Final Assignment MCSP

Question 1
Malmi & Brown (2008) argue for the importance of considering management control systems
as a comprehensive package, as individual components don't operate in isolation. The
components chosen for this assignment are “Budgets”, “Values” and “Hybrid performance
measures”.

Budgets
Budgets serve as a foundational element and a central aspect of Management Control
Systems in most organizations (Malmi & Brown, 2008). It has the ability to integrate various
organizational aspects into a cohesive plan that serves multiple objectives, such as
performance planning and retrospective performance evaluation. Skærbæk and
Tryggestad's (2010) article underscores the active role that accounting devices, such as
budgeting, can play in influencing an organization's strategic orientation. This influence is
exercised through the framing and reframing of strategy. The budgeting process could
contribute to the framing of an organization's strategy by acting as a device that guides
strategic decision-making by specifying the resources that will be allocated to various
activities to meet their financial targets. The framing process will therefore have a significant
impact on the organization's strategic orientation by defining the organization's goals,
priorities, and resource allocation choices. Budgets also have a performative role in
implementing strategy by influencing the behavior of the organization and shaping the
actions taken towards strategic goals. For example, the allocation of resources through
budgeting could direct organizational efforts towards a specific strategic objective. It could
also play a role in the reframing of strategy by reallocating resources, identifying new
opportunities, and learning from the comparison of actual results with the budgeted and
therefore make the organization’s strategy more adaptive. This, by working as a feedback
mechanism that informs future strategic decisions, where the differences between the
budget and actual performance therefore could become a review that causes strategic
adjustments.

Miller & Power (2013) outlines several key roles that accounting practices play in
organizations: territorializing, mediating, adjudicating, and subjectivizing. These roles offer
insights into how budgets can influence an organization's strategic orientation. In its
territorializing role, budgets define certain spaces in organizations which could help shape
the organization's strategic orientation. It would therefore enable the comparison of
performance by creating territories that can be measured. In this way, budgets help construct
the economic units that represent the organization, allowing the organization to be framed in
terms of market or department. The budget can therefore shape the strategic orientation of
the organization by emphasizing certain areas of economic value. In the mediating role,
budgeting allows an organization to plan acceptable levels of behavior and evaluate
performance against those plans. It establishes a framework that allows different parts of the
organization to understand their roles and responsibilities. By doing this, budgeting mediates
between the organizational strategy and operational actions which thereby shapes the
strategic orientation of the organization. It can also be viewed as a form of communication,
linking different actors within an organization through the common “language” of the budget,
which becomes a platform where organizational objectives can be understood, interpreted,
and acted upon. This mediation by budgeting ensures that everyone's efforts are aligned
with the strategic goals of the organization. In its adjudicating role, budgeting can
significantly shape an organization's strategic orientation by establishing clear performance
expectations, enabling comparisons, enforcing accountability, and ensuring alignment of
organizational efforts with strategic goals. By clearly defining the acceptable levels of
behavior in terms of performance, budgeting creates a performance measurement system
(PMS) that helps to judge the effectiveness of strategic decisions. In this way, budgeting
adjudicates the performance of different parts of the organization, assessing their
contributions to the organization's strategic goals. Furthermore, budgeting also enables
comparisons among different departments or units within the organization, further solidifying
its adjudicating role. These comparisons can reveal areas of strength and weakness, and
thereby help the organization adjust its strategic orientation for better alignment with its
performance capabilities. In its subjectivizing role, budgeting assists interpreting individual
and team performances comparable, effectively creating a competitive internal environment
aimed at achieving or surpassing budgetary targets. This stimulates a continuous
self-regulatory process, reinforcing obedience to the strategic direction set by the
organization. Consequently, this subjectivizing role of budgeting creates a collective identity
centered on meeting organizational goals and strategic objectives.

Values
Organizational values deeply influence behavior through three principal mechanisms. First,
organizations often select employees whose values align with their own. Second, individuals
may adjust their values to align with those of the organization. Finally, explicit organizational
values can guide behavior, regardless of personal belief (Malmi & Brown, 2008). From the
context of Ladva & Andrew (2014), the value-based control is the organization's "web of
control," which consists of three controls: chargeable hours, time budgeting, and
self-disciplining for career advancement. This "web of control" impacts an organization’s
strategic orientation in various ways. Firstly, by creating a culture that values time-efficiency
which pressures the employees to appear more efficient. This influences their behavior to
govern their work to appear that way. The value-based control also promotes self-discipline,
which is seen as essential for career advancement. This in turn fosters a belief system
where long work hours and sacrifices in work-life balance are necessary to gain experience
and to further progress in their career. Finally, the value-based system also creates a culture
where employees are supposed to "earn their stripes" through hard work and dedication.
This creates an identity of being "willing to get the work done," which shapes the firm's
strategic direction to foster a high-performance culture, often at the cost of the employees
work-life balance.

Alvesson and Kärreman (2004) would see these values as a socio-ideological control, which
represent the cultural aspect of control that influences how the organization operates and
makes strategic decisions. If a company successfully creates a value-based control system
among their employees, they can more effectively guide them to work towards the
company's strategic goals. For example, if their “values” are that you have to be efficient, it's
easier to achieve organizational targets of increasing the overall efficiency. These shared
values among the employees could therefore lead to the same effects that Ladva & Andrew
(2014) observed, such as longer work hours.

Hybrid measurement systems

Hybrid PMS’s are a foundational component of management control systems in
organizations (Malmi & Brown, 2008). Incorporating both financial and non-financial
measures makes it possible to combine various organizational aspects into a combined
strategy. They have evolved over time, with early systems focusing on management by
objectives, to more recent adaptations such as the balanced scorecard. Based on Cooper et
al.'s (2019) study, hybrid PMS’s could impact an organization’s strategic decisions in several
ways. One way is that they can play a role in creating a sense of legitimacy within an
organization. This is because these systems provide a framework for evaluating
performance. As these systems are seen as a way of justifying strategic decisions, they
contribute to shaping the organization's strategic orientation by influencing the legitimacy of
various strategic options. This means that strategies that align with the measures
emphasized by the PMS’s are likely to be perceived as more legitimate. Hybrid PMS’s can
also help manage the tensions and conflicts that may arise due to the multiplicity of
performance measures. These systems combine financial and non-financial measures,
providing a more balanced view of performance which could aid the management of
potential conflicts between different strategic objectives. Hybrid PMS’s can also facilitate
organizational learning and improvement by providing a more comprehensive view of
performance. This could help organizations identify areas of strength and weakness, and
therefore make better strategic decisions.

Contrafatto & Burns (2013) would argue that hybrid PMS’s could significantly influence an
organization’s strategic orientation, particularly regarding social and environmental
accounting and reporting (SEAR) practices. Firstly, hybrid PMS’s offer a more holistic
perspective on organizational performance. Instead of focusing solely on traditional financial
metrics like profit, they also account for non-financial aspects of performance. This includes
environmental impact, social responsibility, and sustainability efforts. As such, adopting a
hybrid system could help steer an organization towards more socially and environmentally
responsible practices. Secondly, a hybrid system's use can align the interests of various
stakeholders. Organizations face pressure from multiple directions to improve their
sustainability and social responsibility, including regulatory bodies, investors, customers, and
the general public. A hybrid system, which reports on these areas, would help demonstrate
an organization's commitment to meeting these varied expectations. However, the adoption
of hybrid measurement systems can also face challenges. The integration of non-financial
metrics into PMS’s can be complex and can initially lead to conflicts within the organization,
particularly in an environment where profit-seeking remains dominant.

Question 2
Management accounting tools play a crucial role in organizations, especially where different
interests and evaluative principles coexist (Chenhall, Hall, and Smith, 2013). The
involvement of such tools in these settings can lead to what they refer to as an "organizing
dissonance", which suggests that the combining of multiple evaluative principles can create
a “productive friction” of tensions and compromises, where accounting practices act as a
platform for debate and discussion. These tensions can arise when practices are seen as
favoring one evaluative principle over another, leading to disagreements and struggles
between different groups within the organization. Management accounting practices also
play a significant role in facilitating compromise between conflicting interests. They act as
conventions, which are artifacts or objects that represent a compromise between competing
opinions. Accounting practices, such as the creation of financial reports or the development
of performance indicators, can materialize different values and principles, making them
visible and allowing for ongoing discussions and debates. Through these tools, accounting
practices create a tangible representation of the compromise between different evaluative
principles. However, compromises are not static and may require constant work to maintain
their stability. Breakdowns in compromise can occur, and these breakdowns are typically met
with two types of responses. The first is viewing breakdowns as temporary issues requiring
improvements to the current practice. The second response is more drastic and involves a
reflection on the underlying principles and values of the practice, which can spark debates
over deeply held values and possibly result in organizing dissonance.

The article by Busco and Quattrone (2018) investigates the role of these accounting tools
and their function in producing both tension and compromise. These tensions are founded
by the inherent problem with accounting tools to provide complete representations,
something that leads to the constant search for perfection and the creation of generative
“in-tensions”. In other words, the incompleteness of accounting visualizations creates a
space for debate and strategic questioning which often leads to productive discourse and
innovative strategies. A budget could be an example of this, where different departments
have different opinions on how the allocation should look like, which therefore could create
tensions where innovative solutions and compromises emerge. The article also points to
accounting's role as a “maieutic machine”, the method of generating knowledge through
questioning. In this sense, accounting practices act as pathways for defining sustainable
collections through conversations, questions, and debates. This maieutic process supports
continuous engagement and informed participation, creating collective spaces for voicing
different concerns and mediating diverse perspectives.

Burchell et al. (1980) also discuss how management accounting and control tools can be
involved in ongoing struggles between groups with different values and interests in
organizations. In terms of causing tension, accounting systems often mirror the institutional
needs and influences of various bodies such as professional institutes, regulatory bodies,
and academic institutions. These can differ from actual accounting practices and the true
needs of the organization, creating potential misalignments and conflicts. For example, the
economic efficiency that accounting systems are supposed to bring may not align with
practical realities. This difference can lead to tensions among different groups within an
organization as they struggle to unite their interests with the perceived role of accounting.
The complex nature of accounting and how deeply it’s tied with organizational systems also
leads to conflicting interpretations of accounting data. Different stakeholders might interpret
accounting information based on their own perspectives and interests, leading to potential
disagreements and conflicts. On the other hand, management accounting and control tools
can also play a vital role in reaching compromise and mediating these internal conflicts.
Accounting systems function in different ways and are shaped by institutional, political, and
organizational processes. They can be used as “learning machines”, fostering understanding
and facilitating compromise by providing a common language for organizational
decision-making. Burchell et al. (1980) provides examples of computational, judgemental,
political, and inspirational approaches to decision-making, where accounting plays a crucial
role. By providing a set of standard measurements and norms, accounting systems can help
different stakeholders find common ground. Moreover, the use of accounting systems for
retrospective justification and rationalization of actions can also assist in reaching
compromise. By providing a basis for assessing past decisions, accounting can lead to
discussions around these decisions, enabling various stakeholders to understand each
other's perspectives in a better way and thereby lead to compromises.

Höglund et al. (2021) explores these dynamics with a focus on public sector organizations.
The implementation of management accounting and control tools can lead to tensions within
organizations due to the varying interests and values of different stakeholders. This is
particularly common within public sector organizations, which must deal with the scrutiny of
multiple stakeholders including government regulators, employees, and the public. The
Swedish Transport Administration (STA) is an example of such tensions, where strategic
management accounting (SMA) practices face institutional complexities due to multiple
accountability pressures. One major area of tension comes from the nature of performance
evaluation and the focus on strategic indicators. As seen in the case of the STA, the
implementation of a balanced scorecard as an SMA technique was met with criticism
because it only focused on critical issues, neglecting other non-critical but still important
aspects. This tension stems from the different values and interests within the organization.
While some parties might prioritize specific metrics of performance, others may value a more
holistic view that includes non-critical issues as well. Furthermore, tensions may occur due
to an ambiguity in the strategy caused by the problem of translating broad assignments into
concrete SMA techniques. In the STA, the government assignments sometimes disrupted
the agency's formal management and control chain as well, which increased the tension
further. However, management accounting and control tools also play a pivotal role in
negotiating these tensions and reaching compromises within the organization. An example
of this is the introduction of the delivery qualities framework at the STA. This new framework,
which became a communication tool for the agency, addressed long-term outcomes and
improved communication with stakeholders, thereby providing a better fit for the strategy. It
served as a compromise between the need for accountability and the desire for an effective
monitoring tool. The introduction of the delivery qualities framework also highlights the
dynamics between different actors in shaping the SMA practices. The public and media's
criticism and scrutiny led to the need for this new monitoring tool, demonstrating how the
demands and interests of external stakeholders can shape internal management accounting
practices. Thus, SMA practices in the public sector provide a legitimate form of
accountability that addresses the demand for quantification and measurable results, all while
considering the different values and interests of their stakeholders.
References
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Burchell, S., Clubb, C., Hopwood, A., Hughes, J., & Nahapiet, J. (1980). The roles of
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Busco, C., & Quattrone, P. (2018). In Search of the “Perfect One”: How accounting as a
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