The role of accounting devices in performing corporate strategy
Introduction
Over the last 40 years or so, accounting research has enquired into the relationship between accounting and strategy. Chenhall (2003), for example points out that contingency-based research follows the more conventional view that perceives management accounting as a passive tool to assist management’s strategic decision making. Hansen and Mouritsen (2005) point out that accounting research has often neglected to ask what strategy is, declaring that management accounting is for implementing rather than formulating strategy. Instead of following the more conventional view they question the allegedly passive subordinate role of accounting in relation to strategy and Mouritsen and Kreiner (2003) point out that a whole array of accounting devices can play an active part in realizing a successful strategy.
Our present work is inspired by such contributions and our aim is to provide answers to questions about possible roles that accounting devices1 can assume in relation to strategy. We ask whether accounting devices can assume other roles, apart from subordinating themselves to strategy during the implementation of the latter. This question indicates the possibility that particular accounting devices may play an active part not only in promoting the efficient implementation of a strategy, but also in contributing to its structuring and (re)formulation. Closely related to this is the question about the identity of the strategic actor: who enacts and (re)formulates strategy? Who is the key strategic actor? Like Whittington (2004) and Chua (2007), we are interested in exploring the role that accounting devices can play as people become skilled strategists. The strategist may be a senior manager, but may also be people outside and below senior management, perhaps even lay people.
In our inquiry we draw upon actor-network theory (ANT) and the notions of (re)framing and overflowing (Callon, 1998b). The advantage of these notions is that they allow for the contingent nature of strategy. ANT alerts us to the possibility that various non-human entities such as reports, accounting systems, and other physical arrangements can play an active role in enacting and (re)formulating strategy. Callon (1998a, p. 6) points out that: “In order to become calculative, agencies do indeed need to be equipped.” The coming-into-being of a particular strategy and strategic actor can be closely linked to a stream of calculative devices with which agencies are equipped. We suggest that the accounting devices can be active in (re)formulating strategy. The question of ‘who’ is the strategic actor can be extended to mean ‘who or what’ to allow more explicitly for the possibility that a stream of accounting devices can play a complex part in enacting and (re)formulating strategy. This means that the important question of what strategy is can be extended to include the very nature of the components of strategy and strategic change. We thus ask about what constitutes strategy and strategic change? Our proposition is that they both may be constituted by a whole array of accounting devices.
In this paper we use a case-based field study to consider our proposition regarding the active role of accounting devices in enacting and (re)formulating strategy. In addition to asking if this proposition is sound, we examine the timing and location of linkages between accounting devices and strategy and how they may also evolve and change. Our empirical focus is on a company that was facing major changes in its external environment and market. Thus, in our study we trace a chain of events connected with matters such as cost rationalizations, capital investments, and new competition. The company studied is the Ferry Division (since 1995 known as Scandlines) of the Danish government-owned railway company DSB. The paper is organized as follows. Section “accounting and strategy – a review of the literature” next discusses the relationship between accounting and strategy in light of previous research and presents the notions of (re)framing and overflowing that are used in analyzing the case. However, before applying these notions we describe our case-based method (Section “method and research site”). Then, in Sections “the main events of the case and the analysis”, “the framing and overflowing of an adaptation strategy”, “the emergence of concerned groups”, and “reframing strategy” we present the analysis of the roles of accounting devices in connection with the strategy and strategic change in the Scandlines case. Finally, in Section “concluding discussion” we provide a summary of our findings and discuss the implications for theory and future research. In particular we emphasize the findings concerning the performative role of accounting in relation to: (1) strategy formulation, (2) the identity of the key strategic actor, and (3) the constitution of strategy and strategic change.
Section snippets
Accounting and strategy – A review of the literature
Since the contribution of Anthony (1965), the link between accounting and strategy has been on the accounting research agenda. This link has been conceptualized in various ways and perhaps the most enduring strand has been one that emphasizes accounting’s role as a means for assisting strategy. For example, Wilson (1997) argues that the role of accounting is to serve the needs of strategic management. Recent contributions have emphasized the more complex dynamic role of accounting devices as
Method and research site
Our method is inspired by an ethnographic approach and our case builds on what MacKenzie (1996, pp. 59–61) has termed ‘Ethnoaccountancy’, that is to say, a description of how accounting is practiced. In this case, how a firm’s strategic situation is accounted for, made known and acted upon. It is a case study based upon fieldwork, and the aim is to reconstruct a chain of related events by following the interactions between humans and non-humans such as accounting devices. The fieldwork included
The main events of the case and the analysis
The case is a complex one, and the present section provides a summary of the main events with a view to guiding the reader through the subsequent analytical Sections “the framing and overflowing of an adaptation strategy”, “the emergence of concerned groups”, and “reframing strategy”. Historically, the Ferry Division (in the following referred to as the Division) was a 100% state-owned enterprise dedicated to ferry transportation. Until 1995 it was a Division of the national railway company DSB
The framing and overflowing of an adaptation strategy
…accounting tools and, more generally, management tools influence agents behaviours. These effects never appear so clearly as when tools induce strategies of adaptation (Callon, 1998a, p. 24).
Below we will draw upon the notions of framing and overflowing as we look at how and why the strategy in our case became (re)formulated in a passive adaptive way, rather than remaining active as originally proposed (September, 1991). As an integral part of this analysis, we will also describe the
The emergence of concerned groups
There is nobody more obstinate, attentive, cautious and rigorous than a group of concerned people, even if they are wrongly labelled as lay people by defenders of delegative democracy, who want to know why they are enduring unbearable misfortune (Callon, 2003, p. 42).
As noted in the previous section, officers, captains, and union representatives in the Division regarded top management’s idea of ‘development – not liquidation’ as problematic. However, by establishing an association with other
Reframing strategy
Once the overflows, source agents and target agents have all been correctly identified and described, and once measuring instruments for quantifying and comparing them have been set up, it becomes possible to reframe interactions. At this point it is meaningful to assert that X, Y and Z should be allowed to participate in negotiations concerning contracts between A, B and C from which they were formerly excluded […] or to put it another way, of reframing hitherto uncontained overflows (Callon,
Concluding discussion
The literature on the relation between accounting and strategy has undergone something of a revival over the last few years, encouraged by case studies which have generated new questions and concerns, and new theoretical approaches. This paper contributes to this literature through developing a better grasp of the performative role of accounting in relation to; (1) strategy formulation; (2) the identity of the key strategic actor; and, (3) the constitution of strategy and strategic change.
Acknowledgements
Our particular thanks to Paolo Quattrone, Jan Mouritsen, Susse Georg, Lise Justesen, Casper Bruun Jensen, Tor Hernes and anonymous reviewers for the advice and helpful comments. Also, we gratefully acknowledge valuable comments received from participants at the 4S/ Easst conference in Paris 2004, the EAA conference in Gothenburg 2005, “New Directions in Management Accounting” conference in Brussels 2006. Special thanks to Mark Christensen for substantial comments and for making the English run
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2023, British Accounting ReviewCitation Excerpt :The objectivity and neutrality widely accorded to numbers achieves its most developed form (Miller, 2001 p. 381) There is an increasing body of research that examines the calculative capacity of accounting practices and their consequences (e.g., Kornberg and Carter, 2009; Mouritsen et al., 2009; Skærbæk & Tryggestad, 2010). However, only recently have researchers in the social and environmental domain begun to consider the role of accounting practices as calculative devices (e.g., Cuckston, 2018; Georg & Justesen, 2017; Sobkowiak et al., 2020).