in accordance with that meaning. Meaning is not inherent, it is brought to the situation by the individual. These meanings are derived through social interaction, the ways in which people meet, talk, work and play together and in doing so construct and share meanings. These meanings are socially constructed, internalized and shared between individuals.
Preston (1995) added that the social constructionist perspective does not preclude the existence of organizational structures and processes, but suggests that these are symbolic representations of a particular view of organizational reality.
These meanings are also expressed symbolically through language. In this context accounting information is a symbolic representation of reality. Individual behaviour is guided by the meanings, values and beliefs that are constructed and shared by organizational members. These symbols are then subject to interpretation by individuals, who act towards them on the basis of the meaning they have for them. However, Preston recognized that these structures and processes may inﬂuence the development of an organizational culture – the shared values, beliefs and meanings that are collectively held by organizational participants.
ACCOUNTING FOR MANAGERS
Culture, control and accounting
Allaire and Firsirotu (1984) contrasted a sociostructural system based on formal structures, strategies, policies and management processes with a cultural system based on myths, ideology, values and artefacts and shaped by society, the history of the organization and the contingency factors affecting it. Sociostructural and cultural systems were in a complex relationship, with potential for stress when an organization is subject to sudden pressures for change.
The review of research on organizational culture undertaken by Smircich (1983) reﬂected a convergence of views around culture as ‘shared key values and beliefs’ (p. 345). These values and beliefs convey a sense of identity, generate commitment, enhance social system stability, and serve as a sense-making device to guide and shape behaviour. Smircich also identiﬁed the existence of multiple organization subcultures – a multiplicity of cultures within an organization, rather than one pervading culture.
Handy (1978) described four different organizational cultures: club, based on informal relationships; role, based on tightly deﬁned jobs; task, a focus on solving problems; and existential, an orientation to individual purpose. Deal and Kennedy (1982) also identiﬁed four types of cultures: tough guy/macho (individualists who take high risks); work hard/play hard (fun and action with low risk);
bet-your-company (big stakes decisions); and process (bureaucratic emphasis).
As we saw in Chapter 4, Ouchi (1979) identiﬁed three mechanisms for control: market (based on prices); bureaucracy (based on rules); and clan (based on tradition). Clan mechanisms are represented in professions, where different organizations have the same values. Ouchi used the example of a hospital, where a highly formalized and lengthy period of socialization leads to both skill and value training.
Schein (1988/1968) described the process that brings about change in the values and attitudes of different groups of people throughout their career as ‘organizational socialization’. It occurs whenever an individual enters an organization, changes departments or is promoted. Socialization determines employee loyalty, commitment, productivity and turnover. It is the process whereby a new member learns the values, norms and behaviour patterns – the ‘price of membership’ (p. 54). These norms, values and behaviours are learned from organizational publications, from training, line managers, peers and role models, and from the rewards and punishments that exist. Where the values of the immediate group that the individual joins are out of line with the value system of the organization as a whole, the individual learns the values of the immediate group more quickly than those of the organization. The essence of management, according to Schein, is that managers must understand organizations as social systems that socialize their members, and then gain control over those forces.
Accounting can be one such element of control. Scott (1998) described accounting systems as ‘one of the most important conventions connecting institutionally deﬁned belief systems with technical activities’ (p. 137). Scott argued that some organizations rely less on formal controls and more on developing a set of beliefs and norms to guide behaviour.
INTERPRETIVE AND CRITICAL PERSPECTIVES ON ACCOUNTING 61Langﬁeld-Smith (1995) contrasted culture as the setting for control; as a control mechanism itself; and as a ﬁlter for perceiving the environment. Langﬁeld-Smith described a model by Flamholtz, Das and Tsui in which culture facilitates control when the control system is consistent with the social norms of the organization, or inhibits control when it is at variance with those norms. As Ouchi (1977) showed, culture can lead to a ritual form of control where knowledge of the transformation process is imperfect and the ability to measure output is low.
Langﬁeld-Smith (1995) also described research by Birnberg and Snodgrass in which culture inﬂuences the effectiveness of a control system by inﬂuencing individual perceptions and value judgements about those perceptions.
Hofstede (1981) argued that control systems must be sensitive to organizational cultures and that those running counter to culture are unlikely to be successfully imposed. Markus and Pfeffer (1983) suggested that resistance to and failure of accounting control systems was common, arguing that control systems will be implemented when they are consistent with the dominant organizational culture and paradigm in their implications for values and beliefs.
The radical paradigm and critical accounting Radical approaches (Burrell and Morgan, 1979) emphasize broader structural issues such as the role of the state, distribution of the surplus of production and class difference (Hopper et al., 1987). Hopper and Powell (1985) claimed that the functional approach does not address issues of power and conﬂict and argued that interpretive approaches ‘indicate how accounting systems may promote change, albeit within a managerial conception of the term, rather than being stabilizers’ (p. 449).
Hopper et al. (2001) argued that under Thatcherism:
accounting data and the consulting arms of accounting ﬁrms had been central to economic and policy debates, involving privatization, industrial restructuring, reform of the public sector, and worries about de-industrialization...
it appeared apparent that accounting had to be studied in its broader social, political and institutional context. (p. 276) Those writers who sought a more radical interpretation than the interpretive one drew on the work of Marx. There are three groups within this perspective: political economy, labour process and critical theory (Roslender, 1995). All are concerned with promoting change in the status quo.
The political economy approach recognizes power and conﬂict in society and the effect that accounting has on the distribution of income, power and wealth. Labour process focuses on the corruption of human creativity in the pursuit of wealth, especially deskilling and management control as a reproducer of capitalism.
Labour process theorists argue that:
the driving force for social change in capitalist society is the development and displacement (i.e. of impediments to capital accumulation and their resolutions)... [that] are inherent in the structural instabilities that characterize
ACCOUNTING FOR MANAGERScapitalism’s unequal and antagonistic social relations. (Neimark and Tinker, 1986, p. 378) Neimark and Tinker emphasized the ‘on-going conﬂict among and between social classes over the disposition and division of the social surplus’ (p. 379) and how ‘[s]ocial and organizational control systems are not neutral mechanisms in these struggles but are attached to and legitimate concrete power interests’ (p. 380).
The third Marxist perspective, critical theory, emphasizes a critique of the status quo and emancipation towards a better life. Hopper and Powell (1985) argued that critical studies show how ‘accounting measures alienate through subordinating behaviour to perceived imperatives which are in fact socially created’ (p. 454).
Laughlin (1999) deﬁned critical accounting as providing:
a critical understanding of the role of accounting processes and practices and the accounting profession in the functioning of society and organizations with an intention to use that understanding to engage (where appropriate) in changing these processes, practices and the profession. (p. 73) An example of the application of critical theory is provided by Perrow (1991), who
If one raised proﬁts by externalizing many costs to the community, exploiting the workforce, evading government controls by corrupting ofﬁcials, manipulating stock values, and controlling the market by forming quasi-cartels or other predatory practices – all common practices in the nineteenth and twentieth century – then proﬁts will not reﬂect the efﬁcient use of labor, capital, and natural resources. (p. 746) Much of critical theory is concerned with opening up the discourse from a narrow economic-rational application of accounting to question its underlying assumptions and its (often dysfunctional) consequences. Discourse is a conversation, albeit an informed one, through which arguments and counter-arguments are considered. Accounting is implicated in discourse because in its written form, it presents ‘facts’ that contain implicit assumptions. An accounting discourse of proﬁt and return on investment is dominated by an economic-rational logic. Thus, accounting ‘serves to construct a particular ﬁeld of visibility’ (Miller and O’Leary, 1987, p. 239).
In promoting critical theory, Broadbent and Laughlin (1997) emphasized ‘a recognition of the choice between seeking to develop change through meaningful debate [rather than] through the application of power or coercion’ (p. 645).
Power and accounting
We have seen how control systems and management accounting in particular are aimed at inﬂuencing behaviour. This is inextricably bound up with consideration of power. Pfeffer (1992) deﬁned power as ‘the potential ability to inﬂuence behavior,
INTERPRETIVE AND CRITICAL PERSPECTIVES ON ACCOUNTING 63to change the course of events, to overcome resistance, and to get people to do things that they would not otherwise do’ (p. 30).
Morgan (1986) identiﬁed power as either a resource or a social relation, deﬁning it as ‘the medium through which conﬂicts of interest are ultimately resolved’ (p. 158). As a social relation, power is concerned with domination of one person (or group) over another. As a resource, power is concerned with the dependency of one party on particular allocations, and the control over the distribution of that resource by another party. By contrast, Giddens (1976) argued that power does not of itself imply conﬂict. Because power is linked to the pursuit of interest, it is only when interests do not coincide that power and conﬂict are related.
Power is implicit in organizational functioning and in the deﬁnition of what is
important. Child (1972) concluded:
When incorporating strategic choice in a theory of organization, one is recognizing the operation of an essentially political process in which constraints and opportunities are functions of the power exercised by decision-makers in the light of ideological values. (p. 16)
Cooper et al. (1981) saw accounting systems having:
[an] impact on sustaining and inﬂuencing an organization’s culture and language and in terms of their ideological and legitimizing inﬂuence in maintaining systems of power and control in organizations. (p. 175) Emmanuel et al. (1990) described control as taking two forms: control as domination of one person or group over others; and control as regulation where the controller detects a variation between actual and planned results and creates a stimulus for corrective action. While the latter is associated with the cybernetic system described in Chapter 4, control as domination is relevant to the interpretive and critical perspective.
Markus and Pfeffer (1983) argued that accounting and control systems are
related to intra-organizational power:
because they collect and manipulate information used in decision-making... [and] because they are used to change the performance of individuals and the outcomes of organizational processes. (pp. 206–7) Conclusion We will return to interpretive and critical perspectives throughout this book.
However, a major difﬁculty in adopting a non-rational paradigm is that organizational discourse suggests that the rational-economic paradigm of shareholder value is the only valid one, while individuals often act in the pursuit of power and self-interest.
Otley et al. (1995) suggested that while the deﬁnition of management control was ‘managerialist in focus... this should not preclude a critical stance and thus a broader choice of theoretical approaches’ (p. S42).