Margaret A. Abernethy

The role of budgets in organizations facing strategic change: an exploratory study

Abstract Recent attention in the general management literature has focused on mechanisms and processes used by organizations to respond and adapt to changes in their operating environment. There is, however, very little broad-based empirical research examining the role that management accounting control systems can play in shaping organizational change. Much of the empirical research to date has focused on the role of accounting as a diagnostic tool for assessing and rewarding managerial performance despite the recognition that accounting can serve as a dialogue, learning and idea creation machine ( Burchell et al., 1980 . Accounting Organisations and Society 5,5–27). The purpose of this study is to explore how accounting can serve this alternative role. We use (Simons, R. 1990.) Accounting Organisations and Society 15, 127–143). interactive/diagnostic classification of management control systems to capture how accounting can be used as a learning machine in the formulation and implementation of strategic change. A theoretical model is developed to examine the relationship between strategic change, style of budget use and performance. It is argued that an interactive style of budget use can mitigate the disruptive performance effects of the strategic change process. The data, collected from Chief Executive Officers in 63 public hospitals, provide results that are consistent with our expectations.

The impact of manufacturing flexibility on management control system design

Abstract Despite anecdotal evidence questioning the relevance of management accounting in firms pursuing “new” manufacturing strategies, the exact nature and role of accounting information for controlling manufacturing activities has received little empirical attention. This study examines the impact of manufacturing flexibility on the design of management control systems. In particular, we examine the implications of flexibility on the use of efficiency-based performance measurement systems and the use of integrative liaison devices. We collected data, through semi-structured interviews, from general managers in manufacturing firms in Melbourne, Australia. These interview data were used to develop measures for the constructs of interest. Exploratory analysis of the data indicates that integrative liaison devices are a critical form of control in managing the implementation of flexible manufacturing strategies. However, the role of accounting or other efficiency-based performance measures declines in those firms with a commitment to manufacturing flexibility.

Management control systems in research and development organizations: The role of accounting, behavior and personnel controls

Abstract This paper reports the result of an empirical study examining the role of accounting and non-accounting controls in a research and development setting. The paper draws on Perrows model of technology and structure to explore the influence of task characteristics on the effectiveness of accounting, behavior and personnel forms of control (Perrow, 1970). The main contribution of the study is the finding that non-accounting controls, especially personnel forms of control, contribute to organization effectiveness, particularly where task characteristics are not well suited to the use of accounting-based controls. In addition, the results suggest that of the two task dimensions examined, task analyzability and number of exceptions, the latter proves to have the more significant influence on the suitability of the controls. “Programmed” types of controls (such as either accounting or behavior controls) appear unsuitable where number of exceptions is high.

The consequences of customization on management accounting system design

The understanding of the antecedent conditions influencing the design of management accounting systems (MASs) is very limited. In recent years, significant research attention has been devoted to understanding how different strategic priorities influence these systems. However, the results of these studies have been, at best, equivocal and numerous calls have been made for further research to “unravel” the conflicts that have emerged in the literature. The purpose of this study is to examine not only the relation between strategy and MAS but also to develop a theoretical model to explain how and why this relation exists. The model draws on Galbraith [Galbraith, J. (1973). Designing complex organisations. Reading: Addison-Wesley] to develop a theoretical argument concerning the inter-relations among customization, interdependence and MAS. We are particularly interested in assessing whether the relation between customization and MAS is a direct one or whether the relation operates via interdependence. The results indicate that customization affects MAS via interdependence, rather than directly. The study of 170 production and sales managers further revealed little difference in MAS use between production and sales managers facing similar amounts of customization or interdependence.

The role of professional control in the management of complex organizations

Abstract The limitations of formal administrative controls in organizations performing complex production tasks have created the need for less obtrusive forms of management control. When formal administrative controls cannot cater to the unpredictability of complex work demands, one strategy is to employ “professionals” who have been trained to cope with these demands and whose behaviour is primarily controlled through social and self-control mechanisms. There is some question, however, as to the effectiveness of this strategy. There is evidence that integrating professionals into bureaucratic organizations creates the potential for a “clash of cultures”. Conflict emerges when salaried professionals engage in behaviour directed towards increasing their own autonomy (or in some cases maintaining it) and management implement control systems designed to control that behaviour. This paper argues that the degree of conflict experienced will depend on the individual role orientation of the professional and the extent to which management confront professionals with bureaucratic administrative systems which restrict their self-regulatory activities. The study was undertaken in a large public teaching hospital in Australia and the results support the theoretical position taken in the paper.

Budget use, task uncertainty, system goal orientation and subunit performance: A test of the ‘fit’ hypothesis in not-for-profit hospitals☆

Abstract Researchers have used contingency theory to argue that organizations perform more effectively if structures and control systems are designed to match contextual variables. The ‘fit’ hypotheses developed in the organization and management control literatures to test this theory have generally assumed the existence of a unifying set of organization goals and that individual behaviour can be directed towards the achievement of these goals. Management control systems, such as budgeting, have been similarly conceptualized. This paper argues that the extent to which individuals will behave in an ‘administratively’ rational manner and wittingly or unwittingly match the use of control strategies to organizational contextual variables will depend on whether they identify with the organization as a system. The paper tests the three-way interaction between task uncertainty, budget use and system goal orientation. The empirical analysis based on a sample of 192 subunit managers in four large Australian not-for-profit hospitals provides results to support the hypothesis developed.

Power, organization design and managerial behaviour

Abstract This paper examines empirically the impact of authority structures on the use of accounting information systems (AISs) for decision control and decision management. The model is designed to enable an assessment of the relative impact of formal authority that stems from allocation of decision rights and informal authority that stems from individual power and influence. The study is based on data collected from physician managers in large public teaching hospitals in Italy. The results support the hypotheses and demonstrate the consequences of power on organizational functioning. Our findings indicate that the delegation of formal authority to physician managers not only has a direct impact on the use of accounting for decision control and decision management it also has an important effect on their cost consciousness.

Accounting and Control in Health Care: Behavioural, Organisational, Sociological and Critical Perspectives

Abstract This chapter synthesises literature exploring complex technical, social, political and institutional influences on the inception and operation of accounting in health care contexts and its diverse effects. The review is organised according to two key methodological positions adopted by researchers—behavioural/organisational and critical/sociological. The review demonstrates that although behavioural/organisational studies focus on technical economic imperatives associated with the design and use of accounting and control systems in health care organisations these cannot be disentangled or decoupled from the historical, institutional and socio-political contexts of health care accounting. To this end the chapter calls for increased methodological pluralism to further improve our understanding of accounting in health care contexts. A number of other suggestions for future research are offered and projected trends in the structure and delivery of health care services are discussed.

The Relationship between Organisation Structure and Management Control in Hospitals: An Elaboration and Test of Mintzberg’s Professional Bureaucracy Model

The conflict between professional and bureaucratic models of behaviour has long been recognised. Evidence provided in the professional/bureaucratic literature indicates that this conflict will impact on the effectiveness of management control systems when dominant professionals, such as physicians, are incorporated into bureaucratic organisations. This article elaborates Mintzberg′s (1979) professional bureaucracy model and empirically examines a number of propositions concerning the way in which activities are controlled and coordinated in hospitals. An analysis of 192 subunit managers in four large Australian teaching hospitals indicated significant differences in the use of control and co‐ordinating mechanisms by health care professionals who manage core operating subunits and managers of subunits which provide support services. These differences do not all follow the predictions of Mintzberg′s model.

Are Employee Selection and Incentive Contracts Complements or Substitutes

There is a debate in the literature as to whether employee selection is a substitute or complement to incentive contracting. We argue that incentive contracts and selection can be both complements and substitutes conditional on the contracting difficulty faced by the firm. We examine these control choices in a setting where contracting difficulties arise due to the firms choice of strategy and from the volatility created by the firms external environment. We select a firms commitment to organizational learning (OL) as our strategic choice variable as this provides a useful proxy for identifying settings where explicit incentive contracting is difficult. The results show that, as firms become increasingly committed to OL, incentive contracts and employee selection operate as complements. However, with a high commitment to OL and an increasing level of external volatility, contracting on performance measures will become less effective. In this context, our results indicate that there is a substitution effect toward employee selection.