behind the habits

Behind the habits, routines, and institutions of management accounting (*)

Reinaldo Guerreiro

Department of Accounting and Actuarial Sciences

School of Economics, Business and Accounting

University of São Paulo, Brazil

<[email protected]>

Fábio Frezatti

Department of Accounting and Actuarial Sciences



<[email protected]>

Tania Casado

Department of Business Administration



<[email protected]>

Corresponding author:Prof. Luciano GualbertoSchool of Economics, Business and AccountingUniversity of Sao Paulo908 – Cidade UniversitariaSao Paulo 05508-900BrazilPhone: 55-11 818-5820Fax: 55-11 818-5822

(*) Paper to be presented at 4TH CONFERENCE ON NEW DIRECTIONS IN MANAGEMENT ACCOUNTING: INNOVATIONS IN PRACTICE AND RESEARCH – BRUSSELS, BELGIUM, DECEMBER, 2004.

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Behind the habits, routines, and institutions of management accounting

AbstractIn spite of motivating and facilitating factors in the external environment, the implementation of new management-accounting techniques and concepts in companies is disappointing. Institutional theory is a sociological approach that can be applied in accounting to study this phenomenon. It focuses on accounting as an institution within the company—that is, as a routine made up of habits that make sense to a certain group of people. The essential tenet of institutional theory is the idea of ‘group habits’—whereby the institution is understood to be structured on the basis of routines and habits. The research hypothesis of the present study is that certain concepts from psychology and organizational culture can contribute to the application of the institutional approach to management accounting. In particular, this study examines the causes of the existing gap between management-accounting theory and management practice. The study adds new elements to the institutional approach, and integrates it with concepts from psychology and organizational culture, to create a better understanding of management accounting. Keywords: management accounting, institutional theory, organizational culture, archetypes.

1. IntroductionThere is a paradox in current management-accounting practice. Despite the presence of

motivating and facilitating factors in the external environment, and despite many new

techniques and instruments being available to business managers, the level of implementation of

new accounting techniques and concepts is, in practice, low. Institutional theory is a

sociological approach that can been applied to accounting to explain this paradox.

Institutional theory rejects the premises of the neoclassical theory that has thus far been

normative in management accounting. Rather, institutional theory focuses on management

accounting as an institution within the company. It perceives accounting practice in terms of a

routine of habits that make sense to a certain group of people. These habits are widely accepted

within the institution; indeed they are taken for granted. If habits become formalized and

institutionalized, they mould institutions.

The personal and social dimensions within an institution are interconnected. Individuals

influence the group and the group influences individuals. The psychological concept of the

unconscious allows a clearer understanding of how personal and group habits are formed.

By using certain sociological and psychological concepts—including institutional theory,

habit formation, and the unconscious—this study offers a new perspective on the gap between

theory and practice in management accounting.

2. Environmental changes and management-accounting inertia

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The social and economic environment of developed countries has changed significantly in the

past two decades (Baines and Langfield-Smith, 2003). Such developments as market

deregulation, new forms of economic financing, the intensified accumulation of capital, new

financial resource flows, and rapid technological developments in communications have

changed the ways in which organizations function. Zeffane (1996) has observed that creating

and maintaining organizational success is more complex nowadays than it was ten years ago—

especially as a result of the significant interdependence that now exists between national

economies. At the same time, the world has become much more dynamic as a result of the

explosion in global communications. This complexity and dynamism mean that organizations

cannot remain unchanged in a rapidly changing world.

In the business sphere, this post-modern period (Harvey 1998) has seen profound changes

in the production of goods and services and in communication. Businesses are more aware of

the need to attend to client needs in an extremely competitive global environment.

In theory, companies have been induced to implement profound changes in their business

management models, in their management instruments, and in management accounting. Baines

and Langfield-Smith (2003) have noted a common theme in normative management-accounting

research—that changes in companies’ management-accounting systems are guided by changes

in the external organizational environment. This theme is based on the idea that managers

require specific management information to support their decision-making in an increasingly

uncertain environment and to monitor their progress in strategic achievements. Granlund and

Lukka (1998) have used the concept of ‘convergence and divergence drivers’ in arguing that

there is a global tendency towards a convergence of concepts in management-accounting

systems. Kasurinen (2002) classified the forces that influence changes in management

accounting as being motivators, facilitators, and catalysts.

However, in spite of the existence of these motivators, facilitators, and catalysts, the

present authors argue that little change has occurred in management accounting. The problem

can be termed ‘management-accounting inertia’. This refers to the fact that accounting research

has exerted little impact on business practice—resulting in a significant discrepancy between

theory and practice. Various studies have examined this issue directly or indirectly. These

include Otley (1985), Choudhury (1986), Johnson and Kaplan (1987), Edwards and Emmanuel

(1990), Cohen and Paquette (1991), Bright et al. (1992), Emore and Ness (1991), Green and

Amenkhienan (1992), Ask and Ax (1992), Drury et al. (1993), Scapens and Roberts (1994),

Scapens (1994), Covaleski et al. (1996), Evans and Ashworth (1996), Libby and Waterhouse

(1996), Granlund and Lukka (1998), Burns (2000), Burns and Scapens (2000) and Granlund

(2001).

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Green and Amenkhienan (1992) have noted a lack of synchronization between

innovations in manufacturing and innovations in management accounting. Although changes in

the latter are occurring, companies largely continue to rely on outdated accounting models.

Bright et al. (1992) made a similar observation—noting that many companies are still

introducing and developing costing systems that they consider innovative, whereas many

observers would characterize such systems as already being well established. Granlund (2001)

has noted that accounting systems are frequently difficult to change—in spite of the influence of

significant market changes and other pressures for modification of accounting practices.

3. Neoclassical theory as the basis for normative management accountingScapens (1994) has noted that the theory of management accounting has been strongly

influenced by neoclassical economic theory, but that this theory is an inadequate theoretical

framework to explain the development of management-accounting systems. According to Burns

(2000), the conventional wisdom has conceived of accounting change as a product of rational

behavior that seeks to optimize company profit through the creation of effective information—a

perspective that is based on neoclassical economic theory. In contrast, institutional theory

conceives of accounting as an ‘institution’ that makes sense to a certain social group. This

‘institutional perspective’ is a relatively recent phenomenon.

Neoclassical theory was developed by economists to assist in forecasting behavior and in

making market analyses. The original intention did not include an explanation of management

behavior. The theory is based on two important assumptions: (i) the rational maximization of

economic agents; and (ii) the general equilibrium provided by market forces. The theory’s

premise of economic rationality implies that individuals will always take rational decisions.

Market equilibrium is thus seen as the sum total of the rational economic behavior of

individuals. According to the neoclassical model, other human dimensions—including

psychological and sociological factors—are not considered to be part of economic analysis.

Under the influence of the neoclassical school, this belief in the economic rationality of

individual economic agents has been transferred to an understanding of the internal dynamics of

companies. Employees, managers, and owners have been perceived as rational economic agents,

and the role of management accounting has been to provide adequate information for decision-

makers to optimize their economic decisions. These views have also influenced the

development of management-accounting studies. The aim has been to seek the best decision

model, the best measuring concepts, the best system solutions, and so on—all with a view to

maximizing company profits. Management accounting displays an abundance of ‘ideal’ models

—such as activity-based costing (ABC), the balanced scorecard, the theory of constraints, and

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so on. Many of these are now a decade old, but empirical research demonstrates that few

companies are actually using these new models (Green and Amenkhienan, 1992; Bright et al.,

1992).

Some basic questions thus arise:

Why are companies not making more use of the new conceptual models?

Why are inadequate theoretical management concepts still used?

Which conceptual models proposed in the normative neoclassical approach are really

efficient for business management?

The present study addresses the first of these questions.

4. Institutional theoryBurns and Scapens (2000) have noted that an increasing interest in institutional theory has led to

two approaches from this theory appearing in the accounting literature: (i) new institutional

sociology (NIS); and (ii) old institutional economics (OIE). According to Burns (2000), OIE is

the aspect of institutional theory most applicable to analytical studies of changes in management

accounting.

According to the OIE perspective, the institution is the main object of analysis—rather

than the rational behavior of individual decision-makers (as proposed by neoclassical theory).

Burns and Scapens (2000, p. 8) follow Barley and Tolbert (1997) in defining an institution in

terms of “ ... shared assumptions that are accepted and taken for granted, which identify

categories of human actors and their activities and appropriate relations”. Scapens (1994) has

observed that, in the context of OIE, Veblen (1919) supplied the first definition of an institution:

“ ... a certain way of thinking a set of persons have in common”. According to Burns (2000),

Walton Hamilton (1932) considered an institution to be a prevailing manner of thinking or

acting —which then becomes part of the habits or customs of a group of people. In this context,

Rowsell and Berry (1993) used Selznick’s (1957) definition of an institution as a natural

product of social needs and pressures. The institution is a social system that gives sense to the

integrated aspirations of a group of people. Selznick (1957) contrasted an institution with an

administrative organization—describing the latter as a rational instrument, defined to carry out a

task.

The relationships among institutions, routines, and habits can be understood as illustrated

in Figure 1. Habits involve a predisposition to engage in previously adopted forms of action.

The existence of habits does not exclude the idea of intention in individual behavior; habits can

be modified. Whereas habits are located in the personal sphere, routines involve a group of

people. Routines are thus formalized institutional habits. Routines incorporate behaviors that are

guided by rules, and they are strengthened by repetition of actions in compliance with these

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rules. Routines represent ways of thinking and acting that are usually taken for granted by a

group of individuals.

Figure 1: Elements from Institutional Theory

Burns and Scapens (2000) have characterized ‘rules’ as being the formal declarations of

procedures, whereas the term ‘routines’ refer to the actual use of the procedures. Making

reference to Bowman (1994), Zeffane (1996) noted that organizations are restricted by routines,

although organizations cannot function without them. Bowman (1994) noted that routines cause

problems to organizations when they block strategic change and hinder innovative thinking.

5. Management accounting as an institutionAccording to Scapens (1994), the set of ideas contained in OIE represents a more adequate

intellectual framework for understanding management-accounting systems than does the

neoclassical model. According to this author, institutional theory is not the only (nor the best)

approach, although it is a valid structure for understanding management-accounting practices as

institutionalized routines and for exploring the interaction between management accounting and

other social institutions. Burns and Scapens (2000) used the concepts of habits, routines, and

institutions to explain how accounting practices can turn into routines and, over time, become

part of a set of organizational assumptions that are taken for granted—and thus become

‘institutionalized’. This ‘institutionalized’ management accounting is both molded by and

impacts upon other institutions in the organizational context. Budgets are elaborated,

performance is monitored, and reports are regularly and routinely produced through clearly

specified rules and procedures. Management accounting establishes a fundamental structure to

present and represent economic events to organizational members. Organizational performance

is reported upon, both internally and externally, according to rules and conventions. Economic

INSTITUIÇÕES

ROTINAS

HÁBITOS

INSTITUTIONAL DIMENSION

INSTITUTIONS

ROUTINES

HABITS

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events do not speak for themselves; people consider organizational activities in accordance with

the logic of accounting measuring.

Apart from reflecting performance, accounting rules and procedures also define the rights

of groups of individuals (owners, financers, managers, workers, and so on) and establish the

guidelines for implementing actions (resource allocation, operational decisions, price decisions,

and so on). Management-accounting practices thus provide social coherence and meaning to

organizational behavior and daily activities. When accounting practices turn into

institutionalized routines, organizational members fully accept their roles in the organizational

process and in decision-making. Accounting thus becomes a mechanism that gives sense to

business activities and prevents potential conflicts in the organization. However, if new

accounting systems are introduced, such institutionalization can also be associated with

resistance to the new systems.

6. Unconscious factors in human psychologyAccording to Hall and Lindzey (1984), the following sources have influenced personality

theory: (i) personality studies based on clinical observations (a tradition that was started by

Charcot, Janet and mainly by Freud, Jung and MacDougall); (ii) the Gestalt tradition and

William Stern (with an emphasis on behavioral unity); (iii) experimental and learning

psychology (with an emphasis on rigorously controlled research); and (iv) the psychometric

tradition (with an emphasis on measuring and studying individual differences). Goleman (1997)

has noted that, during the initial decades of the twentieth century, behaviorists dominated

academic psychology. These behaviorists followed Skinner (1953), who stated that only

externally and objectively observable behavior could be studied with scientific accuracy.

According to Goleman (1997), a “cognitive revolution” occurred at the end of the 1960s when

clinical psychology shifted its focus to the study of how the mind records and accumulates

information and the nature of intelligence. In their research on the gaps in the organizational

literature, Marshak et al. (2000) noted the importance of the ‘unconscious’ in two conceptual

formulations. The first was based on the pioneering studies of Freud, Jung, and their followers.

The second was based on cognitive science—more recently referred to as the ‘cognitive

unconscious’. This second perspective proposes that the majority of individual thoughts are not

‘unconscious’ in the Freudian and Jungian sense of being ‘repressed’, but are ‘unconscious’ in

the sense of operating below the cognitive level of consciousness (and therefore inaccessible to

consciousness).

Quellette and Wood (1998) used cognitive psychology to deal with habit and conscious

intention in people’s daily lives. According to Quellette and Wood (1998), habits are tendencies

to repeat answers—given a stable and facilitating context. According to cognitive psychology,

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there is a high probability that past behavior will explain future answers if certain factors are

present. These include: (i) well-practised (well-learned) behavior; (ii) a stable context (few

changes in goals); and (iii) high frequency (with much repetition). If these factors are present,

an initiated action does not require conscious control; rather, answers become automatic. The

action can be performed very quickly and, together with other activities, with little need for

focused attention. If the above-mentioned factors are absent, the action is guided and controlled

by conscious intention. Quellette and Wood (1998) suggested that the creation and control of

the action can follow two processes: (i) automatic, unconscious repetition of past acts; and (ii)

controlled, conscious trust in behavioral intentions. In the sphere of cognitive psychology, the

general idea is that behavior can be controlled through conscious (rather than unconscious)

cognitive processing. It should be emphasized that this psychological approach does not use the

term ‘unconscious’; rather, the preferred term is ‘non-conscious’. In this context, although

actions are carried out in a non-conscious way, they are guided by cognitive, rapid, and easy

processing. This processing requires minimal attention, and is carried out in parallel with other

activities.

The concept of the ‘unconscious’ is characteristic of psychoanalytical psychology, whose

pioneers were Freud and Jung. Carr (2002, p. 477) observed that: “The psychiatrist Gustav Jung

(1875–1961) is perhaps best remembered for the ideas on the collective unconscious and for the

belief that these ancestral experiences were recorded in the brain as archetypes”. In accordance

with Jungian psychology, as shown in Figure 2, the total personality of an individual can be

visualized as a sphere composed of various layers. The external layer is the field of

consciousness, the layer immediately below corresponds to personal unconscious, and the inner

layer is referred to as the group and collective unconscious.

Figure 2: Individual personality according to Jung

CONSCIENTE

INCONSCIENTE PESSOAL

INCONSCIENTE DE GRUPO

PSYCHOLOGICAL DIMENSION

CONSCIENTE



CONSCIOUS

PERSONAL UNCONSCIOUS

GROUP AND COLLECTIVE UNCONSCIOUS

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Santos (1976) has noted that: “ ... our consciousness stops at the end of our knowledge of

things external to us”. The personal unconscious is completely individual. It is formed as the

individual is formed, and it consists of things that have simply been forgotten. Thus, the

individual’s level of consciousness is closely related to the quantity of knowledge he or she

acquires by living in a specific environment and relating with a social group. Jung (1995, p. 58)

characterized the personal in these terms: “The personal unconscious contains lost, suppressed

(forgotten on purpose) memories, painful evocations, perceptions that, let us say, did not cross

the limit of consciousness (subliminal), that is, perceptions of the senses which, due to a lack of

intensity, did not reach consciousness and contents that have not ripened yet to reach

consciousness”. Jung (1995) thus emphasized negative concepts established in the personal

unconscious—such as “suppressed memories” and “painful evocations”. In contrast, Santos

(1976, p. 21) emphasized “simply forgotten things”—things that happened around the

individual, but to which the individual did not pay attention. The individual might have been

more interested in other things (leading to suppressed thoughts) or might have even made an

effort not to remember (leading to repressed thoughts).

Jung (1995) asserted that, apart from personal memories, certain great “primordial”

images are contained in every individual. This represents the hereditary aptitude of human

imagination as it was in primordial times. According to Jungian psychology, this explains the

surprising phenomenon that certain themes and motifs of legends are replicated in identical

form in various parts of the world, and explains why mentally ill persons can reproduce exactly

the same images and associations known from ancient texts. Jung (1995) thus characterized the

unconscious as consisting of two layers. He distinguished the personal from the impersonal, and

called the latter the “collective unconscious”.

In Junguian theory of psychology, the idea of the ‘archetype’ is as important as that of

collective unconscious. By attending to people with mental problems and reflecting on his

observations, Jung (1995, p. 57) gradually characterized the concept of the ‘archetype’ in these

terms: “ … therefore, this more advanced stage of treatment, in which fantasies no longer rest

on personal reminiscences, is about the manifestation of the most profound layer of the

unconscious, where universal and primitive human images lie sleeping. I called these images or

motifs archetypes (or dominants).” According to Silveira (1994), ‘archetype’ can be

characterized as a kind of aptitude to reproduce the same mythical ideas constantly. Silveira

(1994, p. 80) noted that the archetype functions as a “node” of concentrated psychic energy,

whatever the origin of the individual. When this potential energy becomes actual—that is, when

it takes form—it has the archetypal image. Precisely how such archetypal images are configured

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on the basis of physical energy is unknown. However, as Silveira (1994) observed, exactly how

the energy of a waterfall is transformed into light is unknown, as is the precise mechanism of

how light is turned into heat. Mathews (2002, p. 461) has observed: “Jung saw archetypes as

primordial patterns all human beings have in common, affecting the way we perceive, imagine

and think, structuring physical apprehension and deeply influencing behavior”.

The idea of a collective unconscious incorporates universal traits within various races,

ages, and religions. Referring to this Jungian idea, Santos (1976) has noted that just as race,

tribes, and families can be differentiated in other ways, these human groupings can also be

differentiated on the basis of a certain shared layer of the unconscious. Santos (1976, p. 125)

called this part of the unconscious “the collective unconscious of a certain group”—thus adding

the words “of a certain group” to avoid terminological confusion with the idea of the more

general collective unconscious.

Krystal (1990, p. 112) used the expression “thought forms” and stated: “ ... from birth till

death, all of us are influenced by symbols or thought forms. Some of them we are aware of, but

many are sent or received at an unconscious or subliminal level.” According to Krystal (1990)

behavior is not only affected by what the individual consciously thinks, but also by what occurs

at an unconscious level. Everybody is influenced in different ways. Every child is ‘bombarded’

by various familial and societal customs, taboos, fears, superstitions, beliefs, and habits. All of

these are ‘thought forms’ that contain the energy of many people who accepted and used

specific forms of thinking and acting and, by doing so, increased their potency. Some of these

thought forms are timeless and remain useful, whereas others are ancient or inapplicable to

current ways of life.

The concept of the unconscious has been studied from various perspectives—including

management accounting, auditing, decision-making, organizational culture, and organizational

change. Harung (1993) emphasized the importance of integrating the objective and subjective

approaches in the decision-making process. Willcocks and Rees (1995) have observed that, in

adopting a psychoanalytical perspective, organizational theorists have emphasized the

importance of personality. Using a Freudian psychoanalytical approach, Willcocks and Rees

(1995) follow Morgan (1986) in declaring that a large part of daily reality, which is considered

rational and taken for granted, actually realizes preoccupations that rest below the threshold of

consciousness. Morgan (1986) stated that individuals can become ‘stuck’ in a trap of their own

thoughts, which are influenced by the unconscious preoccupations deriving from their personal

history.

With respect to factors influencing the decision-making process, Harung (1993, p. 40)

observed: “I consider two main factors that influence our decisions: past experience and

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conditioning”. According to this author, experience is the accumulated memory of past

impressions, actions, and conquests. Experience is considered as a ‘friend’, although, through

conditioning, it can turn into an ‘enemy’—because past habits can impede objective attention to

present conditions, and thus produce systematic errors of judgment. Bazerman et al. (2002) used

a similar concept when contemplating the problem of accounting scandals. These authors

asserted that the fundamental cause of problems is not intentional corruption; rather the

fundamental cause is a vulnerability to unconscious bias. They noted that psychological

research demonstrates that desires strongly influence the way in which people interpret

information, even when they wish to be objective and impartial. Bazerman et al. (2002) quoted

examples of bias in “ruling for one’s own sake”—whereby different persons with the same

information reach different conclusions that are favorable to themselves.

Harung (1996) presented an holistic way of integrating the elements of the administrative

process using a model of human consciousness that was inspired by the teachings of the Vedic

knowledge tradition. This model contemplates: (i) action and sense; (ii) desire; (iii) mind; (iv)

intellect; (v) feeling; (vi) the being; and (vii) transcendental consciousness. Harung (1996) noted

that one of the model’s main points is that all personality levels are always operating—both

consciously and unconsciously.

O´Connor (1993) incorporated the concepts of conscious and unconscious behavior in a

matrix of kinds of resistance against changes. The author noted that: “ ... when resistance is

unconsciously motivated, colleagues really do not perceive that their behavior is destroying

change. In this case, their actions are based on wrong information, poor training or deeply

nested habits deriving from ancient work routines” (O’Connor, 1993, p. 4).

7. Unconscious factors in organizational cultureSchein (1990) asserted that ‘culture’ is a set of assumptions, learned throughout history, that is

shared and taken for granted by group members. Drawing on this general understanding of

culture, Schein (1992) defined ‘organizational culture’ as: “A set of shared basic assumptions

learned by the group, to the extent that they solved their external adaptation and internal

integration problems, which has functioned well enough to be considered valid and, therefore,

to be taught to new members as a correct way of perceiving, thinking and feeling in relation to

the mentioned problems”.

In a survey of the literature, Lundberg (1990) noted that the term ‘organizational culture’

has certain connotations. These include:

a common reference framework—that is, a framework that is widely accepted, taken for

granted, and shared by an important set of social group members;

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an acquired and motivating framework—a socially learned framework that is

transmitted by group members and supports them with behavioral rules within an organization;

a common psychology—demonstrating the particular characteristics of an organization

and contributing to its identity;

a notion of permanence over time—a stable social unit of any size (as long as it has a

reasonable history);

a symbolic framework—an observable framework to which meanings are attributed (for

example, through language); and

a configuration of deeply embedded values and assumptions.

Such features of an ‘organizational culture’ are modifiable, but this is not achieved easily.

Locatelli and West (1996) noted that several researchers (Schein, 1985; Schein, 1990;

Lundberg, 1990; Payne, 1991) have conceived of organizational culture as a layered

phenomenon—ranging from relatively observable phenomena to more invisible phenomena.

Schein (1985) presented a cultural typology with the following levels: (i) artifacts and creations;

(ii) values; and (iii) basic underlying assumptions (as depicted in Figure 3).

Figure 3: Cultural typology proposed by Schein

Hofstede et al. (1990) studied organizational culture in different companies in different

countries. The authors classified the manifestations of culture in terms of values, rituals, heroes,

and symbols. Lundberg (1990) proposed three levels of cultural meaning. The first level was

called ‘manifested’. This covered symbolic artefacts, language (jargons, sayings, and slogans),

histories (myths and sagas), ritualistic activities (rituals and ceremonies), and standardized

conduct (norms, conventions, and customs). The second level was called ‘strategic’. It consisted

ARTEFATOS E CRIAÇÕES

VALORES

PRESSUPOSIÇÕES BÁSICAS

SUBJACENTES

CULTURAL DIMENSION


VALORES


SUBJACENTES

ARTEFACTS AND CREATIONS

VALUES

BASIC UNDERLYING ASSUMPTIONS

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of strategic beliefs. The third was called the ‘focal’ level. It was made up of ideologies, values,

and assumptions. This third level was considered by Lundberg (1990) as the most profound

layer of the organizational culture model. It incorporated values, assumptions, and ideology, and

corresponded to the organization’s true character—thus guiding most thoughts and actions in

the organization. Lundberg (1990, p. 20) noted that: “ ... this deepest meaning level is

essentially taken for granted and, to get to know it, we can infer its components on the basis of

other, more visible things”. Locatelli and West (1996) used proposals from previous studies

(Martin and Siehl, 1983; Schein, 1985; Ott, 1989) to establish a typology of organizational

culture. Their structure included three levels: (i) artefacts and behavioral patterns; (ii) values

and beliefs; and (iii) basic underlying assumptions.

According to Buch and Wetzel (2001), the basic underlying assumptions of

organizational culture are unconscious perceptions, thoughts, and feelings that are taken for

granted. These are difficult to analyze and modify because they are not directly observable and

must therefore be inferred from what can be seen and heard in the organization. Schein (1992)

has noted that the observable manifestations of organizational culture refer to ancient artefacts

and preserved values. The artefacts are physical and visible—such as a dressing code, physical

environmental characteristics (architecture, offices, and status symbols), and signs, signatures

and flags placed in certain locations. The preserved values that are are heard and spoken include

justifications, aims, philosophies, sayings, slogans, and strategies.

Locatelli and West (1996) have observed that the concept of such ‘basic presuppositions’

is relatively new, and that it has only recently received attention in the literature. However,

some organizational theorists, particularly Schein (1985), have defined organizational culture in

terms of its basic assumptions. These assumptions can start as values, but are gradually taken

for granted over time. According to Schein (1985): “Thus, basic assumptions can be understood

as a powerful and integrated system of beliefs, perceptions and values that is established outside

consciousness”.

Schein’s concept of ‘basic assumptions’ (1985) is closely connected with the

‘unconscious’ characteristics of a specific group, as characterized by Santos (1976) in the

context of Jung’s psychological theory. They are embedded in the personal unconscious and

organizational group unconscious. They lie outside consciousness but motivate the

organizational group’s behavior.

The organizational culture typology proposed by Locatelli and West (1996) posits beliefs

as conscious, although the authors mentioned that the level characterized as ‘behavioral

patterns’ incorporates things that the organizational members continue doing frequently without

thinking—which are thus automatic and not conscious.

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It is therefore apparent that important constituent elements of an organization’s culture

reside in the unconscious layer of organizational members. These motivate interpersonal and

inter-group relations, judgments, evaluations, strategies, and actions.

According to Schein’s (1990) typology of organizational culture, ‘artefacts’ include the

physical environment, the dressing code, and the way in which people address one another.

Other manifestations include company records, products, declarations of company philosophy,

and annual reports. This category also covers the adopted technology and language, histories,

ceremonies and celebrations, ritualistic activities, and management standards and practices. In

this context, management accounting can be perceived sociologically as an organizational

artefact that is largely configured and structured by the behavioral standards and basic

assumptions of the organization—that is, by elements that lie outside the conscious dimension

of the organization and its members.

8. The influence of unconscious factors in constructing the management-accounting institutionThree approaches have been presented above: (i) the institutional approach; (ii) the

psychological approach; and (iii) the organizational culture approach. As demonstrated in

Figure 4, these approaches (which are characterized here as ‘dimensions’), can be correlated and

integrated. On the basis of this integration, a more complete understanding of management

accounting from the institutional approach can be constructed, incorporating the concept of

unconscious factors.

Figure 4: Integration between the dimensions

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Figure 4 demonstrates that unconscious factors are present in psychology (personal

unconscious and group unconscious), as well as in organizational culture (basic underlying

assumptions). The influence of unconscious factors on management accounting in terms of

institutional theory can be explained through the psychological and cultural approaches—that is,

the basic underlying assumptions of a specific social group (cultural dimension) are present in

the personal and group unconscious of individuals (psychological dimension), and these

structure the habits (institutional dimension) that create the routines and the institution of

management accounting.

Figure 5 displays the relationship. In one direction, the group unconscious (psychological

dimension) affects the basic underlying assumptions (cultural dimension) and establishes the

habits (institutional dimension) that create the management-accounting routines. In the opposite

direction, routine practice (institutional dimension) strengthens group habits and the acceptance

of the basic underlying assumptions (cultural dimension), conditioning the unconscious

behavior of individuals and specific groups within the organization.

Figure 5: Relations between the dimensions

CONSCIENTE





VALORES


SUBJACENTES

CULTURAL DIMENSION

CONSCIENTE



CONSCIOUSNESS

PERSONAL UNCONSCIOUS

GROUP UNCONSCIOUS

INSTITUIÇÕES

ROTINAS

HÁBITOS


INSTITUTIONS

ROUTINES

HABITS


VALORES


SUBJACENTES

ARTEFACTS AND CREATIONS

VALUES

BASIC UNDERLYING ASSUMPTIONS

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From the institutional point of view, management accounting can be considered as an

institution constituted on the routines and habits of a specific social group. The concept of habit

is the fundamental element of the institutional approach, and explains the formation of routines

(and the subsequent constitution of institutions). From the standpoint of organizational culture,

accounting can be characterized as one of the artefacts that externalize the culture of a specific

social group. As shown in Figure 4, the so-called artefacts from the cultural approach realize

certain (conscious) organizational values, although they are strongly influenced by basic

underlying assumptions (which are now unconscious, but were conscious values in the past).

The basic underlying assumptions (the unconscious elements of the cultural dimension) are the

fundamental elements of the organizational culture approach, and are responsible for the

formation of habits (which, in turn, are the unconscious elements of the institutional dimension

and responsible for the structuring of the management-accounting institution).

The integration of institutional and psychological theory is based on Santos’ concept

(1976) of the unconscious characteristic of a specific group. The persons directly and indirectly

related to accounting constitute a specific group. This group consists of accounting

professionals, students, authors, teachers, and users of the information created in this area—in

short, everybody who researches, teaches, practises, or uses accounting ideas. As observed by

Guerreiro et al. (2004), accounting has a history of more than a thousand years and possesses a

shared basis that is similar to the concept of group unconscious. This constitutes a kind of

‘collective unconscious of accountants’ with specific thought forms. These thought forms

incorporate the thoughts, beliefs, and experiences of many persons over a long time in relation

to specific issues. They are not truly ‘archetypes’, but they function in a similar way and possess

a strong ‘psychic energy’.

The thought forms that exist in the ‘unconscious of the accounting group’ are strong.

They include customs, traditions, and habits that have been accepted for centuries. Krystal

Personal and group unconscious

Basic underlying assumptions

Habits and routines


CULTURAL DIMENSION


16

(1990) has noted that a thought becomes more powerful as it is loaded with emotion.

Furthermore, when a large number of persons ‘grasp’ it and ‘feed’ it with their energy, its power

is substantially increased. This process explains the formation of habits in the accounting social

group, which turn into routines and institutions. These then constitute the basic assumptions of

the cultural heritage of this group. The habits from the institutional dimension and the basic

underlying assumptions from the cultural dimensions are stored in the minds of individuals in a

specific social group—thus contributing to their individual personalities and to the configuration

of group culture.

9. Implications and future researchIn the introduction to this study, a paradox in management accounting was characterized in the

following general terms: Why do companies not make more practical use of the new conceptual

models proposed in theory? This question is based on empirical research that has demonstrated

the existence of a gap between theory and practice in management accounting. The current

environment demands new management instruments and the environment is favorable for the

use of new and more adequate instruments of business management. Companies who make

better use of more efficient instruments will have greater chances of optimizing their results and

surviving in a competitive environment. The existing gap between normative theory (which

proposes the use of new concepts for result optimization) and management-accounting practice

(which uses inadequate tools for result optimization) constitutes a real problem.

Institutional theory thus criticizes the assumptions of neoclassical theory that have

previously directed the theoretical development of management accounting. Institutional theory,

according to the OIE approach, perceives management accounting as an institution—that is, as a

set of routines habitually performed by a group of individuals. It emphasizes the social nature of

the management-accounting problem.

The present study adds new elements in identifying and understanding the causes of the

problem. According to the approaches presented in this essay, it can be inferred that the

fundamental causes of the management-accounting problem correspond to the habits of the

organization. The organizational culture approach perceives habits as being embedded in the

deepest layers of company culture as basic underlying assumptions. The psychological-

psychoanalytical approach perceives habits as being largely unconscious. The habits that are

deeply rooted in the minds of individuals and group culture are simply accepted—no matter

how inadequate they might be for needs of the organization.

This sort of conceptual understanding of habits entails practical consequences (Quellette

and Wood, 1998). Successful intervention strategies for changing habitual behavior require an

understanding of the factors that maintain the routine answers. Such an understanding can

17

enable social scientists to establish efficient strategies to help people to change inappropriate

behavior. Changing existing behavior in stable contexts requires a conscious decision to

implement new solutions and to suppress established undesirable behavior. Efficient change

strategies must incorporate the formulation of explicit plans to implement new behavior. The

implementation of such behavioral change should favor short-term rewards (as well as long-

term rewards), so that immediate positive consequences stimulate a continuous focus on the

new, desired behavior. The most efficient change strategies impede the performance of

established behavior while they facilitate the transformation of new behavior into habits.

Inspired by the psychoanalytical school, Johann (2004) has emphasized the importance of

understanding the influence of unconscious factors, noting that an awareness of the unconscious

elements of a certain company opens up possibilities to access the aspects of its organizational

collective unconscious that influence its cultural values. This enables the company to analyze

and judge its true motifs in a qualitative revalidation of its culture.

Because the habits and routines that structure management accounting are largely

unconscious, they are neither rational nor easy to change. The distance between theory and

practice in management accounting can be minimized by:

awareness: making management-accounting professionals and users aware of the need

to discuss the concepts used in management-accounting practice;

understanding: increasing the level of understanding of the concepts that are actually

adopted in management accounting (using a collective process of reflection and searching for

the meaning of the adopted concepts, as opposed to alternative concepts);

criticism: making a critical analysis of the operational and strategic effects of the

concepts currently used in the organization, as well as the new models proposed in theory;

conscious choice: making a conscious choice among rational conceptual alternatives—a

choice that is compatible with the group’s basic values; and

creation of new habits: efficiently converting new concepts and models into habits and

routines—thus ensuring that the new cultural artefacts are truly institutionalized.

This study adds new elements to the study of management accounting using an

institutional approach. It seeks to integrate this approach with the approaches of organizational

culture and psychology by highlighting the existence of unconscious factors. Further research is

required with a view to achieving a better understanding of the relations between the

institutional, cultural, and psychological approaches, and with a view to empirically validating

the influence of unconscious factors on the structuring of management accounting.

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behind the habits

Documents

editora nova fronteira

rio de janeiro

actuarial sciences school

basic underlying assumptions

administrative science quarterly

harvard business review

management accounting research

conceptual models proposed