Trust for Accounting and Accounting for Trust 2006 Management Accounting Research

8/10/2019 Trust for Accounting and Accounting for Trust 2006 Management Accounting Research

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Management Accounting Research 17 (2006) 1141

Trust for accounting and accounting for trust

Cristiano Busco a, Angelo Riccaboni a, Robert W. Scapens b,c,

a University of Siena, Italyb Manchester Business School, Booth Street West, Manchester M15 6PB, UK

c University of Groningen, The Netherlands

Abstract

This paper combines insights from the sociology of knowledge and the emerging practice-based literature on

learning and knowing to extend the institutional framework of accounting change developed by Burns and Scapens

[Burns, J., Scapens, R.W., 2000. Conceptualising management accounting change: an institutional framework.

Manage. Acc. Res., 11, 325]. In particular, it explores how management accounting systems (MAS) can be

implicated in processes of learning and culture change, and used to identify trustworthy solutions in the face

of organisational crises. A case study of an Italian company, which was subject to massive change following its

acquisition by General Electric, is used to discuss how, when crises arise and organisation members find themselves

under intense pressure for change, their rationales and routinised behaviour, which are driven by the existingknowledge and cultural assumptions, are challenged. The case illustrates how MAS can act as sources of trust for

the processes of change i.e., accounting for trust; while at the same time being socially constructed objects of

trust i.e.,trust for accounting. Drawing on the concept of personal trust and the notion of roles as access points to

organisational (expert) systems, the paper discusses how, in this case, finance experts facilitated the acceptance and

progressive sharing of new rationales and routines. Clearly, this does not guarantee that change will occur or occur

in some desired direction in other cases, but it increases the possibility of replacing trust in the predictability of

routines with feelings of trust for change.

2005 Elsevier Ltd. All rights reserved.

Keywords: Management accounting; Change; Crisis; Trust; Expert systems

Corresponding author.

E-mail address:[email protected] (R.W. Scapens).

1044-5005/$ see front matter 2005 Elsevier Ltd. All rights reserved.doi:10.1016/j.mar.2005.08.001


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12 C. Busco et al. / Management Accounting Research 17 (2006) 1141

1. Introduction

This paper aims to understand how management accounting systems (MAS)1 are implicated in pro-

cesses of individual (un)learning2 and organisational culture change, and how they may be used to identifytrustworthy solutions in the face of organisational crises. By extending the institutional framework of

management accounting change developed by Burns and Scapens (2000), we will explore the role ofMAS as practices acting both as sources and objects of trust/distrust for change (Nooteboom, 2002),and discuss the way in which they may be relied upon by organisational actors to challenge existing

knowledge, and open up possibilities for radical change.The last 20 years have witnessed a massive transformation in business organisations, which have been

forced by intense competition and the globalisation of markets to re-define their strategies, structures

and processes. Consequently, change has become a pervasive feature of organisational life. The roleof accounting and control systems within processes of organisational learning and transformation has

been widely debated in the literature (see, among the others,Hopwood, 1987; Argyris, 1990; Dent, 1990;Gray, 1990; Cobb et al., 1995; Otley and Berry, 1994; Coad, 1995; Kloot, 1997; Burns and Scapens, 2000;Meer-Kooistra and Vosselman, 2000; Johansson and Baldvinsdottir, 2003; Seal et al., 2004; Bhimani and

Roberts, 2004).Various writers have illustrated the potential of accounting for visualising, analysing andmeasuring the current state of a business, for questioning operational and managerial strategies, and forjustifying new courses of action (Hopwood, 1990; Ezzamel et al., 1998). In particular, there is agreement

that systems of measurement and accountability have the potential for making reality calculable (andthereby making individuals accountableseeMiller and OLeary, 1994); for translating stock marketdriven pressures into quantifiable financial targets linked to production processes and business practices

(Ezzamel et al., 1999); for promoting employee identification with and commitment to specific valuesand operating philosophies (Jazayeri and Hopper, 1999); and for improving intra-organisational commu-

nication by infusing managers and non-accountants with a shared financial vocabulary for reading thestate of the business (Roberts and Scapens, 1990).

When crises arises, organisations can be faced with an overwhelming need for radical change, and

accounting practices (along with other organisational systems) can play a role in enabling individualorganisational members to respond to this need for change. Their responses, however, may be guidedby either existing routines and habits of thought, orby rational deliberation. As carriers of organisa-

tional and individual knowledge (Nelson and Winter, 1982; Burns and Scapens, 2000), MAS can, onthe one hand, play an active part in processes of change, by facilitating search and experimentation,

while on the other hand they can also limit the questioning of existing knowledge and assumptions(Hopwood, 1987; Dent, 1990; Argyris, 1990). Kloot explored the intertwined relationship that links man-agement control practices and organisational learning, and argued that management control systems

affect the understanding of what changes mean, how and what solutions might be generated, and a per-ception of whether the time has come to uncouple the organization from old structures and operatingparadigms to move to new structures and paradigms (1997, p. 69). Although organisational learning

implies that knowledge is transferred to the organisation, learning per se is essentially an individual

1 In this paper, we use the term management accounting systems to be consistent with the literature to which we refer. But

possibly, the label performance measurement would be a more accurate term to describe the broader essence of these systems.2 We use the expression(un)learningto signify that the process of acquiring new knowledge and skills may also involve the

discarding of existing skills and knowledge.


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C. Busco et al. / Management Accounting Research 17 (2006) 1141 13

process (Argyris and Schon, 1978; Levitt and March, 1988; Herriott et al., 1985). However, the way

in which MAS contribute to processes of individual (un)learning, and the relationship between tacit(unconscious) and purposeful (conscious) behaviour is still far from being clear and deserves further

investigation.Aiming to address these issues, this paper combines insights from the sociology of knowledge ( Berger

and Luckmann, 1966; Giddens, 1984, 1990)and the emerging practice-based literature on learning andknowing (Gherardi, 2000; Gherardi and Nicolini, 2001; Nicolini et al., 2003)to extend the institutional

framework of accounting change developed byBurns and Scapens (2000);where MAS are viewed assets of rules (the formalised statements of procedures) and routines (the practices habitually in use)implicated within the production and reproduction of knowledge. In so doing, we emphasise the need

to study processes of (un)learning and change by looking at the intertwined relationship between par-ticipation ina practice such as management accounting and the management of anxieties (Schein,

1992)which characterisereflection on a practice. According to this perspective, knowing and acting inorganisations and in other situated contexts are mediated, not just by rules and routines, but also by dis-courses, social relations, etc. (Nicolini et al., 2003).This paper will combine theoretical interpretations

with empirical evidence from an explanatory case studywhile, on the one hand, the perspective devel-oped in the paper has contributed to our search for a theoretical explanation of the evidence collected;on the other hand, the empirical data has itself illuminated the interpretive perspective offered in these

pages.The structure of the paper is as follows. Section2introduces the concept of MAS as routinised prac-

tices implicated within processes of individual (un)learning and organisational change. In so doing,the section discusses issues such as the reasons behind the routinisation of human behaviour, theway in which knowledge is (un)learned by participating in and reflecting on practices, as well as

the role of trust in assessing and questioning the validity of existent knowledge. The section ends

by exploring the concept of trust for change. Section 3 then explores the interplay between MASand trust in action; illustrating the processes of cultural integration and transformation which fol-

lowed the acquisition of Nuovo Pignone (Italy) by General Electric (US). Section 4 begins with areview of the concept of culture, which anticipates a discussion of the role of MAS within the pro-

cess of cultural unfreezing, change, and re-freezing at General Electric-Nuovo Pignone. Next, theinsights from our interpretive perspective are discussed as we explore the nature of MAS as: (1)

sources and (2) objects of trust; (3) the notion of roles as access points to organisational systems

such as management accounting; (4) the need to interpret processes of radical change beyond idlecuriosity, as they involve practice-based management of anxieties. We end this section by illustrat-ing that (5) the intertwined relationship between MAS and trust for change can sometimes work in a

mutually damaging way. Finally, Section5 concludes the paper by reviewing its contents and key mes-sages.

2. The role oftrustand accounting practiceswithin processes of (un)learning and change

2.1. MAS as routinised practices and their linkage with trust

During the 1990s, a number of scholars described accounting practices as organisational routines (see,among others, Roberts and Scapens, 1990; Dent, 1991; Scapens, 1994; Mouritsen, 1994; Burns and


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Scapens, 2000; Burns, 2000). The work ofNelson and Winter (1982)on evolutionary economics seems

to have directly or indirectly influenced many of these contributions. Arguing that the routinisation of

activityis the most important mechanism for the storage of organisational knowledge, Nelson and Winter

describe routines as the means through which organisational memory is produced and reproduced inpractice. Significantly, they suggest, one area of firm behaviour that plainly is governed by a highlystructured set of routines is accounting (1982, p. 410).

As routines represent the behavioural-level manifestation of the institutionalised cultural order, they

assist individuals to cope with the uncertainties that characterise their social experience. Habits of thoughtand routinised patterns of behaviour provide a sense of stability and predictability through time and space,and enable individuals to cope with the complexity of specific situations and to take appropriate actions

(Bourdieu, 1990).When shared organisationally, the power of routines is reinforced by their ability toreduce conflict. As stressed by Nelson and Winter, routine operation involves a comprehensive truce in

interorganisational conflict . . .(and) the fear of breaking the truce is, in general, a powerful force tendingto hold organisations on the path of relatively inflexible routine (1982, pp. 110112). However, althoughdeeply embedded in individual stocks of knowledge, routines do change over time, and there is always the

possibility of a breakdown in behavioural regularities. As suggested by Lawson, there will be momentsof crisis situations or structural breaks when existing conventions or social practices are disrupted (1985,p. 920).

The literature on organisations contains various definitions of crisis (see for example,Hermann, 1963;Turner, 1976). A substantial threat to either the organisation or the individual is generally at the centre

of such definitions (Webb, 1996). Furthermore, there are usually inadequate resources and little time inwhich to respond (seeMishra, 1996). Webb suggests that an assessment of the adequacy of resources isa key element in defining the presence or absence of a crisis; it is the lack of available resources, which

distinguishes a potential crisis from ordinary problems. In crisis situations dependency on others increases

as it is necessary to look to others to provide the missing resources. But here it is important to know who orwhat you can trust; for as Webb argues, when you feel shaky about your own ability to cope, it becomes

imperative to choose those you can trust (1996, pp. 289292). Since crisis involves inadequacy, andtrust entails predictability (Luhmann, 1979),Webb also points out that crises are magnifying loci for

the enhancement or dissolution of trust and a uniquely heated crucible for both its creation and itsdestruction (1996, p. 293).

In such crisis situations, feelings of trust are likely to play a pivotal role in the search for solu-

tions as, for the individual, such situations represent a breaking down of the behavioural and cognitivetruce, which is normally sustained by organisational routines. However, accounting systems, purpo-sively designed by management, and consciously/unconsciously drawn upon by organisational mem-

bers, may have the potential to sustain trust at such a time. But the outcome is far from obvious,and needs to be explored within the specific organisational context. When accounting is embedded

within the trusted rationales (i.e., the accepted norms of behaviour and ways of thinking), whichsustain organisational routines, it is likely to be employed to confront environmental disturbancesor organisational crises, and to reconstitute the previous conditions of safety. In such situations,

there could be said to be acceptance of accounting, and as such accounting and accountants arewelcome in the search for solutions to the crisis. Conversely, when accounting systems are used asad hoc measures, detached from any trusted rationales, they are likely to be marginalised, but they

could become a focus of conflict if they are then drawn upon in a crisis (see Roberts and Scapens,1990).


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To explore the linkages between MAS and feelings of trust within processes of (un)learning and

change, three connected issues require particular attention at this stage: firstly, the reasons behind theroutinisation of human behaviour (Section2.2); secondly, the way in which knowledge is (un)learned

by participating in and reflecting on routinised practices (Section2.3); thirdly, the role of trust inassessing and questioning the validity of existent knowledge (Section 2.4). These issues are crucial tounderstanding the dynamics of stability and change at both the individual and organisational level, aswell as the role which MAS are able to play during these processes.

2.2. Agents need for routinisation

Berger and Luckmann (1966) draw onGehlens philosophical anthropology (1956), Schutzs phe-nomenological approach (1972) and Meads social psychology (1934) to explore the mechanisms throughwhich a shared cultural order is produced and reproduced in light of the biological qualities of

the individual. Significantly, they argue that the formative causes of social experience are anthropo-logical in nature: the human organism lacks the necessary biological means to provide stability for

human conduct (1966, p. 69). Consequently, Berger and Luckmann see social order as emerging outof the need to support human nature by providing it with those stabilising cognitive and normativestructures that are absent biologically. This is achieved through processes of reutilisation, by which

agents retain the knowledge acquired from their social experiences and cope with reality of everyday life without continually questioning its traits and characteristics. Accordingly, the cultural orderof any society, or organisation, can be described as a never-ending social product, which combines

both stability, through the enactment of repeated patterns of behaviour, and the potential for change.The latter is made possible through the world-openness, which characterise agents relationships

with their environment (Berger and Luckmann, 1966, p. 65), while routinisation provides individuals

with the sense of safety that is needed for coping with the anxieties that characterise the contexts ofinteraction.

Similarly,Giddens (1984) stressed the importance of routinised patterns of behaviour in the conti-nuity and ordering of social life. In particular, drawing on the Freudian perspective of personality andEriksons ego-psychology (1963), Giddens grounded his theory of the subject in the interplay between

the development of personality, the processes of routinisation, and the reflexive monitoring of action.He argued that ontological security is the basic anxiety-controlling mechanism (1984, p. 57), which isdeveloped during the infants pre-linguistic stage to cope with anxiety and, later, sustained through the

enactment of predictable routines in social interaction. Trust is to be found in the deepest layer of ontolog-ical security and, as Giddens suggests, the generation of feelings of trust in others, as the deepest-lying

element of the basic security system, depends substantially upon predictable and caring routines (1984,p. 53).Importantly, the cognitive sense of safety, which individuals are looking for, is constantly created,

sustained and reinforced in action through practices. Human behaviour is not exclusively dependentupon psychological mechanisms embedded within the personality of the individual. As Giddens argues,human agency is mediated by the social relations whichindividuals sustain in the routine practices of their

daily lives (1984, p. 50). Thus, through routinised practices individuals satisfy their need for ontologicalsecurity, while reproducing the wider organisational and societal order. However, a question remains:

how is knowledge acquired, maintained (or questioned) and validated before it becomes embedded inroutinised practices?


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2.3. Cognitive and behavioural implications of learning: the concept of practice

Interpreting MAS as socially constructed and institutionalisedpracticesinvolved within processes of

individual (un)learning and organisational change, requires exploration of practice as a concept whichcombines the social constructionist notion of participation with the institutional notion of reflexiv-ity (Gherardi and Nicolini, 2001). Drawing onDeweys philosophical pragmatism (1910)andLewins

social psychology (1952),experiential learning theory has stressed the central role that experience playswithin processes of individual (un)learning and organisational change (see Kolb, 1984; Senge, 1990;Kim, 1993; Gherardi and Nicolini, 2001).In particular, by emphasising that learning is achieved through

reflection upon everyday experience, this theory aims to reconcile: (1) cognitive perspectives, whichtend to emphasise cognition over effect, and (2) behavioural studies, which deny any role for subjectiveexperience in the learning process (Kolb, 1984).Experiential learning theory suggests that anexperiencealone is not sufficient for learning; something must be done with it. In the same way, change alonedoes not represent learning; there must be something to be transformed, some existing knowledge that

is being acted upon. Therefore, by defining learning as a process whereby knowledge is created throughthe transformation of experience, experiential learning theory describes the way in which the individ-ual constructs meaning through continuous cycles of experiencing, reflecting, abstracting and acting. 3

Importantly, the concept of practice is central to experiential learning; as the locusto participateinand toreflecton.

A practice is a system of activities in which knowing is not separate from doing. The logic

of practice does not draw a distinction between subject and object (Gherardi and Nicolini, 2001, p.53). Through practices, situations and knowledge recursively reproduce themselves within processes of

(un)learning and change. In doing so, practices are both pre-reflexive (i.e., they rely on taken-for-grantedtacit assumptions) and reflexively constitutive of the context from which they arise. Eventually, when

critical situations arise, reflexivity betrays the logic of practice (Gherardi and Nicolini, 2001, p. 51); itrequires a separation, creating a distance between the knowing subject and the object of its knowledge.Therefore, participating competently in a practice (i.e., knowing in practice) is recursively linked toreflecting on a practice (i.e., knowinga practice).

Practices contain both behavioural and cognitive elements, by including both the mental and thematerial. Competence in a practice is built through participation and is embodied in pre-reflexive tacit

knowledge. To participate in a practice implies learning the sens pratique of that activity (Bourdieu,1990).The sens pratique is pre-reflexive; it is kept within the habitus, locked-in routinised behavioursand supported by historical anchors. Accordingly, the concept ofparticipationemphasises the fact that

(un)learning does not take place exclusively in the minds of individuals, but rather stems from theengagement of individuals in social practices situated in specific contexts of interaction (Gherardi andNicolini, 2001). Participation in a practice provides individuals with know how, i.e., the tacit-knowledge

embedded in that practice (Polanyi, 1962).Polanyi defines tacit knowledge as the outcome of an activeshaping of experience performed in the pursuit of knowledge (1983, p. 6).

3 Building on the work ofKolb (1984)andSenge (1990),Kim (1993)argues that learning involves thought and action in both

the conceptual (cognitive) and the operational (behavioural) realms, and explains how in learning a person continually cycles

through a process of having a concrete experience, making observations and reflections on that experience, forming abstract

concepts and generalisations based on those reflections, and testing those ideas in new situations, which leads to another concrete

experience (p. 38).


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According to this perspective, processes of (un)learning and change are continuously performed

by individuals as they engage, as competent (knowledgeable) actors, in the practices that sustain anorganisation. Individuals produce and reproduce social contexts by participating in practices, whose

validity becomes the object of a critical reflection, only when a breakdown threatens the tacit-knowledge,which sustains them. Reflexivity, therefore, is linked to the institutionalisation of knowledge; i.e., tothe process of disembedding knowledge from those practices through which it is sustained in action.In such situations, individuals use their practical experience to reflect back on the contents (know-

ing what) of their existing knowledge. In Polanyis terms, when the flow of experience is interrupted,the subject switches from subsidiary to focal awareness to re-asses the validity of knowledge thatwas once taken-for-granted. When the validity of existing knowledge is questioned through reflec-

tion on practices, trust becomes an important resource to be drawn upon by individuals. The nextsection focuses on the role of trust in coping with the uncertainty that characterise processes of

change.

2.4. Coping with uncertainty, distance and risk: the role of trust

What is trust? What is the role of trust in modern organisations? Trust is a concept, which has been

widely explored in the management and organisation literatures (Gambetta, 1988; Tylerand Kramer, 1996;Nooteboom, 2002), and is now also beginning to be discussed in the accounting literature (Meer-Kooistraand Vosselman, 2000; Tomkins, 2001; Johansson and Baldvinsdottir, 2003; Seal et al., 2004; Dekker,

2003, 2004; Barrett et al., 2005). For our purposes, the conceptualisation of trust can be linked to anunderstanding of the agents psychological make-up (Giddens, 1984) and his/her need for routinisation

(Berger and Luckmann, 1966), which implies a preference for a stable and predictable environment(Luhmann, 1979). As such, trust, in its broadest sense, is a mechanism that can reduce uncertainty in

contexts of interaction and facilitate the functioning of organisational systems through the behaviour ofsocial actors (seeSako, 1992; Grey and Garsten, 2001).

The role of trust in the modern organisation derives from the way contemporary organisations engagewith the complexity of late-modernity.Giddens (1990, 1991)characterises late-modernity by the inten-

sification of world-wide social relationships which link distant localities in such a way that localhappenings are shaped by distant events and, in turn, distant events are shaped by local happenings.

According to Giddens, the problem of order in late-modernity is one of time-space distanciation, inwhich there is a disembedding of experiences and meanings from the local context where they emerge,while standardised and abstract dimensions of space and time come to rationalise these decontextualised

activities.Giddens identifies two types of disembedding mechanisms:symbolic tokensandexpert systems(1990,

p. 22), which he collectively refers to as abstract systems (p. 80). Symbolic tokens (money is probably the

best example4) are mechanisms, which can store and transmit some sort of value, thereby enabling valueto be transported across both time and space. The second type, expert systems, is systems of technical

accomplishment or professional expertise that organise large areas of the material and social environmentsin which we live today (Giddens, 1990, p. 27). Expert systems facilitate the establishment of socialrelations across vast expanses of time and space, providing abstract guarantees of expectations through

4 According to Giddens, money provides for the enactment of transactions between agents widely separated in time and

space (1990, p. 24).


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the development of their own expertise and cadres of experts who further stretch social systems.The

complexity of late-modernity requires two forms of trust: a confidence in the reliability of: (i) specificindividuals (personal trust) and (ii) abstract systems (system trust). Importantly, these two forms of

trust are often interdependent, as individuals are usually the access points for the systems, and throughface-to-face contacts such individuals can absorb risk by assuring potential users that these systems aretrustworthy (Bachmann, 2001). Thus, whereas face-to-face contacts represent an important source ofsystem trust, the strength of stable and anonymous standards of expertise, together with established rules

and procedures, can also contribute to reinforce personal trust.Where trust is undermined, individuals(and social groups) will be unable to rely on the anticipated behaviours and responses, and they willexperience what Giddens refers to as ontological insecurity. Similarly, according to Luhmann, the first

and basic problems with which social actors have to cope: is how to reduce uncertainty ( Bachmann,2001).In this respect, trust can be understood only by recognising and accepting the radical uncertainty

of human behaviour (Nooteboom, 2002).Trust absorbs uncertainty, but at the same time produces risk.Risk is inevitable whenever any individual decides to trust another social actor or a social system on thebasis of limited available information (Bachmann, 2001).Summarising, trust can be interpreted as risky

engagement (Luhmann, 1979); wheresomeone(the trustorthe subject of trust) has trust insomeone or

something(the trusteethe object of trust) in some respect and under certain conditions (the context);seeNooteboom (2002).

Consequently, trust is connected to: (1) predictions about the trustworthiness of the trustee, (2) therisks associated with acting on the basis of such predictions, and (3) the contextual factors that serve

to either enhance or prevent the development and maintenance of a sense of trust (Lewicki and Bunker,1995, 1996). As such, the notion of trust extends beyond a basic need for predictability, to embody acertain degree of confidence in the face of risk (Lewis and Weigert, 1985). As suggested byBoon and

Holmes (1991), trusting relationships involve a state of confident positive expectations about anothers

motives with respect to oneself in situations entailing risk (p. 194). For these reasons, it is crucialto interpret trusting relationships as cognitive phenomena embedded in practices, and grounded within

ongoing processes of individual (un)learning and social interaction.

2.5. Managing anxieties during processes of (un)learning: interpreting trust for change

In his description of individual (un)learning, Schein emphasised the role of anxiety and argued that in

order to cope with the anxiety, which arises in contexts of social interaction, agents are constantly lookingfor some level of psychological safety (1992, 1993). Once this level is achieved, since (un)learning isuncomfortable and anxiety-producing (1999, p. 115), the agent maintains this sense of safety through

the repeated enactment of behavioural routines that tend to avoid cognitive and behavioural changes. But(un)learning and change are possible through a process of cultural unfreezing and re-freezing, which atthe individual level comprises: (1) mechanisms of disconfirmation, (2) the emergence of guilt or survival

anxiety, (3) the creation of psychological safety and the overcoming of learning anxiety 5 and finally,once new solutions have been successfully experienced and validated, by (4) a cognitive redefinition and

sedimentation of the new experiences. Importantly, in organisations the processes of social validationenable a progressive sharedness and collective re-freezing of the new experiences that proved to besuccessful in practice.

5 In his earlier work Schein called survival anxietyAnxiety 1 andlearning anxietyAnxiety 2 (see 1993).


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Schein considers disconfirmation the key psychological element which lies at the centre of processes

of (un)learning and change. However, disconfirming information, by itself, is not enough for changeto occur. Schein argues that in order to take such information seriously, and to motivate individuals to

change, the disconfirmation must stimulate what he calls survival anxiety: i.e., the fear, shame or guiltassociated with not learning anything new (1993, p. 88). Although survival anxiety may arise whendisconfirming information is considered valid and relevant, a second kind of anxiety can create defensivereactions and resistance to change. This Schein describes as learning anxiety6:i.e., the feeling that is

associated with an inability or unwillingness to learn something new because it appears too difficult ordisruptive (1993, p. 86).

Following from such positions, we can definetrust for change as the psychological condition experi-

enced by individuals as they reflect critically on their social experiences, which allows them to classifyevents or data as disconfirming (i.e., challenging the taken-for-granted assumptions and routinised patterns

of behaviour), and to raise sufficient survival anxiety to stimulate change, without generating a level oflearning anxiety which escalates defensive attitudes. Importantly, trust for change is socially constructedand mediated by interaction: i.e., it is a psychological state built on social practices and experiences. Such

a perspective offers us an interesting point of departure to interpret the intertwined relationship betweenMAS and feelings of trust for change.

Emerging from the individuals expectations about order, safety and stability in the realm of social

interaction (see Garfinkel, 1967), trust is built on and carried in the practices through which agentsmake sense of the reality in which they live. Such practices represent the presentational ground on

which feelings of trust are created and sustained in specific contexts of interaction (Lewis and Weigert,1985; Seal and Vincent-Jones, 1997). In this paper we will discuss how feeling of trust (and distrust) forprocesses of change can emerge in practice through the tensions that characterise individuals responses

to a crisis. We will explore how MAS can be implicated in the management of potential conflicts between

tacit (or unconscious) and purposeful (or rational) behaviour, which characterise such responses. Insuch circumstances, trusting relationships are needed to give confidence in the search for new types of

behaviour that will inevitably involve uncertainty and risk. Conceptualised as social and institutionalpractices, MAS have the potential to engender feelings of trust in the identification of possible solutions

in critical situations (see Johansson and Baldvinsdottir, 2003). Along these lines, this paper seeks tounderstand the role of management accounting practices in the emergence of feelings of trust (or distrust)for the changes proposed in crisis situations. Our objective is to investigate the extent to which forms of

personal and system trust are implicated in the constitution of (management) accounting as a social andinstitutional practice.

We will adopt an interpretive perspective combining theory with insights from the field. While, on

the one hand, the perspective developed in the paper will provide a theoretical explanation of the evi-dence collected, on the other hand, the evidence will also be used to illuminate and reflect on the

insights that characterise our interpretive perspective. In the next section, we will begin this processby outlining the change which followed the acquisition of Nuovo Pignone (Italy) by General Electric(US).

6 This leads him to the twofold and, to some extent, paradoxical role of anxiety, which although it prevents learning, . . .is

necessary to start learning as well (Schein, 1993, p. 89).


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3. Accounting and trust: evidence from the field

3.1. The case of Nuovo Pignone: the background of an acquisition7

Originally established in 1842 in Florence (Italy) as Pignone, Nuovo {New} Pignone (NP) was setup in 1954 following its acquisition by ENI, a state-owned holding company, and was later, in 1994,acquired by the US multinational, General Electric (GE).8 Established as a cast-iron foundry, over theyears the company grew and prospered through the design and manufacture of specialised equipment,

such as electrical turbines, compressors, pumps and turbines for energy related industriesits technicalachievements include the worlds first gas-powered internal combustion engine. As a result of its produc-tion excellence, NP has been successful in gaining large contracts for major projects, such as supplying

pumping stations and other equipment for the Trans-Siberian Pipeline. Given NPs well-earned reputationfor the quality of its engineering and products, and also its extensive market portfolio, it was not surprising

that GE decided to acquire this major competitor.GEs acquisition of NP took place following two major events which had had a huge impact upon

Italian social, political and economic life: (1) a massive investigation during the early 90s, called ManiPulite(or Clean Hands), which ended in the arrest of hundreds of politicians and managers, and (2) anextensive programme of privatisation which was launched by the government in 1993. During the ManiPulite investigation the climate in the country was very tense. The investigation was driven by a pervasive

public mood to rid the economic and political life of the country of kickbacks and bribery. Importantfor our purpose is that the investigation led to the arrest on corruption charges of some 20 of ENIs topexecutives, including its chairman, Gabriele Cagliari, who later committed suicide in prison. Hit by this

Mani Pulite scandal and by a loss of $554 million in 1992, ENI entered a phase of major organisationalrestructuring. During this period NP, which was one of ENIs few profitable businesses, was classified as

non-core and sold in 1994 through a private treaty between the government and GE. The sale was part ofthe privatisation programme, which has been carried out by successive Italian governments since 1993,encouraged by the European Unions restrictions on state aid to industry, as well as the need to reduce

public-sector debt.We will focus on the integration of NP into the global GE organisation. Although various programmes

of organisational restructuring were implemented within NP, ranging from downsizing and delayering

to boundaryless working and outsourcing, the process of integration was grounded in a major changein the understanding of measurement, and especially performance measurement, within NP. As far as

measurement systems were concerned, the culture of NP was so totally different to GE that a massive

7 The insights from the GE-NP case are based on a longitudinal study of close observation during which two of the currentauthors had the opportunity to spend considerable amounts of time in the company (see Busco, 2003). From 1995 to 2004 we

were given the opportunity to explore the process of accounting and performance measurement change as it unfolded, and to

interpret the reactions of a community whose culture was deeply challenged by the GE acquisition. We were offered the chance

to play an active role in both discussing the changes with employees and contributing to their re-training. We were asked to

build on our interviews, observations, participations in meetings, workshops and focus groups, in order to develop and present

together with GE finance experts training courses on such topics as finance for non financial managers, understanding financial

fundamentals, thefinancial benefits of six-sigma and controllership. Thisdual role as researcherand helperclinician (Schein,

1992) allowed us wide-ranging access to the organisational setting, where we took part in workshops, seminars, group discussions

and courses. Overall, we conducted more than 90 interviews up to the end of 2004.8 NP was acquired by GE Power Systems (which in 2004 becameGE Energy).


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process of cognitive and practical redefinition was required. Whereas NP had no tradition of using

performance measurement systems, GEs management and organisational style relied extensively onsuch systems for both communication and control. Before the acquisition, NP was a state-owned and

largely bureaucratic company, which had to produce budgets and various reports for both head officeand the state bureaucracy; but they were used largely for ceremonial purposes and not integrated intomanagement practices. Although, this did not prevent NP from being quite profitable, due largely to itsexcellent products and production systems, following the acquisition by GE significant change took place

as the GE Way9 was applied very aggressively throughout NP. There were two major components ofthis change within NP: the first was the re-design of the companys systems of control and accountability,and the second was the subsequent implementation of the Six Sigma Initiativea measurement-based

quality improvement programme.

3.2. The challenge of cultural change: the GE Way

GE is a massive global business,10 managed through a common organisational language and widely

shared cultural values. We knew the world was going to change. And the world has changed totally!confirmed an NP finance manager. Despite its undoubted technical competence, speed and promptnesswere not typical characteristics of the old NP, which sometimes described itself as a bureaucratic giant.

However, the processes of change that GE brought to NP, besides being radical, were also very rapid.The GE Way is a tough and aggressive business philosophy. An interesting example concerns human

resource management. Talking to a meeting of GE operating managers, Jack Welch the CEO of GE at

the time categorised managers and employees as: A players, who subscribe to the companys valuesand who have to be kept and rewarded; B players, who still deserve to be trusted because they have thepotential to improve their skills and productivity; and C Players, who do not subscribe to the companys

values and who, without remorse, deserve to be fired.

Too many of you work too hard to make Cs into Bs. It is a wheel-spinning exercise. Push Cs onto B companies or C companies, and theyll do just fine. . . .Were an A plus company. We want

only A players. We can get anyone we want. . . .Take care of your best. Reward them. Promotethem. Pay them well. Give them a lot of stock options and dont spend all that time trying workplans to get Cs to be Bs. Move them on out early. Its a contribution. (GEs CEOreported in

Slater, 1998)

The GE Way of running the business was deployed within NP through a massive program of trainingand education. Importantly, besides intense training sessions in Florence, the key pillar of GEs educationstrategy was to expose key-players to Crotonvillea 52 acre training campus in the Hudson Valley of

9 This is the term used to describe the established ways of working within GE.10 From 1stJanuary 2004,GE hasreorganisedits structure around markets andcustomers. In particular,GE businesses have been

divided into two groups: Growth Engines and Cash Generators. The Growth Engines represent about 85% of GEs earnings, and

are described as market leaders with great strengths in technology, cost, services, global distribution and capital efficiency. The

seven GE Growth Engines businesses are: GE Consumer Finance; GE Energy (formerly GE Power Systems); GE Healthcare;

GE Infrastructure; NBC; GE Transportation; GE Commercial Finance. On the other hand, Cash Generators represent about 15%

of GEs earnings. These businesses are more cyclical, but characterised by consistently strong cash flow. There are four GE Cash

Generators businesses namely: GE Advanced Materials; GE Insurance; GE Equipment Services; GE Consumer & Industrial

(GE 2003 Annual Report, p. 5).


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New York. Courses in Crotonville gather together leaders from all the GE businesses around the world,

offering to the company a common frame of reference to forge ties that promote knowledge and best-practices sharing, explained a NP manager, who was urged to attend a Leadership Development Program

right after the GE takeover. For this reason, he continued:

if you wish to fully understand the magnitude of the NP process of change, you have to look at GEsoperating system, which is the GE Way in action: i.e., a year-round series of intense learning sessionswhere Business CEOs, top-managers and corporate initiative champions meet to share views and

best practices from across the company. In January 1995, this was the rollercoaster we suddenlyfound ourselves on. With no chance to escape or postpone, we had to learn quickly how to fasten

our seats-belt, and enjoy the ride all the way through Operating Managers Meetings, CorporateExecutive Councils, Quarterly Business Reviews, the frightening Sessions C, Sessions I (strategyreview), Sessions II (budgeting) as well as Sessions D (compliance).

Interestingly, when asked to describe NPs control systems before GEs arrival, a management accoun-tant emphasised that there were no pressures for financial improvements. No particular information wasrequired. . . .The tools were there, the data were there, but they didnt look so interesting or burning as

now. I still have doubts that anyone bothered to read our reports carefully, he continued. The extentof the change that took place within NP was quite obvious in an interview with a business analyst who,

while nervously consulting his calendar, explained that:

GEs headquarters need numbers to show to Wall Street. Consequently, we need to be fast, reliableand, indeed, profitable. If not, the week after tough inquirers start to cross the Atlantic . . ..

NPs employees were not left alone to face the uncertainties of change, however. They were providedwith a number of instruments for learning and coping with the new business reality; one of which was

the language of accounting and measurement. We are building up the necessary kit-for-survival, arentwe? commented a project engineer at the end of a financial fundamentals training session. Thus, whileexperiencing a period of transformation, everyone within NP was learning a new vocabulary and a set of

practices, which helped to exorcise the fears connected to the re-defined organisational context.

3.3. Re-structuring the accounting and finance function

Redesigning the systems of accountability involved major extensions to the companys financial sys-

tems, and a profound process of re-structuring of the accounting and finance function. The latter compriseda reorganisation ofManufacturing Finance (the department traditionally responsible for cost account-

ing) and the establishment of new departments: namely Financial Planning and Analysis (FP&A) andCommercial Finance. In addition, a new task-force ofFinance Managers was created and assigned toindividual divisions or streams as finance experts to support the businesses. The process of re-structuring

the finance function in NP reflected the GE view of the role of accountants whose talents include, buttranscend, traditional controllership [to] full-fledge participants in driving the business to win in themarket-placea role far bigger than the dreary and wasteful budget drills and bean counting that once

defined and limited the job (CEOs letter to share owners, GE 1997 Annual Report).Within GE, FP&A means planning, communication and controllership explained a senior GE FP&A

Manager. We investigate our financials to provide the CFO and the CEO with accurate information tomake proper decisions. We plan, monitor and evaluate contribution margin, operating margin, cash flow,


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and all key financial measures. We estimate major short and long-term financing outlays, analyse projects

to determine cost benefit based on economic return and strategic considerations, generate reports thatprovide a picture of current business standing and how this defines future business risks and opportunities.

Importantly, we monitor the external environment by applying financial tools and techniques to theassessment of markets and market dynamics such as competition, barriers to entry/exit, technology, etc..Importantly, through planning and reporting the FP&A team is instrumental in ensuring the integrity ofthe financial statements which is essential for controllership purposes.

GE is devoted to controllership, emphasised the senior GE FP&A Manager, who continued, wemaintain a dynamic system of controls and procedures that is designed to ensure reliable financialrecord keeping, transparent financial reporting and disclosure, as well as an efficient and effective use

of resources. Within GE, the FP&A team is responsible for business segments analysis and closing:i.e., for all financial reporting and analysis requirements (Profit & Lost, Balance Sheet, Volume), includ-

ing monthly pre-close, quarterly closing, management packages, global segment roll-ups, as well as thelinkages with corporate processes such as the strategy definition and the Operating Plan. Finally, FP&Aplays a central role in terms of communication and coordination, providing a liaison between finance,

front-end businesses, and the global HQ. We are the channel where all the key financial informationflows. We touch almost everything that has to do with financial data. Being the pulse of what/how thebusiness is doing, we have to be accurate and reliable in order to be trusted (FP&A Manager). Such a

pivotal position has put FP&A at the forefront of the GE organisation. FP&A managers share with thedivisions general managers the ownership of the planning and budgeting process.

Finance Managers supervise budgeting and reporting within the individual divisions, functions orbusinesses. They coordinate business opportunities, plans and performance measurements, as well asensuring consistency, statutory compliance, and observance of common policies and processes up to the

contribution margin level. Being responsible for business financial forecasting and variance analysis,

Finance Managers are physically locatedwithinthe business. Reporting directly to the CFO, they assistin the development and execution of cost commitment, and provide strong support to the businesses in

following up year-to-date figures, committed expenses and estimates. In so doing, on the one hand, theyliase with FP&A on financial closing processes, ad hoc analysis and project reporting; on the other hand,

they work closely with the general manager to meet the financial and operating goals of the business.The CommercialFinance department had a crucial rolein encouraging those within the sales department

to think in financial terms. An interesting example concerns the intensive training sessions where sales

managers, and other sales personnel, were encouraged to wear the hat of finance and consider customersas financial entities. Financial solution selling will be a strategic weapon in our sales arsenal, declaredan internal booklet prepared by Commercial Finance, which continues:

[as] sales and sales support professionals, you wear many hats and possess many skills that keepour corporation at the sales and support forefront. . . .Now, youre being asked to wear one more

hat probably the most important and powerful one in your career that of a financial consultant.Wearing that hat will open up new sales vistas and greater opportunities. You will be increasinglychallenged to know and assist your accounts better than ever to look for every opportunity to

improve their financial condition by selling General Electric solutions that truly affect their bottomline. . . .Financial selling is the ultimate persuasive sales message cost of ownership, return on

investment, payback, cost/benefits analysis, and contribution to profits is auniversallanguage thatdecision-makers around the world speak and understand (emphasis in the original).


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Overall, the GE Way and the new organisational credo that it entailed were supported and reinforced

by an extensive programme of training. This was intended to provide participants with instruments (thestrategic weapons), which broadened their knowledge and skills (their sales arsenal). Within the company,

the situation was clear to everybodythere was no room for ambiguity. The changes to the previousmanagement processes were tangible. As pointed out by an account manager, using a naval metaphor:

Overall, to be a bureaucratic state ship we were adequately equipped, armed enough (even before

GE takeover). The question was that we didnt need to shoot; nobody asked us to find our limits:there were no wars to do.

WhenGEtookover,thewarbeganandtherewasacommonenemytoshootat;themarketcompetitors.The stories and rhetoric embodied within the GE Way had a powerful impact on the established rationales

within NP. Whilst their effect was to create considerable anxiety, which disrupted the certainties embeddedwithin the existing stocks of knowledge, the continuous waves of communication and training promoted

an emerging sense of safety which had a significant impact on the process of change. If youre relativelynew to finance, relax its not that difficult or complicated to get started. No, you dont have to be aCPA or financial wizard to use some of the fundamentals of finance in selling reassures the introduction

to an internal selling booklet. The emerging sense of safety was rooted in and supported by the neworganisational language which in many circumstances, by empowering individuals with new rationales,stimulated feelings of trust for changeas we will discuss more fully later.

3.4. Mastering quality: the six-sigma initiative

Despite the benefits of wearingthe hatof finance,it was probablythe Six Sigma initiative which played

a major role in bringing about change in NP. Six-Sigma11 is a highly disciplined quality improvement

initiative, which has had a major impact on a number of large businesses over the past decade. It comprisesa range of tools, techniques and processes for achieving very tight quality targets at every organisational

level and operation. In applying Six-Sigma, various labels (i.e., champions, master black-belts, black-belts, green belts) are attached to the individuals involved, who in GE are collectively referred to as anew warrior class.12

The Six Sigma initiative in NP was driven by a desire to improve service to customers. Key customersdefine what quality should mean for us in terms of performance, reliability, prices, levels of service and

many more explained a Six Sigma project leader, who then continued; customers perspectives arecrucial to look at our processes from the outside in, and to identify critical-to-quality (CTQ) areas wherewe can add value or offer any sort of improvement. Once CTQ areas have been identified, they are then

broken-down into multiple critical processes, which need to be investigated in order to reduce defects

11 Sigma is a measure of the number of errors (mistakes) in any processit is derived from the statistical notion of standard

error. When a specific process operates at Six-sigma it means there are only 3.4 mistakes per million discrete operations.12 In addition to the full-time Quality Team, the Six-sigma organisational architecture includesChampions,Master Black belts,

Black beltsand Green belts. TheChampionsare the leaders of functions or divisions who promote, approve and facilitate the

projects within their area of responsibility. The Master Black belts are the full-time Six-sigma experts, who manage various

projects and train theBlack Belts. The latter, are the full time quality managers who lead the teams dedicated to specific projects.

Finally, the Green belts work part-time on specific projects (normally 2025% of their time), while continuing their normal

activities in the company.


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and increase profitability. These critical processes are examined through specific micro projects which

involve five separate steps referred to by the acronym D-MAIC:

(1) Define: a preliminary phase where the key characteristics of the project are identified in terms ofcustomers, CTQs and the core business processes involved.

(2) Measure: where data are collected and CTQs issues are assessed in sigma terms.(3) Analyse: where the fundamental causes of the defects are analysed using a wide variety of tools,

ranging from brainstorming to statistical techniques.

(4) Improve: where the processes are re-engineered to bring the number of defects within the targetedlimits.

(5) Control: where the improvements deployed are monitored through statistical process control to ensurethat the new quality standards are maintained.

As suggested by a NP project manager, although Quality has always been about improving processes,

products and services by eliminating defects and the root causes of those defects, through Six Sigmaprocess improvements we strengthen the ties with their consequences in financial terms. Before a project

is initiated, the potential financial benefits and cost savings of prospective process improvement arequantified, and then used to help to select and prioritise projects. Benefits and savings are re-evaluatedduring the analysis phase to ensure that the cost of the improvements suggested will be justified by the

financial benefits of the project. The actual financial benefits and cost savings are verified once the projectenters the control phase. The rigor associated with linking Six Sigma projects to business financials,emphasised a NP project manager, reinforces alignment within the company as the entire managerial

structure, including CEO, CFO, and line managers are looking to this initiative as an opportunity to reduceexpenses, boost cash and increase productivity.

By integrating financial and non-financial measures, Six-Sigma extended the culture of measurement

to all parts of NP. As a result of using the language of Six-Sigma, operating managers within NP arenow able to share technical improvements and their consequences in financial terms with other GE

managers wherever they are located, whatever business they are in. By empowering engineers andtechnical experts with finance fundamentals they [NP management] didnt create new figures, they didntreproduce accountants. On the contrary, they have infused operating roles with a broader view of the

business. They created a minimum common base of knowledge to talk about contents, to reach the shopfloor without losing any time arguing about meanings, explained a NP project manager. The way inwhich the Six-sigma initiative contributed to the process of culture change within NP will be further

explored in the next section.As stated in the introduction, the aim of this paper is to understand the way in which MAS and feelings

of trust contribute to processes of individual (un)learning and organisational culture change. In Section2we relied upon insights from the sociology of knowledge and the literature on learning and knowing inorganisations to explore issues such as the reasons behind the routinisation of human behaviour; the way

in which organisational practices are implicated within the production and reproduction of knowledge;as well as the role of trust in assessing the validity of existent knowledge and behaviours. We concludedour theoretical analysis by exploring the concept of trust for change.

Importantly, we discussed how trust can be built on and carried in the practices though which organi-sational participants make sense of the reality in which they operate. Therefore, by interpreting MAS as

socially constructed and institutionalised practices, we have emphasised the needto reconcile the cognitiveand behavioural implications of learning by looking at the intertwined relationship between participation


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in a practice and the management of anxieties which characterise reflection on a practice. In the following

section we will combine these theoretical insights with the empirical evidence offered in this section,to explore the extent to which forms of personal and system trust are implicated in the constitution of

(management) accounting systems, which can be interpreted as socially constructed objects of (dis)trust which we will label trust for accounting as well as the role of MAS as sources of (dis)trust duringprocesses of (un)learning and culture change which we will label accounting for trust. Accordingly, webegin the following section with a discussion of the concept of culture.

4. When crisis challenge culture: accounting for trust and trust for accounting

The concept of culture has been central to many research studies in fields ranging from sociology toorganisation theory, and from anthropology to management studies. Although a review of these studies

is beyond the scope of this paper, it is important to recognise that the conceptualisation of culture hashistorically been influenced by the traditional dualism between the objective and subjective perspectives;

between organisations having cultures and organisations as cultures (seeMouritsen, 1989; Czarniawska-Joerges, 1991). Following Berger and Luckmann (1966, p. 65), it can be argued that social constructionismand functionalism converge in an interpretative perspective according to which organisations both reflect

and shape their own reality (Parker, 2000).If culture represents shared interpretive schemes, expressedin language and other symbolic constructions that develop through social interaction, it needs to beacknowledged that such schemes provide the basis for shared systems of meaning that allow day-to-day

activities to become routinised or taken for granted (Smircich, 1983,p. 160).Along these lines, we draw onSchein (1991, 1999)to conceptualise organisational culture as an insti-

tutionalised phenomenon, which binds time and space through ongoing processes of social interaction.

Thus, organisational culture can be interpreted as a socially constructed pattern of shared basic assump-tions, which have been developed by a specific group of individuals (organisational members) as they

learn to cope with the problems of external adaptation and internal integration. Such assumptions repre-sent a mutual stock of knowledge stored in organisational routines, which can be passed on to newcomersas the appropriate way to act, think and feel in specific situations. Scheins view of culture is consistent

with the literature on learning and knowing, which we drew upon in Section2. Here culture is groundedon the agents ability to acquire knowledge from social interaction. Culture embodies the accumulatedknowledge that has been socially validated through past experience, as well as continuous processes of

individual (un)learning and organisational sharedness.However, organisational culture as well as individual knowledge changes overtime. Sometimes such

change is particularly intense; as the GE-NP case illustrates. When crisis situations arise, and organ-isations are faced with a need to change, organisational members can find themselves under intensepressure. Their rationales and routinised behaviours, which are driven by their existing knowledge and

cultural assumptions, are challenged. According toGiddens (1984),in such situations the certainty andpredictability of routines are radically disrupted, and anxiety swamps habitual behaviours. For these rea-sons, by creating circumstances of radical disjuncture of an unpredictable kind that threaten or destroy

the certitudes of institutionalised routines, crises can unlock possibilities for change (Giddens, 1984,p.61).

The theoretical insights presented in this paper (see Section2)suggest that for change to occur indi-vidual actors must take seriously the rationales and potential of the change in order to overcome the


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psychological forces which tend to resist processes of individual (un)learning and transformation. Being

at the root of the constitution of both the individual subject (and her/his cognitive and behavioural char-acteristics) and the social context, organisational practices (including management accounting) can be

important in crisis situations. In particular, conceptualised as rules and routines, MAS are pivotal insupporting the ongoing constitution and redefinition of agency, and the relationship between the existingtaken-for-granted assumptions and the emerging new reality of everyday life (Scapens, 1994; Burns andScapens, 2000).The next section uses the theoretical perspectives discussed earlier to examine the way

in which MAS contribute to the unfreezing, change and re-freezing at Nuovo Pignone.

4.1. Unfreezing, change and refreezing in NP: the role of management accounting practices

The reflective and constitutive role of accounting systems has long been debated within the literature(see for instance Hopwood, 1987, 1990; Macintosh and Scapens, 1990). Portrayed as playing a powerful

role in organisational and social affairs, accounting practices have been said to influence perceptions,change language and infuse dialogue, thereby permeating the way in which priorities, concerns andworries, and new possibilities for action are expressed (Hopwood, 1990, p. 9). In addition, particularly

during the last decade, several case studies have attempted to investigate the way in which accounting andother organisational practices contribute to the ongoing processes of production and reproduction of a

specific organisational reality (see, among the others, Dent, 1991; Miller and OLeary, 1994; Scapens andRoberts, 1993; Carmona et al., 1998; Jazayeri and Hopper, 1999; Johansson and Baldvinsdottir, 2003).

Among the recent research which has explored the role played by accounting systems in processes

of organisational transformation, the paper ofEzzamel et al. (1999) provides an interesting metaphor.Synthesising the philosophy which inspired a process of renovation in one organisation, Ezzamel andhis colleagues quoted the companys CEO, who talked about a burning platform theory of change.

Specifically, he argued that:

. . .when the roustabouts are standing on the offshore oil rig and the foreman yells, Jump into thewater, not only wont they jump but they also wont feel too kindly towards the foreman. There

may be sharks in the water. Theyll jump only when they see themselves the flames shooting upfrom the platform. . . .The leaders job is to help everyone see that the platform is burning, whetherthe flames are apparent or not. The process of change begins when people decide to take the flames

seriously and manage by fact, and that means the brutal understanding of reality. (seeEzzamel etal., 1999,p. 39)

This metaphor opens up possibilities for illuminating the role of accounting in a crisis situation. As

suggested by Ezzamel et al., accounting systems have the potential to help organisational leaders makeflames visible: i.e., to act as disconfirming data and to construct a powerful discourse that almost literallysets the platform on fire (1999, p. 41). For this reason, the burning platform metaphor is not simply

facilitated by accounting, rather it is an accounting construction (Ezzamel et al., 1999, p. 42). Thissuggests the way in which management accounting practices and feelings of trust for change can act in arecursive mutually reinforcing waysuch as in NP. Nevertheless, as we discuss later, they can also work

in an opposite mutually damaging way.As indicated at the outset, the aim of this paper is largely theoretical. We aim to interpret the intertwined

constitution of management accounting and feelings of trust for change within processes of individualand collective (un)learning. Conceptualised as organisational rules and routines, management accounting


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practices can be implicated in the tensions between habitual and intentional behaviour, between tacit and

rational choice, and between unconscious and conscious deliberation, which the individual experiencesduring processes of (un)learning. By exploring the processes of knowledge recall in crisis situations, this

paper focuses on the management of anxiety which characterise processes of reflection on a practice.Next, we begin the construction of our interpretive perspective by drawing on insights from the GE-NPcase.

As acknowledged by people at all levels in the company, the transformation of NP was very deep and

intense. GE was so different from ENI that a massive cultural re-definition (a cultural revolution) wasrequired. It was a matter of unlearning the old culture as everyone in NP became exposed to the GE Way.Change occurred through the redefinition of key concepts; and the resulting behavioural changes became

refrozen in the personalities of the individuals and in the organisational norms and routines ( Schein,1992).Grounded in the emerging practices, such cognitive experiences were crucial in overcoming the

learning anxieties, which individuals experienced in departing from their existing organisational routines.As we will see, the transformation of NP clearly illustrates the way in which MAS are implicated withinthe sociological and psychological mechanisms at work.

4.1.1. The unfreezing of Nuovo Pignone as the GE Way gets reproduced

As described earlier, GE is a massive organisation that is constantly seeking to create shared organi-sational knowledge, commonly referred to as the GE Way. Its continuous and almost obsessive objectiveis to use a common culture to align the strategy of its global and heterogeneous businesses. In so doing,

over the past 20 years GE has grown by acquisition, and globally reproduced its own way of running thebusiness; relying on employees commitment to the slogans and rhetoric of its senior corporate officers.

Training sessions in Crotonville,13 the intense pace of the GE operating system, as well as the day-to-daypressures of the job (If not, the week after tough inquirers start to cross the Atlantic . . .as cited earlier)

are just a few examples of the ways of deploying the GE Way worldwide. NP employees had to copewith it promptly, by jumping on what they perceived as a rollercoaster (With no chance to escape orpostpone, we had to learn quickly how to fasten our seats-belt, and enjoy the ride . . .as cited earlier).

Most acquisitions involve some cultural shift, but in NP it was a very major one. The changes were

fast and, despite its technical abilities, speed was not a typical characteristic of the old NP. That wasnt anormal change, that was a shock! An earthquake in our daily way to think and behave. Take the example

of human resource management, from a rather relaxed system mainly based on egalitarian principles,we suddenly faced the A, B, C ranking theory. I am not arguing it was right before, I am not arguing itat all, but this was scary, recalled a B-ranked engineer. Again, reflecting the sentiments of GEs CEO,

the head of Human Resources at NP argued: You have to get rid of blockers and identify high-flyers

simultaneously. Thus, in spite of Italian labour regulations, which make it difficult to fire people, theCEOs speech (quoted earlier in the paper) had a profound effect on everyone in NP. A couple of months

after this speech the following trade-union notice appeared in the canteen14:

Nuovo Pignone has grown up . . . with the strong commitment to the workers. . . . We will not

allow the destruction of an asset [human resources] by someone [GE headquarters] who ignores our

13 Such is the power of Crotonville in promoting leadership and the GE culture that Schein compared its training activities and

courses to wartime brainwashing (Crainer, 1999).14 Unions have traditionally been very strong in this region, and within NP in particular.


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history, our culture, the organisational life of our company or by someone [local management] who

has suddenly lost his memory due to being well paid! (Comments in brackets added.)

This trade union notice appeared following a decision by NPs management to restructure certainactivities within its offices in Florence. Specifically, due to the attention then being given to efficiency

and cost savings, services such as the payment of wages, expenses reimbursement, personnel attendancerecords,mail room, fax and switchboard, technical documentation and filing, reception, internal deliveries,andsecurity, were all about to be outsourced. However, rather than resistingthese changes, the trade unions

emphasised the importance of re-training people for different jobs. It is important to recognise that NPsacquisition by GE did not have a significant effect on employment levels. At the beginning of 2004 the

total number of workers (around 4200) in NP was approximately the same as in 1994. Increasingly,training and re-education have come to be seen as important common ground for trade union agreementsin the face of organisational restructuring.

GE is not afraid to commit resources to the communication of its valuesespecially within a recently

acquired company, such as NP. In the late-1990s, communication and training were (and still are) centralto GEs policy for NP. The resources invested in NP to communicate the GE Way were massive, and

the communication was endemic; it follows you even in the toilet was the possibly exaggerated claimof one NP white-collar worker. You may not completely share these ideas, you may need time to

understand them, but you cannot say that nobody told you. You cant ignore them, they are out there, theyare everywhere, explained a human resource manager pointing to one of the latest mission statements.Thus, NP employees were not left alone in coping with the change.

Deployed through massive waves of training, the reproduction of the GE Way within NP was rootedin charismatic leadership and a new measurement-based language, both of which acted as sources ofdisconfirmation to unfreeze the existing culture. Thus, although local managements conduct was regarded

by some union leaders as opportunistic behaviour, and a betrayal (someone who has suddenly lost hismemory), it cannot be interpreted simply as a matter of bonuses and stock options (being well paid!). Asillustrated below, the reasons for change were more complex and, thus, a deeper explanation is needed.

4.1.2. Changing Nuovo Pignones culture as finance and measurement become increasingly

important

The psychological securities built up during the era of ENI management were seriously threatenedby the GE Way. They were possibly already under threat following the Mani Pulite investigation, but

certainly once GE acquired NP, it was clear that a major change was going to take place. Most of theparticipants were quite aware of the organisational characteristics of the old NP; they knew its strengths

and weaknesses. In view of GEs reputation, it was not difficult to make predictions about the intensity ofthe process of integration. It was very clear that threats (like the A,B,Cranking) could (indeed, would)become facts.

The stories and rhetoric, which contributed to the creation of the myth of the GE Way, had a powerfulimpact on the established frames of meaning. Of course, the unions stated they were ready to fight,but NP was already changing. That is to say, the workers reactions to GEs values were quite rational.

The interviews with lower level employees, apart from cataloguing a variety of complaints on specificissues, revealed quite clearly how much they cared about being part of a world-famous company. Thus,

in Scheins terms, after creating survival anxiety (or guilt), continuous waves of communication andtraining promoted an emerging sense of psychological safety. This was reinforced by the diffusion of


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a new business credo, which empowered individuals with the level of trust required to overcome the

learning anxiety that characterises human beings (seeSchein, 1999).Importantly, when GE took-over, the role of MAS became central, and many were required to wear

the hat of finance (cited earlier). As the former CFO of NP pointed out:

. . . thefirst three GE individuals to arrive at NP were the chief financialofficer, the financialplanningand analysis manager, and me as a corporate auditor. GE knew it was buying a state-run company

with good product technology, poor measurement systems, and little financial management. Veryearly in the process, a significant effort was put into creating a measurement system aligned withthe business goals that was capable of providing timely and accurate information. Within the first

six months, NP went through a metrics revolution. . . .The finance organisation changed its missionfrom just being a general accounting operation with obsolete legacy systems, mostly concerned

with complying with local laws and regulations, to being a more contemporary organisation withfinancial analysis skills, new accounting systems, and mostly concerned with driving shareholder

value by taking an active part within organisational life.

Moreover, as described earlier, after the re-structuring of the accounting and finance function, a secondmajor transformation came along with the launch of the Six-sigma initiative, which entailed the significantuse of quantitative tools and a major focus on the consequences of quality improvements in terms of cost

savings and financial benefits. Within this context, MAS and the finance function became involved intranslating day-to-day activities into terms that Champions, Black Belts and Green Belt were increasingly

concerned about: meeting the budget, enhancing revenues and reducing costs. Through the active par-ticipation of finance contacts,15 six-sigma team members were progressively educated about the wholefinancial picture of their projects. Importantly, within NP this included the impact of operating decisions,

such as machine upgrades, reviews of working practices and changing raw materials, on key performance

indicatorslike cash flow, non-value added activities, growth and cost savings. As they were increasinglyconfronted with GE financial jargon, the six-sigma team members came to see their finance contacts as

knowledgeable experts who were capable of facilitating informed access to the measurement-based GEWay.

4.1.3. Re-freezing culture through successful experiences

Participation within management accounting practices enables informed employees to rely upon theirreflexive abilities to make sense of the new organisational reality. The individual is faced with questionssuch as: What is GE?, What are the implications of GEs acquisition for my job? and, principally,

How should I now behave?.Harris (1994)suggests that responses to such questions are primarily the

outcome of mental dialogues which the individual has with him/herself (e.g., I believe X means Y, so isit better to behave in this way or that?) and other contextually relevant agents (e.g., What would they

think about it? What I am expected to do?). By drawing on their knowledge, reflexive actors have thecapability of making sense of organisational life (Kim, 1993). As pointed out by Macintosh and Scapens,individuals are not just social dupes, but existential beings who reflexively monitor and provide rationales

for the character of the ongoing flow of their social life (1990, p. 458).

15 Finance contacts are accounting and finance experts who assist black belts and green belts as they translate operational

improvements into cost savings and financial benefits.


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When crises arise, they are generally accompanied by phases of disorientation and then reorientation,

during which individuals and organisations initially face a cultural mismatch a knowledge gap ( Haeremet al., 1996; Hennestad, 1999) as their available knowledge does not help them cope with the crisis

which has to be faced. In such instances, if a solution is found and it continues to be successful, it canbecome institutionalised in organisational rules and routines. What was once a hypothesis, supported byonly a hunch or a value, comes gradually to be treated as a reality. . . .Basic assumptions . . .have becomeso taken for granted that one finds little variation within a cultural unit (Schein, 1985,p. 18). Talking

about Six-sigma, an NP engineer emphasised:

Six-sigma has been spread throughout the company, which is now strongly integrated and boundby this modus operandi. Nowadays, when we think, discuss or communicate, we do it in terms

of Critical-To-Quality issues and contribution margin. It doesnt matter if we are talking to theaccountants or among engineers. It doesnt matter if we are ringing Talamona [a distant NPsdivision] or the States.

Thus, as well as improvements measured on the sigma-scale, and greater productivity and customer

satisfaction, there are also important intangible outcomes of the Six-sigma initiative. They are cultural.. . .Indeed, they cannot be always synthesised in impressive numbers, but they represent potential future

achievements argued a Human Resources manager. Furthermore, in a global company such as GE thereare potential benefits stretching far beyond the boundaries of the division or subsidiary which implementedthem; as was the case with the NP response time in ITO processes project that was acclaimed the best Six-

sigma project within GE Power Systems at the 1998 Quality Rally in Atlanta. Consequently, the culturalbenefits of the project were spread throughout GE, as locallydeveloped improvements contributed to thereproduction of the GE Way organisation-wide (that is,globallyGiddens, 1990).The sharing of these

measures allowed our outcomes to be understood and appreciated world-wide claimed an engineer a

few months later, waving a folder containing Six-sigma training material.Within NP the existing technical culture was not repudiated, rather it was complemented by the culture

of measurement. Few managers and employees left the company; rather they participated in the processof transformation, which merged the engineering-oriented capabilities of NP with the GEs obsessive

attention for bottom-line results. In particular, MAS and feelings of trust for change acted in a mutuallyreinforcing way as they enabled the process of (un)learning and the sharing of new knowledge whichcharacterised the process of cultural integration. Next, we combine the theoretical insights of the paper

with evidence from the GE-NP case to sketch our interpretive perspective.

4.2. MAS as sources and objects of trust: an interpretive perspective

With the purpose of understanding how MAS are implicated in processes of organisational culturechange, and how they can be used by individuals to identify trustworthy solutions in critical situations,

this paper builds on a series of contributions that conceptualise knowledge and learning as social andcultural phenomena involving both behavioural and cognitive elements (see Section 2). We surveyedliterature which emphasises that processes of individual (un)learning cannot be conceived only as mental

processes residing in individuals heads; rather they must be viewed as situatedin the historical, relationaland cultural contexts in which they arise, and are embodiedin a variety of socially constructed forms (such

as MAS). Thus, for us, knowledge is maintained both as memory traces and within repeated patterns ofbehaviour (Giddens, 1984), and is developed socially throughparticipation inandreflection onpractices


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(rather than simply the outcome of independent thinking by autonomous individuals). Accordingly, we

emphasise the importance of understanding the role of practices within the process of (un)learning and

knowing, which precede knowledgeboth logically and chronologically; as knowledge is an institution-

alised version of knowing (Nicolini et al., 2003).The aim of this section is to illustrate some of the key issues which characterise our interpretive per-

spective. In the following sub-sections we will explore the concept of trust and its use in understandingprocesses of accounting change, especially in crisis situations and the accompanying cultural transfor-

mation. Drawing on insights from the GE-NP case we will discuss the way in which on the one hand:(1) MAS acted as sources of trust during processes of individual (un)learning and culture change withinNP that is, accounting for trust; on the other hand, (2) how forms of personal and system trust were

implicated in the introduction and constitution of MAS as socially constructed objects of trust trust foraccounting. Then we extend Burns and Scapens (2000) institutional framework by focussing attention

on (3) the notion ofroles as access points to organisational systems, such as management accounting,and (4) the nature of processes ofradical change. Next, we discuss (5) how it is also possible for theintertwined relationship between MAS and trust for change to work in a mutually destructive way. Finally,

the section ends by summarising the key features of our interpretive perspective.

(1) MAS as sources of trust: exploring accounting for trust

Throughout this paper we have recognised that trust is a socially constructed phenomenon. Inparticul

Trust for Accounting and Accounting for Trust 2006 Management Accounting Research

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