A multi approach framework construction

The current study focuses on providing an answer to the question of how HEIs in Greece responded to governmental pressures for accounting reform during the decade of 1998-2008; specifically, it focuses on the extent to which HEIs implement the accrual accounting system and the influence of the isomorphic and intra organizational dynamics on its implementation. The aim of this enquiry is to assist in providing a deep understanding of the external and internal dynamics that influence the adoption and implementation of the management accounting (MA) systems, resulting thus, to new daily accounting practices within certain organizations. As Burns and Scapens (2000, p. 21) stated:

“Management accounting systems and practices constitute organizational rules and routines, and in order to understand complex processes of management accounting change their institutional character has to be recognized.”

In this vein, a comprehensive and solid theoretical framework is developed for gaining a deep understanding and explanation of the process of change and the key role of the institutional and intra organizational dynamics to be determined. This particular framework employs various institutional theory strands and perspectives on change management theories, regarding change management processes that consider the ways in which MA practices can undergo change. It is based on multi theoretical approaches in order to explore key elements of change and management change process that

underpin the entire reform and the success or failure of change efforts. Given the complexity of change this framework is expected to mainly contribute to a thorough exploration and explanation of fundamental change management issues that should be concerned by actors who initiate or implement changes within specific organizational settings such a higher education sector.

As a starting point, NIS suggested that organisations respond to changing environments in order to render as legitimate, aiming to social worthiness and achieving thus societal support and mobilizing resources (Oliver, 1991). Based on the NIS’s notion of institutional isomorphism exerted by coercive, normative and mimetic isomorphism pressures, this framework argues that certain organizations such as the Greek HEIs may have introduced changes to their MA systems initiated and resulted by these forms of pressures. On the other hand, Broadbent and Laughlin (2005, p. 9) stated that an initial “kick” is likely to stimulate change. This “kick” could possibly take a number of paths as a management response to internal or external pressures (Rautiainen, 2008; Siti- Nabiha & Scapens, 2005; West & Carnegie, 2010). This view could then be appropriately used to identify the MA change and the adoption of a new accounting system that was precisely what happened in the case of Greek HEIs. The HEIs in Greece have been faced with this “kick” toward the implementation of the accrual accounting system via legal pressures (P.D. 205/98). Similar to Greenberg and Baron (1993) who described organisational change with some examples (Chapter 2, p. 51), the Greek HEIs have been challenged by external unplanned changes, such as government regulations, which have been translated into internal planned changes, such as changes in administrative systems e.g. management accounting systems (Fig. 3.4).

External change Unplanned change Government regulations

Fig. 3.4: Changes pressures in Greek HEIs (adapted from Greenberg & Baron, 1993, p. 624).

However, contradictory to the notion of institutional isomorphism, Oliver (1991, p. 175) claimed that “organisations do not invariably conform to the rules, myths, or expectations of their institutional environment” by adopting thus various strategies in response to institutional change pressures. The organizational responses may vary

“from conforming to resistant, from passive to active, from preconscious to controlling, from impotent to influential, and from habitual to opportunistic, depending on the institutional pressures toward conformity that are exerted on organizations” (Oliver, 1991, p. 151).

It is also discussed that coercion and the degree of coercion exercised on organizations is a key determinant for the adoption of change and the change of the existing status quo, since organizations themselves are usually reluctant to implement the changes required (Munir et al., 2011). Organizations can develop a consciousness of the need to change and decide upon the adoption of new practices as long as they are subjected to external institutional pressures (Burns, 2000). Furthermore, it is usually possible for organisational actors to respond in different ways in the implementation of decisions made on the introduction of change rather than passively to accept it (Munir et al., 2011). Accordingly, in order to fully understand changes attempted in MA systems within specific organizational settings, such as the Greek higher education sector, it is

HEIs

Internal change Planned change

Changes in management accounting systems

required to thoroughly investigate and analytically interpret the types of institutional pressures that enforce change and the way in which organizations respond to change pressures due to the intra organizational forces that are enacted in change efforts.

For purposes of the scope of this study, MA practices are viewed through relationships between rules and routines, with the way “things shouldbe done” reflecting rules, while the way “things are done” reflecting routines (Burns & Scapens, 2000). Aligned with institutional perspective, MA systems are considered as “inextricably linked to the prevailing rules and norms which structure social and organisational life” (Ribeiro & Scapens, 2006, p. 95). The framework of Burns and Scapens (2000) provided insights on the change of existing MA practices, contradictory to the stability of practice that is reinforced by unchanging institutional forces. It is possible for change to occur and be realized at any given point in time (synchronic change) within the institutional realm. Indeed, by synchronic change new MA practices may be introduced within institutional realm under various isomorphic pressures. Furthermore, the recurrent enactment and the reproduction of new rules and practices, expressed by daily routines in the action realm, may cause change to occur over time (diachronically). For example, in the case of Greek HEIs a synchronic change has been emerged initially in the institutional realm as new MA rules e.g. accrual accounting system introduction and implementation have been demanded by the law (P.D. 205/98). This synchronic change was expected to occur diachronically via the reproduction recurrence of accounting rules and practices reflecting new routines of accrual accounting systems in the realm of action. As Burns and Scapens (2000, p. 11) stated, the institutionalisation process “involves a dissociation of patterns of behaviour from their particular historical circumstances” and

new rules and routines become institutions or simply the “way things are”. These institutions will then be encoded into the ongoing rules and routines that will facilitate the shaping of new rules, and so on. However, existed institutions are more likely to resist change and influence action when they are widely and deeply accepted. Burns and Scapens (2000) defined institutionalisation as a process of encoding, enacting, reproducing and institutionalizing formalized rules into ‘taken-for-granted’ routines. During the encoding process institutional behaviours are translated into a system of rules. In turn, enacting these rules depends on their alignment and compatibility with the existing institutions. If new rules and routines challenge existing institutional principles, organizational actors are likely to respond negatively to the enactment of these rules and routines, depending on their capability and the power resources available at their disposal. Thus, the enacting process may be subject of resistance (Burns & Scapens, 2000; Yazdifar, 2003). Burns and Scapens (2000) argued that in order for the new rules being successfully enacted, the norms and values underpinning them need to be compatible with the norms and values of those who will enact or implement them otherwise the enactment process could be subjected to resistance. It may be easier to implement change consistent with the established institutional routines than it is in the cases where change modifies the existing particular way of doing things or else “norm” (Burns & Scapens, 2000). Reproduction of the encoded rules, either in the same or through a revised form, follows the encoding and enactment phases. Institutionalisation occurs when routines and rules “take on a normative and factual quality”, become through the process of institutionalisation taken for granted and do not associate with various people’s and/or group’s interests (Burns & Scapens, 2000, p.

11). Once it has happened, the process then continues as it constantly evolves the repetition of the new practices that are institutionally acceptable.

The above discussion underlined apparently that perceptions and behaviours activated of the organisational actors who are affected by the new system may largely determine the acceptance or the resistance to the implementation of a new MA system. Thus, aiming to a thorough understanding of the change management process and the guiding dynamics forward, insights deriving from change management theories will be further employed. Change management theories regarding change management processes that accommodate the ways in which MA practices can undergo change will be adopted to help identify the change management dynamics and the ways change is managed within organizations. Specifically, Lewin’s Field Force analysis of change in Cartwright (1959) by the three phases model provides a certain construct of analyzing, assessing and taking fundamental and critical steps to drive organizational actors’ behaviour and enforcing the drivers rather than the restraining forces of change. The suggested framework (Figure 3.5) presents the intra organisational dynamics which have or not been mobilised in order for change to occur under the external institutional pressures: institutional dynamics and change dynamics. Using as a start point the NIS perspective this framework employs external institutional dynamics driven by the environment of the organization such as isomorphism pressures which are exerted by the coercive, normative or mimetic isomorphism forces.

MAS: Management Accounting System AAS: Accrual Accounting System Figure 3.5: Management Accounting Change Institutional Process (Author’s Own).

According to the framework, coercive isomorphism results from external pressures that dominant organisations exercise on other dependent and/or subsided organisations such as the state’s regulations governing public agencies, including in most cases funding and resource allocation. In Greece, the HEIs are public sector entities and government regulates them according to the desired objectives and by using appropriate instruments. In particular, with the P.D. 205/98 the enhancement of the accountability and effectiveness aimed for the Greek HEIs through the introduction of the accrual accounting system. Normative isomorphism stems primarily from professionalization. In the specific area of higher education norms and values dominant in the higher education context may influence and determine the appropriation of the HEIs’ behaviour and governance processes, mainly based on informal rather than formal rules

Encoding Motivating Coercive Managing Enacting Mimetic Reproducing/Institutionalizing Institutionalizing Normative New routines use of AAS Isomorphic Pressures Change Dynamics Internal Institutional Dynamics New rules of MAS Institution Realm Action Realm Action Realm Institution Realm

and guides. In this sense, Greek HEIs under the normative isomorphic pressure may had been enforced to adopt systems and processes that have been considered to be appropriate as dominant in the area of higher education or other relevant public agencies or other professional groups, such as the accrual accounting system that was introduced by the P.D. 205/98. Mimetic isomorphism is guided by ambiguous goals or uncertainty and organisations may imitate other organisations in the same or relevant organizational field that are considered as more legitimate or more successfully functioned or organized (Csizmadia, 2006). For example, some of the Greek HEIs under the mimetic isomorphism may have imitated other similar HEIs with regard to the adoption of the accounting reform and the accrual accounting system as successful perceived. Even though the three types of isomorphic pressure may not be always distinguished but, in fact, may operate simultaneously, they all can affect the organizational behaviour enacting the emergence for the adoption of a reform regarding procedures and structures of the organization (Csizmadia, 2006; DiMaggio & Powell, 1983,) such as the implementation of the accrual accounting system in the Greek HEIs. Indeed, the current framework suggests that the three isomorphic forces are not distinct but each of them may influence the others, as well as, the internal environment of each individual organization. For example, the coercive force driven by law may affect the professional rules and activities, creating and shaping regulations and appropriate norms in the relevant organizational field, activating this way the normative isomorphism mechanism in each individual organization. In this case, the normative force which is emerged may in turn influence the mimetic isomorphism force; thus may activate the mimetic isomorphism mechanism of each individual organization in order

to secure its legitimacy and its successful position in the organizational field, such as the Greek higher education sector.

However, in the same line with Oliver’s (1991, p. 146) view supporting the variation of organizational behaviour “from passive conformity to active resistance in response to institutional pressures” this framework supports that since the initiation of change by a stimulating “kick” the organizational decision makers and actors who are involved in change process may are (or not) employed in order to forward (or restrain) change, influencing thus the organizational response to institutional pressures. Those organisational actors, such as leaders and managers, who aim towards the institutionalisation of new principles, should undertake the effort to concretise the new routines and rules within the organisational environment. The achievement of this target should gained through the enforcement and activation of the change process, which would guide ultimately in using the new rules and routines as “taken for granted”, considered as the ultimate positive outcome of a successful change process. As stated previously in the introduction chapter, the reform of the accounting system used in the public sector in Greece - including the Greek HEIs - was announced initially in 1997 and was promoted later with the P.D. 205/1998. In the case of the Greek HEIs the actors who had the responsibility to implement the announced changes imposed by law (P.D. 205/1998) were the Rector and the Senate of each individual HEI. In terms of their European equivalent counterparts these constitute the Executive Head, the Academic body and the decision making body of the HEI. The new declared principles of this attempt of accounting reform were:

 the increase of the efficiency and effectiveness of public administration e.g. the improvement of the operational and the economic performance

 the reduction of public expenditure, and

 the assessment of the degree of efficient use of the resources allocated to each public organisation e.g. the improvement of the organizational accountability and control.

According to the perspective of OIE, the successful integration of new concepts into a system occurs when these become institutionalised. Institutionalisation of new concepts means that they are being converted into new habits, values, and routines within the organisational environment (Guerreiro et al., 2006; Oliver, 1997). In the suggested framework the institutional analysis of the accrual accounting system implemented within the Greek HEIs adopts the Burns and Scapens (2000) analysis and constitutes of three stages (Figure 3.5) indicating the institutional dynamics: Encoding, Enacting and Reproducing/Institutionalizing. The framework also indicates that during these three stages may similarly be activated the change dynamics, as they derive from the three phases Lewin’s model: Motivating, Managing and Institutionalizing Change. Accordingly, the foundation for a successful MA change is proposed to be facilitated by the involvement and interaction of both institutional and change dynamics defined them as intra organizational dynamics. The intra organizational dynamics may interact and affect the institutionalization of new rules with respect to the three phase process indentified as Phase A (Encoding/Motivating change), Phase B (Enacting/Managing change) and Phase C (Reproducing/Institutionalizing change). In consequence, the suggested framework (Figure 3.5) supports that two types of intra organisational

dynamics must be mobilised in order for change to occur: institutional dynamics and change dynamics. It focuses on three key dynamics of the change processes: Motivating, Managing and Institutionalizing change. These dynamics are interrelated with the institutional dynamics considered as Encoding institutional principles, Enacting new rules and at last Reproducing/Institutionalizing them e.g. using new routines unconsciously. The intra organizational dynamics that may emerge and interact in the organizational environment under the external institutional pressures for change reflect the coercive, normative and mimetic forces within the institutional environment of the organization. Encoding and Motivating for change, viewed as a coercive force, is the driver which guides to changes, while Enacting and Managing change, seen as a normative force, is the enabler towards the successful implementation of changes. At last, Reproducing and Institutionalizing change, perceived as a cognitive force which is expected to result in the successful implementation of change; the institutionalization of the new rules and routines. Otherwise, it will mean the failure of the changing process.

The analysis of change into various discrete phases concerns activities and techniques based on the unique attributes of each phase that may be adapted by managers and with phases usually may and do overlap (Burke, 1994). Based on Lewin’s Force Field analysis and further change management literature, an analytical presentation, as well as, activities explanation of the MA change process/steps follows next (Fig. 3.6). The presentation of change process phases and steps in Figure 3.6 is inspired from the framework that is suggested regarding change management in public entities by (UNPD, 2006).

Figure 3.6: MA change process from a managerial approach (Author’s Own).

Encoding/Motivating Change

Creating readiness for change and overcoming resistance to change

Step 1: Increasing urgency