AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS A study of the emergence of management accounting system ethos and its influence on perceived system success Alnoor Bhimani Department of Accounting and Finance, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, UK Abstract This study considers how certain notional organisational culture elements became embedded in the design of an innovative management accounting system (MAS) and how the alignment between the cultural premise of the MAS and that espoused by MAS users influenced the perceived success of the new system. The research data for the study were obtained over a three and half year period and derive from interviews, questionnaire responses and public as well as internal corporate documents. The site chosen for the study is a division of Siemens—a global firm in the electronics and electrical components industry. Two employee groups with functional expertise in engineering and business eco- nomics respectively comprise the MAS user groups. During the development and implementation phases of the new MAS, Siemens was actively engaged in a corporate-wide culture change programme that was supportive of the new MAS initiative. The study results are in two parts. First they report on the manner in which the organisational pro- gramme of culture change affected the cultural premise of the new system. Second, they indicate that the degree of alignment between the organisational culture elements which were embedded within the MAS and the organisational outlook of the two user groups significantly influenced the system’s perceived success. # 2003 Elsevier Science Ltd. All rights reserved. 1. Introduction Past research suggests that different groups of MAS users within organisations exhibit different rationales, priorities and cultural orientations (Ahrens, 1996, 1997, 1999; Appleyard & Pallett, 2000; Bamber, 1993; Birnberg & Shields, 1989; Bruns & McKinnon, 1993; Ko & Mock, 1988; Lo ¨ n- ing, 1994; Markus & Pfeffer, 1983; Young & Selto, 1991) and that these may influence their perceptions of the success of MAS changeovers (Brewer, 1998; Broadbent, 1992; Dent, 1991; Ezzamel, 1987; God- dard, 1997a; Hopwood, 1989; Mouritsen, 1996; O’Connor, 1995; Roberts, 1990). Some researchers suggest that changes in organisational control systems tend to be deemed successful when accompanied by organisation cultural values which support the new systems (Das, 1986; Dent, 1987; Robey & Farrow, 1982; Rowlinson, 1995; Zmud, 1979). Moreover, user involvement in the design of information systems has been reported to enhance the perceived success of a systems change because user value assumptions become embedded into the new systems’ architecture (Argyris & Kaplan, 1994; Birnberg, 1998; Caplan, 1988; Fisher, 1998; Franz & Robey, 1986; Markus & Pfeffer, 1983; Shields & Young, 1989). Whilst evidence exists that the introduction of a novel management accounting system can bring about desired consequences when the system users 0361-3682/03/$ - see front matter # 2003 Elsevier Science Ltd. All rights reserved. PII: S0361-3682(02)00025-9 Accounting, Organizations and Society www.elsevier.com/locate/aos AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS consider the organisational values of their work- ing environment to be consistent with those embedded within the new system, there has been little research on how such consistencies emerge. The present study aims to address this concern by exploring how certain notional organisational culture elements became embedded features of a newly implemented MAS within a specific organi- sation. It also aims to investigate how the align- ment between the organisational culture elements which were embedded within the MAS and the organisational outlook of two MAS user groups influenced their perception of the success of the new system. The site chosen for this study is the Fibre Optics business unit (HLFO) of the Semiconductors Group of Siemens AG—a global electronics and electrical components firm. Operational officers within HLFO have specific expertise either in engineering (Technisch) or in business economics (Kaufmannisch). Engineering and business officers’ educational training differs in that the former tend to possess engineering based qualifications whereas the latter have a business economics aca- demic background. These two distinct functional expertises provide a basis for categorising opera- tional officers at HLFO into two different employee groups. The new management account- ing system adopted by HLFO is called process- based target costing (PBTC) which was designed by HLFO engineering officers between September 1995 and May 1996. PBTC became operational in August 1996. The information collected to achieve the two aims of the investigation is derived from different sources. Interviews were carried out between early 1995 and mid-1998 with company officers. Inter- nal documents, accounting reports, statistical data, graphical charts and official company his- tories were consulted. Two questionnaires were also used for collecting data on the MAS users’ organisational culture orientation. One ques- tionnaire was administered to engineering and busi- ness officers prior to the introduction of the new accounting system and the other was administered following its implementation. Whilst HLFO was in the process of designing and implementing the new MAS, a corporate-wide culture change pro- gramme was in progress at Siemens. The two questionnaire administrations enabled changes in the users’ organisational outlooks over this time period to be assessed. The second questionnaire also included a question on the users’ perception of the success of the new MAS. The paper is structured as follows: following a review of the literature dealing with organisational culture and MAS ethos alignment, the paper dis- cusses the emergence of the new MAS’s ethos in the light the corporate culture change programme being put into effect throughout Siemens. The questionnaire and interview-based approach and hypotheses for investigating how the alignment between the organisational culture elements characterising the MAS and the system users’ orientation towards a developmental culture relate to the new MAS’s perceived success are subse- quently considered. Following a discussion of the results of the investigation, the paper’s concluding section addresses some of the implications of the study and future research possibilities in the area. 2. Literature review 2.1. Management accounting systems and organisational culture The management accounting literature has only recently started to show empirical concern with the concept of ‘organisational culture’ (Dent, 1991; Goddard, 1997a, 1997b; O’Connor, 1995) though the potential of studying links between organisational culture and systems of control has long been posited (Flamholtz, 1983; Hopwood, 1987; Markus & Pfeffer, 1983; Ouchi & Johnson, 1978). More recently, Shields (1995) and Birnberg (1998, 2000) have reiterated the desirability of investigating how cost management systems adoptions and effects are conditioned by variables such as organisational culture. Whilst there is evidence to suggest that the per- ceived implementation success of a new MAS is influenced by whether its information output is considered easy to use, accurate and timely, investigations of organisational culture and con- trol practices indicate that successful information 2 A. Bhimani / Accounting, Organizations and Society AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS systems changes tend to result when supporting and compatible organisational values are in place (DeLone & McLean, 1992; Doll & Torkzadeh, 1988; Earley & Kanfer, 1985; Hogarth, 1993; Shields, 1995). Research studies suggest that the introduction of novel information systems may not bring about the desired effects if users do not perceive the organisational characteristics and cli- mate of their working environment to be con- sistent with the values embedded within the new system (Cushing,1990; Das, 1986; Robey & Far- row, 1982; Rowlinson, 1995; Zmud, 1979). How closely the cultural orientation of management accounting information users aligns with the value assumptions factored into the design of a MAS has likewise been reported to have an influence on the perceived implementation success of a new system (Argyris & Kaplan, 1994; Birnberg, 1998; Caplan, 1988; Shields & Young, 1989). Some scholars posit the existence of direct linkages between accounting systems characteristics and corporate culture (Goddard, 1997a; O’Connor, 1995; Soeters & Shreuder, 1988) and between organisational culture and accounting systems design (Bourn & Ezzamel, 1986; Broadbent, 1992; Dent, 1991). In the context of cost management innovations, Shields and Young (1989) and Young (1997) sug- gest that often, novel systems are administrative rather than technical in nature and as such, their implementation fate is not independent of the preferences, goals and strategies of top managers. Foster and Swenson (1997), McGowan and Klammer (1997) and Friedman and Lyne (1995, 1999) provide empirical support in this light. Cooper, Kaplan, Maisel, Morrisey, and Oehm (1992) offer some evidence that a variety of behavioural and organisational factors are inter- twined with the implementation of activity based costing (ABC) systems and Anderson (1997) and Anderson and Young (1999) explore the existence of relationships between contextual variables such as organisational commitment and shared organisational values and ABC implementation success. Following an investigation of Canadian firms, Gosselin (1997, p. 8) has reported that: ‘‘ administrative innovations such as ABC are easier to adopt and implement in mechanistic organizations’’. Based on a study of Finnish organisations, Malmi (1997, p. 21) concludes that user resistance can lead to ABC systems failure and that organizational culture is ‘‘important’’ in explaining such resistance. Argyris and Kaplan (1994) identify organisational culture change stra- tegies that can be effected to overcome employee resistance to the introduction of ABC and Hen- ning and Lindahl (1995, p. 58) stress the impor- tance of having an ABC system implementation ‘‘ fit the current culture of the organization’’. Different levels of success in management infor- mation systems implementations have also been argued to depend on organisational groupings (Cooper & Zmud, 1990; Cushing, 1990; Lucas, 1975; Newman & Rosenberg, 1985). Research on group polarisation suggests that group interaction enhances the salience of value conformity (Barki & Hartwick, 1989; Brown, 1965) and that it increases familiarity with different information elements (Bates, Amundson, Schroder, & Morris, 1995; Rutledge & Harrell, 1994). Moreover, inter- group interaction causes ‘‘bonding to a choice or system as well as leads to a convergence of utili- ties’’ (Whyte, 1989, p. 49). Studies of the imple- mentation of management accounting innovations suggest that their information output ‘‘ is used for various purposes by various organizational sub-groups’’ (Malmi, 1996, p. 243) with effects that are ‘‘far from unambiguous’’ (Ibid.). Shields and Young (1989, 1994) believe that cost management systems implementation success depends on specific group based behavioural vari- ables. Attention must be given to how well an innovation such as the implementation of a new MAS matches the preferences, goals, strategies, agendas, skills and the resources of dominant employee groups (Shields, 1995). In this light, Scapens and Roberts (1993) have investigated the emergence of resistance to the implementation of a new information system within an organisation with different subcultures. They report that although different organisational participants can be agreed on the desirability of altered infor- mation systems for controlling internal oper- ations, there may be ‘‘ very different perceptions of the precise nature of these infor- A. Bhimani / Accounting, Organizations and Society 3 AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS mation needs’’ (Scapens & Roberts, 1993, p. 31). They document the disparity between divisional managers’ predilection for information defined primarily in economic terms and unit company managers’ preference for accounting information focusing on production factors, scheduling resources and delivery issues. These findings lend appeal to Argyris’s (1990, p. 503) contention that an accounting system’s technical features will be premised on accounting information system designers’ ‘‘technical theory of control’’ which may not accord with the views of users. Markus and Pfeffer (1983) have similarly documented instances of information system implementation failures whereby the ethos of newly implemented information systems are at odds with the under- lying departmental culture of information user groups. Whilst this literature has sought to explore ways in which systems changeovers are affected by their designers and users’ organisational culture orien- tations, it has not addressed the question of how the technical configuration of management accounting systems can evolve such as to embed particular organisational culture elements. This is one intent of the present study which also investi- gates how far the alignment between the organi- sational culture elements espoused by two functional employee groups within a business unit of Siemens and those embedded within a new MAS are associated with the users’ perceptions of MAS success. To this end, a methodological model to assess organisational culture orientation is considered below. 2.2. The competing values model of organisational culture Organisation research concerned with the role of organisational culture has had to contend with a wide variety of definitions of organisational cul- ture (see Martin, 1992; Reichers & Schneider, 1990; Weick, 1985 for reviews). For the purposes of this paper, organisational culture is taken to refer to the patterns of values and ideas in organisations that shape human behaviour and its artefacts (Zammuto & Krakower, 1991). This definition is sufficiently broad as to be, in the main, identifiable with most quantitative and/or qualitative organi- sational culture studies (Pettigrew, 1979). Although some researchers contend that organi- sational culture cannot be effectively examined using quantitative methods (Frost, Moore, Louis, Lundberg, & Martin, 1991; Louis, 1983; Schein, 1985; Smircich, 1983) and that ‘‘culture needs to be observed, more than measured’’ (Schein, 1996, p. 229), others see statistical analyses as being able to contribute significantly to investigations of organisational culture (Hofstede, Neuigen, Okayre, & Sanders, 1990; Rousseau, 1990; Saf- fold, 1988; Siehl & Martin, 1988; Wilkins & Ouchi, 1983; Zammuto & Krakower, 1991). The present study makes use of qualitative information regarding cultural changes within Siemens obtained from internal corporate documents, external publications as well as from interviews with HLFO and other Siemens executives. The study also derives information from the admini- stration of two questionnaires based on a model concerned with organisational culture elements. Within the organisation study literature, a number of different models exist for quantitatively analysing organisational culture (see Xenikou & Furnham, 1996). The present study focuses on aspects of organisation culture which are explored using the competing values model (Cameron & Quinn, 1998; Quinn, 1988; Quinn & Kimberly, 1984; Quinn & Rohrbaugh, 1981, 1983). The competing values model differentiates between underlying values which create meaning in orga- nisational settings and the cultural artefacts that reflect them. This model relies on the premise that although cultural artefacts such as myths, lan- guage, rituals and symbols are specific to organi- sations, values are not. The model assumes that it is not different sets of values which give rise to different organisational cultures but varying emphases on the limited set of values prevalent within the larger society. This perspective is one that is gaining favour among researchers inter- ested in the relationships between national culture and management accounting and control systems (see Harrison & McKinnon, 1999). Quinn and Kimberly (1984, p. 298) argue that the competing values model can enable ‘‘ such things as the means of compliance, motives, lea- 4 A. Bhimani / Accounting, Organizations and Society AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS dership, decision-making effectiveness, values and organizational forms’’ to be explored. This is made possible by identifying different axes of organisational effectiveness. Quinn and Kimberly (1984) propose that one of these relates to an organisational focus ranging from, at one end, an internal and micro-emphasis on the well-being and development of people within the organisation to stressing the well-being and development of the organisation itself at the other extreme. Another value dimension which they advance relates to organisational structure ranging from empha- sizing stability and control to stressing flexibility and change. The competing values model thus enables four resulting cultural types of organi- sational orientations to be posited: group, develop- mental, hierarchical and rational (see Fig. 1). Quinn and Kimberly (1984) consider that the ‘‘group’’ culture is based on norms and values associated with affiliation. It emphasises flexibility and internal focus and stresses cohesion, morale and member participation in decision making as means and human resource development as ends. The group culture’s strategic orientation is one of implementation through consensus building. The ‘‘developmental’’ culture which stresses flexibility Fig. 1. The competing values model [adapted from Quinn and Kimberly (1984)]. A. Bhimani / Accounting, Organizations and Society 5 AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS and an external focus is permeated by assumptions of dynamic change. Growth and resource acqui- sition as ends are enabled by readiness and flexi- bility as means. It is the ideological appeal of the task undertaken which motivates individuals. The ‘‘hierarchical’’ culture underscores the rele- vance of control and internal focus. Information management and communication as means enable the achievement of stability and control as ends. Effectively, this cultural type reflects the values and norms associated with bureaucracy. Sig- nificance is given to orderly work situations with sufficient co-ordination and distribution to pro- vide organisational participants with a sense of security, continuity and stability. Individuals’ actions are directed by formally delineated roles and enforcement is ordered by rules and regu- lations. Finally, the ‘‘rational’’ cultural type stres- ses control and external focus. Productivity and efficiency as ends are brought about by planning and goal setting as means. Achievement is emphasised and individual motivation comes from the meritocracy-based belief that competent per- formance and achievement of designated organi- sational objectives are to be rewarded. Quinn and Kimberly (1984, p. 300) affirm that although no organisation is likely to identify purely with only one culture, ‘‘ a distinctive cul- ture reflective of one characteristic grouping as opposed to another’’ in terms of the competing values model will prevail. Table 1 identifies char- acteristic elements of each cultural type based on the competing values model. The following section discusses the organisa- tional programme of culture change at Siemens and the emergence of the new management accounting system—process based target costing at HLFO. Its purpose is to delineate the manner in which the culture change programme shaped the cultural premise upon which the new MAS fea- tures were founded in terms of the competing values model dimensions. Whilst the study makes use of several sources of information, for the fol- lowing part, general information on Siemens was obtained from official external and internal pub- lications as well as from published interviews with company executives. Interviews were also under- taken with Siemens managers both from within and from outside the Fibre Optics unit (see Table 2). 3. Culture change at Siemens 3.1. In pursuit of flexibility and external outlook In early 1993, Siemens launched a company- wide culture change programme referred to as Table 1 Organisational culture type characteristics under the competing values model a Culture types Characteristics Group Developmental Hierarchical Rational Flexibility vs control Flexibility Flexibility Control Control External vs internal Internal External Internal External Means Member participation, cohesion, morale Adaptability, readiness Communication information management Planning, goal setting Ends Development of human resources Growth, resource acquisition Stability, bureaucracy, control Productivity efficiency Compliance Affiliation Ideology Rules Contract Motivation Attachment Growth Security Competence Leadership Concerned supportive Inventive risk taking Conservative cautious Directive goal oriented a Based on Quinn and Kimberly (1984). 6 A. Bhimani / Accounting, Organizations and Society AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS time optimized processes (TOP). At the heart of this organisational drive, was an attempt to engender greater flexibility of operational prac- tices and an enhanced outward management orientation. Many managers across the organi- sation perceived a need to alter their business units’ accounting information systems once the implementation of the TOP initiative had started to take effect. The TOP programme aimed to achieve greater ‘‘customer and process orien- tation, faster decision making, team-oriented management, enhanced self-initiative and self- responsibility’’ (Siemens, 1994, p. 3). Alongside these goals, managers sought ‘‘more powerful cost consciousness and more effective cost manage- ment’’ (Innovation Management Director com- menting on the TOP initiative, 3/6/1996). To understand how the Siemens-wide programme of culture change affected the design of the new MAS at HLFO, it is essential to consider the emergence of TOP at Siemens. The idea that ‘‘it is essential to simplify and to reduce decision processes and to place ourselves closer to the market and to our customers’’ (Karl Heinz Kaske, President of Siemens, cited in Michel & Longin, 1990, p. 161) was a concern which had been expressed by Siemens’ top man- agement since the mid-1980’s. Kaske had articu- lated a need for the organisation to become more flexible, dynamic and competitive. He had sought: an internal structure to enable us to dis- cover, develop and encourage our managers’ entrepreneurial talents in order to allow them total managerial control over projects rather than simply partial authority (Ibid.) Table 2 Interviews undertaken with managers at Siemens Interviewee Siemens unit Duration (min) Information Manager Defence Electronics 30 TOP Programme Executive Siemens Plessey Sytems 30 Innovation Management Director Siemens Nixdorf 45 Innovation Management Officer Siemens Nixdorf 30 Management Development Consultant Siemens Corporate Communications 30 General Manager—Business Improvement Siemens PLC (UK) 15 Human Resources Manager Private Communication Systems 30 Engineering Manager Siemens-Matsushita Components 20 TOP Programme Officer Drives and Standard Products 30 Manager—Human Resources Strategy Semiconductors 45 Information Systems Manager Semiconductors 60 Finance Director Private Communication Systems 30 Deputy Director Public Communications Networks 20 Engineering Consultant Electronic Components 45 Management Training Corporate Human Resources 30 Regional Manager (Europe) Development 30 Information Systems Manager Infrastructure Services 45 PBTC Software Developer HLFO 45 Phoenix Technical Project Leader HLFO 90 Head of Production Planning HLFO 45 Strategy and Marketing Manager HLFO 30 Assistant to General Manager HLFO 30 Product Developer A HLFO 20 Product Developer B HLFO 45 PBTC Project Leader HLFO 90 Financial Manager HLFO 90 General Manager HLFO 120 Head of Accounting HLFO 90 A. Bhimani / Accounting, Organizations and Society 7 AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS In 1985, Kaske restructured Siemens’ activities into three distinct elements (divisions, regional units and central services) to ‘‘ enhance effi- ciency, reduce costs and avoid duplication of activities’’ (Ibid.). In 1989, the company put into place further decentralization measures which cul- minated into the present company structure con- sisting of divisions, groups and business units. During the 1990’s, senior company executives continued to voice concerns similar to Kaske’s. For instance, Siemens’ General Works Manager indicated that: we harbour some doubts about whether thinking in terms of competitive, market and cost advantages truly permeates our corpora- tion (Siemens, 1990, p. 2). A major problem according to him was that ‘‘personal goals and business goals often take separate or even divergent paths’’ (Ibid., p.3). One difficulty faced by the organisation was perceived to relate to information exchange and communi- cation channels. A Senior Innovations Manager had noted that Within the organisation, there are obvious inter-company communication barriers. There is talk of a wall of silence between the upper levels and the rest of the staff, who are left in ignorance regarding the background to many decisions (Siemens, 1991a, p. 2). Likewise, an Engineering Works Manager had remarked that ‘‘stumbling blocks’’ stood in the way of commitment and entrepreneurial action: Many regard change primarily as a risk. Innovative, entrepreneurial action becomes shipwrecked on the jagged rocks of rigid demarcation (Siemens, 1991b). A year after his appointment as President and Chief Executive Officer in 1992, Heinrich von Pierer launched the ‘‘time optimized processes’’ (TOP) culture change programme to ‘‘tear down barriers within the company’’ (interview excerpts form The Economist, 13/11/1996, p. 12). Heinrich von Pierer’s basic strategy was to give equal weight to both cost-cutting and reaping the rewards of the ‘‘cultural revolution’’ (Ibid) through increased flexibility in the way organizational processes were carried out and greater awareness of external market factors. Under TOP, two hundred and sixty independent business units were created each with responsibility for bringing about a change in culture. Employees were to be remunerated on the basis of results rather than rank as had been the case traditionally. Staff were expected to assess their superiors as well as be assessed by them. An internal employee magazine noted TOP’s aim to ‘‘achieve accelerated optimisation of all processes in the value chains’’ (Siemens, 1994, p. 2) and to ‘‘ design more efficient structures, decision pat- terns and processes’’ (Siemens, 1994, p. 2). The TOP initiative singled out productivity measures as having three dimensions: quality, time and cost. One Financial Manager noted that: If we shorten and simplify our development and marketing processes, then costs will go down quality will go up. Our aim is to be faster, better and cheaper than our competi- tors (4/6/1996). During the early 1990’s, senior managers within the Semiconductors division at Siemens identified a variety of problems including long decision pro- cesses, excessive bureaucratic hurdles, repair and quality problems arising from high levels of labour demarcation, uncontrollable document complex- ity, illogical process flows, inadequate inter- departmental communication and ineffective information systems structures. The TOP pro- gramme attempted to fuel the implementation of innovations such as ‘‘time based management’’, ‘‘total quality management’’, ‘‘total cycle time analysis’’ and ‘‘kaizen’’ among others so as to foster ‘‘ customer and process orientation, faster decision making, team-oriented management, enhanced self-initiative and self-responsibility’’ (Siemens, 1994, p. 3). Once the implementation of TOP was under way, it had an impact on work attitudes according to a number of managers at Siemens. An Engineering Manager indicated that a TOP motivated re-engi- 8 A. Bhimani / Accounting, Organizations and Society AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS neering project had led to ‘‘ teamwork, job- rotation, group meetings, speaking your mind which were practically inconceivable before, are now all part of a day’s work’’ (3/6/1996). An Inno- vation Management Director noted that: ‘‘Today there is a powerful cost consciousness in the com- pany together with a broad palette of cost controls’’ (3/6/1996). He nevertheless believed that: In comparison to our competitors, we cannot claim to be front-runners in cost cutting We are profit-minded but the follow-through is weak and inconsistent (Ibid) and stressed that: In the future, we will commit ourselves to effective cost management at all levels and in all functions since consistent profit is an important indicator of whether we are doing the right thing and doing it right. TOP provides a framework for moving in this direction (Ibid.). The TOP culture change programme continued to receive wide publicity across all groups and divisions and was made visible through a multitude of plat- forms: logos, office stationary, internal newsletter articles and corporate confectionery among others. Certain dimensions of the TOP initiative were to become extensively reflected in the target cost management system (process based target costing) which was to be implemented at HLFO. In particular, cost, quality and time concerns of the programme of cultural change, were to be central elements of the new MAS. Concurrently, factors which underscored the relevance of flexible work practices and high sensitivity to the enterprise’s external environment were to be important characterising features of the new system. One TOP initiative publication stated that: Time and quality are key to improved perfor- mance and lowered costs. Significant cost dis- advantages with competitors are attributable to inadequate product design and wasteful processes. It is here that out greatest potential lies (Siemens, 1996). It further stressed that: improved results are dependent not only on costs but also on the relationship between productivity and costs which can be improved if infrastructure and processes are improved as well as time and quality para- meters (Siemens, 1996). These elements of the TOP initiative were to become embedded in the design of the new MAS. 3.2. Process based target costing At HLFO, the belief that costing information of a different type to that being provided was neces- sary had began to be voiced from early 1995. Until late 1994, HLFO had controlled a large portion of the fibre optics market for IBM mainframe com- puters. But at this time, a foreign competitor entered the market with the objective of taking over a major part of Siemens’ market share in this sector primarily by offering the same products at a lower price. This led HLFO managers to consider ways of reducing product costs initially through more flexible production practices and efficiency drives and subsequently by redesigning production specifications and processes so as to reduce overall resource consumption over the longer term. In order to remain competitive, HLFO man- agers believed it was necessary to bring down the total manufacturing costs of its subcomponent parts to around one third of their original level in the face of the emerging competitive threat. HLFO started to focus on the emerging market and financial information needs of design engi- neers. In September 1995, HLFO initiated the development of a target cost based accounting system which aimed to provide accounting infor- mation on market imposed cost ceilings for differ- ent product functions. The system was developed by a team of HLFO designers with engineering functional expertise who interfaced with other engineers in operational departments about their information requirements. The design engineers also liaised with HLFO accountants trained in business economics about implementation issues concerning PBTC. A. Bhimani / Accounting, Organizations and Society 9 AOS 387 Disk used No. pages 26, DTD=4.3.1 Version 7.51e ARTICLE IN PRESS Whilst the newly perceived information needs of design engineers were being addressed, HLFO also launched what it termed the ‘Phoenix’ project in September 1995 which was a re-engineering exer- cise to alter the manufacturing process. Phoenix entailed the reconfiguration of manufacturing such that all basic products would run on one automated line prior to mass-customising the product. All products were to use modularised production steps according to individualised pro- duct specifications. Design engineers at HLFO had not traditionally desired or been provided with extensive account- ing information relating to either manufacturing processes or to the selling prices of fibre optics products. Their primary role had been to develop leading edge technological innovations and to seek ways of further improving product specifications, performance and efficiency. The accounting sys- tem in place at HLFO had been designed with the object of allocating rather than tracing costs in line with Siemens-wide accounting procedures. This costing system divided material and produc- tion elements into cost blocks and used volume- based allocation methods. Direct material and direct labour costs served as a basis for the appli- cation of different overhead costs using predefined overhead rates. This practice did not seek to relate resource changes in components to changes in production or to enable costings for different gen- erations of re-engineered products to be com- pared. Thus, if for instance, a process change resulted in the production time being reduced by 50%, the accounting system allocated the same overhead cost amount to a smaller base by doubl- ing the allocation ratio without providing design engineers with information on the origins and flows of costs. The Phoenix project team’s focus of attention was mainly on analysing the production process. But the production process was itself in large part reflective of product design which determined the basis of production workflow, timing and ultimately costs. It was difficult for the design engineers to address questions about the impact of a com- ponent change on the cost of the production pro- cess. What was deemed desirable was to have linkages between the decisions made at the design stage and the resultant effects on the production costs. If such information could be made avail- able, it would enable design decisions to take account of production implications which them- selves had to be considered in the context of cus- tomer requirements. A key element of the project was the application of target costing concepts to set market-defined parameters affecting produc- tion cost, timing and quality factors. To enable this, the engineering officers working on the Phoenix initiative integrated engineering and cost management information relating to costs, time and quality factors into single reports. PBTC’s information output was thus intended to assist the design and production engineering officers to relate product function areas to the production process. PBTC became operational in August 1996 and by April 1997, an HLFO officer who had set up the software requirements for producing PBTC information reports indicated that: ‘‘All new design projects are now using the tool and it is also used for all existing products’’ (24.4.97). The implementation of PBTC necessitated interaction among different operational depart- ments and extensive communication between engineering and business officers. TOP’s basic concerns included the transparency of organi- sational processes, quality accountability, team orientated co-operation, market competition awareness and cost consciousness which were also central to PBTC. PBTC reports were intended to enable the costs of functions to be compared to the perceived customer value for those functions. Moreover, functional cost drivers could be back- tracked from functions to the production pro- cesses so as to depict the trade-offs between materials and processes, or automation and labour costs. PBTC was to delineate production flows visually at the design stage by producing graphic images of time, cost and quality resource consumption across processes. The design engi- neers who had traditionally only dealt with pro- duct specifications could now obtain direct visual information on the effects of different design deci- sions on specific production processes through the availability of PBTC reports. PBTC was also intended to enable responsibility for achieving quality requirements to be tied to 10 A. Bhimani / Accounting, Organizations and Society [...]... information monitoring and reporting, Siemens’ progression towards a meritocratic and individualistic rewards-based culture whereby traditional functional boundaries are transcended in the pursuit of effectiveness and transparency also a ected the form and effects of PBTC Accountants had traditionally internalised a professional conception of the need to economically map the organisation in terms of functional... training was not conducive to the integration of accounting information with other types of operational data The characteristic Wissenschaft-based approach to economic representations of organisational AOS 387 Disk used ARTICLE IN PRESS No pages 26, DTD=4.3.1 Version 7.51e A Bhimani / Accounting, Organizations and Society activities which demarcate costs, functions and departments via numerical data... 139–174 Ahrens, T (1997) Talking accounting: an ethnography of management knowledge in British and German brewers Accounting, Organizations and Society, 22(4), 617–637 Ahrens, T (1999) Contrasting involvements: a study of management accounting practices in Britain and Germany Amsterdam: Harwood Academic Anderson, S W (1997) A framework for assessing cost management system changes: the case of activity-based... implementation at General Motors 1986-1993 Journal of Management Accounting Research, 7, 1–51 Anderson, S W., & Young, S M (1999) The impact of contextual and process factors on the evaluation of activitybased costing systems Accounting, Organizations and Society, 24, 525–560 Appleyard, T., & Pallett, S (2000) Two anglo-German case studies: the management accounting implications of absorbing a new foreign... structure and extensive administrative rules Such characteristics are antithetical to the design and objectives of PBTC PBTC provides information by integrating financial, operational, internal and market-based data Its reports are structured as a dynamic mix of visual, graphical, quantitative and qualitative information Financial content is blended with operational data in PBTC reports Thus a user group... professional training (Joyce & Sloam, 1990; Kim, 1989) Within HLFO, the extent of integration of conceptual and applied engineering concerns was evident in the structuring of technical information reports Engineering analyses were indicative of the systematic fusion of diagrammatic and quantitative data and the blending of theoretical concepts and practical issues The engineering officers’ operational... Journal of Information Systems, 4, 38–59 Das, H (1986) Organizational decision characteristics and personality as determinants of control actions: a laboratory experiment Accounting, Organizations and Society, 11, 215– 231 DeLone, W H., & McLean, E R (1992) Information systems success: the quest for the dependent variable Information Systems Research, 3, 60–95 Dent, J (1991) Accounting and organisational... type, B accords with the ‘‘developmental’’ type, C accords with the ‘‘hierarchical’’ type and D accords with the ‘‘rational’’ type Zammuto and Krakower (1991, p 109) discuss the validity of the approach based on large scale surveys They note that ‘ the data met the criteria of internal consistency, predictable relationships with other organisational phenomena and discrimination among groups’’ AOS 387... comparative contingency study of three local government organizations International Journal of Accounting, 32(1), 79–98 Gosselin, M (1997) The effects of strategy and organizational structure on the adoption and implementation of activity based costing Accounting, Organizations and Society, 22, 105–122 Harrison, G L., & McKinnon, J L (1999) Cross-cultural research in management control systems design: a. .. interviews are indicative of perceived differences between engineering officers and accountants and between traditional accounting information produced by the accountants and the form and nature of PBTC information Engineering officers in R and D, Production and Sales and Marketing considered themselves as being more open than accountants to departing from traditional precepts governing accounting information content . form and effects of PBTC. Accountants had traditionally internalised a professional conception of the need to econom- ically map the organisation in terms of functional boundaries and to allocate. information reports. Engineering analyses were indicative of the systematic fusion of diagrammatic and quantitative data and the blending of theoretical concepts and practical issues. The engineering. prac- tices and an enhanced outward management orientation. Many managers across the organi- sation perceived a need to alter their business units’ accounting information systems once the implementation