Inledande Reflektion Det Är Svårt Att Hålla Isär Identity Och Image Empirisk Men Också

Organizational identity threats and issue interpretation: an unexplored source of management accounting change[*]

Gun Abrahamsson, Hans Englund and Jonas Gerdin

Department of Business Administration

Örebro University

SE-701 82 Örebro, Sweden

Phone: +46 19 30 30 00

Telefax: +46 19 33 25 46

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Introduction

For quite some time now, there has been significant interest in exploring management accounting (MA) change processes in their organizational and social context (Andon, Baxter & Chua, 2007; Busco, Quattrone & Riccaboni, 2007; Ribeiro & Scapens, 2006). Besides topics such as the nature of change (e.g. Andon et al., 2007; Quattrone & Hopper, 2001), forms of change (e.g. Burns & Scapens, 2000; Soin, Seal & Cullen, 2002) and resistance to change (e.g. Dirsmith, Heian & Covaleski, 1997; Ezzamel, Willmott & Worthington, 2004; Granlund, 2001; Siti-Nabiha & Scapens, 2005), there has also been some attempts to develop more coherent frameworks on how to study management accounting change as a social phenomena (Burns & Scapens, 2000; Dillard, Rigsby & Goodman, 2004).

However, comparatively little research attention has been given to exploring the sources of these changes and, in particular, to the role of ‘critical’ events. True, it has been suggested that management accounting change can be triggered by economic downturns and crises (Abernethy & Chua, 1996; Busco, Riccaboni & Scapens, 2006; Ezzamel & Bourn, 1990; Granlund, 2001; Soin et al., 2002), takeovers (Burns, 2000; Siti-Nabiha & Scapens, 2005), and (political) reforms (Abernethy & Chua, 1996; Collier, 2001). Notwithstanding the contribution of these studies in terms of significantly increasing our understanding of how management accounting change processes evolve over time, however, they say little about why certain events become triggers of change while others do not (cf. Hoffman & Ocasio, 2001; Munir, 2005). That is, events are indeed viewed as important for our understanding of how complex management accounting change processes unfold, but are rarely the subject of study as such.

As we see it, this can be problematic since the events as such risk being treated as inherently disruptive whereas they “may or may not become disruptive depending on how they are ‘constructed’.” (Munir, 2005, p. 96). Furthermore, when treating the triggers as just part of the historic explanation of why major management accounting change processes are launched, there is an apparent risk that we keep our eyes open just for the major and most obvious triggers of change, while leaving out the seemingly modest or even insignificant events that may trigger revolutionary management accounting change, depending on how they are socially constructed.

The purpose of this study is to add to the limited knowledge in this area by exploring how and why a most incidental liquidity problem in a manufacturing company led to a major and far-reaching management accounting change project with the aim to radically reduce capital employed. In so doing, we shall divert attention to a largely neglected area in the accounting literature (Empson, 2004), namely, the role of organizational identity. More precisely, we propose that a perceived dissonance between identity (i.e. what members believe are the central, distinctive and enduring attributes of their organization) and construed image (i.e. how members believe outsiders view the organization) constitutes a central interpretive scheme that informs the construction and assessment of importance of key issues and events (cf. Corley & Gioia, 2004; Dutton & Dukerich, 1991; Foreman & Whetten, 2002). This is so, we argue, because such identity threats touch upon the very core characteristics of an organization (Albert & Whetten, 1985).

Arguably, the current study contributes to the management accounting change literature in the following ways. First, while there are many observations that ‘critical’ events such as economic downturns and takeovers may trigger management accounting change processes (Abernethy & Chua, 1996; Busco et al., 2006; Ezzamel & Bourn, 1990; Siti-Nabiha & Scapens, 2005; Soin et al., 2002), there is rarely any research where the process of issue interpretation (theorizing) as such is positioned at the centre of analysis. That is, rather than viewing events as inherently disruptive, we propose an empirically based framework for understanding the process through which a seemingly neutral and objective event is interpreted as ‘critical’, leading to a far-reaching management accounting change.

Second and related, we problematize the typically assumed one-to-one relationship between the nature and scope of events and the following management accounting change processes. That is, although it is acknowledged that e.g. a major financial crisis may (most likely) lead to the development of an accounting (profit) orientation (see e.g. Burns & Baldvinsdottir, 2005) and/or new management accounting practices (Granlund, 2001), we argue that this is not necessarily so. Again, the premise is that events are not inherently disruptive—they must be made disruptive. Accordingly, in order to understand how and why actors respond (or, equally important, do not respond) to particular events, we need to explore the institutionalized ‘internal context’ (Gioia & Thomas, 1996) which serves as a perceptual lens that managers draw upon when interpreting issues and events (cf. Burns & Scapens, 2000).

This leads to the third contribution of the present study, namely, the finding that threats to organizational identity (Corley & Gioia, 2004; Dutton & Dukerich, 1991; Elsbach & Kramer, 1996; Ravasi & Schultz, 2006) constitute a largely unexplored (but see e.g. Empson, 2004), but potentially very important perceptual lens for understanding management accounting change processes.

Fourth and finally, the paper provides some additional insights to the organizational identity literature insofar as it investigates the dynamics of intra-organizational identity threats. That is, it explores how top management in a subunit within a larger company interprets and responds to an event where the interpretation is framed by a formalized relationship to relevant stakeholders (in this case superiors) and comparisons with social referents (Corley & Gioia, 2004; Scott & Lane, 2000) within the group. Based on case study evidence, we propose that the particular properties of intra-organizational relationships contribute to explaining why the subunit managers (re)acted differently to the perceived identity threat than has typically been reported in the organizational identity literature (see e.g. Elsbach & Kramer, 1996; Gioia, Schultz & Corley, 2000).

In the following sections, the theoretical framework is developed and the research design is outlined. Based on an examination of a pre-existing institutionalized ‘gap’ between organizational identity and image in the case company, the social construction of a particular event, including the scope and content of the following management accounting change process, is analyzed. In the concluding section an empirically derived framework for understanding the dynamics of identity/image mirroring is outlined and its implications for future management accounting research are explored.

Identity threats and issue interpretation: a theoretical framework

As argued above, events such as competitive discontinuities and technological advances are not neutral or objective phenomena, i.e. free from interpretations or beyond construction and deconstruction by individuals. Accordingly, a particular event may be constructed in many different ways (Hoffman & Ocasio, 2001; Meyer, 1982), and even as a ‘non-event’ (Munir, 2005), depending on the ‘internal’ social structures (Gioia & Thomas, 1996) that are being (re)produced within a specific social system (see also Giddens, 1984).

In this study, early engagement with the field made us attentive to some specific aspects of the social structures that actors drew upon when constructing the current event. In brief, as part of our ongoing reflection on data (Ahrens & Chapman, 2006), our initial analysis revealed that actors constructed an event—a seemingly ‘insignificant’ and most incidental liquidity problem—as a threat towards their organizational self conception. Therefore, in order to further our framing of the problem, we build on and further develop the idea of discrepancies between organizational identity and image as an important perceptual lens for interpreting and acting upon events and issues (Dutton & Dukerich, 1991; Elsbach & Kramer, 1996; Gioia & Thomas, 1996; Gioia, et al., 2000).

Organizational identity

Even though there is no general agreement on the definition of organizational identity (Corley, Harquail, Pratt, Glynn, Fiol & Hatch, 2006; Ravasi & van Rekom, 2003; Whetten, 2006), most researchers refer to the original definition by Albert and Whetten (1985), when conceptualizing organizational identity. This means that organizational identity is viewed as consisting of three core characteristics, namely the organization’s members’ collective understanding of the features presumed to be central, relatively enduring, and distinctive/distinguishing, so-called CED aspects (Corley et al., 2006; Gioia, et al., 2000; Whetten, 2006). And, since these features involve self-referential meaning (Albert & Whetten, 1985), they allegedly answer the prototypical organizational identity question; who are we, as an organization? (Whetten & Mackey, 2002).

In empirical settings, attributes such as professionalism, provider of superior service (Dutton & Dukerich, 1991), extreme commercial orientation and strong partnership ethos (Empson, 2004), have been used to characterize organizations and their identities. Hence, by referring to organizations in terms of e.g. ‘entrepreneurial’, employee-oriented’, ‘predatory’ (Albert and Whetten, 1985), organizational identity is typically depicted as a cognitive means which guides organizational members regarding what their obligations are, what is legitimate and how they are supposed to act in relation to external parties (Corley et al. 2006). As proposed by Whetten (2006, p. 221), organizational identity can thus be viewed as a categorical imperative “what the organization must do to avoid acting out of character.”

While these characteristics often serve as a point of departure for scholars in the field, they have been discussed and further problematized over the years. For example, Gioia and Thomas (1996) found that university administrators tried to become prominent by becoming non-distinctive from an elite referent group (i.e. becoming a ‘top-ten’ public research institution). More recently, Corley and Gioia (2004) and Gioia et al. (2000) have argued that organizational identities are better described as fluid than enduring (although, indeed, they note that symbolic expressions—‘labels’—may remain unchanged for considerable time). It has also been discussed whether organizational identity claims represent a coherent set of characteristics or consist of fragmented, often incompatible elements (Whetten, 2006).

Following the conceptual framework for synthesizing existing research developed by Brown, Dacin, Pratt & Whetten (2006, p. 101) and those of others (Corley et al., 2006; Whetten, 2006), however, we shall start out from the CED aspects since they “represent what is most important, or central, about the organization to a member.” And, as such, they are likely to inform the interpretation of events and shape legitimate responses and actions (Dutton & Dukerich, 1991). Furthermore, the use of the CED framework is not to say that organizational identity necessarily is ‘unchangeable’ or intrinsically coherent. Rather, our point of departure is that organizational identity is continuous, i.e. has a historic (path dependency) dimension, which implies that it may well develop over time. As argued by Whetten (2006), however, legitimate identity claims are, generally, those which have withstood the test of time. That is, “organizations intentionally perpetuate their central and distinguishing features, preserving for tomorrow what has made them what and/or who they are today. With time, these acts of preservation are likely to take on mythical proportions, endowing them with a sacrosanct quality, manifested as ‘trumping rights’ over lesser commitments and priorities” (p. 224). In other words, CED attributes of the organization represent deeply layered commitments which are (re)produced through time and across circumstances. Accordingly, unless they are severely challenged (see e.g. Corley & Gioia, 2004; Dutton & Dukerich, 1991; Scott & Lane, 2000), they are likely to endure.

It is also acknowledged that organizational identity claims often include tensions and inconsistencies. For example, Whetten (2006) noted that organizations not only have needs for uniqueness, but also for assimilation (see Gioia & Thomas’ (1996) observation mentioned above that organizations may try to earn legitimacy by becoming non-distinctive in some respects). Along the same lines, Corley et al. (2006) suggested that a focus on qualities that both differentiate and assimilate are important for forming identity claims (see also Albert and Whetten, 1985, p. 267).

Finally, it is recognized that organizational identity is typically situated (Albert & Whetten, 1985; Scott & Lane, 2000), i.e. represents an understanding of the organizational self which is relative to the specific time, situation and, not least, the particular audience in question (see also Brickson, 2005). Accordingly, time-space characteristics, in general, and specific stakeholders, in particular, are likely to influence what is deemed as CED characteristics of the organization. To us, this is an important feature of organizational identity as this study focuses on a particular stakeholder relationship, which has rarely been investigated in this literature, namely, that between a subunit and its superiors.

Organizational image

Also the notion of organizational image has been the subject of many different conceptualizations and debates over the years. For example, Gioia et al. (2000, p. 66) noted that “image is a wide-ranging concept connoting perceptions that are both internal and external to the organization […], as well as perceptions that are both projected and received” (see also the discussion in Brown et al., 2006). However, given its fundamental importance for our understanding of how an organization filters and moulds interpretations of and actions on issues and events, the conceptualization first used by Dutton and Dukerich (1991) will be applied in the current study. In brief, they proposed that organizational image denotes the way the organization is viewed by outsiders. Later, this particular definition of image was usefully relabelled construed external image (Dutton, Dukerich & Harquail, 1994), or simply construed image (Brown et al., 2006), to highlight that it refers to “a member’s beliefs about outsiders’ perceptions of the organization” (p. 248), i.e. not those actually held by these outsiders (a concept which Dutton et al., 1994, refer to in terms of reputation, see also Brown, et al., 2006; Gioia et al., 2000).

Following Dutton and Dukerich (1991) seminal study, a number of scholars have argued that not only construed image is important for understanding how organizational members (re)act upon issues and events, but also desired future (or intended) image (Brown et al., 2006; Gioia et al., 2000). As suggested by Gioia and Thomas’ (1996, p. 371) findings, for example, “it is not existing identity or image but, rather, envisioned identity and image—those to be achieved—that imply the standards for interpreting important issues” (see also Corley & Gioia, 2004; Foreman & Whetten, 2002; Gioia et al., 2000). In other words, a visionary perception of how management would like external stakeholders to view their organization sometime in the future constitutes an important ‘mirror’ against which the importance of events is gauged.