Politics of managing: the dialectic of control

Accounting, Organizations and Society 28 (2003) 37–64 www.elsevier.com/locate/aos

Politics of managing: the dialectic of control Kala Saravanamuthua,*, Tony Tinkerb a

School of Accounting & Information Systems, University of South Australia, North Terrace, Adelaide 5000, Australia b Baruch College, Box B12-225, City University of NY, 17 Lexington Avenue, New York, NY 10010, USA

Abstract Accounting influences the evolution of management identity by determining which aspects of performance are made visible. However, management do not technocratically apply accounting measurements. An organizational study is used to analyze how management use partisan performance measurements to control the labor process. Management’s strategies are influenced by how technology, worker skill, and product competition affect worker capacity to resist. Management’s dilution of capital’s interest by accommodating labor’s needs, or mobilization of the efficiency ethos, reflect the politics of dialectical control. # 2002 Elsevier Science Ltd. All rights reserved.

This paper sheds more light on why management respond to budgetary controls in different ways. Here a social analysis of how value is created in the production process, and appropriated on sale of the produce, is used to elucidate management’s contradictory roles as capital and labor. The value creation and appropriation processes are politicized by virtue of being based on a competitive– interdependent social relationship between capital and labor.1 To earn a living, workers sell their

* Corresponding author. Fax: +61-8-8302-0992. E-mail address: [email protected] (K. Saravanamuthu). 1 Marx states that capitalism is characterized by four groups: capitalists; workers; small shop-keepers and independent craft persons (or professionals); and the poverty stricken unemployed who serve to keep wages depressed. The first two categories are by far the most significant because their relationship represents the economic base of society (or mode of production). It is regarded as having a primary, but not the only, influence on the how society transforms. (Hunt, 1990).

labor power to capital in return for wages. Capital has a legal claim on surplus. According to the labor theory of value, total societal surplus is the difference between wages and the exchange value of products produced. Payment of interest, rent and appropriation of (net) profit to capital is legitimized by ownership of the means of production. Therefore, capital’s social role is its capacity to place itself, between every human productive interdependency and. . .extract a return for allowing this interdependent production process to proceed (Hunt, 1990, p. 84). Management occupy a pivotal position between capital and workers in converting labor power into labor. They cannot afford to completely disregard any one need because it would not only jeopardize the wealth accumulation process, but the livelihood of labor itself (which includes management) (Fox, 1974; Thompson, 1990). Consequently, their

0361-3682/02/$ - see front matter # 2002 Elsevier Science Ltd. All rights reserved. PII: S0361-3682(02)00009-0

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behavior has often been dismissed as enigmatic (Alvesson & Willmott, 1996). The contradictory demands of capital and labor on management’s priorities make the task of evaluating their performance a problematic one. Managerial accountability simply means explaining or justifying one’s performance to others. In a competitive-interdependent environment it represents the intersection of norms and interpretive schemes. Norms refer to the legitimizing codes of managerial conduct. (Giddens, 1984). Because accounting is the primary means of monitoring management actions, it is an official, albeit a contested management norm. Accounting should have both moral and instrumental dimensions because it influences how management navigate through the contradictions between capital and labor. However, accounting is a partial interpretation of reality because only certain aspects of one’s actions are highlighted. (Ahrens, 1996; Munro, 1996; Munro & Hatherly, 1993). Analysis of firms with global operations shows that accounting signifies control in headoffice terminology, thereby disregarding contextual differences due to cultural differences and geographical distances (Sewell & Wilkinson, 1992). Accounting also privileges capital’s interest over social ones (Armstrong, 1991, 1999; Previts & Merino, 1979; Tinker, 1991; Tinker, Merino, & Neimark, 1982). But accounting remains a contested terrain because it is interpreted in various ways to suit the politics of local circumstances. Its ‘‘no necessary class belongingness’’ (Hall, 1982, p. 80 following Gramsci, 1971; Hall, 1988; Lehman & Tinker, 1987) provide managers with a certain amount of leeway in either mobilizing accounting’s efficiency assumptions in their strategies; or diluting it by accommodating labor’s call for greater humanization of work.2 Therefore, by reflexively applying norms embedded in accounting measures, management’s interpretive schemes influence the effectiveness of the ruling ideology in

2 Management’s counter signification of accounting’s assumptions does not change the primary contradictions within the production structure. It modifies the superstructure, transforming norms and practices—making it a dialectical outcome. The superstructure refers to the ideo-political effects of the basic economic relationship (Allen, 1975).

the workplace. (Allen, 1975; Giddens, 1984,1991). Management reflexivity is, in turn, shaped by surrounding circumstances that reinforce their identity-dilemma as agents and victims of control: It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness. (Marx, 1970, p. 20). Management’s enigmatic decisions comprise of ‘‘non-decisions’’ (Bachrach & Baratz, 1962) that mobilize the prevailing organizational ethos embedded in accounting measures, and innovative ones that challenge the status quo. The former type of decision-making is also referred to as ‘‘imitative–coercive’’ decisions (Cooper, Hayes, & Wolf, 1981). Consequently, management responses to budgetary controls will be theorized by considering their political allegiances to both capital and labor. It will problematize their identities as agents and victims of control mechanisms. However, conventional literature theorizes management’s dialectical responses from a unidimensional perspective as agents of capital (Abernethy & Lillis, 1995; Jensen & Meckling, 1976; Perera, Harrison, & Poole, 1997). It tries to develop foolproof management monitoring and motivational systems to ensure that the efficiency and growth needs of capital are not diluted. Behavior that fails to maximize surplus is treated as dysfunctional with little consideration extended to the politics of managing the labor process. The politics of managing is even more relevant in contemporary capitalism because management’s prescriptive role as agents of capital has been shattered by their increased vulnerability to the downsizing and cost-control exercises (that were previously imposed on workers). Even radical literature has not fully theorized the role of managers. Marx (1971) argues that the role of the ‘‘functioning capitalist’’3 changes as capitalism transforms itself:

3 Marx (1971) refers to the functioning capitalist as the ‘‘non-owner of capital. Ownership of the capital is represented in relation to him by the money-capitalist, the lender’’ (p. 374).

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actually functioning capitalist (transforming) into a mere manager, administrator of other people’s capital, and of the owner of capital into a mere owner, a mere money capitalist.’’ (Marx, 1961, Vol. 3, p. 427 cited in Hunt, 1990, p. 80). Management’s role in converting labor power into labor has functional and political dimensions: The labour of supervision and management is naturally required whenever the direct process of production assumes the form of a combined social process, and not of the isolated labour of independent producers. However, it has a double nature. On the one hand, all labour in which many individuals cooperate necessarily requires a commanding will to coordinate and unify the process. . .This is a productive job. . .On the other hand—quite apart from any commercial department—this supervision work necessarily arises in all modes of production based on the antithesis between the labourer, as the direct producer, and the owner of the means of production. The greater this antagonism, the greater the role played by supervision. Hence it reaches its peak in the slave system. But it is indispensable also in the capitalist mode of production, since the production process in it is simultaneously a process by which the capitalist consumes labour power. (Marx, 1971, pp. 383–384). Marx (1971) likens management remuneration to wages of skilled labor, which contributes towards surplus value (pp. 386–387). Braverman uses Marx’s wage definition to argue that top management are capital: in addition to their hierarchical position, their remuneration is appropriated from surplus generated by labor. Subordinate management are labor because their salaries are netted off to generate surplus value. Braverman’s ambiguous and tenuous categorization has influenced the subsequent theorizations of managerial tasks as productive–nonproductive (Armstrong, 1989, 1991), coordinate–direct (Carter, 1995), and control–coordinate (Edwards, 1979). Despite its theoretical rigor, the task-remuneration distinction is not helpful in understanding

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the enigmatic role of managers, especially in more recent transformations of capitalism where the distinction between capital and labor has become even more blurred. We address the lacuna in the literature by drawing out the political influences on management’s role as they satisfy the demands for increased labor productivity, and improved working conditions. These conflicting-interdependent needs have existed from the time management emerged as a function in nineteenth century industrial capitalism. In contemporary modes of capitalism, labor tries to maintain its standard of living in the face of increased job insecurity as well as the constant downward pressure on wages by channeling its savings into the capital market. The classes of capital and labor become even more meshed with each other as worker pension and savings find their way into global managed (speculative) funds that contribute to the employment instability within national boundaries. French (2000) discloses that in 1980, only 4.6 million households in the US invested in mutual funds— the figure now stands at 44 million. The global search for the highest return on funds sets off a vicious circle of socially irresponsible, competitive behavior as management react by increasing shortterm profits. They are pressured to intensify the pace of work and substitute the labor component of production with labor-eliminating technology. Labor exploits itself by participating in the treadmill of short-term profits. The cross-identity of capital–labor reinforces the concept of class as a relationship and not a specific group of persons (Thompson, 1975). Burawoy (1979, 1985) provides an illuminating account of how workers exploit themselves by actively consenting to participate in management’s production games. The games obscure the underlying contradiction between capital and labor. But he does not extend the concept of class to management as well. He dismisses departmental management and supervisors as compliant servants of employers, who are concerned with the welfare of workers only in so far as it jeopardizes workplace productivity. Friedman (1977) touches on management’s political role in securing labor’s consent to exploit itself through their discriminate application of control

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strategies on different types of labor. They apply the strategy of Responsible Autonomy on ‘‘central workers’’ and Direct Control on ‘‘peripheral workers’’. Central workers are granted more autonomy because they could cause significant disruption to the generation of surplus value. Responsible Autonomy is an ideological means of harnessing worker power rather than subduing it, because it does not,

ment adopt strategies that accommodate workers’ needs, or further alienate them through technocratic application of efficiency prescriptions.

remove alienation and exploitation, it simply softens their operation or draws workers attention away from them. Its ideal is to have workers behave as though they were participating in a process which reflected their own needs, abilities and will, rather than a process aimed at accumulation and profits (ibid., p. 101, emphasis original).

Managers did not always exist as a profession. They were created to maintain profit growth as capitalism adapted its method of production to rising level of social consciousness and technological advances. Therefore, we ground our theorization of management’s identities in the competitiveinterdependent nature of production relations. These relations are represented in Marx’s theory4 of value. Production is a combination of constant capital (c), in the form of labor–time value of materials and equipment, and living labor (v). When workers sell their labor power in return for wages, the resulting labor process becomes a contradictory source of livelihood and exploitation. Surplus (s) is generated by keeping labor’s wages below the exchange value of products and services. Surplus is not obtained from constant capital because it merely transfers its (use) value to output produced (Friedman, 1977). As capitalism transforms, labor-replacement technology has taken over mundane, dangerous work. But it has also intensified the pace of work, thus increasing the rate of exploitation of labor—s/v (Hunt, 1990; Knights, Willmott, & Collinson, 1985). Exploitation also manifests as the casualization of the workforce and utilization of a very narrow range of labor’s potential skills with little regard for the social, intellectual, spiritual well being of workers. The systematization of labor’s holistic knowledge reduces labor to an appendage of the machinery and leaves it even more vulnerable to exploitation. (Tinker, 1998). Workers’ hostility to their reduced circumstances is suppressed by their dependence on paid employment. However, it does not eliminate retaliatory resistance—making the struggle for control an open-ended one (Thompson, 1990):

Peripheral workers, on the other hand, are subject to direct control because they have less impact on wealth creation, and may be easily replaced by recruits if they withheld labor. To summarize, accounting is not a reification of any ideology because managers signify its meaning in different ways to suit their local circumstances. Because accounting is a primary means of assessing management’s performance, its current construction reflects the history of labor struggle for control. Therefore, the continuing tension between the economic and social aspects of managerial responsibility makes the accounting’s representation of contemporary performance contestable. It gives rise to the inconsistency between the reality reflected in its historical measures, and the shared contemporary experiences of managers in controlling the labor process (Giddens, 1991)—paving the way for politics of management. The paper is structured as follows. In the next section we examine how the various transformations of production relations from the industrial to contemporary capitalism have politicized the role of management. Managerial politics is related to the tension between their accountability to capital as circumscribed by accounting, and workers’ capacity to control the labor process. In Section 2 we use an organizational study to illustrate the politics of managerial accountability. The discussion in Section 3 identifies circumstances under which manage-

1. Literature review 1.1. Management and labor process

4 Marx did not use the term ‘‘theory’’. His observations were laws of capitalism.

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The apparent acclimatization of the worker to new modes of production grows out of the destruction of all other ways of living, the striking of wage bargains that permit a certain enlargement of the customary bounds of subsistence for the working class, the weaving of the net of modern capitalist life that finally makes all other modes of living impossible. But beneath this apparent habituation, the hostility of workers to the degenerated forms of work which are forced upon them continues as a subterranean stream that makes its way to the surface when employment conditions permit, or when the capitalist drive for greater intensity of labour oversteps the bounds of physical and mental capacity. (Braverman, 1974, pp. 150–151). In the current climate, the workforce—who are powerless to control how the products they create are realized and profits appropriated—are alienated further by the global pursuit for the opportunity cost of capital. Ironically, the higher returns may not be attained without workers’ consent to participate in worsening work conditions (Burawoy, 1985). Whilst worker consent is secured at the macro level by destroying alternative forms of living, it involves obscuring the fundamental contradiction in production relations at the micro level. In the case of the latter, Munro (1995) illustrates how the Total Quality Management (TQM) technique relies on market terminology to camouflage exploitation of labor. Its customer-focus creates an illusion that the primary source of alienation of workers has been dismantled. Customer satisfaction, rather than the requirement for higher surplus value, is portrayed as the primary determinant of employment security of both workers and management. We trace the evolution of the management from nineteenth century industrial to contemporary capitalism to understand management’s dilemma in being both agents and victims of control. 1.2. Management and the transformations of capitalism When work was carried out under feudal and guild modes of production, the mercantilist

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performed the functions of management as we know it today—that is, coordinating the process from material acquisition to product sale. However, guild and apprenticeship rules and legislation limit the degree of control the mercantilist could exercise over craft persons’ potential capacity— labor power (Pollard, 1968). Because labor is the source of surplus value, changes had to be made to the mode of production. Industrial capitalism emerged to take advantage of advances in machine and power technology, and to reduce the cost of production through division of labor. Not surprisingly, this early form of capitalism began in towns that were free of guild regulations and norms. Its centralized factory system of labor organization brought guild journeymen and independent artisans together under one roof. Salaried management were employed to convert labor power into labor by: disregard(ing) the difference between labor power and labor that can be gotten out of it, and to buy labor in the same way he (the capitalist) bought his raw materials: as a definite quantity of work, completed and embodied in the product. (Braverman, 1974, pp. 60–61). The factory system formalizes management as a function separate from entrepreneurship. By 1830, there were well-defined groups of managers in many industries. But there was no managerial profession as such. However, entrepreneurs regarded salaried management as the ‘‘quickest way to ruin’’ (Pollard, 1968, p. 313). Managers’ notoriety for greed, dishonesty and alcohol addiction meant that they could not be trusted to privilege the needs of capital (McKendrick, 1961; Musson & Robinson, 1959; Everard, 1949 in Pollard, 1968). Therefore, accounting has a dual purpose in industrial capitalism: it assisted management coordinate the flow of material, labor and technology; and it monitored management actions. The latter compensates for loss of trust in agency relations. But, there was confusion over what constituted profit because capital was regarded as an auxiliary to entrepreneurship and

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not as the central purpose for earning a higher return.5 Taylor removes the ambiguity surrounding over accounting and management’s role in his attempt to increase control over the coordination between workers and machines. He enlists accounting’s production analyses, measurement techniques, and Babbage’s cost reduction concepts to reengineer work practices. Management play a central role in Taylor’s attempts to raise labor control to new heights. Taylorist managers are repositories of knowledge gleaned from craft-persons. Knowledge is then reduced to rules and formulae, thereby separating the conception from the execution aspects of work. Then, based on Babbage’s concepts of reducing the cost of labor through specialization, this monopoly over task knowledge is used to control the labor process. (Braverman, 1974). Like Taylor, Weber (1947) adopts an economic perspective of capital in defining management accountability.6 His organization is one which strives for ‘‘capitalist profit’’ and its membership ‘‘generally closed’’. Weber regards his hierarchical structure as a rational means of achieving Taylor’s technical efficiency. His managers draw their authority from their skills, knowledge and training, as well as the bureaucratic rules and norms: every single bearer of powers of command is legitimated by that system of rational norms, and his power is legitimate in so far as it corresponds with the norms. Obedience is thus give to the norms rather than to the person. (Weber, 1947, pp. 324, 336 cited in Allen, 1975, p. 117). 5 For instance, the Duke of Norfolk’s coal accounts for 1781–1790 referred to the surplus as ‘‘profits and interest’’ in order to highlight the difference in returns between directly managed enterprise and those that were sub-let. In offering investors interest payments even before deducting his salary, Alexander Mason prioritised property rights over labor’s claims. Samuel Walker felt that as an ironmaster, his return should comprise of separate allowances for interest on capital, risk and management. (Pollard, 1968, pp. 271–273) 6 Incidentally, Taylor wrote his seminal work in the last decade of the nineteenth century and it was published in 1911. Weber wrote his Theory of Social and Economic Organizations between 1911 and 1913. He explicates the role of management in the context of large-scale organizations that are reminiscent of pre-1914 Germany. (Allen, 1975).

Taylor’s and Weber’s legitimization of management’s authority through work redesign results in the separation of the conception from execution of work. It was vehemently opposed by early nineteenth century trade unions because it not only stripped workers of their craft knowledge, but it also imposed ‘‘a fully-thought-out labor process in which they function as cogs and levers’’ (Braverman, 1974, p. 136). Nevertheless, these contested principles are embedded in the conceptualization of modern management as agents of capital: (Management) arose as a theoretical construct and as a systematic practice. . .in the very period during which the transformation of labor from processes based on skill to processes based on science was attaining its most rapid tempo. Its role was to render conscious and systematic, the formerly unconscious tendency of capitalist production. It was to ensure that as craft declined, the worker would sink to the level of general and undifferentiated labor power, adaptable to a large range of simple tasks, while as science grew, it would be concentrated in the hands of management (Braverman, 1974, p.120–121). Capitalism’s need for growth in the rate of surplus generated means that it was necessary to move beyond the scientific organization of labor. Initially, industrial psychology was employed to actively manipulate the sociology of work through selection, training and motivation of workers. But, Mayo’s (1920s) Hawthorne experiments show that workers act collectively to resist management standards which govern their pace of work. It challenges industrial psychology’s presumption that performance and ability are often related to worker intelligence (aptitude). Human Relations shifts the emphasis from psychology to the sociology of work where social grouping is fundamental to understanding individual worker behavior (Braverman, 1974). Although Human Relations treats the workplace as a social system, it is premised on Taylorist notion of work. It aims to manufacture productivity—maximizing circumstances to overcome the ‘‘maladjustment between parts’’ of the

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organization (Allen, 1975, p. 163). Therefore, symptoms of social conflict, such as high rate of turnover, absenteeism, and worker resistance, are dismissed as management problems that are confined within the crucible of the organization. Despite Taylor’s admission that rational workers appreciate only too well the connection between higher productivity and lower piece-rates, Human Relations theorizes worker resistance (to piece rate incentives) is as ‘‘irrational’’ and ‘‘uneconomic’’ behavior that are shaped by ‘‘group’’, ‘‘social’’ and other ‘‘emotional’’ factors7 (Mayo, 1945). Therefore, Human Relations continues to treat management as agents of capital who maximize efficiency by manipulating group dynamics. But legitimizing managerial authority within a political social system remained problematic. Barnard (1968) assumes that the organization is a social system, but depoliticizes managerial authority by relying on monetary incentive to secure worker participation. He bases his formulation of authority on the presumption of the ‘‘zone of indifference’’, which refers to worker indifference when complying with management’s orders and instructions. Incidentally, Simon (1957) later converts Barnard’s zone of indifference into acceptance because he ‘‘prefer(red) the term ‘acceptance’’’ (Granovetter, 1985, p. 495, footnote 5).8

7 For Taylor, a worker is rational if one’s behavior served to maximise one’s earnings (under a piece rate system). Taylor, however, admits that a rational worker will also resist increasing output levels because it could lead to a decline in piece rates. This means that by working harder, the worker has to achieve a higher level of productivity for the same wages. Leiserson (1965 in Braverman, 1974) argues that Mayo’s conclusions are invalidated by the observation that the most unproductive workers in the study also had the highest levels of intelligence, vice versa. It shows that worker rationality is no different to business logic—that is, wages are reduced when productivity rises. Leiseron’s rebuttal is strengthened by the fact that the Hawthorne study was itself terminated by the onset of the Great Depression. (Braverman, 1974). 8 This notion persists in March and Simon’s (1993) conversion of the conflict prone workplace into consensual one:

Organizations theories describe the delicate conversion of conflict into cooperation, the mobilization or resources, and the coordination of effort that facilitate the joint survival of an organization and its members. (p. 2).

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Ford’s $5 daily wage illustrates that workers’ resist management’s hierarchical authority, but only within the confines of the competitive–interdependent relationship between capital and labor. Before the advent of the assembly line, skilled workers controlled the construction of a vehicle (Chinoy, 1964). Management resorted to financial incentives to increase labor productivity. The invention of the conveyor system technology allowed the Ford Motor Company to reorganize work to its advantage. It allowed Ford to standardize the wage rate at a daily maximum of $2.34 and exercise ‘‘more strenuous supervision’’ over labor (Sward, 1948, p. 32 cited in Braverman, 1974, p. 148). Initially, workers could resist this exploitation because there were plenty of craftbased jobs elsewhere. Ford’s staff turnover in 1913 alone was reported to be 380%. But Ford’s subsequent $5 wage strategy not only attracted workers back, but it also allowed him to reduce costs by increasing productivity. Workers’ capacity to resist was curtailed by destruction of craft-based jobs, which were unable to compete with the cost of mass-produced vehicles (Braverman, 1974). The Great Depression raised public awareness of the high cost of Fordist mentality to profit maximization. It led to a socially conscionable recommendation in a study of the divergence of interests between management and shareholders (Berle & Means, 1967). It stated that (passive) shareholders should voluntarily surrender their legal claims to unshackle management from the profit priorities of capital. However, this recommendation has been all but forgotten in contemporary capitalism as flexible manufacturing technology was added to the cost reduction arsenal. They include reduction in levels of buffer stock of parts and materials, production based on demand-pull as opposed to supply-driven strategies, and reduction of staff numbers on the shop-floor as well as white-collar employees in service and administrative positions (Womack, Jones, & Roos, 1990). These cost cutting measures make this mode of production a ‘‘fragile’’ one compared with the ‘‘robust’’ Fordist approach. The fragile system has few buffers of any sort. It is more vulnerable to disruption by labor’s resistance to productivity increases. Therefore, the fragile system requires a

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‘‘supportive, non-adversarial’’ atmosphere in the workplace (Krafcik, 1988, p. 17). The non-adversarial atmosphere is concocted by obscuring the existence of the contradictions between capital and labor. It involves linking the shop-floor worker to the ultimate customer through the ideology of ‘‘Economic Citizenship’’ (Miller & O’Leary, 1994). It professes to subsume any conflict in the workplace through its emphasis on maintaining jobs by keeping the customer satisfied.9 However, its underlying purpose is two-fold: firstly, it is a means of subsuming management. Earlier transformations of capitalism formally subsumed labor by systematizing worker knowledge into management rules and standards. The economic citizenship oriented transformation represents the real subsumption of labor as management become the target of cost cutting. (Tinker & Yuthas, 1995a,b). The whittling down of the middle stratum of management shatters management’s traditional (legal) identity as agents of shareholders. Top management justify ‘‘major surgery upon its own lower limbs’’ (Braverman, 1974, p. 343) on grounds that subordinate management add unnecessary costs, slow down decision making, create barriers between the organization and the customer, disempower workers and impede information flow10 (Dunkerely & Thomas, 1998). Consequently, managers’ loyalty to shareholders cannot be taken for granted at a time when moves to routinize their work leaves them feeling increasingly insecure. Most managers felt that they had become ‘‘just another pair of hands’’ with conflicting responsibilities. They had, in many cases, lost the opportunity of being involved in strategy; in some cases 9 This theme is central in Miller and O’ Leary’s (1993,1994) theorization of how Caterpillar introduced the market rationality into its Decatur plant to help it survive increased global competition. The authors acknowledge that there is bound to be conflict in needs, but dismiss it as a temporary adjustment. Consequently, the authors do not anticipate the closure of the plant in favor of a cheaper overseas location despite labor’s participation in its economic citizenship program. 10 Hecksher (1995) shows that, although middle management in the US make up only 8% of the workforce, they account for 19% of job losses between 1988 and 1993.

they felt that they were not ‘managing’ but ‘working’.’’ (Dunkerely & Thomas 1998, p. 16). Routinization of managers’ varied responsibilities not only deskills them, but also undermines the legitimacy of their position in a social organization (Anthony, 1977). Secondly, emulating market conditions within the organizational structure reinforces the rhetoric linking job security and satisfied customers.11 By allowing market terminology to permeate into managerial accountability, the age-old link between generation of higher surplus value and worsening work conditions is obscured. Accountability to the ruthless market regime ‘‘distances’’ the traditional capital-labor struggle from work intensification and deskilling practices (Munro, 1995). Thirdly, as firms grew larger, the personal— reciprocal aspect of accountability—was initially replaced by hierarchical systems that depended on accounting controls. Translating management explanations into a numerical reporting process, routinizes the fundamentally social nature of providing accounts (Edwards, 1979). Productivity assumptions embedded in accounting numbers provide a reference point for what is generally accepted as normal behavior. Control processes require explanations to justify deviations from these norms. Therefore, accounting’s partisan construction creates a culture of productivity-oriented priorities and performance (MacIntyre, 1988). However, contemporary capitalism requires lateral and personal networks to engender a culture of economic citizenship. Ironically, strong lateral networks are

11

However, a study carried out in the automotive and other industries by Arthur Anderson (1994, cited by Ittner in his presentation of the paper, Ittner & Lacker, 1998), questions the presumption of a correlation between company profitability and customer satisfaction levels(in the form of claims on warranty). Unfortunately, the Arthur Anderson report was out of print, and was not available to us. Taylor (1995), argues that it is more likely to be a question of achieving a sufficiently large margin between cost and price to absorb the cost of poor quality product, without jeopardizing profit levels. It is estimated that US auto makers spend close to US$9 billion on fixing quality problems on vehicles. Quality of vehicles produced had improved, but not sufficient to cause a dent in warranties, resulting in the increased cost of a vehicle to the customer.

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also a prerequisite for hierarchical–ideological control (Munro, 1995; Munro & Hatherly, 1993; Roberts, 1996). Because lateral controls require increased levels of employee participation, they could be used to inject an ethical dimension into the previously impersonal nature of hierarchical controls—thereby facilitating greater the humanization of work. Unfortunately, the overt devolution of control to lateral networks and the shopfloor has been accompanied by an increased reliance on the culture of ‘‘market-driven’’ efficiency. Employees are ‘‘empowered’’ but their performance is more closely scrutinized through technologically sophisticated methods of performance evaluation (Armstrong, 1999; Arnold, 1998, 1999; cf. Miller & O’Leary, 1993, 1994). 1.3. Management accountability The question that arises is whether accounting has reduced management accountability to an ‘‘obligatory passage’’ of narrow, efficiency-oriented interpretations of the meaning of work. If management were passive and compliant agents, they would be trapped in accounting’s ‘‘mesmeric grip’’ (Roberts, 1991, p. 367), ensuring that management performance adheres to a predetermined standard. It would mean that management always make optimal decisions to reinforce the existing power structure (Macintosh & Scapens, 1990). In a trade union, the signification of ‘‘politico-social events’’ in economic terms carries more legitimacy than events valued on political grounds (Panozzo, 1996). However, management do not always adhere to bureaucratic rules. Laughlin (1996) shows that in the case of the clergy, the narrow prescriptive view of accounting measures is diluted at subordinate levels by strong commitment to social and spiritual values. March and Simon (1993; Simon, 1957, 1976) attribute management’s non-optimizing decisions to ‘‘bounded rationality’’. It refers to management’s limited access to information, limited knowledge, foresight, skill and time pressure to decide before thoroughly evaluating all options. The authors remain silent on the politico-economic influence of conflicting goals. Pettigrew (1973) argues that management’s political allegiances and hunches play a greater role in shaping

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the decisions outcomes than their limited access to, and capacity to process, information. Admittedly, management responses are also influenced by differences in their cognitive and emotional orientation caused by variations in education, training and nature of tasks performed (Lawrence & Lorsch, 1967). We acknowledge the influence of personal subjectivity, but argue that social actions are primarily shaped by production relations (following Marx, 1970). This means that managers cannot unproblematically privilege shareholder needs over all other organizational participants (following Bittner, 1965; Kunda, 1992; Czarniawska-Joerges, 1996; Roberts & Scapens, 1985). Therefore, accounting’s dominant place in managerial accountability processes does not always mean that management will surrender to accounting’s efficiency orientation to arrive at ‘‘imitativecoercive’’ decisions (Cooper et al., 1981). Imitative– coercive responses manifest in Hopwood’s (1973) Budget Constrained (BC) supervisory evaluation style, where subordinates are held accountable to (technically imperfect)12 budgetary information. Management also make innovative decisions to suit the needs of different circumstances such as Hopwood’s Profit Conscious (PC) behavior. It occurs when supervisors exercise discretion in the degree of reliance they place on accounting feedback by supplementing it with information from other sources. Hopwood regards the BC and PC as discrete styles. However, Otley (1978) shows that a continuum of styles exist between BC and PC. In moving away from the BC orientation, there is a slight reduction in emphasis on meeting the budget, and an increase in emphasis on operational effectiveness. The mixed styles place the onus on subordinate management to ‘‘weigh the advantages and disadvantages of actions that would produce different combinations of short- and long-term benefits’’ (p. 131). The motivation for the BC–PC transition could be due to reflexive decision-making that occurs when the reality depicted by 12 Hopwood (1973) states that accounting information is imperfect for several reasons: it cannot capture complexities of managerial performance; it does not completely represent an organization’s cost function; it encompasses aspects of performance which are not necessarily controllable; and it is essentially short-term in nature.

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accounting is at odds with management’s shared experiences (Giddens, 1991). Their experiences in managing labor is linked to workers’ capacity to disrupt the production process through acts of resistance (Friedman, 1977), as well as their own vulnerability to cost reduction exercises. In the 1980s, contingency studies tried to account for differences in Hopwood’s and Otley’s conclusions. They studied the effect of task uncertainty, budget participation, and budgetary slack on management behavior (Brownell, 1982, 1985; Brownell & Hirst, 1986; Govindarajan, 1984; Govindarajan & Gupta, 1985; Hirst, 1981, 1983, 1987). Unfortunately, the inductive nature of the motivating studies13 was not maintained. These method-oriented studies do not question their own assumptions and privilege rationalism as the only ‘‘correct’’ view. Agency is deemed to be a nonideological and value neutral occupation in which economic rationalism should prevail.14 Economic rationalism is imposed on agency research without any real debate over what the goals of the organization should be. Consequently, they fail to acknowledge the political dimension of management behavior that arises from the competitive– interdependent nature of workplace relations. Furthermore, these studies adopt different measurements and concepts. These shortcomings raise doubts about the validity and comparability of these studies. Space constraint does not allow us to embark on a full critique of this literature here. A comprehensive critique is found in the following papers: Briers and Hirst, (1990), Otley and Fakiolas (2000), Vagneur and Peiperl, (2000). In summary, management’s contradictory position as agent and victim of control motivates them to mobilize numbers in ways in that allow alternative rankings of priorities to emerge (Kirk & Mouritsen, 1996). They apply accounting dialectic-

13 The Hopwood (1973) and Otley (1978) conducted extensive interviews with management before drawing up their respective survey instruments. 14 Hopwood (1973) acknowledges that management’s differential use of information did not arise from ignorance alone (p. 197). For instance, budgeting procedures in governments, are shaped by information usage, organizational as well as political considerations (p. 198 following Wildavsky, 1964).

ally to accommodate and resist the ‘‘logic of capitalism’’, thereby safeguarding employment opportunities and better working conditions (Knights & Collinson, 1987). The question that has to be theorized is the circumstances under which managers make imitative–coercive, or innovative decisions.

2. Organizational study 2.1. Research method A study of management decision-making styles was carried out between 1992 and 1994 in a firm, Organization V. It was a player in the Australian automotive and parts manufacturing industry. The study of managerial behavior focused on three interdependent cost centers. Empirical evidence on management behavior was gathered and analyzed using a qualitative–interpretive approach (Berry, Capps, Cooper, Ferguson, Hopper, & Lowe, 1985; Holstein & Gubrium, 1998; Miller & Glassner, 1998; Rosen, 1991). It ensures continued openness of the study to environmental variables which had not been codified in a semi-structured questionnaire that was used in conducting interviews (McCracken, 1988). The method also enables a reflexive reiterative process of relating theory to practice to be adopted in reconstructing a social ‘‘reality’’ from the following sources: management interviews; analysis of operations data over 5 months in 1994; review of internal records and memoranda; and observation of social interaction on the shopfloor. Therefore, the interpretation of events portrayed here is a partial one. Its value depends upon the plausibility of our theorization. In-depth interviews were conducted with managers and deputy managers of the three sub-units (A, B and C), and other factory service support staff. Henceforth, the sub-unit managers will be referred to as Alan, Ben and Colin, respectively. In these interviews, management’s views on the following were ascertained:  sub-unit goals vis-a`-vis organization goals;  the nature of operations in the sub-unit;

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Fig. 1. Organization V—structure (simplifed).

 the constraints to discharging agency responsibilities;  the information needs of managers;  the influence of existing accounting monitoring systems;  the basis on which a manager chose one accounting measure over another; and,  the significance of chosen measures for each manager (Appendix A). To gain an in-depth appreciation of the organizational pressures on factory managers, representatives of the larger organization were interviewed, including top management, and the Finance Department (Fig. 1). As a condition of entry to the organization, the fieldwork researcher was denied interview access to shopfloor workers because management were involved in tenuous Enterprise Bargaining negotiations to modify working conditions. As the scope of the study was on subordinate management interaction with shopfloor labor and top

management, the restriction on interviewing workers was partly compensated for by relying on second-hand reports of worker resistance strategies.15 Detailed analyses of operations data pertaining to machine downtime, stock levels, types of defects, absenteeism, budgetary performance, 15 The workers’ resistance enabled them to control the production process. The strategies that were actually effected, or were a potential threat, were ascertained by interrelating information from the following sources:

 second-hand reports in interviews with middle managers;  the history of the respective sub-units in terms of industrial disruptions, as found in analyses of performance measures correlating absenteeism, productivity levels, stock losses, etc.;  the dependence of production flow on workers’ skills, machine technology, and production lead-times;  the sub-unit’s future in terms of threat of work being sub-contracted out to external suppliers; and  observation of daily interaction between management and workers.

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Fig. 2. Flow of parts produced by sub-units A, B, and C.

productivity levels, etc. were compiled over a period of 5 months. The analyses were used in the holistic Systems Thinking presentation (Senge, 1995) of subunit performance (See Appendices B–E). This empirical evidence either complemented or contradicted the narrative versions of reality conveyed during field interviews. When contradictory versions of reality emerged, further fieldwork and operations data analyses were undertaken, and the discrepancy incorporated into our theorization. As will be explained later, this occurred in the case of sub-unit A. The fieldwork researcher had indepth interviews or discussions16 with 20 persons. The minimum length of interview time per person was 5 hours. Interviews were conducted over 2 days. In the case of Alan (sub-unit A), interviews stretched for 9 hours because of the post-Systems Thinking discrepancy fieldwork. 2.2. Organizational background—market culture The industry was regarded as one of the forerunners in globalizing production and assembly of parts. Consequently, performance at the Australian plant was linked to international benchmarks of

16 Informal discussions were a way of partially overcoming the restrictions concerning who could be interviewed. It was also a way of gaining a better understanding of how the organization functioned through casual conversation with employees in the course of collecting data, or observing people at work without subjecting employees to a formal interview process.

efficiency, primarily those computed under the International Motor Vehicle Program by the Massachusetts Institute of Technology. The most frequently quoted international benchmark was a highly aggregate figure representing labor hours required to assemble a ‘‘standard’’ vehicle. This narrow signification of industry productivity was vehemently opposed because it could not be broken down into meaningful, comparable performance standards for individual vehicle assemblers, let alone component part manufacturers. Operations of the factory units A, B, and C were inter-related. A and B supplied component parts to C for further processing. Sub-units C and B also supplied manufactured component parts to the rest of the factory and external customers, although C had more external work than B (Fig. 2). Like other players in the automotive and parts manufacturing industry, Organization V had long embraced TQM, Just-in-Time (JIT), and Lean Production techniques (Womack et al., 1990). The expressed goals of the organization included producing quality products, keeping the customer satisfied, delivering products on time and at the lowest cost possible, having a multi-skilled workforce, increasing its share of the export market, and being a good corporate citizen. In Organization V, certain goals dominated the culture because of their perceived connection with employment security. For instance, factory banners reiterated the Economic Citizenship chant that satisfied customers ensured job security (Miller & O’Leary, 1994).

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Top management vocally advocated the maxim, ‘‘Look after the process, profits will follow’’. However, the ethos of ‘‘quality—customer satisfaction— profits’’ was not reflected in management’s budgetary performance criteria. This is because short-term cash flow was central for survival in this industry, which was characterized by narrow profit margins. Cash flow was increased through labor productivity17 (Williams et al., 1994). Sub-unit management used on non-financial information in their daily and weekly meetings to assess the day-to-day state of operations. However, managerial performance in Organization V was ascertained mainly through monthly variances from budget allowances. Budget estimates were loosely linked to international labor productivity benchmarks. Because labor productivity was controlled through budgeted variable costs, its cost classification was biased towards variable costs. Consequently, its fixed and variable cost classifications did not represent the contemporary composition of operating costs. Costs that were variable in the 1970s had become fixed in the 1990s because of changes to production technology and quality requirements. By deliberately maintaining the variable classification of these (fixed) costs, subordinate management could be pressured to raise productivity levels so as to improve their budgetary performance. Officially, subordinate management were responsible for productivity. However, through budgetary control, top management could encroach on subordinate management’s discretion over choice of strategies. Cost classification was an emotive issue as sub-unit management believed that fixed costs should be funded by lump-sum allocations from central resources instead of being linked to productivity. They were aware of the consequences of the budget’s short-term rationality. [Bracketed words in italics have been added for explanatory purposes.] Alan: ‘‘I believe that rather than chase that sort of efficiency, we would be better off in 17 Williams, Haslam, Cutler, Johal, and Willis (1994) explain that in the automotive industry, incremental improvements in labor productivity had a significant impact on international competitiveness—because (internal) labor account for 70% of manufacturing value-added.

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looking to see how we utilize individual equipment.. . .A lot of this [existing] financial reporting is based on the, ‘‘All right, what is our budget in the first place?. . .What sort of time we allow for these parts?’’ Some parts you get a better time than others. Producing a part for x number of years, the budget allowance for it won’t be as good as on a new part because every year they say, ‘‘You gonna improve by 5% this year, Alan. Good on you.’’ The time goes down by such and such. So the part you have been producing for yonks, you’ve sucked it fairly dry—it is not like a nice new one where you can put that in and go thump, thump, thump, and on paper make a good dollar. But you are not giving that as many whacks as you are on the part that you don’t get a good time allowance. And the guys on the shop-floor, they are not dills. They know that they are going to make better time on one part than they are on the other. . . . . .So that’s why it burns deep in my nether region. . .when we look at our overheads and overhead calculations by our Finance people. It doesn’t really take into effect what our real overheads are here. . .I see very clearly. . .my main responsibility is to assess what our true costs are. . .Because only then can I stand up and do some of these other things to ensure that in ten years time that this is all going to be happening, that we are not sitting on the beach.’’ Finance staff admitted that managers rejected the ‘‘reality’’ portrayed by accounting information: Finance staff: ‘‘I know people don’t [accept accounting numbers]. Half of their reason for that is not liking the figures. . .people didn’t always trust figures. That came down to trusting the people that prepared the figures and their flexibility’’. Organization V’s budgeted allowances aimed to ‘‘encourage’’ management to ‘‘continually

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improve’’ cost performance by increasing unpaid labor. As labor cost in Australia was comparatively cheap (Industry Commission, 1996, Minority Opinion, p. 241), it was generally perceived there were more economic gains to be made through more ‘‘efficient’’ labor management than by replacing labor with equipment. Advances in laborsaving equipment technology presented additional threats to employment security. It served to pressure labor to perform at ever higher productivity levels. Organization V tightened its productivity standards in a mechanical fashion every year by arguing that failure to continually improve performance could jeopardize viability of plant operations, and threaten employment security. Consequently, management strategies that squeezed out as much unpaid labor as possible were encouraged, tempered only by the risk of loss of sales: Researcher: ‘‘I’m told that these sub-units [A, B, and C] are undermanned. As a result there is a lot of reliance on overtime, weekend work. . .there seems to be a tendency to use overtime for more difficult jobs, and rework. Isn’t it an expensive strategy?’’ Finance staff: ‘‘Oh, it is. . .There are two issues here. The major one is. . .remoteness from the [external] customer, your ultimate customer. . .Sub-unit Z [which was located at the end of the production line] is the first exposure. . . .If you miss production there, anything you miss is costly. The further down the track you get, the less costly it becomes. . .And I think traditionally sub-units [A and B] are undermanned. . .that goes back to the days when [a certain top manager] squeezed the inefficiency out of the place. I think it was his belief that historically they manned it to whatever they felt was adequate manning. And he felt that they were not making sufficient improvements because there wasn’t enough pressure being applied on the area.. . .He scheduled overtime and created pressure. And he was successful in that. . . When they found that even with overtime they were really under pressure. And there were looming disasters, and it just galvanized

people, into, I suppose, working harder and being more efficient. Ultimately cut overtime. It was a way of bringing some sort of realism into making improvements.’’ Researcher: ‘‘How long has this been going on? It seems like a short term fix.’’ Finance staff: ‘‘I don’t know to what extent there was a big swab of inefficiency that could be collected by creating that pressure. I don’t know to what extent it was very short term, or whether it is a medium term thing. But certainly, it is a legacy.’’ Organization V’s budgetary–productivity control was effected under the guise of a market culture. Subordinate managers had to meet the demands of (internal) customers, without being duly compensated for these activities in their budget allowances. This served to increase pressure on them to meet budget targets by increasing labor productivity. For instance, whenever sub-unit B supplied a large volume of parts to internal customers, Ben maintained a record of re-order stock levels to minimize the amount of stock held in subunit B. However, sub-units that acquired only small quantities of parts from B also expected the same stock control arrangement. Sub-unit B was not able to provide this service without incurring additional costs: either the cost of keeping records for small quantities of parts, or, in the event that B did not provide the service, the cost of disrupting its scheduled production runs. Ben explained how he tried to introduce a Kanban system for his lowvolume internal customers but they refused to cooperate, as the organizational policy required suppliers to satisfy customer demands: Ben: ‘‘Yeah, and it doesn’t hurt them. It doesn’t hurt them at all for not doing that [reorder via Kanban] because all they do is say, ’’We want the. . .[parts]. . .or we can’t fit them to. . .[the final product]. And if I don’t fit them to. . .[the final product], then the product is incomplete. . .and has to go into E status.’’ Researcher: E status ?

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Ben: ‘‘Not complete—quality assurance. Then what I have to do, I have to pull a couple of my. . .[product lines], set up for that job, then run it for them. So I’m the one that suffers’’ The market ethos was so powerful that it was generally perceived that managers who do not satisfy customer demands were not acting in the collective interest of the organization. As satisfaction of market needs assumed higher priority over accommodation of labor’s humanistic demands, the customer focus became a means of using lateral networks to police the hierarchical–ideological efficiency agenda (Munro, 1995; Munro & Hatherly, 1993; Roberts, 1996)—thus, encroaching on sub-unit management discretion. However, accounting’s influence on management decisions was not absolute because of the underlying contradiction between capital and labor. Management either resisted the efficiency ethos embedded in accounting controls, or they mobilized it in their labor strategies. Their choice was influenced by circumstances that affected the amount of (counter) control workers could exert over the pace of work—workers’ leverage of dissent. Here, the circumstances refer to worker skill, type of machine technology, and degree of competition in product market. Fig. 3 shows a summary of these conditions in the three sub-units, and the resulting effect on management rationality. Accommodative management rationality refers to decisions that

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dilute the efficiency agenda to prioritize labor’s needs by making innovative decisions. Technocratic rationality, on the other hand, results in imitative–coercive strategies which are justified as complying with the accountability criteria. In the following sections, we recount conditions under which these rationalities emerged. 2.3. Management rationality 2.3.1. Sub-unit C Colin, the manager of sub-unit C, relied on highly skilled workers to operate the equipment, and maintain quality-delivery standards for parts manufactured. Sub-unit C was operated on JIT inventory levels—which meant that any disruptions in supply would cause the rest of the factory to shudder to a halt. Sub-unit C also faced stiff competition in the global parts market. Although, Colin was painfully aware of the employment implications of not adhering to the stringent international labor productivity benchmark, he realized that his workers wanted more than repetitive, mundane work that was prescribed as a means of increasing efficiency through specialization (Braverman, 1974): Researcher: ‘‘[Sub-unit C] employs highly skilled operators, unlike the rest of the plant. The work here seems comparatively less mundane, and repetitive than else where.

Fig. 3. Summary of socio-structural influences on political rationality of sub-unit managers in Organization V.

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There also seems to be a clearer career path for workers here.’’ Colin: ‘‘Yes, they have got something to work for, and they work hard for the first 8 or 9 months to achieve that goal. It is brand new, and they are being trained, and they are being moved around and they move up. As the months go by, it flattens out when they become skilled operators. And that’s when the mundane starts to come in. Because they are then just loading, they are not learning a new skill, or a new practice. . .Now we are into a new model [of product], and we are into it for 2 years now. Now the operators, when we are in, you are using most people. You are asking them for their ideas: ‘‘What do you think about this? What do you think about that? Does this suit you? Do you want it higher or lower?’’ There is involvement. And they enjoy that. And it breaks away from the mundane. And then it build up, builds up, and now we are in production mode. We will just go on—repetition all the time’’ Appendix B illustrates how budgetary control was used to reinforce the production maximization ethos (see the ‘‘reinforcing’’ behavior loop). As explained earlier, budget allowances were constructed to encourage maximization of production levels. The partisan construction sent a clear signal to subordinate management that they should minimize production downtime. In sub-unit C, this meant keeping machine downtime to a minimum— even for repairs. Colin opted for quick fix, ‘‘band-aid’’ repairs instead of spending more time repairing equipment properly (see first ‘‘balancing’’ behavior loop). This resulted in machines breaking down during every shift. The scale of the problem has been analyzed for critical product lines18. Appendix C illustrates one such line—the y-axis shows the (percentage) ratio of downtime to total time. It would be desirable to have all points on the graph as close to the x-axis as possible. However, this is clearly 18 A product line is deemed as critical if the line is vital for ensuring a smooth supply of parts to the rest of the factory.

not the case. The normal level of downtime tolerated was 0.5%—and actual downtime (for every shift on the x-axis) is well-above the tolerable level. This graph is representative of a number of critical product lines that were analyzed over a 5month period. (Because of the space constraint, all graphs have not been included here. They are available in Saravanamuthu, 2000). Band-aid repairs made product lines so unreliable that Colin had to hold buffer stocks of parts to cover any shortfall in the future. Appendix D shows a comparison of actual stock levels and actual consumption for a critical part. It shows a substantial amount of stock being carried in what should be a JIT environment. The horizontal line represents the budgeted quantity that was used to determine production schedules. It shows that overproduction was not due to prediction errors. This histogram is representative of a number of critical parts that were analyzed over a 5-month period. (The quantity scale on the y-axis has been suppressed to maintain confidentiality. Because of the space constraint, all histograms have not been included here. They are available in Saravanamuthu, 2000). In manufacturing parts for consumption and building up stock, Colin scheduled larger batch sizes and longer production runs. This set off another ‘‘balancing’’ behavior loop because production was not halted when defective parts were detected. The defects were reworked on weekends at overtime labor rates. The unintended consequences (that is, the balancing behaviors) result from the contested notions of productivity built into budgetary feedback (in the reinforcing behavior loop). A technocratic response would be to relieve the pressure at the intersection between the reinforcing and first balancing behavior loops—that is, machine downtime due to short-term repairs. However, Colin did not do so. He used his resources to train staff because resistance by his skilled workers could disrupt a substantial part of production in sub-unit C. Workers resisted by calling in sick without notice (absenteeism), or making crucial component parts ‘‘disappear’’. As a result, Colin believed he could not afford to disregard absenteeism:

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Colin: ‘‘It [absenteeism] is a complete disruption of the area’’

were fixed costs and could not be controlled (or reduced) in the short-term:

Colin accommodated workers’ needs to exercise both their mental and physical abilities. Consequently, Colin used the productivity reports to rationalize, rather than to formulate management decisions:

Ben: ‘‘. . .overhead. . .is about 130% of labor cost. . .Labor cost will be one-sixth of the cost of material used.’’

Researcher: ‘‘So how do you use the productivity data. . .?’’ Colin: ‘‘I use it as an explanation. So there’s always a reason why it has gone up or whatever. And to me, if you forecast, and you have done your job to the best of your ability as you can do it, and if somebody started saying, ‘‘You are not going to do it but you still got to achieve it. ’’Well, something has got to give. And that’s why we operate- some people don’t like that. Whether X [top management] likes it or not, it is the facts of life. You can only squeeze down a side so much. . .’’ Therefore, in circumstances where workers have a high leverage of dissent, management cannot be single-minded in prioritizing capital’s interest over social ones. Management have to accommodate the social needs of workers. Furthermore, because management are also labor, they would be sowing the seeds of their own exploitation if they sacrificed their reflexivity for technocratic adherence to the efficiency ideology. 2.3.2. Sub-unit B Sub-unit B was heavily automated. Firstly, this meant that many of its workers were skilled technicians, who were responsible for overseeing operations and ensuring that the machines were operating properly. They were, however, not as indispensable as workers in sub-unit C, whose hands-on skills and experience were vital for operating the machines. Therefore, management could use casual workers to replace those who were absent—but bore the cost of the learning curve involved in using inexperienced staff. Secondly, automation meant that most of B’s costs

Ben, the manager, was required by a blanket company policy to demonstrate continual cost improvements. The only other variable costs he could reduce were minor items like gloves and earplugs that workers used in the noisy and dangerous environment. Ben resorted to increase unpaid labor: Ben: ‘‘It is difficult to control overheads as the [automated equipment] is hard to move around. The only overheads that you can improve on are gloves, safety equipment.’’ Researcher: ‘‘Do you lower the overhead rate by increasing output, or increasing productivity?’’ Ben: ‘‘In the heavily automated sections, we look at working time. . .we work three shifts here. We roughly have a 50 minutes overlap in which two shifts overlap. And if you can reduce tea breaks or reduce overlaps in any way or reduce downtime, then you can minimize that loss to the company without any further expenditure to the company. In fact you can keep the equipment running longer. There is no extra cost to the company in doing that- it is all productivity. So especially on automated lines, if you can organize labor to relieve themselves and keep the lines going, then there is a big saving there. This is done in a number of ways, for example, by the operator on the second shift comes in and waits behind the operator on the first shift, or roster tea breaks instead of everyone taking tea break at the same time’’ Ben’s workers resisted the efficiency drive by calling in sick. Absenteeism in sub-unit B was higher than in sub-unit C. However, budgetary feedback was the means of signifying performance

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of sub-units. Ben faced an impasse because his workers could resist his cost cutting strategies without jeopardizing employment, and he could not demonstrate productivity improvement by reducing his (fixed) costs of automation. As in sub-unit C, budgetary control in the ‘‘reinforcing behavior loop’’ (see Appendix E) signaled to Ben that he should prioritize reducing production downtime. Situational factors contributed to workers in sub-unit B having a lower leverage of dissent than labor in sub-unit C. They were: substitutability of worker skills; high level of fixed costs of automated machinery; and a protected product market. Because parts produced in B were unique to the firm, they were sheltered from direct competition in the parts market. Ben responded to labor’s lower leverage of dissent by reducing unpaid labor and increasing line reliability. That is, he reduced operator change-over times between shifts, and directed his funds towards pro-active machine maintenance (see the first balancing behavior loop). His workers used their leverage to call in sick at short notice. He unsuccessfully tried to reduce absenteeism in his sub-unit by declaring that anyone who was absent during the week would not be entitled to the lucrative weekend overtime work. Consequently, as shown in the second balancing behavior loop, Ben had to carry higher stock levels than prescribed in the JIT manual. It resulted in larger batch sizes and longer production runs. Subsequently, when defects parts were manufactured, production was not halted (see second balancing behavior loop). Workers were paid overtime rates to rework the stock of defects on weekends. Therefore, prima facie, Ben’s strategy to squeeze labor appeared to be in line with organizational priorities. But downgrading workers’ needs resulted in higher levels of worker resistance compared with C. He relied on the relatively protected product market to absorb the higher (real) cost of production that was incurred in using casual workers, holding higher levels of stock, and producing large batch sizes (with the attendant increase in defect rates). The costs of these unintended consequences are captured in Appendix E. Therefore, in circumstances where there is an impasse between workers’ leverage of dissent and

capital’s efficiency requirement, management adopt a technocratic stance. They mobilize the efficiency assumptions in accounting measures in their labor strategies, thereby shifting responsibility for their short-term behavior onto corporate norms. 2.3.3. Sub-unit A The equipment technology in sub-unit A was outdated. Top management had no intention of upgrading the equipment. Over the years, more and more of its work had been taken over by subunit B as the newly designed tools in B allowed it to produce parts more efficiently. Sub-unit A would be closed if Alan, the manager, was not able to demonstrate that it measured up to international efficiency standards. Alan’s response was to publicly question the validity of the productivity measures. He played down the significance of the productivity reports and let it be known (to his staff) that he was also not overly concerned with record-keeping. This meant that operations data captured at source were distorted, Alan: ‘‘[The monthly comparison against budget allowances]. . .If you are constantly in the red, there is a ritualistic flogging or two around the place. I know what my budget is, I know what I am spending each day, I know how I am performing against that budget. . .That report [monthly deviations from budget] and the various derivatives from it, in the past has been used to what we call a screw and review. You have a weekly or monthly meeting and we all get together. And they used to bash you over the bloody head. Now if it is going to be used to bash me over the head, I’m going to make sure that it is going to be as ineffective as possible. If you want me to, I’ll make that report to read the way you bloody want to read it.’’ (In the case of sub-units B and C, the fieldwork researcher used 5 months operations data to produce the analysis in Appendices B and E. It was not possible to carry out Senge’s (1995) Systems Thinking analysis for A, as reliability of the

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operations data was suspect.) Workers had little leverage over their work (and future) because their manual labor could be replaced by casual workers and automated equipment. In the face of outdated technology, low worker leverage of dissent, and a fast disappearing parts market, Alan’s actions were motivated by the need to continue to provide employment and humanize working conditions: Alan: ‘‘I don’t spend a great deal of time on those reports. . .the bulk of my time is spent with people either counseling or directing or motivating people. This part of the job to see how things are going [in reference to performance reports], but the bulk of my time is spent in people interaction and also the planning. . .I’ve got to spend some time with them [staff] everyday and there are things that I want to do to direct them and motivate them. . .I got to talk to them about it, and also I spend a lot of my time with them telling me their problems and I have got to try and resolve them. The control of the operations of this place is, I really have to do that through the people. I just can’t sit here in isolation and look at some report.’’ Therefore, accommodative behavior was also evident where management and workers have very low level of control over the labor process. As there was little left to lose, management go for broke, manipulating and distorting the partisan measurement system used to evaluate unit viability— thereby, catering to labor’s most basic economic need, employment.

3. Discussion In this paper, we have noted two modifications in capitalist production relations, which do not remove the fundamental contradiction between capital and labor. Firstly, the form of production has transformed over time—from Taylorist engineered work practices to the ideologically manipulated culture of Economic Citizenship. The emphasis on ideological instead of coercive controls perpetuate the privileged position of property

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rights in the face of rising labor consciousness, and increasing public disenchantment with the profit objectives (Braverman, 1974; Thompson, 1990). Secondly, accounting as a primary means of managerial accountability has been similarly contested and modified over time to acknowledge the existence of competing, yet interdependent needs. Therefore, it is possible to politicize Otley’s (1978) BC–PC transition by incorporating management’s discriminate accommodation of worker autonomy in labor strategies (Friedman, 1977) against the backdrop of budgetary accountability. BC decisions are imitative-coercive (Cooper et al., 1981) in nature because they adhere to the efficiency assumptions used in the construction of budgetary controls, while PC actions are innovative attempts to compensate for accounting’s partisan construction by applying it judiciously. Friedman’s argues that Direct Control and Responsible Autonomy strategies reflect management’s acknowledgment of workers’ capacity to resist and control the competitive–interdependent relationship between capital and labor. But even the Responsible Autonomy merely camouflages the inherent contradictions in capitalist relations in order to secure worker consent. In order to provide a political insight into the BC–PC transition, we consider subordinate management accountability in the context of the worker leverage of dissent in controlling the labor process. Worker dissent leverage is affected by the circumstances surrounding production relations: the degree of indispensability of worker skill (Friedman, 1977), the type of machine technology employed, as well as the level of competition faced by products. Worker leverage, in turn, affects management’s level of accommodation of labor’s needs because management’s performance is contingent on other people’s actions (Fox, 1974). Management strategies are also shaped by their heightened sense of insecurity in being next in the exploitation line as capital continues to search for higher surplus from the labor process (Braverman, 1974). Management, as mental and wage labor, are increasingly insecure as their jobs are systematized, and delegated down the line to the shop-floor (Anthony, 1977; Dunkerely & Thomas, 1998; Hecksher, 1995). Therefore, management’s strategies cannot

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be isolated from their multiple identities as agents and victims of efficiency controls. Although management increasingly identify with oppressed labor, they are expected to develop strategies to prioritize the efficiency agenda over worker needs. March and Simon (1993; Simon, 1957, 1976) recognize that managers cannot be treated as vacuous objects, who mechanically arrive at optimal decisions, that are in the best interest of capital. Although their concept of bounded rationality recognizes that management do not always make the best possible decision, the political dimensions of decision making need to be developed. Burawoy (1979, 1985) argues that labor actively exploits itself by consenting to participate in production games that obscure the continued existence of contradictions between capital and labor. This phenomena has to be weighed against the inconsistency management experience because of differences between versions of reality depicted by accounting, and managers’ knowledge of the labor process (Giddens, 1991). Fig. 4 depicts how varying levels of worker leverage of dissent in Organisation V contributed to management’s accommodative and technocratic (that is, imitative–coercive) strategies. When worker leverage of dissent is high (as in sub-unit C) management cannot afford to ignore their call to humanize work practices because of the potential disruption to the production process. Their labor strategies recognize workers as complete and intelligent human beings, who need to be mentally stimulated by the task at hand (following Friedman, 1977). In Organization V, management

accommodated workers’ needs by spending available budget resources on training instead of relieving pressure on the production line by properly repairing machines. Management’s accommodative behavior also occurs at the other extreme end of the continuum, where the leverage of dissent is very low. Workers in sub-unit A had little leverage over their work because their unskilled labor could easily be replaced by casual workers. Worker resistance would play into top management’s hands, providing an excuse to close down operations. In a desperate attempt to keep operations open, the manager was politically motivated in selecting operations data to be fed into the accounting system. It was a desperate strategy because it was only a matter of time before the cost of production in sub-unit A would fall behind technologically advanced competitors. When there is an impasse between worker leverage of dissent and the efficiency ethos, management resort to a technocratic, imitative–coercive decision-making. In Organization V, Ben faced an impasse in demonstrating continual improvement in his budgetary performance—that is, he was caught between fixed machine costs that could not be reduced in the short-term and dissenting workers. Labor was skilled, but not as indispensable as in sub-unit C. The cost of replacing dissenting workers with less experienced workers was not made visible by the accounting system. Therefore, Ben allowed the efficiency targets embedded in accounting information to direct his strategy of increasing aspects of productivity

Fig. 4. Continuum of subordinate management behavior under budgetary control, based on labor’s leverage of dissent.

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made visible by accounting. He ensured machine reliability instead of humanizing work practices. In all three cases, regardless of the whether management displayed a technocratic or accommodative rationality, there were unintended repercussions that increased the real cost of production. These repercussions were not made visible by the budgetary control system. It granted visibility to the financial variances only in the reinforcing loop (see appendices B and E). Any attempt to reduce the unintended consequences of the partisan accountability has to address the fundamental contradiction between the goals of capital and labor. The solution must lie in recognizing that the single-minded pursuit of labor productivity cannot be politically sustained. Further, we argue that Otley’s (1978) BC–PC transition is not a uni-directional movement. Management responses are politically motivated by the circumstances surrounding worker capacity to control and shape the transformation of work. Hopwood’s PC categories would be located at both (accommodative) ends of the continuum in Fig. 4, with the BC category in the (technocratic) center.

4. Conclusion In this paper, we theorized management’s enigmatic behavior as accommodative and technocratic decision-making styles that reflect how situational factors affect worker leverage of dissent. There are a couple of limitations in our organizational study. The restriction that workers could not be directly interviewed was partially overcome by seeking evidence of worker reaction from secondary sources of information (outlined in footnote 15). Whilst these sources provide evidence of worker resistance, they are not substitutes for rich narratives about worker consciousness that could be drawn from interviews. Secondly, this study contextualizes management accountability in the political richness of three sub-units. The political dynamics is drawn from the interaction between lateral and hierarchical social networks, acts of worker resistance (which are moderated by situational factors such as machine technology, and competition), and management accountability

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processes. An analysis of the frequency of occurrence of accommodative and technocratic behaviors, based on a contextualized survey instrument, would add credibility to our theorization. Research that recognizes the politics of management behavior will become increasingly relevant as corporations are compelled to exhibit socially and environmentally friendly behaviors despite the perpetuation of workplace contradictions. The highly visible World Business Council for Sustainable Development warns that companies, which persist in pursuing economic growth at the expense of socio-environmental needs, may not survive: . . .on the subject of sustainability. . .there is indeed a connection- a strong one- among the triple bottom lines of economic, social and environmental performance. . .market forces apply not only to profit and loss and the creation of wealth, but to other factors that profoundly affect the quality of our lives. I think it’s fair to state the case in rather stark terms. . .that in the future, companies that are not sustainable- in the fullest sense of that term- will not be operationally or financially successful. It’s doubtful they will even survive. That’s why this topic has a special urgency for all of us.(Stavropoulos, W., President & CEO of Dow Chemical, 2000, p. 1). However, accounting’s partisan framework is incapable of providing triple bottom line guidance to management (Previts & Merino, 1979). Consequently, it is imperative that agency research acknowledges the politics of managing if it is to assist in formulating sustainable practices.

Acknowledgements The authors thank Alan Lowe, David Otley, Jesse Dillard, and William Carper and two anonymous reviewers for their guiding comments. Earlier versions of this paper were presented at the Asia Pacific Interdisciplinary Research in Accounting, Osaka 1998, Adelaide, 2001; Management Accounting Research Conference, Sydney 1998;

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Critical Perspectives on Accounting, New York 1999; and Critical Management Studies Conference, Manchester 1999, American Accounting Association, 2001. We thank the discussants and participants for their constructive comments. Appendix A. Interviews questionnaire

3.

Areas covered 1. Responsibilities and types of decisions made:  Interviewee’s perception of goals of organisation.  Goals for area of responsibility.  Perception of what customers expect from interviewee’s sub-unit.  Routine and ad-hoc decisions made.  Constraints and advantages of existing internal structure to sub-unit performance. 2. Existing performance information or reports: received or reported.

Adequacy Any modification, or additional information needed to discharge duties:  Fixed versus variable classification  Non-financial operating data  Fair reflection of operations. Other performance areas:  Capital budgeting  Product line management  Human resource management Financial feedback versus operating needs:  Budgets versus non-financial data  Complement each other, or conflicting signals. Possible link between performance measurement and corporate Mission Statement:  Who is my customer?  Measures that best reflect my customer’s (perceived) needs?  Measures that best reflect my needs that my supplier should be aware of? Trend over last five years: how have performance measures evolved?  

4.

5.

6.

Appendices B–E on following pages

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Appendix B. Systems thinking (Senge, 1995) of sub-unit C

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Appendix C. Analysis of ratio of machine downtime to total productive time for a critical product line

Appendix D. Analysis of stock production versus consumption levels. Sub-unit C-Part 391: stock levels vs. actual and anticipated daily requirement

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Appendix E. Systems thinking (Senge, 1995) of sub-unit B

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