Management Control Practice In An Entrepreneurial Business: Longitudinal Case Study By K.H.U.D.Nandana Kumara (Nandana Kumara Uluwatta) (96/MSM/92) A dissertation Submitted to the University of Sri Jayawardenepura In partial fulfillment of the requirements for the degree of Masters of Science in Management M.Sc. (Management) Program Faculty of Graduate Studies, University of Sri Jayawardenepura, 1
Dissertation Submitted for M.Sc (Manaagement) by me. (Nandana Kumara Uluwatta) Sri Lanka
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Management Control Practice In An
Entrepreneurial Business:
Longitudinal Case Study
By
K.H.U.D.Nandana Kumara(Nandana Kumara Uluwatta)
(96/MSM/92)
A dissertation Submitted to the University of Sri Jayawardenepura
In partial fulfillment of the requirements for the degree of Masters of Science in Management
M.Sc. (Management) ProgramFaculty of Graduate Studies,
University of Sri Jayawardenepura,Nugegoda,Sri Lanka.
August 2002
1
Acknowledgement
The credit for my having been able to accomplish my task and complete this dissertation,
should go, without reservation to my supervisor,
Dr. Danture P. Wickramasinghe,
Dean, Faculty of Management and Finance of the University of Colombo,
Sri Lanka, And
Research Fellow, School of Accounting & Finance, University of Manchester, Manchester
M13 9PL
England,
for his unstinted support, valuable and systematic guidance & comments extended and
encouragement given me throughout the duration of this work, even sacrificing his leisure
time at home. I will be failing in my morale duty if I do not gratefully mention here that his
insistence on a research method at the very beginning of this exercise and the unfading
interest shown by him throughout the entire duration of my effort and above all his
admiration and appreciation of hard work where it deserved was a source of inspiration to
me which, made the preparation of this dissertation an enthusiastic and explorative
experience. Thanks to my untiring supervisor a humble feeling of self confidence and
accomplishment in my limited capacity run through me on completing this assignment
which, was a new challenge to me. For all these noble acts and numerous other kind
gestures on his part during the course this research, let me offer a BIG word of THANKS
with a sincere wish that he rise to the highest level of international academic recognition so
that his reservoir of knowledge would be an open source for those who are seeking
academic achievements to quench their thirst for knowledge.
I am also grateful to Mr. Predeep Randiwela, Head, Department of Commerce/ Acting
Dean Faculty of Management & Finance and Mr. Sarath Jayasinghe, Head, Department of
Management Studies of the University of Colombo, Sri Lanka, for their painstaking and
highly admirable contribution to the complete of this research with giving me
encouragement and instructions showing their human qualities and wide knowledge and
for valuable support extended at various stages.
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I must also extend my gratitude to Mr. Ramesh Sriskandaraja, Lecturer, Department of
Management Studies, University of Colombo, Sri Lanka for all the trouble taken and active
participatory support extended in getting computer support at all the stages of research.
I am grateful again to Mr. Pradeep Randiwela, Head, Department of Commerce, University
of Colombo, Sri Lanka and Vichitra Abeyasekara, English Teacher, Sripalee Maha
Vidyalaya, Horana, Sri Lanka who most kindly undertook the editing of this dissertation
and accomplishing it in time at the cost of all their other scheduled work.
I must also thank my colleagues of the faculty Mr.Gamini de Alwis, Dr.Karunarathna,
Mr.Saman Dassanayake, Mr.Gunapala Ranaweerage, Mrs.Thilaxi Kodagoda, Mr. Prabath
Jayasinghe,and Mr Jayakody , who were always supportive are remembered here with
gratitude.
Last but not the least my loving wife Renuka, my daughter Shashika and son Rashmika for
the immense sacrifices they made during this period for the sake of the preparation of this
dissertation. They were very understanding and bore all troubles and taxing as part of their
duty by me.
3
Abstract
This study reports an intensive case study of a recently established food manufacturing
company in Sri Lanka. It examines how management control practices in a particular
manufacturing concern operates under environmental uncertainties stemmed from social
and cultural dimensions implicated in main organisational actors. To understand such
practices, the study has used theoretical and methodological lenses of Hopper and Powell
(1985), which explores fundamental philosophical assumptions of different schools of
thought in management. The empirical data collected through a qualitative naturalistic
research method was made iterated with broader sociologically informed post-positivistic
theories especially, interpretive theories. The findings implicate that management control
and accounting practices are quite different from the conventional wisdom due to the
attributes of personal characteristics, which were, constructed in particular society. The
story that has been told in this study is centred around the notion that the CEO has
accumulated power around himself towards maintaining power around himself. The
resultant characteristics in this mode of control are: centralised decision-making power of
CEO, limited internal information flow/reporting, arbitrary rewards, and reduced benefits.
The accounting system has been to preserve the family but its manifestation through short-
run physical budgets was a keystone in transmitting pressure upon line managers and
thence workers. Deriving from these empirical concerns, the study shed some light on the
ontological and epistemological positions in undertaking accounting research of this
nature. In particular, the study has found the researcher, the phenomena studied, the
context in which they are studied, and the research approach in use, to be intimately
interwined – this in marked contrast with the more orthodox scientific position that they
are detached. The study urges future qualitative field workers to exploit natural
experiments of different varieties.
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Table of Content
Page
Acknowledgement i
Abstract iii
Table of Content iv
List of Figures viii
Chapter One: Introduction 01-10
1.1 Background 01
1.2 The Research 02
1.3 Aims and Objectives 05
1.4 Significance of the Study 05
1.5 Scope of the study 08
1.6 Limitations of the Study 08
1.7 Structure of the Dissertation 10
Chapter Two: Towards a Theorisation of Management Control
Systems 11-48
2.1 Introduction 11
2.2 A Critical Look at Conventional theories in management control 11
2.2.1 Objectivism 13
2.2.2 Social Systems Theory 15
2.2.2.1 Accounting Dysfunctions 16
2.2.2.2 Psychological 'Theories 17
2.2.2.3 Social Psychological Theories 18
2.2.2.4 Structural Theories 20
2.2.2.5 Open System Theories 21
2.2.2.6 Contingency Theories 23
2.2.3 Pluralism 26
2.2.4 interpretive theories 30
2.2.5 Radical theories 35
2.3 A Framework for the present study 43
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Chapter Three: Methodology 49-74
3.1 Introduction 49
3.2 Problems of Orthodox Methodology 49
3.2.1 It is framed from the perspective of the organization 50
3.2.2 It treats the organization as effectively a closed system 50
3.2.3 It has a technical orientation 51
3.2.4 It is prescriptive 51
3.2.5 It is ahistorical 52
3.2.6 It is apolitical 52
3.2.7 It is rationalistic 53
3.2.8 It is functionalist 54
3.2.9 It is reductionist 54
3.2.10 It is positivist 55
3.2.11 It is problem-cantered 56
3.3 Towards a case study approach 57
3.3.1 Case and universe 59
3.3.2 Theory and case formulation 61
3.3.3 Making a case 62
3.4 Research Design and Procedure adopted 62
3.4.1 Unit of analysis and Justification 63
3.4.2 Research methods 65
3.4.2.1 Observations 66
3.4.2.2 Interviews 67
3.4.2.3 Documentation 68
3.4.3 Analysis 68
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3.4.3.1 Inductive data analysis 69
3.4.3.2 Analysis on-site 70
3.4.3.3 Running the data open 71
3.4.3.4 Focusing inductive analysis 72
3.4.3.5 Deepening the analysis 73
Chapter Four: Social and Organisational Context of the Study 75-108
4.1 Introduction 75
4.2 Sri Lankan Society and Business 75
4.2.1 Colonial Economic, Business System and
Society in Sri Lanka (before Independence) 76
4.2.2 Post- Independence (from 1948) 79
4.3 Company Background 84
4.3 Business Idea 854.4 Corporate Strategy 87
4.4.1 Strategic Business units 87
4.4.2 Product categories 88
4.4.3 Objectives, Strategies and Tactics 89
4.4 Organizational Structure and Controls 91
4.5.1 Organization Chart 91
4.5.2 Work Force 92
4.5.3 Nature of responsibilities 93
4.5.4 Incentives and Reactions 94
4.5.5 Decision Making Process 95
4.6 Budgeting and Planning 96
4.6.1 Budgets 96
4.6.2 Planning 97
4.7 Financial / Capital Structures 97
4.7.1 Initial Capital and Net Asset 97
4.7.2 Resource Allocation 98
4.8 Market 98
7
4.8.1 Features of the product 99
4.8.2 Market Development 99
4.8.3 Distribution Network 99
4.8.4 Reaction for Competitor Activities 100
4.9 Costing Process and Material handling 102
4.9.1 Pricing 102
4.9.2 Material Handling 103
4.9.3 Changes to be introduced (Proposed changes) in Cost Accounting Statements 105
4.10 Summary 106
Chapter Five: Analysis of the Case 109-138
5.1 Introduction 109
5.2 Management Theories Vs. CEO Driven Management Control System 109
the government would not accede to IMF demands for reductions in
welfare subsidies.
5. From 1977 to 1983 (Policy Reform period), all the barriers to
liberal economic policies that had been insurmountable in the past
seem to have vanished by 1977. The new government enacted
sweeping political and economic reforms. Its economic reforms were
encouragement of import substitution industries, tax incentives to
foreign investors, establishing a first Investment Promotion Zone/Free
Trade Zone, eliminate of most price controls, introduction of food
subsidies, improves incentives for agricultural producers, ending of
FEEC system, restrictions to foreign capital investments, foreign banks
were permitted to open branches in Sri Lanka, Establishment of Export
Development Board. Three lead projects were conceived and highly
publicized: the Greater Colombo Economic Commission, which would
organize and operate export processing zones; the Accelerated
Mahaweli Development Project, which would try to complete what had
been thought of as a thirty – years project in five or six years; and the
Public Sector Housing Program which aimed to construct 100,000
urban and one million rural dwellings. In addition, a new
administrative capital and parliament building were to be constructed
and transportation, communication, and power infrastructure were to
be improved. The public investment program created employment and
purchasing power, although most of its benefits would appear in the
longer run if at all. Introduction of new Companies Act In 1982 is
encouraged to expansion of different types of companies. During these
five years, Sri Lanka was thus one of Asia’s high-performing
economies. The effect of liberalization and accelerated economic
growth on poverty and inequality have been hotly debated. Bhalla and
Glewwe (1986) argued that inequality fell after 1977, but a chorus of
critics ( e.g. Ravallion and Jayasuriya 1988; Anand and Kanbur 1991)
asserted that both poverty and enequality had actually increased.
99
6. From 1983 – 1989, Start of Civil War created many difficulties
and distractions for economic development. The guerrilla war started
in 1983 LTTE7 and meanwhile radical Sinhalese insurgency unsettled
the south with sporadic acts of terrorism until 1990. These wars were
badly affected to business organizations of Sri Lanka and new
businesses were not stablished due to risky situations prevailing the
country.
7. From 1989 – 1994, Crafted a Second round of policy reforms
contributed to pickup in economic growth in the early 1990s. The
reform package included tariff reductions; rupee devolution; tax
reforms aimed at stimulating the capital market and improving tax
compliance; further liberalization of financial and commodity markets;
and liberalization of exchange controls on the current account of the
balance of payments (Dunham and Kelegama 1995). Other emphases
were privatisation and peoplization (encouragement of individual share
ownership), export promotion (the 1990s were dubbed ‘The Decade of
Exports’), and poverty alleviation. For the first time in Sri Lankan
history, the change of government in 1994 did not lead to changes in
economic policy and Open economic policies introduced in 1977
continues after 1994 too.
As the result of the policies introduced in the 1977, the company Act
1982 was enacted. It was one of the key factors to establish limited
companies. Simultaneously, the open economic policies led many
people to abandon domestic agricultural activities and moved them
towards other industries. As a result their life style became busier than
it was earlier. The time spent at home became lesser and lesser.
Consequently, they were facing difficulties in preparation of all their
three meals (breakfast, lunch and dinner) themselves. Gradually they
7 Liberation Tigers of Tamil Eelam
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were used to buy prepared meals from outside places and processed
food items became more and more popular. Many instant food items
came into Sri Lanken market as a result of these changes in consumer
preference. In early 1990s, instant food processing industries were
mushrooming. These companies were merely catering for the existing
market demand by them. In fact, many of these companies did not
projected towards future market and related strategies. The MFPL of
Sri Lanka was an exception having analysed the existing market
environment and the CEO, the founder established the MFPL in 1997.
The MFPL launched its’ products after carefully reviving the
weaknesses of the existing firms. The firm could realize the salient
weaknesses of distribution system of existing firms in particular and
the products were not widely distributed in remote areas.
4.3 Company Background
The firm produces and market consumer food items mainly Soya meat
which is an instant food item used as a substitute for meat based
products. The instant food items are becoming popular in Sri Lanka
after the Socio Cultural Changes occurring since last three decades.
The increases of urban population growth rate, changing life styles and
consumer taste have provided new opportunities for business firms like
MFPL. In addition to that the liberalized economic policies introduced
in late 1970’s opened up the market opportunities for private
enterprises. More concessions and tax rebates were introduced to
encourage such private entities to improve the socio economic
conditions of the country under the said policies. MFPL was founded in
January 1997 as a private limited company. The company is operating
only within the local market. At present the company has become the
largest market shareholder mainly in Soya based products in Sri Lanka.
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This largest market share acquired by the MFPL, due to lacy and
inefficient competitive nature of the Lanso Company Limited (LCL)8.
The CEO of the company is an MBA9 graduate who completed his
masters' degree in 1996. While he was reading for his MBA he opted to
study the LCL Company and its market, which was producing and
distributing Soya based products in Sri Lanka. This company was the
largest market shareholder by then. It is said to be the target market of
this company were vegetarian consumers. With compared to the total
market this segment is a very small percentage of the whole market.
These preliminary studies have led the CEO of the MFPL to invest in
the similar trade and started the business as a re-packeting of the
Soya10 TVP11 and raw TVP has been purchased from the above
mentioned leading firm named LCL. But the target market was not only
the vegetarians but also who preferred other non-vegetarian taste of
the same products. Capital investment for this firm has been sourced
from private funds of the founding Board of Directors.
Originally, the firm started re-picketing TVP that are purchased from
LCL. LCL imported 200 Mt. of TVP from India annually. MFPL
purchased 80 Mt. of TVP from LCL and distributed in the same market
adding some value for the same such as double laminated packaging
and introduced natural flavored ingredients.
4.6 Business Idea
According to CEO of the company, the CEO had bone a small
conventional village and was schooling to a near by small town. The
8 This company was the main competitor of Soya Market (dominated about 70% of the market) and three years after introduction of MFPL, it was shut down and the Manta Ltd acquires it. 9 Masters of Business Administration10 As Specialists, Soya is the High Protein contend food. This is free from cholesterol. For human body, standard level of cholesterol is required to keep risk free levels on High Density Lipid (HDL) and Low Density Lipid (LDL). To keep control on these levels Soya consumption is required 11 Textured Vegetable Protein
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way to school and back had facilitated with a Volkswagen Car, which
was owned to his father. They were a well-off family in that village. He
believes that, if someone had no wealth it was impossible to run a
business. He had gained the exposure from his father. Since he was
rich enough and he had repaired old cars and sold them by means of
business. Since his childhood he had been dreaming to make more
money through whatever the opportunities available. Further he states
that miraculously he was selected to the university. He did not
expected because he had not worked hard. According to him it was a
“big chance”. Despite, the current job he is involved with was assumed,
due to his degree and he condemns the degree saying it has no value in
this society. In fact, he was able to get this present employment
because of his degree. Non-degree holders cannot apply for such a job.
Through that, legally as well as illegally he earns nearly Rs. 200,000
monthly. He started his own (MFPL) with this money. Now he does not
care much now for his job because he owns an established company
where he is the CEO.
The researcher knows the CEO from his school age. In fact, being able
to get his job by means of his degree and because of his job he was
able to establish and develop current (MFPL) company and the
researcher wonders about his disgrace towards his degree and
employment. Initially having earned enough money, the CEO had
planned to sell imported vehicles. He now engaged in this vehicle deal
as a part-time means to generate more money. He completed an MBA
in a Sri Lankan university in 1993/1995 and did a market research on a
company called LCL as a partial fulfilment of this MBA program.
Having exposure and findings, he used these to capitalize in his own
business. When the researcher was collecting information from the
MFPL the CEO was little reluctant to give information and said:
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“ After finishing this research you should not start a firm which competes mine… Yet I am not
afraid of because beggars like you, how much you earn, cannot really compete with mine…
Therefore, I am not scared to provide you with any sort of information”
However, one of the employees of MFPL, MBA colleagues of CEO at
the same university, had helped him to develop this idea of business in
CEO’s mind. With the assistance of the relationships that he has with
his employment, CEO import necessary machinery and equipments for
his company. In addition, one of his brother-in-laws an expert in food
processing technology, who is having a degree in the discipline.
Further, CEO says that he was able to make his business a success due
to the fact that, most people in Sri Lanka are lazy as then do not like to
prepare their own meals to provide marvellous opportunity for MFPL.
The central task of business leaders is to maximize profit in the
organization. But at the heart of creating sustainable value to earn
profit lies the leader’s ability to innovate and implement new solutions
faster than their competitors. CEO states that, “I believe that killing
competitors are the new technology to compete with competition.
Because my idea is that if needed to kill the competitor to achieve
business success, do not hesitate to kill them. It is very difficult to run
the business according to the Buddhist philosophy; because leaders
have always had to be able to take decisions in turbulent
environments.”
4.4 Corporate Strategy
In 1997, MFPL was a Soya based products oriented company with
diversified interests in consumer markets as re-packeters. Operations
were organized into four Strategic Business Units (SBUs). These
groups were not based on such typical organization categories as
product line or types of customers served. Given this operational
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structure consisting with four SBUs depicted in Exhibit 1, the various
groups within MFPL were all natural customers for each other.
Moreover, the development of any new product or service to be
marketed by MFPL was likely to require the coordinated, cooperative
effort of most, if not all, of the four groups.
4.4.1 Strategic Business Units
There are 4 SBUs, but which are not functioning as SBUs in reality.
These SBUs are designated as (1) MFP marketing services (Pvt.) Ltd.
MFP herbal remedies (Pvt.) Ltd. The function of MFP Marketing
services has been identified as Research &Development Manufactures
all items existing at present in the name of MFP Product line is as Soya
Meat, String Hopper Flower, Noodles, Y drink, Salt, Curry Collections,
Som flavor, Vinegar and Purchasing materials required for the
production. Functions of MFP Distributors has been identified as
Distribution of the MFPL’s produced all items would be the main
responsibility of MFP distributors, Advertising the products and
services, sales promotion, and awareness campaign for customers
retails and middlemen and whole sellers. Develop good relationship
among supply claim managers of the distribution charnel. Functions of
MFP neuter foods are to produce Soya “Nuggets” only for internal
purpose. This seed/ Nugget is not supplied to any other re–packetor or
distributor as it is since the company want to eliminate competitor to
expose in to their market. Product categories coming under Herbal
Remedies are still at experimental stages. Market testing activities
have been introduced for two certain products. It also intended to
develop a good will / reputation among customers by producing a
herbal related products and so as such impression would be used to
exploit the market opportunities through/for Soya products.
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4.4.2 Product Categories
Initially MPFL started their business as a re - packeter of Soya related
products. After wards in the latter period of 1998, they started
producing Soya themselves from which they were able to obtain the
economics of production transportation etc. Except Soya meat the
company also produces, string hopper flour, noodles, Y drink, salt,
curry collection, Som flour, vinegar as well. Soya meet is the main
product, which generates the largest profits to the firm (CEO stated).
However, there was no way to identify the unit cost of production.
Company calculates profit through total batch expenditure against total
selling revenue. However, the estimation of the unit profit is not
accurate. To do it in an acceptable way many other expenditure items
also to be considered. A system has not identified in this regard.
The company as new product development strategy has introduced the
market with a jelly. This product also is in its initial stage. Originally
company thought that the product should go to the market in two
forms such as dry jelly and chilled jelly the dry jelly (Non refrigerated)
was designed for the rural remote areas where cooling facilities were
not available. But company experienced that the product is not moving.
Hence all customers irrespective of their dwelling place preferred the
refrigerated jelly. But rural areas where low income customer
segments and recorded poor sales of both items. Accordingly CEO has
decided not to supply that product to the market. When questioned,
whether that decision is not irrational? CEO stated, “If a product is not
successful at market, I can feel it. Therefore, before experiencing a loss
I would stop that product”
4.4.3 Objectives, Strategies and Tactics
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The primary reason that MFPL had developed as a company was to
invest their own funds in their own firm. The CEO states that,
“ Today’s strategic issues are quality, flexibility and competitiveness. In fact, your product needs
not to be a real quality one. But if you can convince the consumer you can be success.
Competitiveness is the main issue for the success. Therefore, you should be able to eliminate your
competitors or weaken them. I mean “flexibility” is something like using “cats paw”. We pretend
that workers are looked after well and consumers are convinced that they are treated as “god”.
Otherwise, a company cannot be a success. Retention of consumers for short - run is very close to
flexibility”
According to the CEO the Main objective of the firm is to survive. They
want to achieve a “Sustainable Survival” operating business to
capitalize on market operations, which is the most crucial issue here.
Their main objective is achieved through eliminating/ or weakening
competitors rather than caring for social responsibility. Through such
exercise they want to increase their net assets. This kind of objective is
not in black and white in our company. Their corporate objective is
supported by a set of Business Objectives such as:
(1) Identify the areas of business expansion
(2) Capitalize on business operations
(3) Continuous appraisal/ assessment of market of market
changes and trends and
(4) Achieving steady growth rate in a competitive environment.
Their performance measures mainly considers about financial factors
such as, sales value, profits, growth of assets and cost. In addition, we
attempt to project the market and the product mix, to establish
technical goals, and to identify obstacles or boundaries limiting the
business.
CEO states,
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“According to the theory corporate objectives are defined as responsibilities to employees,
shareowners, community and society as a whole. But I think keeping too much emphasis on those
things hinder the development of a business. You can keep these as mere corporate objectives only.
Finally, we attempt to look at ourselves in a mirror and criticise the overall objective. We carefully
evaluate the competition, the threats and contingencies we might have to meet, market shifts we
might anticipate, and attempt to evaluate what we must make happen in order to achieve success of
the objectives.”
The ranking of mentioned key factors, then, provides a priority list for
future management attention. We expect the objective to be
challenging enough, even shocking enough, to force a radical
rethinking of the strategies and tactics. At the next level in the goal
structure is the strategy statement. The strategy describes in detail the
environment of the business opportunity to be pursued in support of
the objective. Normally, there will be several strategies supporting
each objective. Altogether, we had more than 10 strategies operating
in 1997. For example, if we had an objective to achieve certain goals in
the Soya Market, we might have one strategy involving distribution
network, one involving material application, and perhaps another for
safety systems introduced for Soya packets. The strategy looks ahead
over a number of years, normally from one to three, and intermediate
checkpoints are defined along the way providing milestones against
which to judge progress. Progress measurement is an element of a
strategy not included at the objective level. Finally the contribution of
the strategy to the over-all objective is defined in quantitative
measures.
Next in the goal hierarchy is the Tactical Action Program (TAP).
(Examples are given in Exhibit) A TAP is a detailed action plan of the
steps necessary to reach the major long-range checkpoints defined by
the strategies. It normally in short term, covering 2 to 4 months of
effort. For each planned tactic, a responsible individual is designated, a
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start and finish schedule is established, and the required resources are
finished. Below the tactical level, each TAP is broken down into
individual work centers, which we managed by means of individual
oriented management techniques.
4.7 Organizational Structure and Controls
Organization structure and control emphasizes on the meaning of
company’s organizational chart, consistence and recruitment of
workforce, nature of responsibilities of employees, incentive schemes
introduced and the qualitative characteristics of decision-making
process.
4.5.1 Organization Chart
As per the organization chart of the company, there is a General
manager position. But this position is not filled. Instead one of the
directors is acting for the same. His acting position also limited to a
nominal and the CEO, in fact, intervene the activities directly. More
over, there are 3 DGM positions, namely: DGM - Operations, DGM -
Finance & Administration, DGM - Purchasing MIS & Supplier
committee. All these positions are kept vacant purposely and actually
the Director acting for GM directly looks after the responsibilities of
these DGM’s . In these cases also the CEO directly intervene the
activities.
There are 225 positions according to the Organization Chart. 160 of
these positions operate under DGM - Operations. But all these people
are responsible to the CEO directly. The balance 65 people are
operating under DGM - Finance and Purchasing MIS… CEO’s idea is
that the company should emphasis much on operations rather than
clerical work. However only a few of these positions are filled yet.
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Accordingly Operations, Finance & Administrations, Purchasing and
MIS 62.62% (97/160), 66.67%(32/48), and 58.82% (10/17) are vacant
respectively. Average 60% of the total positions in the organization
chart are kept vacant.
4.5.2 Work Force
At the very beginning the profile of the work force of the company was
as - 03 directors, 08 miner employees and1 supervisor. At the
beginning of the business operations, the supervisor also was sent to
the field for distributing the company’s products. Directors also played
the role of the supervisor or other production related miner work or so
on.
Today, in addition to the three directors and CEO, there are two (02)
middle managers, Ten (10) first line managers, forty (40) lower level
managers and three hundred and seventy four (374) non-managerial
workers. According to the organizational chart it is represented
managerial workers and 13 non-managerial workers only. (The CEO
has developed this Organizational Chart)
The three directors have had experience and exposure in different
areas of business operations, which are very crucial for the operation
of the currant activities of the MFPL. For instance, one of the directors
is an expert in food processing activities and related trade. Another is
an expert in import related business activities (the raw TVP for the
business is imported from India), while the other has have got hands on
information and understanding about the market structure and the
nature of role players in the TVP related products and the market.
Actually he was an another main food producer. These three members
of the board of directors are the people who invested their private
funds on the business as the investment capital. One of the directors
left the company after 6 months stay with the MFPL. The position was
110
filled with another and meanwhile one of the existing was designated
as the CEO of the company while serving and chairing the Board
meeting.
Originally the tasks and the work/job has been delegated among
various positions and people but later on some of the assigned jobs
were taken over by the CEO, after observing how the work has been
performed.
4.5.3 Nature of responsibilities
One person is responsible for many jobs that are done in the
organization. Typically, functions are not developed in this Staff and
Function organization structure. Here, the organization structure
showing something entirely different. It is shows the relationship
between strategic mode and operating mode within the same
organization. One of the functions of the manager set strategies for
identifying TAP’s and combine them with existing strategic plan. Often
these managers are responsible for operating these strategies as well.
For instance, managers who identified a Production TAP should show
the results to CEO practically. This may not be approved in the
Strategic Plan. (Dominant role in the strategy) Nearly always, the
strategy or tactic manager also will have an operating role to play. In
most cases does the Strategy manager or Tactic manager have that job
as his full time assignment. Divisional managers should identify their
own objectives and push it them to CEO. Since there are no divisional
managers in practice in this company this is also done by the CEO.
Thus, at MFPL, our managers are given dual responsibility for both
strategies and operations. Their future in the company (survival) will
be decided on the success of both activities. In recent years, we have
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deliberately tried to create an environment in which it becomes natural
for distinguish between their operating and strategic modes. Last I
mislead you, let me re - emphasis that we are talking about two modes
within the same organization, and not about two distinct organizational
structures. In fact, in the majority of cases, the execution of both
modes is through a single manager.
There are a number of reasons why we have chosen to develop the
second, or strategic mode, within the organization. First, the strategic
mode gives us a mechanism for large-scale opportunities, or those
requiring combinations of resources not found in a single unit. Second,
it gives us a mechanism for planning and controlling our investments
for the future, and for making sure that we do achieve the desired
balance of priorities between short-term and long-term activities.
4.5.4 Incentives and Reactions
Majority, almost all, employees in the company is said to be young and
unskilled. CEO says that, such people will not try to overwrite company
practices and comparatively stay with the company for a longer period
of time. Also he believes that, such people would work harder than
others. When recruiting the people, customarily the vacancies are
advertised in National newspapers, but selection is mainly based on
personal contacts, and among known people. The CEO justifies such a
selection stating that the controlling measures are easy to carry out
when known people are sleeted through the known channels.
There is no specific duty hours or working hour for the employees. If an
assignment is given simultaneously a dead line or target completion
day or time also will be given. The job should be completed within such
period/s.
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The vacant positions in the organizational chart are kept as it is by the
design. The CEO says that it is a motivational factor for the people
below such vacant positions to work harder to promote to such
positions. Except production workers, others are entitling for fixed
salary. All the managerial level employees are also recruited on
temporary and/or under probation for low salary scales. As an example,
Accounting Executive is paid with RS.4000 per month at the beginning.
But, production employees are paid salaries according to the piece rate
system. Starting with the immediate supervisor, individuals are rank-
ordered on the basis of their relative performance and contribution,
and an adjustment base salary12 is recommended. The ranks are
combined at successive levels of the organization until the department
level is reached. The department manager identified “bench mark”
people among those on his department. Bench mark are those people
judge as having made equal contributions, even though they are in
different functions and job grades. Incentives are given only to the
marketing, production managers and the supervisors (Key Personnel
Analysis -KPA).
This KPA system created competitiveness among production supervisor
and production manager within the organization to become Operations
controller13 for that they worked hard. “ As a practical matter”, one
manager said,
“KPA is not as much as a zero-sum game as it sounds like. The system does force us to examine
performance at the very lowest levels in the organization and attempt to identify people who have
done a superlative job. As the ranking process moves up the hierarchy, however, only a very few
people from the lower levels manage to survive the screening. The informal test that each of us uses
in identifying our key personnel is, who is contributing most to the success of the business? The net
effect of the process is that almost all of the managers in the higher ranks participate in the incentive
pool. It would be a rare event, for example, for a MIS manager not to receive a incentive. Most
12 Meaning of base salary is that the differentiated piece rates decided on different type of products and departments13 According to the organization chart Operations controller post is vacant.
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unfortunate thing is few managers are not entitle for incentives such as managers in the finance
division ”.
In CEO’s point of view that, above marketing and production people
should look after the marketing and production work and they will
monitor the people to work hard when the incentives are given to such
people. Also it employs a little money on such issues.
4.5.5 Decision Making Process
Even though there is a hierarchical organizational structure and the
procedures, the decision making power seems to centralized in the
hands of the CEO. In other words even though the board of directors
are agreed on a certain decision the CEO may change the same without
getting their consent or overwrite the same. Also the technically
approved matters such as the designer recommended and approved
decisions also overwritten by the CEO as he wishes. Therefore, it
seems that the sole authority of the decision making power lies in the
hand of CEO, and other procedures appeared to be seen as mere
policies or guidelines for the company.
4.6 Budgeting and Planning
The company does not maintain formal budgets or plans. Some
accountants have marked their own short-term targets as advises given
by the CEO. In the company’s point of view, there is no use of
preparing budgets or plans for such a small size company and they are
arguing that of preparing budgets increases the cost to the
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organization. On the other hand, as an active company they don’t have
much enough time to prepare and implement budgets.
4.6.1 Budgets
CEO is the man who is keeping all the resource requirements for
organizational activities in his mind. Actually they prepare some draft
budgets for different types of purposes, but all those budgets are not
available as a documentary source. All the facts and data are kept in
the mind of the CEO. Other higher rankers and operational employees
don’t remember the above-mentioned data and facts. According to the
CEO, these types of data not recorded to keep some facts and figures
such as material usage, production mix etc. in secret. CEO commented
that:
“We really have two budgets for the year, one for Production Department and the other for
Marketing Department. But all the budgets are drafts and flexible, prepared by me. I know what is
happening in the market (Raw material market and Finished goods market). Factors relating to other
factors are also keeping in my mind. I know that what are the required changes and how to update it.
Therefore, we are not maintaining formal budgets, as explained in the theory.”
4.6.2 Planning
The company does not prepare plans, because CEO making all the
decisions related to the company. If I ask from any type of the worker
in the company about the plan, they have different types of plans, but
not written, not formal, not structured and consisting with some ideas/
opinions/ orders given by the CEO. As you have gathered by now, CEO
continued;
“We are not very enthusiastic around here for elaborate methodological approaches to planning.
Speaking philosophically, it seems to me there is a major problem of injecting methodology into a
human organization. The literature abounds with elegant solutions to well-formulated problems.
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However, very few well-formulated problems appear in strategic business management. Even fewer
businessmen are prepared to accept someone else’s strategic model as a guide to their own
behaviour. In our organization, we do not try to apply others’ strategic models to our business
whether they are successful operating planning approaches. In strategy, style is everything, and
planning approaches must deal with style variations effectively, or fail.”
He further commented:
“At MFPL, we have proceeded on the premise that long-range planning can be imbedded
successfully within the primary operating organization. Our commitment to accomplish this has first
priority on matters of organization development and culture, rather than on matters of pure planning
methodology.”
4.7 Financial / Capital Structures
Capital is the main factor, which decides the authoritative power of the
CEO. Capital introduce by the CEO is his own. Then, no one can
influence to the organization based on capital other than the CEO.
4.7.1 Initial Capital and Net Asset
Initially the 3-founding directors formulated RS. 500,000 capital
investment of the firm. Originally, required machineries for the
operations have been leased out and the one of the directors on a
rental free basis has provided the business premise. The company was
able to increase the investment capital up to Rs. 3mn within first three
months of the business operations. Up to this stage the main type of
the business was re-packaging of TVP and distribution of the same
Island wide except North and the North Eastern parts of the Island.
4.7.2 Resource Allocation
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In 1997, MFPL created a Resource Allocation Committee (RAC) to
make strategic resource allocations, and review strategic activities.
This RAC has 03 permanent members including CEO, Managing
Director and Marketing Director. In 1997 the committee was met about
20 times a year for a full day. The agenda for each meeting normally is
settled beforehand and includes a rigorous re-examination of at least
one business objective or consideration of a major new business
opportunity. Topics discussed are: (1) the appropriateness of the
objective in light of current information; (2) progress in the strategic
development of the objective; (3) any actions, which should be taken at
the corporate level to accelerate or otherwise modify the strategic
programs for that objective.
Besides this, managers of key strategies and tactics frequently meet
with RAC for progress reviews, or when initiation of new programs is
under consideration. But, CEO told that, “everyday the committee ends
up without new idea, other than the idea forwarded by the CEO and
therefore, consuming time and cost is very unnecessary for these types
of committee meetings.” Again, CEO states that, they do not have
resource allocation plan for each department. After careful personal
evaluation, he decides departmental resource requirements.
4.8 Market
Soya market in Sri Lanka is very popular now. During last ten years,
number of manufacturers, marketers, repacketors were developed.
This was happened due to busy and lazy life style of the people. Most of
competitors didn’t try to advertise or distribute properly and some
have shut down their companies due to loss leading quality.
4.8.1 Features of the product
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LCL product had a salient weakness, which was not realized or was not
taken into consideration by its management. That was a kind of bad
taste, which was not preferred by the customers. The MFPL was able
to identify this failure and reacted toward getting the advantages of the
opportunity. As a result the MFPL could capture the market within
three months operation in the business. Therefore, the company’s
Investment capital could be increased Rs. 500,00.00 to Rs. 3mn within
the first three months The Company introduced the TVP with natural
flavour and non-vegetarian ingredients
4.8.2 Market Development
At very beginning 80mt out of the total of 200mt of TVP imported by
the LCL Company was purchased by the MFPL and used them as the
raw material in the manufacturing process. The both companies made
an agreement to abide by to provide and buy 80mt annually. The other
players, including LCL, shared the balance 120mt in the total market.
Many of them operated as re-packeters and distributed the products to
the local market.
4.8.3 Distribution Network
The LCL distributed its product only to the selected geographical
locations and only for leading sellers in those areas. MFPL adopted a
completely different approach to select its channel members and
sellers. For instance, MFPL distributed its product throughout the
Island except North and the North Eastern Provinces, due to prevailing
Civil war of these two areas. In order to develop the distribution
channel MFPL appointed agents on unconditional basis. That is in
many cases when a company appoints its agents they ask for an initial
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deposit from the agent. But MFPL appointed agents without such initial
deposit or other conditions, which hinder the operation of the
distribution activities. Also the MFPL provided the sellers with
unlimited credit facilities to expand the distribution of MFPL’s
items/goods. In fact, MFPL was able to introduce such systems since
their capital investment does not induce any interest to be paid to
outside funding agents. In other words, investment capital was
consisted with private funds of the board of directors. The company’s
policy for the dealers and sellers was favorable for the existing market
features. For instance, No need to emphasize that such a dealers or
sellers would be glad to accept such policy since many of the Sri
Lankan small scale sellers find difficult to afford for such initial
deposits or unconditional credit facilities would definitely enhance the
business strength of such small sellers. Some sellers, of course have
misused the opportunity provided for them and as such some amount of
credit granted still remain unpaid. Yet this strategy enhanced the
strength of the company’s distribution channel. Hence, the company
could easily develop a wide spreaded distribution network throughout
the Island. Distribution channel has specifically found rural areas since
fish products (fresh fish) distribution is not widely spreaded or
available in those areas. Sales agents have been appointed for areas
and every provincial town except north and Eastern Provinces. Goods
are been distributed regularly. But the company had experienced in
some areas sales are recorded only about 25% of the total distribution
to the particular sales agent. Yet regular supply/distribution is
maintained. CEO says the When the customers wants to buy the
product it should be available to hem/ has at their close proximity.
Hence the product should be available in the market without any
shortage.
4.8.4 Reaction for Competitor Activities
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MFPL was able to identify the competitor reaction toward their
business operations and strategies. For instance, from the sellers of the
products of MFPL, the company found that the competitor has taken
some steps to cripple their production by not providing the agreed TVP
for the MFPL, since LCL was the only supplier of TVP to MFPL. The
MFPL was able to understand the LCL’s behavior in advance.
Therefore, they had orders and imported a buffer stock of TVP. Once
the LCL denied supplying the agreed amount of 80mt of TVP, the MFPL
produced their items utilizing the Buffer stock and distributed to the
market. Meanwhile, the LCL Company increases their production and
released them to the market. By the time the consumers were attracted
to the MFPL’s and hence, at the end there were huge bulks of LCL’s
items in the market, which could not dispose. Then afterwards, the
MFPL Company started importing raw TVP from India directly and
completely deviated from LCL.
Originally nugget is purchased farm LCL and later it was imported
from India. With the importation of nugget from India, company could
save 15% of the cost of purchasing. At percent the company produces
Nugget it self. As a result 10% of further cost reduction has been
experienced. This Soya Nugget is said to the comparatively smaller
then that of other substitute available in the market, the label is not
preferred by the consumes. Therefore, CEO says that this nugget in not
givens to external bodies or agents as a strategic measures. With the
introduction of in houses production, Nugget rather then outsourcing
the dwellers in the factory are complained about the noise generated
by the machineries when production process were going on. In order to
dilute the pressures from such residents the CEO recruited the
relations or family members of such dwellers to the factory as
production employees or any others. Hence he says the pressures from
sorrowing dwellers were eliminated.
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The costs of mercenaries imported for nugget production were
recovered within initial two (02) years period and hence the company
generates profits. CEO believes that the industry may not exist as it is
for longest period yet lifetimes of machineries have been estimated
approximately for 10 years. Therefore ECO says the machineries
should be utilized with full capacity at present to exploit market
opportunities available now.
The Soya Nugget is also supplied / distributed to the retailers in bulk
from in order to cater for the low-income groups at a comparatively
lower price than normally picketed MFPL products. Because the lowers
income group could be attracted with such practices and it would help
further extension of market share of the company. Once the expected
demand is met the company intends to introduce them with pocketed
product at a later stage. The product is available in seventeen (17)
different flavours in which prices are slightly different. It also available
with deferent weights, in order to cater for the affordability of different
costumes segments, yet pricing has not been based on any costing
strategy. Instead market price is determined according to the price of
substitute products that are supplied to the market by the competitors
or on arbitrary basis
4.9 Costing Process and Material handling
In MFPL, there are no generally accepted costing procedures,
methods, and practices. Actually they are not maintaining even single
page for to record costing information. The CEO considered that the
costing information is the very secret information rather than other
information. However, the CEO maintains all the costing data in his
mind and he personally handles material to avoid racket and errors
occurring when others involve into transactions.
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4.9.1 Pricing
Up to now the pricing of the product of MFPL has been based on
market price of the competitor’s product in the market. The goods or
items produced are not separated in to department wise or human
resource is not allocated according to the nature of production or items
produced. In other words workers are rotated and production is carried
out as required by the each item/s.
Different items are produced in the same premises and as a result
space problems are spires. Worker is, in fact, become all rounder at
the end. Any trade union activity may cause serious adverse results as
well. But, CEO believes that, by training people as all rounder, their
idling time could be minimized and training people as all rounder can
improve the production. Also if a worker is absent another could easily
carry out his or her work.
4.9.2 Material Handling
In addition to the Supply Department Stores, instead of purchasing
from the central stores, the production department directly handles
procurement of raw material. This is specifically experienced when
bulk purchases are done. (e.g. chilly, and spices). The unit or the
department who purchases the items directly prepares GRN. Returned
goods and items are re-use in the manufacturing process as raw
materials. It is found that no records will be maintained in returned
goods or items concerned. When inquired from the CEO he says that,
record keeping in these items will further delay the production process,
and it may result in creating idling time of machineries or some
workers as well. Hence, once the goods are returned or defectives are
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identified the will be used in the production process as soon as
possible. Further he says, that if these items are not used at once it
may be lead to steal them or misuse by the employees. In addition,
keeping defectives or returned goods/items for some times in the
factory premises also implies kind of displaying the company’s
weaknesses hence better to dispatch them as soon as possible. If the
packaging is defective, such items will be sent back to the production
department to re-pack. Therefore, computing cost per unit is said to be
cumbersome. Items will not be released until such time dispatch notes
are issued. This controlling measure has implemented in order to
minimize malpractice.
Existing stores maintain bin cards, which uses only as a store
controlling measure. In other words it is used to supervise the
storekeeper’s work. These bin card records are not taken into account
when items or raw materials are purchased.
GRNs are issued without a proper mechanism. For instance, GRNs may
not issue at the time when goods are received but it will be issued after
2 or 3 days later when these goods are reached at the machines.
Surprisingly, the GRN card will be recorded as per the invoice received
but not accordance with the amount of goods actually received. It is
also observed that, malpractice may occur as a result of this GRN
system. CEO says that he cannot withhold the production until such
times the GRNs are issued; instead the market should be supplied with
the goods in right time. Further, if the GRNs are not properly
implemented, the cost or damage incurred in this regard will be
comparatively very law with compared to the damage that could be
taken place as a result of the goods are not supplied to the market in
right time.
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Location of the material stores is not closer to the production
departments. This has created many difficulties according to the people
in the production department. But CEO says that he wants to keep this
distance to avoid some kinds of malpractice that could be possible
when departments’ ant the stores are located very closely. Production
supervisors say that, production process is interrupted very often as a
result of this distance between stores and the production units.
Material obsolescence are very often occurred due to the fact that
improper inventory system. In fact, different kinds of raw materials and
items are stored in the same place or the bin without any classification
or grading system. This has experienced as result of lack of spaces to
maintain a proper storing facilities. CEO argues that developing the
store facilities make an additional cost which does not generate any
profit in turn but if the same amount of money is spent on
manufacturing activities that will bring a profit to the company in turn.
Storekeeper complains that he is not in a position to do his job properly
since unauthorized people interfere in to his job. For instance, without
proper authentication or documents production unit may consume the
items in the store for an urgent manufacturing work. Hence proper
management of stores is impossible.
4.9.3 Changes to be introduced (Proposed changes)
in Cost Accounting Statements
It is proposed to introduce the following devices to the practice in
order to manage cost concerns. Such as,
1. Introduction of wages control ledges (WCL)
2. Introduction of Batch card (BC)
3. Introduction of Return Goods Report (RGR)
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These “new” methods are proposed mainly because, existing practices
does not help to measure unit cost of business operation. More
Specifically with the introduction of WCL it is intended to be achieved
the following objectives.
To calculate direct incentives for production workers. In fact, the
present practice of the MFPL is that the wages are implemented as a
“piece rate” System. Workers are not provided with any others
incentives than this. The company as a system, which cannot control
the cost in terms of EPF concerned for instance, if an employee earns
RS, has identified this System. 15,000 through the said system the
MFPL has to pay EPF for Rs. 15,000. With the proposed new system it
is intended to introduce a basic salary structure, which is
supplemented with incentive scheme. Thus the EPF would be applied
only to the Basic salary. The company intended to introduce a very low
Basic salary structure as a cost controlling measure. In addition, it is
proposed to introduce an incentive for the attendance of the
employees. Hence, it will work as in device to motivate workers for
regular attendance. Moreover, it is also expected to measure the actual
Numbers of units produces though WCL since the incentives are to be
bared on the number of units produced by the employee too.
The management of MFPL is expected to measure the performance of
each production divisions through this system as well. At present
production is carried out through rotation of workers, in which
separation of division or departments of production is not
possible/visible. The company also intends to identify the wage cost
ratio per unit on departmental basic and it will be needed as a
controlling measure in future bruises operations. This proposal also
implies that an employee should produce a minimum given number of
units in order to claim for the basic salary and beyond which incentives
are applied. The CEO intends to identify wages output ratio, which may
use as a controlling device.
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4.10 Summary
This chapter has discussed an influence of social and organizational
culture on rise and development of food processing companies in Sri
Lanka with special attention to the MFPL. Business orientation in Sri
Lanka started with the base of wealth and accumulation. Before
independence Plantation agriculture brings about a complete capitalist
transformation. In Sri Lanka, capitalism developed in a society whose
traditional structures and values, including ethnic and caste loyalties,
underwent change. Furthermore, in the case of the arrack rents, the
investment was also very much self-financing. At the bottom of the
social scale were the marginalized poor in scattered forms of self-
employment, and workers on plantation and manufacturing enterprises
located in and around Colombo. The above situation is highly
influenced to development, stagnation and decline of business society
in Sri Lanka before independence.
When Sri Lanka, achieved independence in 1948, it had practiced
limited self-rule based on universal franchise since 1931. There was a
smoothly functioning export economy that provided commodities
urgently demanded by the world market. Productivity was low and
population was growing rapidly. Existing economic structure would be
unable to support the growing population at its current standard. From
1948 to 1956, period of Economic populism with an open economy, Sri
Lankan government provides wide range of direct benefits to a large
segment of the population. This was influenced to reduce the in home
agricultural products. From 1956 to 1965, Economic populism with
economic controls, most of private owned businesses such as transport
trade, converted into government owned business organizations by
nationalizing. This situation encourages government owned businesses
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and discourages private owned businesses. From 1965 to 1970, limited
liberalization the rightward political shift and trade liberalization
package was introduced. Agricultural productions were promoted.
From 1970 to 1977, under the Controlled Economy, economic and
business conditions had begun to worsen and unemployment was
rising. This period is directed towards development of agricultural
businesses and reduces imported consumption of goods. From 1977 to
1983, Policy Reform period with the open economy damages to the
plantation sector and in addition production sector activities reduce
and service sector activities were expanded. These economic reforms
became an encouragement for imports and foreign investors.
Introduction of new Companies Act In 1982 helps in encouraging an
expansion of different types of companies.
From 1983 – 1989, Start of Civil War created many difficulties and
destructions for economic development especially in the agricultural
food product areas. From 1989 –1994, Crafted a Second round of policy
reforms contributed to pickup in economic growth in the early 1990s.
The reform package included tariff reductions; rupee devolution; tax
reforms aimed at stimulating the capital market and improving tax
compliance; further liberalization of financial and commodity markets;
and liberalization of exchange controls on the current account of the
balance of payments. Other emphases were privatisation and
peoplisation (encouragement of individual share ownership), export
promotion, and poverty alleviation. These economic policies are
operating consistently up to now too. However, from 1977, the open
economic policies led many people to abandon domestic agricultural
activities and moved them towards other industries and removed from
their traditional and cultural norms and value systems. People started
to concentrate only on finding an office employment using the political
influence. This malpractice in politics directed towards the destruction
of the total life style and people became very busy and indolent than it
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was before. The time spent at home became lesser and lesser.
Gradually they were used to buy prepared meals. As a result of it
instant and just-in-time food industries became more and more
popular. The MFPL of Sri Lanka was an exception having analysed the
existing market environment and the CEO, the founder established the
MFPL in 1997. The company is operating only within the local market.
At present the company has become the largest market shareholder
mainly in Soya based products in Sri Lanka. CEO of the company is the
in charge for all the activities of the company. He has gained his
exposure from his family background, government employment and
education he acquired from the University first degree and
Postgraduate degree. The strategy is not to care about the social
responsibility and to care only about the business success through
profit maximization. For this purpose he follows strategic issues such
as quality, flexibility and competitiveness. The main objective of the
firm is to survive. According to the CEO of the company he doesn’t
apply standard models to run the business organization and informal
management control systems, which are occupied, and all these plans
are in the mind of the CEO. Now a days the CEO is going to introduce
some formal control systems to this organization after the discussions
with the researcher.
CHAPTER FIVE
Analysis of the Case
5.2 Introduction
MFPL was a mix of automated and non-automated production with
most products produced continuously. The main products were made in
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two separate production departments: MFP nutria foods and MFP
herbal remedies. The researcher chose to work in the MFP nutria foods
Division, as it was the largest production department in MFPL. Nine
kinds of food items (Soya Meat, String Hopper Flower, Noodles, Y
Drink, Salt, Curry collections, Som flavor, and Vinegar) were made in
separate plants in this division. Out of nine kinds of products Soya
Meat, String Hopper Flower and Noodles are fast moving items and
others slow moving. Among above main three products Soya meat is
the dominant product possibly because its production was quicker.
5.2 Management Theories Vs. CEO Driven
Management Control System
Classical Management Theories, espouses a “scientific basis to
administration”, based on beliefs that the organisational world
possesses the characteristics of the physical one. Thus, it is claimed,
administrative principles can be derived by systematic study of cause
and effect relationships. Open system theory discusses the exchanges
with the environment. Contingency theory tends to portray
“management in a technical role”, matching organisational design to
the dictates of contingent factors of survival. Interpretive theories
emphasize the ‘reality’ rather than any ‘independent reality’. However
the presumed independent variables may not be so. Structural theories
discusses that the influence of corporate structures and accounting
systems to create variations on economic efficiency. As in the case of
systems theory, factors such as “technology” may be part of strategies
of control.
5.2.1 CEO’s Ideology
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According to the interpretive work of Meyer at el (1977) is relevant in
this context, structures, rules, plans, goals etc. are seen as myths and
rituals which reinforce the stability of behaviour within organizations
and legitimise their action externally. CEO14 of the company is always
trying to explain that management theories are not applied in the
practice and he commented:
“I think we are the only firm/ company who become the market leader within a very short period of
time. I have no idea about to what extent the so-called theories were useful in this regard. I believe
that leaders in commercial and public–sector organizations should understand and address the
challenges of dynamic environment and adapt in company’s activities accordingly today’s fast–
moving environment with the help of complexity15 thinking.”
Above statement of CEO is relevant to the Interpretive Theories. It is
proved that the theory supported to the practice, but practitioners in
the business field don’t know that whether they are following theories.
They are commenting that they found the way of managing the
organization.
Open Systems Theory under the Social Systems Theory is
characterized by exchanges with the environment, were particularly
influential. Open System Theories regards organisations as organisms
that process inputs from the environment back as outputs. Its
ecological orientation stresses the interdependence between the
organisation, its internal Sub-systems and the environment. Open
system theory considers, organizations and environments tend to be
taken as objective, when control systems are described as determined
by the variety in the environmental and organizational needs for
survival, by stressing the need for integration for the survival of the
whole, there is a presumption of a "functional unity" to organizations,
which may divert attention from issues of power and conflict. 14 Chief Executive Officer15 Complexity is a term used to refer to a collection of scientific disciplines, all of which are concerned with finding patterns among collections of behavior or phenomena – Managing Complexity, Robin Wood, 2001, p.1
130
As CEO commented:
“However, I managed the business in line with the environment factors, closely observing the
directions of these elements, introducing changes timely. I believe these are the main factors of our
success. For example, when we recruit people as our employees, we critically evaluate their
suitability for the company. But we never hesitate to kick them out if needed.”
Therefore, it endorses, here, once again what open theory explains.
The assumptions behind contingency theory are similar to those under-
lying an open systems approach - the key relationship between an
organization and its environment can be understood in terms of the
organization’ s need to survive, and the fact that there are certain
functional imperatives for the various sub-systems. As CEO
commented:
“In addition to that I would like to say that, irrespective of the board of director’s decisions we
might implement the activities if there are viable for the existing market conditions. The board of
directors also works with the ordinary workers in achieving expected goals. Our main aim is to
survive in the existing market.”
The CEO follows a system of this nature in order to ensure the
company’s survival, which explains very clear in the systems approach.
5.2.2 Hidden Authority & Organizational
Capacity
An interpretive approach emphasizes the essentially subjective “nature
of the social world” and attempts, to understand it primarily from the
frame of reference of those being studied, as Laing (1967) pointed out,
'persons are distinguished from things in that persons experience the
world whereas things behave in the world’. The focus is on individual
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meaning and people's perceptions of "reality" rather than any
independent “reality" that might exist external to them. CEO doesn’t
believe staff in the organization. He can realize that he also started this
business from collecting data from LCL and after starting the LCL sold
to another company due to insolvency.
CEO said, If the required data are available and Director acting for GM
wishes, you may receive them” when researcher told him about the
need of data. But the following day contacted the Director acting for
GM, CEO received the phone and says, “ If you need to collect some
information, you should meet me” and then researcher reminds him
what he said the other day.
He responded:
“When GM (acting) is present, I should not disgrace him. I should give him the due recognition. It is
not nice to let down him. That’s why I told you that way. But if you need any information you
should come to me. Because I’m the CEO, I’m the person who decides whether to give you the
information or not.”
To achieve major long - range checkpoints defined by the strategies,
though there is a Tactical Action Program (TAP), CEO overwrite it.
In this regard CEO commented:
“The preset goals/objectives will be a base for a strategy, but according to the latest market
conditions I alter all the action plans immediately if it is required. These TAP are delegated and
assigned to different action centres. But I personally monitor these and alter it requires.”
Since the many positions are kept vacant in the organizational chart.
CEO commented:
“It provides more liberty/ freedom to work as I wish. Many senior level positions such as DGM-
Operations, DGM - Finance and Administration, DGM - MIS and Supplies Committee etc. are kept
vacant, cost of maintaining such positions are not appeared to be seen. I have nominally, assigned
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acting GM many responsibilities and jobs. But, I personally intervene his work too. I grace him
since it is not nice (theoretically) demoralize him.”
According to the all above, it is understood that CEO of the company
well understood the nature of social world, and what the real meaning
of reality explained as interpretive theories.
5.2.3 Financial Authority and Corporate
Strategy
Structural theories say that variations between corporate structures
and accounting systems are ascribed to differences between political
and managerial values and not just the dictates of economic efficiency.
Thus, the possibility that corporate controls are social creations subject
to choices in acknowledged. Although accountants have noted
problems associated with new corporate structures such as
divisionalized organizations, their analysis has been almost exclusively
conducted from a technical and Classical Economic viewpoint. Little
interest by accountants has been shown in radical interpretations of
structural changes, which question whether the logic of efficiency was,
and is, paramount in influencing accounting and corporate
developments. CEO always talking about his capital share to the
company and his personnel wealth very proudly and as his power of
justice. CEO who belongs 65% share capital, chair the board of
directors and monitor and interfere the work of board of directors and
final decisions are taken only by the CEO. Therefore, the board of
directors is nominally take decisions and responsible for certain jobs.
CEO commented:
“Employees of the company know that I have enough wealth. Therefore, if the company runs on
bankrupts the employees are the people who affect most. I purposely have let workers to know
about this. I am taking final decisions in all the areas of business activities, because I have 65%
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share capital of the company. If any failure occurs I am the person who face the largest risk.
Therefore, I can overwrite any decision taken by the Board of Directors.”
According to the above statement, the managerial value is developed
based on the financial capability of the CEO. But according to the
theory that variations between corporate structures and accounting
systems are ascribed to differences between political and managerial
values and not just the dictates of economic efficiency. Moreover CEO
says,
“I believe that investing money is better than saving them. The risk of investment cannot be
avoided. But through investment we may be able to provide people with jobs. If I can do the same
for my relations, friends and village mates, I would be able to context for the general election.
Politicians can earn money and expand their businesses. I do not want to have many businesses at
the beginning. Instead, I want this business to be very strong and steady with different products in
the same production line. Thus, I would be able to compensate one’s loss from another product.”
On the other hand CEO develops the corporate structure based on four
SBUs, but which are not functioning as SBUs in reality. And also
accounting systems design according to the perception of CEO on the
basis of situational factors. He commented:
“Corporate structures and accounting systems are developed according to the organization culture.
To escape from tax liability, I design the SBUs. Actually all the SBUs are under the same roof.
Same batch of workers are doing all the activities related to the SBUs. Corporate controls are in my
hand. I the man who solve problems associated with new corporate structure.”
5.2.4 Making Subordinates Unimportant.
Contingency Theories seeks to provide a reconciliation and synthesis of
the conclusions emerging from a verity of organizational studies. The
work of industrial psychologists and the human relations school is
combined with open systems theory and that which empirically
measures structural characteristics of organizations. Its principal
thesis is that different organizations principles are appropriate under
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different environmental circumstances, and within different parts of the
organization. Effective operation of enterprises is seen as dependent
upon there being a suitable match between its internal organization
(including structures, styles of leadership and decision making), and
the nature of the demands placed upon it by its tasks, size,
environment, and members wants. CEO says,
“No one in the organization is competent in performing any task properly. He has developed such an
image. CEO comments negatively on what ever work they perform.”
CEO’s idea is to say that subordinates are not important since they are
not in a position to perform a proper work. When I was collecting
information, one of the workers brought to CEO some noodle product
for his verification. The CEO then fired the worker in front of the
researcher too and advised him to destroy the product. Later on CEO
accompanied me to the production section and advice the worker to
change the ingredients combination and tested and approved the
production. He asked me to test the product too. I tested it and
comments saying “very good”. In fact I was not aware whether it was
good or bad. The CEO does not respect their qualifications but they
should prove it practically. Another occasion, a designer came to CEO
to get his verifications and comments for the packet he designed. He
was not satisfied with the designed because it was big for the amount
of noodles to be packaged. Hence, he pointed out the extra cost
incurred in this regard and instructed to reduce the size in to a
manageable size. Then it would save material cost, printing cost,
storage cost and defective cost that would incur as a result of loose
packet.
Under the contingency theory also emphasizes that different
organizations principles are appropriate under different environmental
circumstances, and within different parts of the organization. But, CEO
thinks that subordinates are not important since they are not in a
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position to perform a proper work. Only CEO the man who is capable to
do anything perfect. This is actually a disagreeable rapport between
the theory and the practice.
5.3 Frequent Information Flows and Centralized
Decisions
According to the conventional literature, accounting provides
management with financial information for decision-making and
control. Budgetary control is depicted as crucial to delegated
management within central control. Budgets are seen as a rational and
iterative process of forward planning, coordination and targeting,
evaluating and rewarding performance. Such accounting was hardly
found in this case study.
According to the studies under Interpretive Theories noted that
accounting language become a medium for calmer and more informed
political debate, facilitating the exchange of views and the design of
further investigative action.
As accountants become more aware of the circumstances and
perspectives of other areas of business, and as non-accounting
managers become more familiar with financial terms, it may be that
accounting will increasingly provide a medium and forum for debate.
Indeed, in two of the organizations investigated by Powell, accountants
had become responsible for all negotiations with trades union
representatives.
5.3.1 Internal Financial Reporting
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Pluralist notions applied to accounting are not limited to bargaining
between managerial interests, but can and have been extended to
industrial relations and financial reporting. Psychological Theories is
subsumed under the title of Human intervention processing approaches
to accounting. The essential thrust of the work is to determine what
factors affect the quality of individual decision making. Libby and Lewis
classify the major variables into three sets - inputs, process, and
outputs. Input variables measure the properties of the information.
Process variables seek to measure aspects of the decision-maker.
Output variables include the speed, quality and reliability of
Judgments, and Perceptions of their quality and of the information
given. MPFL retained the external reporting system but its internal
financial reporting systems changed enormously. One newly appointed
accountant reported:
“ We have to send a daily report regarding cash and other transactions to the CEO and the MD of
the company. The Managing Director (MD) receives these daily reports for their clear
understanding about the financial condition of the company. New computerized systems speeded up
the supply of internal information to directors. However, no external reports have been published.
Auditors are our friends. Audited financial statements are presented only to the Inland Revenue
Department only for the tax purpose.”
Accounting information tended to be the preserve of the three
directors. One accountant remarked:
“We record the bills or memo's which are signed by MD or CEO. All departmental expenditures and
income have to be signed by these two directors. Sometimes, without the signature of CEO those
bills cannot be recorded. Otherwise we refer the bills back.”
According to Swanson, information systems should be recognised as
having a, "significant capacity for the encouragement of organizational
delusion" - although there may be an "inner-directed" rationale, the aim
could be to make a show of "good information" to higher management.
Chambers discussed accounting and quasi-myths. I he suggested that it
was often simpler to invent fictions than to establish a connection
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between the input of certain information to a person and the output in
the form of a decision or action. Finally, Earl and Hopwood, building on
the decision theories of Weick, claim that in very uncertain situations
management information systems are used to retrospectively
rationalise decisions and actions already taken. The Directors became
the repository of all financial information, which was processed
according to their instructions. MD (acting) Finance remarked:
“We have two systems for accounting information. Two sets of accounts are prepared. One is
prepared personally by the MD (He is a Chartered Accountant) and it is informal which is a
restricted area only usable with the permission of CEO. The other system is external reporting,
which is for other shareholders, the bank, the Tax Authority.”
Interpretive work stresses the constant uncertainty confronting
individuals seeking to make sense of the world they inhibit. Through
language, they negotiate an understanding shared by others. Thus it
may be, that accounting may be regarded as a "common language” for
the discussion and resolution of contentious issues. Again, MD
admitted:
“We are private limited company. All the directors are friends and CEO is the active director of the
company. Power is cantered on CEO. We have to maintain many informal systems as CEO wish.
And in addition, you know, business is competitive. You can't maintain all of them in a
straightforward way.”
One employee commented:
“Some informal transactions are kept in the IOU fund account for irregular payments to bribery of
government and tax officials. These transactions were usually shown under other headings in the
annual reports. However accounting record are prepared by different parties for different periods.”
One senior accountant commented:
“I don't know what the real transactions were in the IOU fund. It was alleged by some individual
that sometimes the heads of transactions were changed to evade tax such as increasing the amount
of tax exempted items.”
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Accounting reports for publication are prepared in this company as a
ceremonial practice. But internal daily reports are prepared based on
actual figures with the instruction of CEO. Internal accounting
statements with financial information is used to decision-making
purpose. Rather than using accounting information as a cornerstone of
rational delegated management there were perceptions within the
company that the owner-managers used the systems to enable them to
show flawless reports to other external users interested to the
organization.
5.3.2 Mindful Budgets in the “No Budget”
Practice
In pluralism, by facilitating processes such as budgets by designing
accounting systems that permit the creation of several perspectives,
and which encourage learning through dialogue and dialectics may be
preferable to refining systems that, as is often the case, purport to give
a single version of the truth.
As CEO states:
“I don’t care about accounting records and principles. I know everything about this company
personally. I just prepare accounting report for tax purposes. But I intended to introduce a kind of
costing system. Then I would be able to compute the margin of each product.”16
Argyris noted how managers used budgets as "needlers’ over
subordinates. Accountants were criticised for hierarchical punitive
reporting and achieving success through the failure of others. The
ensuing tension and hostility between Staff and line managers was held
to be counter-productive to the fulfilment of organisational goals.
Ridgeway and Dearden both chronicled how using accounting criteria
as performance measures could reduce organisational effectiveness.
16 In May 3rd 2001,Researcher personally interviewed CEO of the company at the Factory Premises. When CEO supervising the Factory, he express these ideas.
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Dalton, Rosen and Schneck, Lowe and Shaw, and Schiff and Lewin all
demonstrated how managerial bias and slack could enter budgets. Dew
and Gee found that many managers either did not use accounting
information received, or used it incorrectly. More recently Ashton
noted how dysfunctional consequences of accounting systems are
perpetuated and amplified by their feedback mechanisms.
According to the pluralistic studies, then budgetary control may
principally be a means of instituting and promoting bargaining
whereby participants can stake out claims, discover alternative claims
and meanings to organisational events, enrich their understanding of
the organisation, and secure a degree of consensus.
However, accounting in MFPL now changing eventually, though not necessarily according
to the expectations of policy makers or development economists. Much of conventional
management accounting is based on functional approach, is inextricably linked with
scientific Management. Indeed Fayol specifically instances budgets as planning and
control tools. Neo-classical economics provides a basis for marginal costing and financial
management and reinforces notions of control based on assumptions of economic man, and
organizations with unitary goals headed by a single decision-maker. Despite the criticisms
of conventional management accounting and its theoretical props, by behavioura1
scientists in particular, such approaches persist. Horngren defines his general approach to
management accounting as designing formal controls "to provide goal congruence and
incentive through the use of technical tools. Very recently i.e. from end of year
2001, the new management accountant is appointed and he was
delegated to authority to establish the budgetary control system. Cost
information was collected through accounting systems and the CEO’s
personal contacts but the research revealed no professional cost
accountant or associated systems dedicated to providing cost
information to managers outside of the family. Managers had little idea
whether the organization was running profitably. Budgets in the
normal sense of routinised regular downward financial reporting
disappeared.
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However, physical budgets and quotas were passed down to production
managers who transmitted their messages (and pressures) to first line
managers (foremen and supervisors). As will be described later, this
gave rise to a series of informal practices by junior managers with the
shop floor to achieve budget, often with the tacit approval of
production managers.
Now the management emphasized market trends in making budgets
rather than a production orientation as previously. Budgets and all
other conventional controlling devices are not prepared but those will
be registered only in the CEO’s mind. Production and sales budgets are
nominally prepared but a “mindful budget” is implemented. Therefore,
the MFPL’s practice further endorses the researchers previous findings
in this regard. As one marketing official commented:
“Accounting information comes through late although it is correct. But we prepare our sales budget
on the basis of sales force indicators and market trends, which is very dynamic.”
A new marketing function was established to gather sales forecasts
emanating from the field. These formed the basis of the production
budget. The budget committee consisted of four members: CEO, MD,
Production Manager and Marketing manager. The annual budget
expressed in physical terms was reviewed occasionally after the
personal observations of CEO. CEO often following telephone
conversations with production and marketing managers reshuffled the
physical budget continually. He would then informally arrange a
meeting with marketing officials and production managers to fix
revised targets or change product lines. The production managers
rarely influenced these decisions: they were only there to execute
CEO's commands.
As a production manager remarked:
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“Initially we made a production plan on the basis of yearly and monthly budgets as fixed at the
beginning of the year and at the beginning of the month. Now we revise targets as new information
comes through. In this case CEO plays the vital role.”
Cost reduction the main language of managers who in turn relayed this
message to the shop floor. Redundancy programmes were the main
source of cost reductions aided by cuts to benefits and allowances. Top
management used physical budget figures to evaluate the performance
of production managers. Production managers had to report any
deviations from budget to CEO who usually wanted to see a reasonable
cause for deviations. Although the feedback systems were improved in
terms of accuracy and speed they were essentially ad hoc with
arbitrary imposed targets upon managers. The budgetary controls
disciplined production managers not because of any accepted logic and
reasonableness of accounting numbers or their reinforcement by
lucrative reward systems but because of power relations within the
enterprise. Top management specially the CEO, who were also the
owners, were the final authority on recruitment, punishments,
promotions, dismissals and all other company matters including budget
targets and performance appraisal. Production managers realized their
targets by controlling supervisors who in turn had to wrest with the
problem of securing worker effort. Reporting systems for supervisors
and foremen were introduced recently. Each day they submitted their
logbook to the production manager, which contained shift information
such as volume of production, working hours of machines, causes of
stoppages, the number of casual workers worked, and wastage.
However, the volume of production was what mattered. As a supervisor
commented:
“Certainly managers are interested in the volume of production. As long as the volume of
production is right they have nothing to say.”
The CEO was proud of how his system of logbooks had increased the
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visibility of operations. He commented:
“I personally developed this reporting system. By the virtue of this system, I can understand what
went on during the shift. There is no scope for supervisors and foremen to conceal the fact. And the
quality of products also can be maintained with specific targets.”
He under-rated the powers of human agency and ingenuity. Foremen
and workers tried hard to not report some incidents. For instance, one
day a foreman became very angry with a casual worker and threatened
to fire him for insubordination. Nevertheless, he did not report this at
the end of the shift to DCC: there was an informal understanding
between worker sand their immediate bosses to work things out within
the shop floor. Open systems provide a means of viewing and
describing "the ga1ne of budgetary control' described it in input
(External and Internal) - output terms. An attraction of open system is
its ability to relate different resolution levels of analysis and various
disciplines. Thus Ansari used it because of its ability to combine and
reconcile structural and social psychological work on budgets. Later,
his analysis was extended to the design of budget reporting systems to
facilitate managerial recognition environmental influences and inter
departmental dependencies.
As production manager revealed:
“Presently we don't have to face any serious problems from the part of workers. The deviations of
production budgets are mainly due to raw material shortage or machinery breakdown.”
However, accounting controls came to play a vital role in a despotic
and ad hoc form of family-based controls over managers and thence
supervisors and workers though the budgets were. The accounting
department and the information it supplied became an untouchable
area for all managers outside the family of owners. Nevertheless,
despite accounting numbers being rarely revealed, they were used to
justify changes as they passed downward.
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5.3.3 Accounting As a Ceremonial practice and
Representational Craft
Boland argued that accounting is a ceremony or ritual played out to
reinforce the myth that large organizations are subject to external
checks upon their societal effectiveness. Such behaviour is seen as a
consequence of the accounting profession trying to reconcile
conflicting ideological pressures placed upon it. However the myths
spawned and the associated technologies have produced a bias against
reform. The work is interesting in underlining the social creation of
accounting, and how meanings attached to it help maintain the status
quo, but questions about which ideological pressures are most
significant, and whose purposes are served by such myth creation and
stabilization are left unexplored.
CEO commented:
“I do not think about presenting past transactions and events. But for the purpose of providing
requested information to parties such as Banks, Banks, Inland Revenue Department, and Other
Government Agencies, financial statements are prepared. Actually according to my idea, there is no
value of providing these statements to outsiders, because we don’t have benefit from it.”
This organization prepares financial statements as a ceremonial
practice. In addition, the auditors are also their friends. Therefore we
cant expect true and fair view from those financial statements.
5.4 Harmonization of the Work Force
Classical Management theories suppose that the behaviour of the
employee is taken to be passive and determinable by managerial
manipulation of situational variables. Taylorism advocates managerial
manipulation of the workforce through economic variables; the social
psychologists emphasize job design and leadership style. Social
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psychologists recognize that human desires may conflict with those of
the organisation or other parties to it, in its advocacy of participative
methods it tends to assume that these are reconcilable. Interpretive
theory suggested that understanding of the conduct of others is
obtained through a process of interpretation, or "typification", rather
than by direct observation - such "typifications" being continuously
learnt, modified or re-affirmed throughout people's lives.
5.4.1 Getting Blue Collars in the Foreground
Management theories suppose that the behaviour of the employee is
taken to be passive and determinable by managerial manipulation of
situational variables. Whereas CEO identified everyone including CEO,
within organization perform blue-collar jobs, because they are working
hard in the organisation. CEO’s view is that,
“White collars as a mischief. It is to protect their incapability or rationalize their laciness to do
hand work. They always think that the manager’s world as world of words. Theoretically white
collar managers like to work with telephones, documents and decision-making committees.
Everyone in the organization should carry out whatever the work without any discrimination. Any
layers within jobs hinder the morale and efficiency of worker. I believe the work of a person should
be able to measure quantitatively to do so. They should involve in production work. Managers are
important. Helpers are also equally important. If needed a manager should perform the helper’s
work too. Because, they earn higher than helpers. I myself do this kind of work. It is common to
all.”
CEO vies that in his company there is no white-collar jobs.
“I think ‘white collar job’ people cannot or do not like to work hard. Because their attire get dirt.
Therefore, I don’t want to recruit any white-collar workers to the company and I treat all the higher
rankers also as hard workers and not as white collars. Hence, positions is/are kept vacant in the
company’s organization chart can be treated as white collar jobs.”
He commented again:
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“I work in a Government organization too. I do a white collar job their as defined in the theory. Also
I know that I myself and others are not doing a fair job for the salary are receive. I do not allow my
company workers to be like that. Not much clerical work is needed. These formalities are
maintained just to satisfy the requirement of the rules and regulations. Otherwise we need only
people to work means “work” it does not imply spend time keeping records.”
According to the statements of CEO, it is very difficult to determine
the behaviour of employees and position of the employee is not an
important factor to work hard. He accepts those who are work hard as
white collars. So call theories are not influenced to this employees
category.
5.4.2 Employees are Treated as Work Hoarse
Social psychologists recognize that employee desires may conflict with
those of the organisation or other parties to it; in its advocacy of
participative methods it tends to assume that these are reconcilable.
Interpretive theory suggested that understanding of the conduct of
others is obtained through a process of interpretation, or "typification",
rather than by direct observation - such "typifications" being
continuously learnt, modified or re-affirmed throughout people's lives.
CEO is very strict in labour management. No worker can idle his/ her
time. Every minites they have to work. CEO’s view in this regard “ we
can’t pondle workers. If they are not well they should see their doctor.
When they are here they should work. I have given them enough
freedom. But it does not mean that they can spend their time
unproductive. I don’t like the people who try to cheat me. If I found
some one guilty immediately I send (sack) them home. I want this
organization to generate very big profits.
As CEO commented:
“We have not left any room for trade union activities or do not allow them to time to talk about
gossips or unwanted things while working. Yet they can discuss anything related to the production
or any other directly with me. Even though I’m full time employed in another organization, I spend
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more hours here. Generally I stay in the factory even late nights. Usually I go home after 12.00
midnights. My employees also follow me.”
One of the workers says,
“ I worked in a similar manufacturing organization before, I joined here at the request of the CEO.
He gave me 15% higher salary than previous company and a car. My job was to plan the production.
But here I have to plan and implement the same and show results finally. I have no any prescribed
working hours. Sometimes I work entire 24 hours till job is finished. CEO also works that way.
Therefore, I like to work like that. Normally CEO work here till midnight or may be 2.00 a.m. in the
following day morning and spend at least about 18 hours more here. He never spends his time
idling. He works throughout the period that stays here. Therefore, we also follow him. In fact, my
workload with compared to previous place, is about 4 times higher. But I am getting experience and
exposure.”
In fact, the responsibilities and the duties of the work force was not
limited to the given task or the job itself, but carried out whatever the
work to be done in order to run the business smoothly. One person is
responsible for many jobs that are done in the organization. CEO says
he can get the maximum output by doing so, and help minimize the
cost of operations. In addition, when there are vacancies in the higher
level of the organization, CEO says, people are motivated to such
vacancies. As an example, the person recruited as Accounts Executive
works in the Costing department as well as financial department.
Simultaneously he performs the task of Assistant Financial Accountant
and the Assistant Management Accountant. Further he commented;
“ I do not worry about even if senior Board of directors leave the company. I can do all these things.
These so-called managers and Board of directors are there only nominally. One of the founding
directors, who had experience in instant string hopper flower, vinegar production etc. He was a
owner of a big company. He wanted to resign. I released him. He runs his business today but he can
not be a real competitor for our company because they don’t have the dedication and commitment
that I have. Now we are the leading player of such items too. Any worker, irrespective of the level,
can resign at any time. Also we do not hesitate to kick them out at any time if we need to do so.”
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5.5 Pragmatism over Techniques
According to the Chandler design of accounting control systems is
central to the Strategy and structure of industrial enterprises and
Williamson’s theory of Markets and hierarchies has been unlisted to
develop this approach further. Theory discusses that the strategy
with, social psychological variables, which are effecting to the
structure, the reporting relationship of accountants, training and
socialization. But the structure developed in this company is not
showing any relationship or the actual overall structure of the
organization. This is nominal chart with dummies and prepared only to
representational requirement.
5.5.2 Dysfunctional Goals Vs. Unitary Goals
Much of conventiona1 theories treat organizations as stable empirical
phenomena that have, or should have, unitary goals, normally profit
maximization. Bureaucratic dysfunctions acknowledge that
organizations themselves do not have goals but are composed of
individuals and groups striving towards different ends, “local” goals are
often in conflict and dysfunctional in the formally stated organizational
goals. According to the Accounting Dysfunctions of Social Systems
Theory, the managerial definition of the enterprise was preserved.
Recognition of the divergence of goals within organisations, their
significance to change, and how accounting might recognize and assist
this process was de-emphasized. But CEO Commented:
“As a production oriented business organization we are facing to the very risky, unstable and
complex environment. Specially, the political environment is highly influenced to each of
organizations very badly. Therefore, with my experience, I know wary well that the unitary goals
are not adequate to run the business. That is why; I am searching for different types of income
sources. I have negative thinks about the future. Anything can happen any time. Because I decided
not to resign from my permanent job and not to stop my car sale on the other hand.”
Conventiona1 theories explain that organizations have unitary goals.
Bureaucratic dysfunctions explain that groups motivated towards
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“local” goals rather than moving towards formally stated organizational
goals. But in this company, there are no formally stated goals, no
groups are motivated towards to different ends or different goals and
the CEO has authority to set or change goals related to the company
activities. Fox have advocated pluralism as a more realistic approach to
organizational control. Here organisations are taken to be comprised of
sectional groups with divergent and often mutually in consistent goals.
Common purpose exists only insofar as groups are interdependent.
Control is achieved by maintaining a network of rules and regulations
that permit bargaining between the groups. The aim being to contain
rather than eliminate conflict by negotiating courses of action which
permit each group maximum freedom consistent with the binding
constraints laid down by other groups. CEO states that,
“Formal or informal groups within the organization are extremely prohibited. Trade union activities
are also prohibited. Even though there is a hierarchical structure and the procedures, the decision
making power in hands of me. I appointed SBU groups nominally only to show some structural
changes to outsiders and acquire some advantages from tax calculations. Those groups are actually
engaging with group activities.”
Pluralism explains organizations are taken to be comprised of
interdependent sectional groups with different and often mutually in
consistent goals. But in this company groups, freedom to group
behaviour and group decision-making is really prohibited. CEO is
taking all troubles on his shoulders.
5.5.3 Eye on Environment
Conventional theory says, human nature is taken to be calculative and
instrumentally rational, but essentially passive. The only significant
changes envisaged are within a managerial conception of society,
whereby organizational changes are instituted by key decision-makers
at the apex of the organization, and are restricted to adaptation to
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market threats and opportunities and represent movements towards
economic optimality.
LCL was catering its product only to the vegetarian-customers, and the
advertisement campaign focused only the same target. This
advertisement has telecast or broadcasted only on Poya Days. This day
has been decided according to the Buddhists discourse that they should
refrain from eating any meat or should refrain from killing any living
being. The product of LCL Company said to be flavored with artificial
ingredients.
Natural flavor orientation plays a vital role since early 1990s in Sri
Lankan context. As such MFPL has decided to introduce their products
with natural flavors. It is said to be that if the TVP products were not
packeted properly it would be ruined/destroyed by (gulla) Veevee, a
king of food worm. The double laminated packet introduced by the
MFPL was a sustainable solution for this problem and it was useful for
preserving the quality of the food as well. CEO’s view is that
“The high protein content of TVP would provide customers with not only the required nutritional
value for customers but also cholesterol free nature of product protects them from other cholesterol-
related diseases. This much of high protein can not acquire from other foods for this type of low
price.”
Again CEO states that.
“Though the majority of Sri Lankans are Buddhists. I have understood that they are not real
Buddhists. They are Buddhists because their birth certificates say their religion is Buddhism. Major
supplier and competitor of Soya at very beginning have thought that our customers are real
Buddhists and accordingly they planed their promotional campaigns. They openly prefer to pretend
they are non carnivorous. But secretly they prefer to eat meat. Therefore, our promotional activities
geared to address this issue. We produce vegetarian products with natural flavor of chicken, beef,
pork, prawns etc. etc. Many of these Buddhists prefer to buy packeted such stuffs rather than
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waiting at a beef stall to fresh beef or meat. Many people want to pretend they are Buddhists who
does not eat meat. Indeed in consumption they behave other way round.” 17
Further, CEO commented:
“ We advertise our product contains equal weight of nutritional value of meat, fish or other stuffs.
People believe it and our sales increases. Sri Lanken consumers are preferred to be westernised.
Therefore, we can easily mislead them if we are tactful enough. We package our products in
Colourful Bright Packets. We use at least five or six bright colours. Other look of the product is very
important to our customers. We use double laminated packet to prevent our product from “Gulla”
impact/effect. We realized that through our market experience, we ones check single laminated
competitor products 90% of them were affected with “Gulla” infection. Therefore, we use double
laminated package to prevent this infections because it is really a relied measure. Now people know
our competitor’s products are inferior in quality with compared to ours.”
The company had identified that their noodle was not a fast mooing
item in the market. Hence a advertisement companies launched
through TV sponsoring a TV Telecast program. The participants for this
program is chosen among those who send the prescribed coupon
inched in the noodle packet. After introducing this method the
company has realized the noodle has became very fast mooing item in
the market.
CEO says
“The consumers has to he treated with the “dogs principle” (not as God). In his words a dog will
wag its tail and be friendly with you if you offer the dog with a bone. The customers, therefore,
should be given with some kind of “bone” then s/he would be attracted. He termed this as a
“Strategic window”.
According to all above, it is understood that the CEO follows a system
of this nature in order to ensure the company’s survival and he act as
key single decision maker at the apex of the organization, and are
restricted to adaptation to market threats and opportunities and
represent movements towards economic optimality, which explains
very clearly in the conventional theories.
17 CEO’s idea and experience about Buddhists and vegetarians
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5.5.4 Foreseen Social Responsibilities
Contingency theory, found that the managerial decision-making styles
depend on the "personality" of an organization. In addition some
authors discussed organizational values and motivation, management
aspiration for profit growth were included as an important independent
variables, and supposed that different modes of organization decision-
making predominated under various forms of uncertainty and that
different kinds of management information systems were therefore
required. There is a minimal concern towards the social responsibility
in MFPL.
CEO’s view is that:
“Personality of our organization is to earn profits anyhow. If the company wants to maximize profit,
through organizational growth, such responsibilities hinder the way to achieve such goals. If the
business is to survive consideration on social responsibility is a shield. Those concepts are good for
the westerners, who live in USA or other developed countries. We live in Sri Lanka. We should
think about Sri Lanken context. Who cares about social issues when operating a business in Sri
Lanka? For example, we informed our customers through our media campaign/ advertisement that
our product does not produce using Technology of genetically modification before objections raised
about Technology of genetically modification. Now people believe that we are the only company
who produce Soya without Technology of genetically modification. In fact, we import Soya from
India. Generally Technology of genetically modification is used in producing Soya. We are not
going to tell the truth to the customer. In other words businesses is really a racket. I believe that
consuming a small percentage of Technology of genetically modification processed product does
not make any adverse effect. Anyway, that has not scientifically proved yet.”
According to the psychological theories, people are viewed as
imperfect information processors; the processing is assumed to be
systematic and capable of revelation by scientific study. Decision-
making is depicted deterministically as an interaction between
objective characteristics of the information set and innate
characteristics of the subjects. Ontologically the world is taken to be
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prior to individual cognition, the problem is their imperfection in
perceiving it. Thus, according to Libby the options for improving
accounting decisions lie in either changing the way information is
presented or educating the decision-maker in better methods of
processing information, or replacing him or her with a model. Further
he states,
“Our label information may mislead the consumers, but consumers are not aware of this. And also
these ingredients do not make any dangerous adverse impact on their lives. Therefore, it is nothing
to worry. How about the air pollution which cause as a result of automobiles and what extent it
affect our lives? We are not much worried about it. Then why should I worry about a slight adverse
impact creates as my business to society?”
Commenting Again;
“ We attempt to look at ourselves in a mirror and critique the overall objective. We carefully
evaluate the competition, the threats and contingencies we might have to meet, market shifts we
might anticipate, and attempt to evaluate what we must make happen in order to achieve success of
the objectives. For example, we informed our customers through our media campaign/
advertisement that our product does not produce using Technology of genetically modification
before objections raised about Technology of genetically modification. Now people believe that we
are the only company who produce Soya without. In fact, we import Soya from India. Generally
Technology of genetically modification is used in producing Soya. We are not going to tell the truth
to the customer. In other words businesses is really a racket. I believe that consuming a small
percentage of Technology of genetically modification-processed product does not make any adverse
effect. Anyway, that has not scientifically proved yet. However, we were able to capitalize on this
rumour and treat too.”
Again CEO commented:
“Our Soya nugget is comparatively smaller than our competitors. We have done it purposely. Many
consumers are quantity conscious. Therefore, it is better to give them smaller 20 pieces than 10 big
pieces of same weight. That attracts consumers. We have experienced it. Our consumers prefer it.
According to their response they like to buy our Soya product because it has many nuggets. In fact,
our packet also contain the same weight our competitors. We intended to introduce herbal related
products to the market as well. We want our customer to convince that we are social friendly
organization who cares about customers’ health. That image will help us to market out Soya
product. Thus, people will believe/trust us. We can promote our products easily. We are not worried
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about the minority groups of consumers at all. Our products are for the people who are with us.
From this segment we can maximize our profit.”
CEO of the company further commented:
“Many consumers, are in Sri Lanka do not have refrigerators, specially who are residing in remote
areas. We tried to introduce our “jelly”. But these remote area/rural area consumers are not aware
about the same and they are not affordable. Since there earning capacity is very low. (Many rural
communities is under poverty level) We realized it and immediately stopped “Jelly” production.
Under this type of situations we don’t worry about small percentage of consumers.”
Further, CEO commented their secret in business success as follows:
“We react immediately and very effectively to our competitors. Initially we bought much market
release of LCL products and re marketed them with our trademark. LCL thought that their products
are fast moving. Therefore, they increased production and supplied to the market with huge bulks
assuming that consumers demand is very high for LCL products. We stopped buying their products
from the market and released our own production to the market at the same time. Then what
happened are our product moved fast and the heap of LCL products remained unsold in the market.
We continued our normal targets and meanwhile LCL’s product was outdated and got “Gulla”
infections. Many consumers perceived that LCL’s products are lower in quality. That is how we
improve the market image regarding the quality.”
At present LCL Company has been sold to MBL. But we offered the
Biggest bid for the tender. They did not sell it to us since we were the
biggest competitors. Now we are planning to produce substitutes for
MBL’s products also. In future we will buy the MBL. We can create an
environment to do so. We have recruited some of the best of MBL’s to
our company at present too.
Decision making process of the company is comply with Contingency
theory because its styles depend on the "personality" of an
organization. According to the values and motivation of the
organization the Profit Maximization Objective is considering rather
than going for Social Responsibility. As Psychological Theories
explains, people are viewed as imperfect information processors. It is
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true in this study, because the company people cheating customers
giving imperfect information about genetically modified foods.
5.5.5 Pricing by Going Prices
Clawson suggests that the elaborate bookkeeping and control
procedures recommended at the turn of the century were “not needed
to determine prices for competition with other capitalists, but rather
for the purpose of class struggles”. CEO commented:
“The company prices its products based on going prices in the market. On going price/s are
observed and the products are priced on that basis when setting prices of goods of MFPL. Therefore,
MFPL does not concern about any cost factors, profit factors or other pricing objectives for this
regard. CEO’s prime concern is to recover whatever the amount / cost that could be claimed. This is
due to the fact that he always tries to minimize the potential loss. CEO’s practice of going price as a
tool to penetrate market and expand product/ market through such a policy. At the same time to
avoid new entrants to the market.”
According to the statements of CEO it is clear that, prices of their
goods is determined based on competition, and not for the purpose of
class struggle.
5.5.6 Ad – hoc Arrangements in Daily
Operations
Radical theorists view society as being composed of contradictory
elements and pervaded by systems of power that lead to inequalities
and alienation in all aspects of life, they are concerned with developing
an understanding of the social and economic world that also forms a
critique of the status quo. A theme central to all radical theories is that
the nature and organizing principle of a society, as a whole is both
reflected in and shaped by every aspect of that society. One Employer
commented:
156
“ Sometimes CEO wants me to do some other duties beyond my area. But he request very politely to
do so. I am not hesitated to do whatever he asks. One day he wants me to do a spy job. He had a
suspicion on one of the delivery vans. He wanted me to follow and spy what they do. His suspicion
is correct. On the way the two subordinates who was on delivery work, handed over some
parcels/goods to a neighboring house. I was able to catch them as CEO suspected. Immediately they
were sacked. He summoned a meeting at all workers with board of directors and divulge what
happened and handed over the letters of terminating of work publicity.”
The former focuses on the fundamental conflicts that are both a
product of, and reflected in, industrial structures and economic
relationships, e.g. surplus value, class relationships, structures of
control, whilst the latter emphasizes individual consciousness,
alienation through reification, and the way this is dominated by
ideological influence, not least through language. The difference
between the two approaches is akin to that between the functional and
interpretive approaches. In other words radical structuralism treats the
social world as being composed of external objects and relationships
independent of any particular person, while radical humanism
emphasizes individual perceptions and interpretations.
CEO of the company intervene whatever the work he found important
and leads people to attend accordingly. He interacts employees to
follow up distribution staff irrespective of their job /profile and monitor
distribution work, and report malpractices. In addition, accounts
executive has been instructed to attend to develop a cost accounting
system. It proves that whether there is no position to do some activity,
the CEO can create the position in a jiffy to achieve organizational
targets. A roster system where workers are assigned to different tasks
and moving them from and among different production activities was
very common at the MFPL. Return items are used as reproduction of
the item but no records are maintained. Everyone has to attend to
urgent work that arises, irrespective of his or her level or responsibility
in the organization. No specific schedule to start work and finish them.
All workers should attend to the work at any time and work until the
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job is done. Production process stops at any moment if the product is
not selling fast enough or not moving rapidly. Market research will not
be carried out in this regard. That will be totally up to CEO’s decision.
CEO believes that just by allowing hired managers to get the things
done will not be effective and efficient in a really competitive setting.
Therefore, he won’t allow his board of directors to depend on
subordinate managers and he himself does not depend on any other
within the organization. He and other board of directors are the
shareowners of the entire business entity in which he bears the biggest
percentage (65%) of the share. Therefore, he says;
“Just allowing hired people to handle business is risky hence he himself wants to monitor the entire
work within organization. He wants his board of directors follow him and he does not want to
adhere into any rules and regulations to take actions if it really valid.”
He personally interferes into the works of others and override their
decisions at any time and he commented again:
“I look at this organization as my own. Therefore, I cannot leave the organization to be inefficient
and make unnecessary loss. Instead interfere the work of others and monitor in order to minimize
mismanagement.”
All radical theories are that the nature and organizing principle of a
society, as a whole is both reflected in and shaped by every aspect of
that society and forms a critique of a status – quo. Fundamental
conflicts are the creations of ideological influences. But this company
follows an ad hoc arrangement in their daily activities rather than
considering for theories explained early.
5.7 Summary
This chapter aimed at analysing the data collected from MFPL. The
qualitative ethnographic rich accounts demonstrate that “One Man
Show” has become a reality in managing many facets of organizational
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and social life in this firm. The explicitly in this regard is that CEO is
the main actor in every control arrangement. The social and
organizational eligibility for these arrangements has centred around
the CEO from an economic and financial power: CEO has 65% shares
and more than 50% of staff consisting with family members and family
friends of the CEO.
This study has addressed this issue with a view to understanding
management and accounting control practices within an uncertain
context stemmed from the influence of societal and individual culture.
It attempts to understand how culture shapes the values and meaning
frames of organizational participants and provides them with
interpretive schemes for processing experiences. In turn, the study
illustrates how such interpretive schema affect accounting and control
practices in organizations. This is achieved by focusing on four generic
issues: (1) How do organizations initiate accounting and control
systems? (2) How do such systems evolve over time? (3) What roles do
they play in an organizational crisis? And (4) How does organizational
action become disconnected from such systems?
In asking these questions, I intended to make sense of my field
experience. To do so, I have been inclined to be critical of functional
theories of management accounting such contingency theory or
systemic theories (See Hopper and Powell, 1985) and tended to take
more sociologically informed theories such as interpretive and radical
theories. In particular, I was impressed by radical theories where
culture plays a dominant role (See, Wickramasinghe and Hopper,
2000). In line with these theoretical thoughts, the empirics have
been built certain patterns (Strauss, and Glaser, 1967): (1) CEO Driven
Management Control System (2) Frequent Information Flows and
Centralized Decisions (3) Harmonization of the work force (4)
Pragmatism over Techniques, I discovered that social and
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organizational context also has interesting implications for
understanding the limitations of traditional theories of control. This
chapter has given rise to elaborate substantial evidence for
enlightening these patterns towards a theoretical understanding: a
kind of culture of people in a specific organizational setting has been
predominant creating different organizational outcomes. The next
chapter deals with these in details towards culminating in a conclusion.
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CHAPTER SIX
General Summary and Conclusions
6.1 A General Summary
This study aimed at understanding a particular management control
practices in a specific context operating in an uncertain context. The
fundamental questions being posed were: (i) how do organizations
initiate accounting and control systems? (ii) how do such systems
evolve over time? (iii) what roles do they play in an organizational
crisis? and (iv) how do organizational actions become disconnected
from such systems? These questions are meant for ‘telling a story’
(Ramstad, 1986) about a kind of management control system in which
accounting controls play a major role. To pursue this exercise,
accounting has been viewed as social and institutional practice,
Hopwood, and Miller, 1996). This implicates that though accounting, at
its surface, is seen as a technical activity, it has to be processed in a
social and organizational context in which real accounting naturally
emerge with unexpected outcomes. These outcomes are quite different
from what is seen from a technical perspective (Hopper and Powell,
1985). The story that has been told in the name of a dissertation is for
justifying this reality about accounting and management control
practices.
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According to the story I have told, it has been always clear that the
CEO manages the business observing closely the environmental
changes and influences to the business and keeps the full authority on
all the activities of the organization. This is natural: according to
interpretive approach, 'persons are distinguished from things in that
persons experience the world whereas things behave in the world’.
This replicates the validity of existence of subjective “nature of the
social world”. Organization chart, design by the CEO is keeping many
positions vacant to motivate people to go higher ranks. This is
somewhat unorthodox but it can be justifiable as CEO has 65% share
capital and it represents the Financial Authority of the CEO. Corporate
Plan is also prepared based on that strength and he is proud about his
personal financial strength. He spreads his power throughout the
company based on this. And he believe that the investments rather
than savings. SBU’s are established and managed considering
situational factors. CEO considers subordinates are unimportant as
they are not in a position to perform a proper work and he thinks that
he is the man who is capable to do anything perfect.
The second set of insights focuses on the Frequent Information Flows
and Centralized Decisions. This is done through Internal Financial
Reporting, Mindful Budgets in the “No Budget” Practice and
Accounting as a Ceremonial Practice and Representational Craft.
According to the conventional wisdom, accounting provides
management with financial information for decision-making and
control. Budgetary control is depicted as crucial to delegated
management within central control. Budgets are seen as a rational and
iterative process of forward planning, coordination and targeting,
evaluating and rewarding performance. Such accounting was hardly
found in this case study. Daily reports are regarding cash and other
transactions are prepared only for internal purposes and all the
documents signed by the MD or CEO. External reports are prepared
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nominally only for tax purposes as a ceremonial practice. These reports
are consisted with incorrect figures. Interpretive work considers
accounting as a "common language”. However, this firm considers
accounting as a “secret language”. As CEO’s advices, there are some
illegal and informal transactions are also taken place. There are no
formal written budgets. All the budgets are Mindful.
My third piece of empirics focused on the ‘harmonization of the work
force’. One of the salient features in this regard is that ‘keeping blue
collars in the foreground and employees are treated as working hoarse.
According to the CEO, those who are working hardly is considered as
Blue Collar workers so he recruits only Blue Colors. He argues that the
kind of behavior of employees cannot be measured. Moreover, trade
union activities are prohibited at MFPL. Employees must work until
CEO asks them to stop working. No worker can idle his/her time. In
addition, the responsibilities and the duties of the work force was not
limited to the given task or the job itself, but carried out whatever the
work to be done in order to run the business smoothly.
My forth attempt focuses on pragmatism over techniques. This is seen
in terms of a number of scenarios: ‘creating dummies in the
organization structure, dysfunctional goals versus unitary goals, eye on
environment, foreseen social responsibilities, pricing by going prices
and ad-hoc arrangements in daily operations. However, the
organizational structure of MFPL designed as a nominal structure. The
flow in this structure cannot be seen in the practice. So, the
organization chart is merely nominal with dummies and prepared only
to representational requirement. Moreover, MFPL does not have
unitary goals as they are confronted with substantial uncertainties in
an unstable environment. So, profit maximization is seen as a
supplementary requirement in a series of goals.
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6.2 Conclusions
The context in this regard has been defined as uncertain. Contingency-
like management theories (Woodward, 1958, Gordon and Miller, 1976,
Khandawalla, 1975) have viewed ‘contexts’ as a set of contingent
factors such as environment, technology, and culture. They have failed
to understand that these ‘factors’ are a part of the organization itself as
social and organizational arrangements are always coming together
through unlimited interactions as a complex web of socio-political and
cultural phenomena. Contingency theorists have mistakenly understood
these factors as separately quantifiable variables for measuring and
establishing statistical relationships. The present study has realized
that this is a game played with artificial data.
Keeping this ontological position in the mind, I went on to take a post-
positivistic epistemology for exploring the social and organizational
reality on management and accounting controls. Several implications
emerge from our experience with qualitative methods beyond those
discussed in the preceding chapters. To begin with for exploring the
emergent view that accounting is complicit in the social construction of
reality, one can find there are a number of interpretive approaches that
offer a strong potential for providing different insights into the
interrelationships among accounting, organizations and society. These
approaches help one pursue the phenomenon of interest, even though
some compel awareness that their application joins the researcher as
researcher and as subject party to the social construction and the
alteration of a social reality. I think that one should employ a number of
differing perspectives, possibly in dialectic tension with one another. I
also believe that it is premature either to dismiss any perspectives or to
advance any single approach as clearly superior (compare Willmott,
1983; Chua, 1986a, b). Moreover, researchers engaged in doing as
164
opposed to talking about field work (Argyris, 1977); tend to be silent
about their underlying assumptions. As Willmott (1983) suggested,
empiricists may only be informed by rather than be contained within
the various perspectives. Thus, I highly recommend doing qualitative
field research, regardless of its type, over merely talking about field
research.
In accordance with the preceding discussions, and in some contrast to
the previous accounting discourse (Tomkings & Groves, 1983;
Willmott, 1983; Chua, 1986a, 1986b), I found it problematic to adopt a
specific ontological stence a priory and then conduct an empirical
study. I believe that the ontological and epistemological assumptions
with which a researcher can function effectively emerge from, or at
least interact with the act of doing research. Here, though, the
implication that qualitative research involves fewer ontological
commitments is by no means certain. The philosophy of science
literature usefully warns the researcher of the differing and shifting
forces that influence research so that field workers should reflect on
their work and come to terms with their emerging assumptions (see,
for examples, Campbell, 1970, 1984, 1986b).
Perhaps most importantly, we have found the researcher, the
phenomena studied, the context in which they are studied, and the
research approach in use, to be intimately intertwined- this in marked
contrast with the more orthodox scientific position that they are
dictated. I believe that this condition should not be tacitly ignored, nor
overtly suppressed, nor be thought of as being solvable by some new
research design modification. It inheres in the conduct of research, and
a researcher must recognize his or her own potentially active role in
the research setting and continually self-reflect upon it (perhaps
surprisingly, see Friedman, 1953, p. 40; Einstein & Infeld, 1983, p. 6).
In part, we have tried to do this by double–looping ourselves, and
165
seeing ourselves as at least temporary members of the social context
being studied. It is important to make the warning here, that
constructive reflexivity is very delicately balance with crippling self –
doubt.
Based on my reading of the literature and my applications of qualitative
research methods, it appears that interpretive techniques use similar
data collection methods; thus, underlying assumptions may come to
dominate the thinking of the researcher primarily at the analysis stage
of research. Ironically, a survey of the literature on qualitative methods
(Sieber, 1973; Miles, 1979) reveals that relatively little guidance exists
on conducting analyses and interpreting data. Thus, I believe that
substantial work is needed in this area by accounting researchers that
is directed at establishing a social system of belief change (Campbell,
1986b), wherein a socially constructed concept of scientific validity is
developed with respect to the product of analysis and interpretation
(Campbell, 1986b).
Consequently, currently lacking such research protocols, dialectic
tension and reflexivity appear to offer meaningful approaches to data
analysis. These approaches encouraged us to use and contrast several
concepts – for example, qualitative vs. quantitative data, traditional vs.
emergent theories, and superiors vs. subordinates – as a way of
exploring different facets of accounting in organization and society. I
recommend this general approach to future field researchers. I do not,
however, recommend or condone efforts to routinize or program such
approaches to analysis. I also recommend that researchers of different
philosophical presumptions undertake field studies; we believe that a
dialectic tension among researchers has an excellent potential for
forecasting innovation.
166
Despite my attempts to study what subjects say, what they say they do,
and what they do, qualitative field research is predominantly driven by
words. This focus on words is, of course, in addition to a focus on
numbers in accounting research. I recommend that researchers
concentrate their efforts on studying the role of rhetoric in the
research act, in the organizational contexts studied, and in
communicating the results of the research to subjects and through the
review process, to the academic community (compare, Manning, 1979;
Whyte, 1986; McCloskey, 1983).
The forgoing implications lead me to conclude that use of accounting in
organizations and society may be conceived of as a conventional
process, and the interpretive research act may be treated similarly.
Thus, rhetorical analysis should be one element of the interpretive
approach. Donnellon reasoned that one can usefully apply a rhetorical
or linguistic analysis to the study of contemporary organizations for
these five reasons: (1) organizational actors use words to make
inferences about the goals being pursued; (2) they make these
inferences with reference to the organizational context in which they
occur, the social context, the interact ional context, and previous
interactions; (3) besides making inferences about goals, actors (CEO in
this case) also make inferences about the people with whom they are
dealing; (4) communication behaviour is multi-functional, and observes
of what occurs in the interaction should recognize that outcomes other
than the strict transference of information generally occur when people
interact; and (5) conventional behaviour in organizations helps serve
the technical function, and it also produces interpersonal and symbolic
effects that can influence the substance of the interaction (1987, pp.
42-43). Thus, a concern for rhetoric and language is consistent with
many aspects of the emergent perspective and with the aphorism used
in virtually all elementary accounting courses: ‘Accounting is the
language of businesses’.
167
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