The Strategic Competence of Accountants and Middle Managers in Budget Making

Accounting, Organizations and Society 36 (2011) 167–182

Contents lists available at ScienceDirect

Accounting, Organizations and Society journal homepage: www.elsevier.com/locate/aos

The strategic competence of accountants and middle managers in budget making
Bertrand Fauré a,⇑, Linda Rouleau b,1 a b

University Toulouse III, LERASS, 115 Route de Narbonne, 31077 Toulouse Cedex 4, France HEC Montréal, 3000 Chemin de la Côte Sainte-Catherine, Montréal, Canada H3T 2A7

a b s t r a c t
This paper aims to advance the notion of the ‘‘situated functionality of numbers’’ (Ahrens & Chapman, 2007) by investigating the practical knowledge of strategy which shapes the calculations performed by accountants and middle managers when they are making a budget. It proposes an in-depth investigation of the budgeting conversations collected during an extensive field study in a large construction firm that had undertaken a new partnership strategy. Drawing on a conversation analytical approach, it identifies three micro-practices of calculation constitutive of the accountants’ and middle managers’ strategic competence: invoking the usefulness of numbers to activate local projects; constructing the acceptability of numbers to report them to external partners; authorising the plausibility of numbers to reconcile local contingencies and global coherence. The paper then explores how accountants and middle managers come to a mutual understanding of their respective accountabilities when they perform their strategic competence. It ends by discussing the unintended consequences of these transformations in their professional roles. Ó 2011 Published by Elsevier Ltd.

1. Introduction In recent decades organizations have undergone two significant and related changes. Firstly, corporate strategy has tended to become increasingly business and client-oriented, secondly performance measurement systems strongly related to accounting have become increasingly complicated. These evolutions

References: Abernethy, M. A., & Lillis, A. M. (1995). The impact of manufacturing flexibility on management control system design. Accounting, Organizations and Society, 20(4), 241–260. Abertheny, M. A., & Brownell, P. (1999). The role of budgets in organizations facing strategic change: An exploratory study. Accounting, Organizations and Society, 24(3), 189–204. Ahrens, T., & Chapman, C. S. (2007). Management accounting as practice. Accounting, Organizations and Society, 32(1–2), 5–31. Anthony, R. N. (1965). Planning and control systems: A framework for analysis. Boston: Harvard Business School Press. Balogun, J. (2003). From blaming the middle to harnessing its potential: Creating change intermediaries. British Journal of Management, 14(1), 69–83. Balogun, J., Gleadle, P., Hope Hailey, V., & Willmott, H. (2005). Managing change across boundaries: Boundary-shaking practices. British Journal of Management, 16(4), 261–278. Balogun, J., & Johnson, G. (2004). Organizational restructuring and middle manager sense making. Academy of Management Journal, 47(4), 523–549. B. Fauré, L. Rouleau / Accounting, Organizations and Society 36 (2011) 167–182 Burns, J., & Baldvinsdottir, G. (2005). An institutional perspective of accountants’ new roles – The interplay of contradictions and praxis. European Accounting Review, 14(4), 725–757. Busch, T. (2002). Slack in public administration: Conceptual and methodological issues. Managerial Auditing Journal, 17(3), 153–159. Chua, W. F. (2007). Accounting, measuring, reporting and strategizing – Re-using verbs: A review essay. Accounting, Organizations and Society, 32(4–5), 487–494. Clifton, J. (2006). A conversation analytical approach to business communication. The case of leadership. Journal of Business Communication, 43(3), 202–219. Collier, P. M. (2001). The power of accounting: A field study of local financial management in a police force. Management Accounting Research, 12, 465–486. Comerford, S. E., & Abernethy, M. A. (1999). Budgeting and the management of role conflict in hospitals. Behavioral Research in Accounting, 11, 93–110. Cooren, F. (2004). The communicative achievement of collective minding. Analysis of board meeting excerpts. Management Communication Quarterly, 17(4), 517–551. Covaleski, M. A., Evans, J. H., Luft, J. L., & Shields, M. D. (2003). Budgeting research: Three theoretical perspectives and criteria for selective integration. Journal of Management Accounting Research, 15, 3–49. Creswell, J. W., & Miller, D. L. (2000). Determining validity in qualitative inquiry. Theory into Practice, 39(3), 124–130. Davila, T., & Wouters, M. (2005). Managing budget emphasis through the explicit design of conditional budgetary slack. Accounting, Organizations and Society, 30(7), 587–608. Davis, S., DeZoort, F. T., & Kopp, L. S. (2006). The effect of obedience pressure and perceived responsibility on management accountants’ creation of budgetary slack. Behavioral Research in Accounting, 18(1), 19–35. Denis, J.-L., Langley, A., & Rouleau, L. (2006). The power of numbers in strategizing. Strategic Organization, 4(4), 349–377. Dulaimi, M. F. (2005). The challenge of customer orientation in the construction industry. Construction Innovation, 5(1), 3–12. Dunk, A. S., & Nouri, H. (1998). Antecedents of budgetary slack: A literature review and synthesis. Journal of Accounting Literature, 17, 72–96. Dutton, J. E., Ashford, S. J., O’Neil, R. M., Hayes, E., & Wierba, E. E. (1997). Reading the wind: How middle managers assess the context for selling issues to top managers. Strategic Management Journal, 18(5), 407–423. Fairhurst, G. T., & Cooren, F. (2004). Organizational language-in-use: Interaction analysis, conversation analysis and speech act schematics. In D. Grant, C. Hardy, C. Oswick, & L. L. Putnam (Eds.), Handbook of Organizational Discourse (pp. 131–152). London: Sage. Fairhurst, G. T., & Putnam, L. L. (2004). Organizations as discursive constructions. Communication Theory, 14(1), 5–26. Fauré, B., Brumman, B., Giroux, N., & Taylor, J. (2010). The calculation of business, or the business of calculation? Accounting as organizing through everyday communication. Human Relations, 63(8), 1249–1273. Fisher, J. G., Frederickson, J. R., & Peffer, S. A. (2006). Budget negotiations in multi-periods settings. Accounting, Organizations and Society, 31(6), 511–528. Floyd, S. W., & Wooldridge, B. (1997). Middle management’s strategic influence and organizational performance. Journal of Management Studies, 34(3), 465–485. Floyd, S. W., & Wooldridge, B. (2000). Building strategy from the middle: Reconceptualising strategy process. Thousands Oaks, CA: Sage. Frow, N., Marginson, D., & Ogden, S. (2005). Encouraging strategic behaviour while maintaining management control: Multi-functional project teams, budgets, and the negotiations of shared accountabilities in contemporary enterprises. Management Accounting Research, 16(3), 269–292. Giddens, A. (1984). The constitution of society. Cambridge: Polity. Govindarajan, V. (1989). Implementing competitive strategies at the business unit level: Implications of matching managers with strategies. Strategic Management Journal, 10(3), 251–269. Granlund, M., & Lukka, K. (1998). Towards increasing business orientation: Finnish management accountants in a changing cultural context. Management Accounting Research, 9, 185–211. Hope, J., & Fraser, R. (2003). Beyond budgeting: How managers can break free from the annual performance trap. Boston: Harvard Business School Press. Järvenpää, M. (2007). Making business partners: A case study on how management accounting culture was changed. European Accounting Review, 16(1), 99–142. 181 Jarzabkowski, P., Balogun, J., & Seidl, D. (2007). Strategizing: The challenges of a practice perspective. Human Relations, 60(1), 5–27. Jensen, M. C. (2003). Paying people to lie: The truth about the budgeting process. European Financial Management, 9, 379–406. Johnson, G., Langley, A., Melin, L., & Whittington, R. (2007). Strategy as practice: Research directions and resources. Cambridge: Cambridge University Press. Johnson, G., Melin, L., & Whittington, R. (2003). Micro strategy and strategizing: Towards an activity-based view. Journal of Management Studies, 40(1), 3–22. Laine, P. M., & Vaara, E. (2007). Struggling over subjectivity: A discursive analysis of strategic development in an engineering group. Human Relations, 60(1), 29–58. Lillis, A. M. (2002). Managing multiple dimensions of manufacturing performance – An exploratory study. Accounting, Organizations and Society, 27(6), 497–529. Llewellyn, S., & Milne, M. J. (2007). Accounting as codified discourse. Accounting, Auditing and Accountability Journal, 20(6), 805–824. Lowe, A., & Jones, A. (2004). Emergent strategy and the measurement of performance: The formulation of performance indicators at the microlevel. Organization Studies, 25(8), 1313–1337. Lukka, K. (1988). Budgetary biasing in organizations: Theoretical framework and empirical evidence. Accounting, Organizations and Society, 13(3), 281–301. Mantere, S. (2005). Strategic practices as enablers and disablers of championing activity. Strategic Organization, 3(2), 157–184. Marginson, D. E. W. (2002). Management control systems and their effects on strategy formation at middle-management levels: Evidence from a UK organization. Strategic Management, 23(11), 1019–1031. Oakes, L. S., Townley, B., & Cooper, D. J. (1998). Business planning as pedagogy: Language and control in a changing institutional field. Administrative Science Quarterly, 43, 257–292. Orlikowski, W. J. (2002). Knowing in practice: Enacting a collective capability in distributed organizing. Organization Science, 13, 249–273. Price, A. D. F., Ganiev, B. V., & Newson, E. (2003). Changing strategic management practice within the UK construction industry. Strategic Change, 12(7), 347–366. Pries, F., Doree, A., Van der Veen, B., & Vrijhoef, R. (2004). The role of leaders’ paradigm in construction industry change. Construction Management and Economics, 22(1), 7–10. Putnam, L. L., & Cooren, F. (2004). Alternative perspectives on the role of text and agency in constituting organizations. Organization, 11(3), 323–334. Roberts, J. (1991). The possibilities of accountability. Accounting, Organizations and Society, 16(4), 355–368. Robichaud, D., Giroux, H., & Taylor, J. R. (2004). The meta-conversation: The recursive property of language as the key to organizing. Academy of Management Review, 29(4), 1–18. Robson, K. (1992). Accounting numbers as ‘‘inscription’’: Action at distance and the development of accounting. Accounting, Organizations and Society, 17(7), 685–708. Rouleau, L. (2005). Micro-practices of strategic sensemaking and sensegiving: How middle managers interpret and sell change every day. Journal of Management Studies, 42(7), 1413–1441. Rouleau, L., & Balogun, J. (2011). Middle managers, strategic sensemaking and discursive competence. Journal of Management Studies (accepted, forthcoming). doi: 10.1111/j.1467-6486.2010.00941.x. Samra-Fredericks, D. (2003). Strategizing as lived experience and strategists’ everyday efforts to shape strategic direction. Journal of Management Studies, 40(1), 141–174. Samra-Fredericks, D. (2005). Strategic practice, ‘discourse’ and the everyday interactional constitution of ‘power effects’. Organization, 12(6), 803–841. Samra-Fredericks, D. (2010). Researching everyday practice: The ethnomethodological contribution. In D. Golsorkhi, L. Rouleau, D. Seidl, & & E. Vaara (Eds.), Cambridge handbook of strategy as practice (pp. 230–242). Cambridge University Press. Senaratne, S., & Sexton, M. (2008). Managing construction project change: A knowledge management perspective. Construction Management and Economics, 26(12), 1303–1311. Simons, R. (1987). The role of management control systems and business strategy: An empirical analysis. Accounting, Organizations and Society, 12, 357–374. Skærbæk, P., & Tryggestad, K. (2010). The role of accounting devices in performing corporate strategy. Accounting, Organizations and Society, 35, 108–124. 182 B. Fauré, L. Rouleau / Accounting, Organizations and Society 36 (2011) 167–182 Van der Veeken, H., & Wouters, M. (2002). Use of accounting information systems by operations managers in a project company. Management Accounting Research, 13(3), 345–370. Vollmer, H. (2007). How to do more with numbers: Elementary stakes, framing, keying, and the three-dimensional character of numerical signs. Accounting, Organizations and Society, 32(6), 577–600. Weick, K. E., & Roberts, K. H. (1993). Collective mind in organizations: Heedful interrelating on flight decks. Administrative Science Quarterly, 38(3), 357–381. Styhre, A., & Josephson, P.-E. (2006). Revisiting site manager work: Stuck in the middle? Construction Management and Economics, 24(5), 521–528. Taylor, J. R., & Robichaud, D. (2004). Finding the organization in the communication: Discourse as action and sensemaking. Organization, 11(3), 395–413. Taylor, J. R., & Van Every, E. J. (2000). The emergent organization: Communication as its site and surface. Mahwah, NJ: Lawrence Erlbaum. Van der Stede, W. (2000). The relationship between two consequences of budgetary control: Budgetary slack creation and managerial shortterm orientation. Accounting, Organizations and Society, 25(6), 609–622.