A STRUCTURATION PERSPECTIVE OF MANAGE MENT CONTROL SYSTEM: AN INDONESIAN CASE STUDY

CONTROL SYSTEM: AN INDONESIAN CASE STUDY

Sujoko Efferin

Surabaya University

Indonesia

A bstract

T h i s c a s e s t u d y is a i m e d a t p r o v i d i n g d e s c r i p t i o n , a b o u t s o c i a l construction

employed within an

o r g a n i s a t i o n . In s o d o i n g , t h i s s t u d y a d o p t s a s o c i o l o g i c a l a p p r o a c h , t h a t is structuration theory proposed by Anthony Giddens? Using ethnography m e t h o d , it e x p l i c i t l y e x a m i n e s h o w a n d w h y t h e s y s t e m is c r e a t e d f r o m t h e p e r s p e c t i v e o f a n o r g a n i s a t i o n p a r t i c u l a r l y in I n d o n e s i a n c o n t e x t . T h e r e s u l t of this

study

reveals that

far

from

consisting of merely technical,

m e c h a n i c a l a s p e c t s , t h e s y s t e m in p r a c t i c e i s ' i n t e r t w i n e d w i t h t h e c u l t u r e o f its b r o a d e r c o m m u n i t y in c o n s t r u c t i n g t h e s y s t e m . T h is s t u d y a l s o r e v e a l s

that the adoption of such a theory may enable a researcher to understand the

the design of management control system.

link between

Introduction

M a n a g e m e n t a c c o u n t i n g is t r a d i t i o n a l l y s e e n a s a t e c h n i c a l a c t i v i t y w i t h merely mechanical aspects. Most of the management accounting literatures are dominated by assumptions and perspectives borrowed from neo-classical economics (Neimark

of traditional studies in m a n a g e m e n t a c c o u n t i n g a r e o f t e n e i t h e r o f l i tt l e r e l e v a n c e t o - t h e u n d e r s t a n d i n g o f the real practices or. at best, provide an incomplete picture.

and Tinker

H o w e v e r , t h e r e h a s r e c e n t l y b e e n a n a w a r e n e s s o f tlie n e e d t o d i r e c t r e s e a r c h

a c t i v i t i e s t o e x a m i n e t h e s o c i a l a s p e c t s o f a c c o u n t i n g , th g t is t o r e g a r d a c c o u n t i n g a s

a social practice (Burchell et al.

A c c o u n t i n g s y s t e m s in o r g a n i s a t i o n a l c o n t e x t s a r e b e c o m i n g to b e s e e n a s m o r e t h a n t e c h n i c a l p h e n o m e n a a n d t h a t to u n d e r s t a n d t h e m , t h e s o c i a l r o o t s m u s t a l s o b e u n d e r s t o o d ( L a u g h l i n 1 9 8 7 ) . It m e a n s t h a t a n u n d e r s t a n d i n g o f t h e s p e c i f i c c o n t e x t in w h i c h a n o r g a n i s a t i o n e x i s t s m a y p r o v i d e a r i c h e r p i c t u r e to u n d e r s t a n d th e s v s t c M s better.

I ) e c I lW 7 1 Centre for Indonesian Accounting and Management Research

Vol. 5. No.

The International Journal of Accounting and Business Society 17

Many accounting researchers start adopting various theoretical frameworks

f r o m a n o t h e r d i s c i p l i n e s ( e .g . s o c i o l o g y , p o l i t i c s , a n d p h i l o s o p h y ) in o r d e r t o e x t e n d the domain of accounting knowledge and to gain a richer understanding about

a c c o u n t i n g in p r a c t i c e . T h i s i n v o l v e s t h e a b a n d o n m e n t o f t h e s o l e l y u s e o f t h e s o - called

scientific/positivistic methodological frameworks which put emphasis mainly on discovering

objective, universal generalisations, and the development a more subjective understanding about truth and knowledge.

O n e o f t h e s o c i o l o g i c a l t h e o r i e s n e w l y a d o p t e d in a c c o u n t i n g r e s e a r c h is structuration theory p r o p o s e d b y A n t h o n y G i d d e n s . It is a t t h i s c o n c e r n t h a t t h i s s t u d y is c o n d u c t e d . T h e a p p l i c a t i o n o f t h e s t r u c t u r a t i o n t h e o r y h a s b e e n r e g a r d e d a s u s e f u l in s e n s i t i s i n g r e s e a r c h a n d t h e o r y b u i l d i n g t o t h e r o l e o f m a n a g e m e n t

a c c o u n t i n g in o r g a n i s a t i o n s ( M a c i n t o s h a n d S c a p e n s 1 9 9 1 ) . In L iis r e s p e c t , t h e understanding of the social aspects of the discipline may extend one's understanding of management control

is far beyond its technical/mechanical aspects. Next sections will briefly review some of traditional t h e o r i e s in m a n a g e m e n t c o n t r o l s y s te m * a n d h o w s t r u c t u r a t i o n t h e o r y m a y f a c i l i t a t e further development of the theoretical domain of the system.

system day-to-day practices which

T raditional Perspective O f M anagem ent Control System

M a n a g e m e n t c o n t r o l s y s t e m is r e g a r d e d a s a m e a n s o f g a t h e r i n g i n f o r m a t i o n to

coordinating activities, communicating and evaluating information, deciding what action should be taken, and

aid the processes

influencing people to change their behavior throughout the organisation (Horngren et al. 1997; Anthony and Govindarajan 1995).

I ts e f f e c t i v e n e s s d e p e n d s u p o n h o w w e ll it s u p p o r t s t h e a c h i e v e m e n t o f a h i g h l e v e l o f m o t i v a t i o n a n d p r o m o t e s the goal congruence between different parts of a company.

Anthony and Govindarajan (1995) tend to differentiate between management

c o n t r o l s y s t e m a n d s t r a t e g y f o r m u l a t i o n a n d t a s k c o n t r o l . T h e s y s t e m is s e e n a s

h a v i n g t h e d o m a i n in t h e l e v e l o f m i d d l e m a n a g e m e n t w i t h its m a i n p u r p o s e t o e n s u r e the achievement of the strategies and objectives of the company. On the contrary, s t r a t e g y f o r m u l a t i o n is a f u n c t i o n p e r f o r m e d b y t o p - l e v e l m a n a g e m e n t in r e l a t i o n to strategic management through the setting of long term goals, strategies and policies,

w h e r e a s t a s k c o n t r o l a r e p e r f o r m e d b y t h e l o w e s t l e v e l o f m a n a g e m e n t w i t h its m a i n purpose to ensure the achievement of efficient and effective performance of

individual tasks.

T h i s v ie w is s o m e w h a t q u e s t i o n a b l e a s it is a l m o s t i m p o s s i b l e t o c l e a r l y separate the performance of those

f u n c t i o n s in p r a c t i c e . T h e v i e w is a l s o challenged by Simons (1990) arguing that the system must be seen as broadly including formalised procedures for such things asplanning, budgeting, environmental

different

scanning, competitor analyses,

performance

reporting and

evaluation, resource

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18 A structuration Perspective of Management Control System:

allocation, and employee rewards. In other words, the system can not be separated

f r o m t h e a c t i v i t i e s p e r f o n n e d in t h e t o p - l e v e l m a n a g e m e n t lik e s t r a t e g y f o r m u l a t i o n a n d in t h e m i d d l e a n d l o w e s t le v e ls o f m a n a g e m e n t lik e s t r a t e g y i m p l e m e n t a t i o n . S u c h a separation, although conceptually, has contributed to a lack of understanding of the

n a t u r e o f m a n a g e m e n t c o n t r o l w h i c h r e s u l t s in a n a r t i f i c i a l d i c h o t o m y e q u a t i n g strategic planning with formulation and management control with implementation ( S i m o n s 1 9 9 0 ). T h e r e f o r e , it h a s b e e n r e c o g n i s e d t h a t m a n a g e m e n t c o n t r o l s y s t e m is

b e t t e r to b e s t u d i e d a s a u n i t y o f th e w h o l e p l a n n i n g a n d c o n t r o l s y s t e m in th e c o m p a n y w h i c h is b o t h c o n c e p t u a l l y a n d p r a c t i c a l l y i n s e p a r a b l e .

In d e f i n i n g t h e a r e a o f m a n a g e m e n t c o n t r o l s y s t e m , t r a d i t i o n a l l i t e r a t u r e s r e c o g n i s e t h e i m p o r t a n c e o f t a k i n g in to a c c o u n t th e c u l t u r e o f th e c o m p a n y , h u m a n resource aspect, formal and informal systems and behavioral consideration (Homgren

e t a l. 1 9 9 4 ; A n t h o n y a n d G o v m d a r a j a n 1 9 9 5 ). H o w e v e r , th e y t e n d t o s e e t h o s e f a c t o r s

a s i n d e p e n d e n t f r o m t h e s y s t e m , a n d th e y i n t e r a c t w i t h e a c h o t h e r . T h e t a s k o f t h e s y s t e m , in t h i s r e s p e c t , is to a c c o m m o d a t e t h o s e f a c t o r s a n d t h e r e f o r e , t o p m a n a g e m e n t m u s t d e s i g n t h e s y s t e m in s u c h a w a y t h a t th e y w ill n o t c o n t r a d i c t w i t h it.

This traditional belief has. at best, provide an incomplete, too simplified p i c t u r e a b o u t h o w th e m a n a g e m e n t c o n t r o l s y s t e m w o r k s in p r a c t i c e . T h e s y s t e m is regarded as a neutral, objective and value-free means to assist management to achieve its o b j e c t i v e s . In t h i s r e s p e c t , s u c h a b e l i e f p u t litt l e e m p h a s i s o n t h e r e c o g n i t i o n o f

socially constructed w h i c h is s u b j e c t to a c o n t i n u i n g p r o c e s s o f t r a n s f o r m a t i o n a n d i n s e p a r a b l e

a s h a v i n g s o c i a l a s p e c t s . In o t h e r w o r d s , t h e -r e a l s y s t e m in p r a c t i c e is

f r o m t h e w i d e r s o c i e t y m w h i c h it is e m b e d d e d a n d r o o t e d . N e i m a r k a n d T i n k e r ( 1 9 8 6 ) propose that the system needs to be seen as changing over time and linked to, and

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[ he International Journal of Accounting and Business Society 19

c o m p a n y ) . T h e r e l a t i o n s h i p b e t w e e n c o n t r o l a n d its w i d e r e n v i r o n m e n t , t h e r e f o r e , a r e mutually produced and determined one by the other (Neimark and Tinker 1986). An

i n c l u s i o n o f s o c i o l o g i c a l p e r s p e c t i v e s is s t u d y i n g m a n a g e m e n t c o n t r o l s y s t e m is a u s e f u l w a y in e n r i c h i n g o u r u n d e r s t a n d i n g a b o u t t h e sy s t e m .

Structuration T heory And M anagem ent Control System

G i d d e n ' s s t r u c t u r a t i o n t h e o r y h a s o p e n e d a p o s s i b i l i t y to e x p l i c i t l y r e v e a l

h o w a c c o u n t i n g s y s t e m s a r c e m b e d d e d in its s o c i a l e n v i r o n m e n t ( C h e w 1 9 9 2 ) a n d t o u n d e r s t a n d th e s o c i a l c o n t e x t o f m a n a g e m e n t a c c o u n t i n g in o r g a n i s a t i o n s ( B o l a n d

1 9 8 5 , R o b e r t s a n d S c a p e n s 1 9 8 5 . C a p p s e t a l. 1 9 8 7 ). S t r u c t u r a t i o n is d e f i n e d a s t h e "conditions governing the continuity of transformation of structures, and therefore the reproduction of systems" (Giddens 1979. 66). Giddens

(1979) argues that social systems vary widely between different types of society due to different conditions of s o c i a l r e p r o d u c t i o n . T h e r e is l i tt l e p o i n t in l o o k i n g f o r a n o v e r a l l t h e o r y o f s t a b i l i t y

a n d c h a n g e in s u c h sy s t e m s . A n y a t t e m p t to s t u d y s o c i a l s y s t e m s a n d s t r u c t u r e s , t h e r e f o r e , m u s t b e s e e n a s a m e a n s to p r e s e n t a s e n s i t i s a t i o n d e v i c e i n s t e a d o f a corpus of propositions.

G i d d e n s " t h e o r \ is c o n c e r n e d w i t h u n d e r s t a n d i n g t h e r e l a t i o n s h i p b e t w e e n t h e acti\ ities of human agents and the structure of social system (Macintosh and Scapens 1990).

between system and s t r u c t u r e . S o c i a l s y s t e m is s e e n a s c o m p r i s i n g s o c i a l p r a c t i c e s w h i c h a r e r e p r o d u c e d across time and space through the actions of human agents, while structure refers to the structuring properties which pro\ ide for the

In analysing

h a u lin g of those social practices into

s o c i a l s y s t e m s . I n o t h e r w o r d s , s y s t e m is n o t s t r u c t u r e , b u t s y s t e m h a s s t r u c t u r e w h i c h are drawn

it i s o n l y t h r o u g h a c t i o n a n d interaction that structure is itself reproduced. Hence, structure is both the medium and the outcome of interaction.

upon in social

interaction.

However,

G i d d e n s a l s o a t t e m p t s to p r o v i d e a c o n c e p t u a l f r a m e w o r k t h a t e n a b l e t h e incorporation of the concepts of

agency and structure described above (Macintosh

a n d S c a p e n s 1991 ). A g e n c \ r e f e r s to th e e x i s t e n c e o f a g e n t s w h i c h a c t i v e l y c o n s t i t u t e s o c i a l life a n d th e e l e m e n t s o f s o c i a l s t r u c t u r e in w h i c h t h e y liv e . It r e c o g n i s e s t h e

a b i l i ty o f i n d i v i d u a l s to k n o w t h e i r n e e d s a n d to m o n i t o r t h e i r a c t i o n s a s w e l l a s t h e o t h e r s " a c t i o n s . H e n c e , t h i s a b ility c a u s e th e m to b e p u r p o s i v e a n d a c t i v e l y c o n s t i t u t e t h e i r s o c i a l s e t t i n g s a s p r e v i o u s l y m e n t i o n e d . In t h i s r e s p e c t , t h e s o c i a l s t r u c t u r e s a r e both constituted by human agency while at the same time they are the medium of

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20 A structuration Perspective o f Management Control System:

further constitution. Social relations, then are produced and reproduced across time and space (Giddens 1976).

T h e c e n t r a l p o i n t in o r d e r t o f u l l y u n d e r s t a n d s u c h s o c i a l s t r u c t u r e s , r e l a t i o n s

a n d c h a n g e s is t h a t o n e n e e d t o c o n s i d e r b o t h t h e s t a t i o n a r y , c r o s s s e c t i o n a l a n d t h e dynamic standpoints of the society (Weaver and Goia 1994). The stationary, cross­ sectional standpoint refers to the rules, resources, and practices constituting the arena

a n d t o o l s o f s o c i a l a c t i o n . T h e d y n a m i c , l o n g i t u d i n a l s t a n d p o i n t r e f e r s t o t h e w a y in w h i c h t h e i n d i v i d u a l ’s a c t i o n s

intentionally and unintentionally change and recreate

e x i s t i n g s t r u c t u r e s ( i.e . r u l e s , p r a c t i c e s a n d r e s o u r c e s ) o f t h e s o c i e t y . T h i s d o e s n o t mean that structures are reducible to merely actions for one cannot act without preexisting structures which provide a media for changes.

Therefore, stmcturation theory deals with production and reproduction of s o c i a l s t a i c t u r e in i n t e r a c t i o n ,

c r e a t i o n , m a i n t e n a n c e a n d c h a n g e in s o c i e t y . T o

examine such transformations effectively Giddens proposes a conceptual framework

f o r it. G i d d e n s ( 1 9 8 4 ) s u g g e s t s t h e r e a r e t h r e e d i m e n s i o n s o f s o c i a l s t r u c t u r e ; s i g n i f i c a t i o n ( m e a n i n g ) , l e g i t i m a t i o n ( m o r a li t y ), a n d d o m i n a t i o n ( p o w e r ) . T h e t h r e e

d i m e n s i o n s c a n b e d e s c r i b e d in t h e F i g u r e 1 b e lo w .

Structure Signification

Domination

Legitimation

Modality Interpretive

Norm Scheme

Facility

Interaction Communication

S ig n ific a tio n

S i g n i f i c a t i o n s t r u c t u r e r e f e r s t o a m e d i u m f o r e x c h a n g i n g m e a n i n g s a n d i d e a in order to make people to be able to communicate with each other. Interpretative

schemes are the cognitive means by which each agent makes sense of what others say

a n d d o . T h e s c h e m e s e n a b l e h i m / h e r t o m a k e s e n s e o f w h a t is h a p p e n i n g a n d t o d e c i d e

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The International Journal of Accounting and Business Society 21

o n h o w l i e / s h e s h o u l d a c t in d i f f e r e n t c i r c u m s t a n c e s . T h e u s e o f t h e c o g n i t i v e s c h e m e s d e p e n d s u p o n a n d d r a w s f r o m t h e s i g n i f i c a t i o n s t r u c t u r e , w h i l e it a l s o reproduces that structure simultaneously (Macintosh and Scapens 1991). This scheme

may consists of discursive practices, such as speech, writing and so on

Management accounting systems can be thought of as such a modality, for instance the systems provide managers with a means of understanding the activities of their organisation and allows them to communicate meaningfully about those activities and to make sense organisational activities (Macintosh and Scapens 1990). M a n a g e m e n t a c c o u n t i n g a n d , m o r e g e n e r a l l y , m a n a g e m e n t c o n t r o l s y s t e m , in t h i s r e s p e c t , is t h e i n t e r p r e t i v e s c h e m e w h i c h m e d i a t e s b e t w e e n t h e s i g n i f i c a t i o n s t r u c t u r e

a n d s o c i a l i n t e r a c t i o n in t h e f o r m o f c o m m u n i c a t i o n b e t w e e n m a n a g e r s . M o r e o v e r , m a n a g e m e n t c o n t r o l s y s t e m is t h e m e a n s b y w h i c h m a n a g e r s u s e t o i n t e r p r e t p a s t results, take actions, and make plans.

S i g n i f i c a t i o n s t r u c t u r e in a n o r g a n i s a t i o n c u l t u r a l l y c a n n o t b e s e p a r a t e d f r o m t h e e x i s t e n c e o f t h e o r g a n i s a t i o n ’s i n f o r m a t i o n s y s t e m . T h e o r g a n i s a t i o n ’s i n t e r n a l

d e s i g n e l e m e n t s , i .e . its s t r u c t u r e a n d c u l t u r e , i n f l u e n c e t h e d e s i g n o f t h e i n f o r m a t i o n s y s t e m a n d , in t u r n , t h e s y s t e m m a y c o n t r i b u t e t o c h a n g e s in its s t r u c t u r e a n d c u l t u r e ( S i l v e r e t a l . 1 9 9 5 ) . In t h i s s e n s e , t h e s y s t e m m a y a f f e c t t h e m e a n s o f c o m m u n i c a t i o n

between the organisational members. Such a system can be seen as culturally

c o n s t r u c t e d e m b e d d e d in t h e o r g a n i s a t i o n ’s s h a r e d v a l u e s a n d b e l i e f s . It is e x p r e s s e d as the formaJ and unwritten rules shaping the take-up of design of the information system

understanding signification s t r u c t u r e r e q u i r e s u n d e r s t a n d i n g t h e o r g a n i s a t i o n ’s c u l t u r e a n d i n f o r m a t i o n s y s t e m a s w e l l . In t h i s r e s p e c t , t h e i n f o r m a t i o n s y s t e m i n v o l v e s n o t o n l y f o r m a l s y s t e m , b u t a l s o

(Hackney and

informal and unwritten procedures.

Legitim ation

Legitimation involves the moral constitution of interaction which takes form as norms and moral codes giving sanction to particular behaviors (Macintosh and Scapens

1991). It c o n s i s t s o f l e g i t i m a c y c o d e s , normative rules, and moral o b l i g a t i o n s . T h e m o r a l i t y in a s o c i e t y is p r o d u c e d a n d r e p r o d u c e d t h r o u g h t h e

e x e r c i s e o f s a n c t i o n s u s e d t o r e w a r d o r p e n a l i s e t h e a g e n t s in a c c o r d a n c e w i t h t h e i r

c o m p l i a n c e o r n o n c o m p l i a n c e w i t h t h e c o d e s o f c o n d u c t . T h e r e s u l t , t h e n , is m o r a l l y meaningful action.

social construction of m a n a g e m e n t c o n t r o l s y s t e m i n e v i t a b l y a l s o r e q u i r e s a n u n d e r s t a n d i n g o f a c o m p a n y ’s culture. The shared values and beliefs form an unwritten rules and norms of

Using structuration

perspective to analyse the

b e h a v i o u r in t h e c o m p a n y . T h e c u l t u r e is e s t a b l i s h e d o v e r a l o n g t i m e , a n d t h e r e f o r e , t h e a c c e p t a n c e o f t h e c o n t r o l s y s t e m i s 'i n f l u e n c e d b y t h e e x t e n t t o w h i c h it r e f l e c t s the culture of the company.

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22 A stmcturation Perspective of Management Control System:

Furthermore, the system embody norms of organisational activity and provide the moral underpinnings for the signification structure and the financial discourse t h r o u g h l e g i t i m a t i n g t h e r i g h t s o f s o m e p a r t i c i p a n t s t o h o l d o t h e r s a c c o u n t a b l e in financial

and technical terms for their actions (Macintosh and Scapens 1990). M a n a g e m e n t c o n t r o l s y s t e m , in th is r e s p e c t , c o m m u n i c a t e s a s e t o f v a l u e s a n d i d e a l s

a b o u t w h a t is a p p r o v e d a n d w h a t is d i s a p p r o v e d , a n d j u s t i f i e s t h e u s e o f c e r t a i n rewards and penalties.

D o m in a tio n

D o m i n a t i o n s t r u c t u r e i n v o k e s th e c o d e s f o r r e g u l a t i n g t h e r e l a t i o n s , a n d dependence and autonomy within a social institution. They are facilitated through r e s o u r c e s t h r o u g h w h i c h a g e n t s d r a w u p o n t h e d o m i n a t i o n s t r u c t u r e in t h e e x e r c i s e o f p o w e r . In t h i s s e n s e , p o w e r e x e r c i s e w i t h i n a s o c i e t y / o r g a n i s a t i o n c a n n o t b e p e r f o r m e d without the domination structure. Giddens distinguishes two types of resources: allocative resources which arise from command over objects, goods, and other material phenomena, and authoritativ e resources which arise from capabilities to organise and

a k e y e l e m e n t in th e p r o c e s s o f a c c o u n t a b i l i t y in o r g a n i s a t i o n s a n d c o n s e q u e n t l y a m a j o r f a c i l i t v f o r th e m e d i a t i o n o f th e d o m i n a t i o n s t r u c t u r e in r e l a t i o n s o f p o w e r ( M a c i n t o s h a n d S c a p e n s I9<J0). It is a f a c i l i t y t h a t e a c h le v e l o f m a n a g e m e n t c a n u s e t o c o o r d i n a t e a n d to c o n t r o l o t h e r p a r t i c i p a n t s . A c c o r d i n g t o G i d d e n s ( 1 9 7 9 ) . p o w e r

Those three dimensions o f s o c i a l s t r u c t u r e a r e i n e x t r i c a b l y l i n k e d a n d o n ly s e p a r a b l e a n a l y t i c a l l y . F o r i n s t a n c e , th e d o m i n a t i o n s t r u c t u r e w h i c h c o m p r i s e s th e r u l e s a n d r e s o u r c e s d r a w n u p o n in r e l a t i o n s o f p o w e r a r e c l o s e l y l i n k e d t o t h e

signification and legitimation structure. Command over the management accounting p r o c e s s , f o r e x a m p l e , is a r e s o u r c e w h i c h c a n b e u s e d in t h e e x e r c i s e o f p o w e r in organisations

it c o u l d b e a r g u e d t h a t m a n a g e m e n t a c c o u n t i n g , t h r o u g h th e d e s i g n o f t h e m a n a g e m e n t c o n t r o l s y s t e m , is implicated

domination structures within organisation.

in the signification,

legitimation

and

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The International Journal o f Accounting and Business Society 23

T h e a d o p t i o n o f s t r u c t u r a t i o n th e o ry - m a y f a c i l i t a t e a n u n d e r s t a n d i n g a b o u t w h a t . w h y . a n d h o w a p a r t i c u l a r d e s i g n o f m a n a g e m e n t c o n t r o l s y s t e m is u s e d in a specific context. The above propositions also reveal that management control system

h a s n o t o n ly s t a t i o n a r y n a t u r e b u t a l s o d y n a m i c n a t u r e . T h e s y s t e m f a c i l i t a t e a m e a n s

f o r t h e o r g a n i s a t i o n 's m e m b e r s t o a c t in a c c o r d a n c e w i t h t h e n o r m s a n d r u l e s o f t h e o r g a n i s a t i o n . O n t h e o t h e r h a n d , t h e sy s t e m a l s o s o c i a l l y d e v e l o p s a n d c h a n g e s o v e r t i m e d u e t o t h e a c t i o n s o f th e m e m b e r s . T h o s e t w o n a t u r e s a r e w o r t h s t u d y i n g in o r d e r to extend the theoretical domain of management control system to include both technical and social aspects of the system.

Research Method

T h i s s tu d y is c o n d u c t e d f r o m M a y t o A u g u s t 1 9 9 7 . T h e .m e th o d u s e d is

ethnography. According to Neuman (1994), ethnography comes from cultural

a n t h r o p o l o g y w h i c h m e a n s " .. . d e s c r i b i n g a c u l t u r e a n d u n d e r s t a n d i n g a n o t h e r y v ay o f life f r o m t h e n a t i v e p o i n t o f v i e w " (p . 3 3 3 ) . In t h i s m e t h o d , t h e r e s e a r c h e r i m m e r s e s

h i m s e l f t o t h e d a i l y life o f t h e o b j e c t . In t h i s s e n s e , p e o p l e d i s p l a y t h e i r m e a n i n g ( w h a t th ey t h i n k , b e l i e v e , p o n d e r ) t h r o u g h b e h a v i o r ( e .g . s p e e c h , a c t i o n s ) in t h e i r s p e c i f i c s o c i a l c o n t e x t . T h e c r u c i a l p o i n t is t h e i n t e r p r e t a t i o n o f t h e m e a n i n g o f t h e b e h a v i o r

h a s b e e n c h o s e n , n a m e ly " T T T a i l o r . " T h e r e a r e s e v e r a l r e a s o n s f o r c h o o s i n g t h i s company. Firstly, tailor companies normally are labor-intensive. They do not have

Vol. 5, No. 2, Dec 1997 © Centre lor Indonesian Accounting and Management Research

24 A structuration Perspective o f Management Control System:

c o m p a n i e s u n d e r t h e c a t e g o r y o f S m a l l a n d H o u s e h o l d c o m p a n i e s in C l o t h i n g , T e x t i l e s and Leather Industry in 1993 (BPS 1994). This represents 98.8% of the total number o f c o m p a n i e s i n s u c h a n i n d u s t r y in t h a t y e a r ( t h e t o t a l n u m b e r w a s 3 6 7 , 2 2 2

companies). The small clothing, textiles and leather industry also experiences a s u b s t a n t i a l g r o w t h in t e r m s o f t h e n u m b e r o f c o m p a n i e s . B e t w e e n 1 9 9 1 a n d 1 9 9 3 , t h e

number of the companies grew 38.75% (19.788 to 27.455) which was much above t h o s e o f l a r g e a n d m e d i u m i n d u s t r i e s . 1 5 . 7 1 % ( 3 , 9 3 5 t o 4 , 2 4 6 ) ,- a n d h o u s e h o l d

industry. 12.3% (298.761 to 335.521). Therefore, the small and household companies is s e e n a s h a v i n g s i g n i f i c a n t i n f l u e n c e in t h e d e v e l o p m e n t a n d r e p r e s e n t i n g t h e m a j o r i t y of this kind of industry.

To understand their system, one can not simply evaluate their effectiveness and

e f f i c i e n c y b a s e d u p o n t h e c r i t e r i a u s e d in t h e t r a d i t i o n a l l i t e r a t u r e s . T h e i r s y s t e m m u s t

b e u n d e r s t o o d b y u s i n g t h e i r o w n p e r s p e c t i v e s . In t h i s r e s p e c t , t h e e f f e c t i v e w a y t o d o s o is b y e x a m i n i n g a n d id e n tif y in g t h e s o c i a l c o n s t r u c t i o n o f t h e i r m a n a g e m e n t c o n t r o l s y s t e m s . T h e r e f o r e , t h i s s t u d y is s e e n a s a s t e p w h i c h m a y p r o v i d e a n i n i t i a l u s e f u l insight into such practices and has implications to the majority of the Indonesian business enterprises.

The identification of such a construction enable us to understand what, why and how such a particular design of management control system exists in a specific

c o n t e x t . O b v i o u s l y , t h e e x p e c t e d r e s u l t s o f t h i s s t u d y is f a r b e y o n d t h e t e c h n i c a l aspects as those described in traditional literatures.

Company Analysis

B a ckgro un d o f the ( 'om pany

F o r t h e s a k e o f c o n f i d e n t i a l i t y , t h e r e a l n a m e s o f t h e c o m p a n y a n d its k e y p e r s o n s w ill n o t b e r e v e a l e d . T T is t h e n a m e o f t h e o w n e r t h e c o m p a n y . T T T a i l o r h a s

a r e l a t i v e l y l o n g h i s t o r y a s i t h a s b e e n e s t a b l i s h e d s i n c e 2 0 y e a r s a g o . H o w e v e r , it w a s n o t u n t i l t h e l a s t t h r e e y e a r s t h a t it e x p e r i e n c e d a s t e a d i l y s u b s t a n t i a l g r o w t h . H a v i n g o n l y 6 e m p l o y e e s in t h e f i r s t h a l f o f 1 9 9 4 . t h e c o m p a n y is c u r r e n t l y e m p l o y i n g a b o u t

15 w o r k e r s ; a 1 5 0 % i n c r e a s e . T e n o f t h e f i f t e e n a r e h i g h l y s k i l l f u l , e x p e r i e n c e d workers. Based upon the number of machines employed. TT Tailor also experiences a s u b s t a n t i a l i n c r e a s e , m o r e t h a n 1 0 0 % i n c r e a s e ; 5 u n i t s in 1 9 9 4 c o m p a r e d t o 12 u n i t s in

G e n e r a l l y , t a i l o r i n d u s t r y in I n d o n e s i a c a n b e c l a s s i f i e d i n t o t w o c a t e g o r i e s , m e n 's t a i l o r a n d w o m e n 's t a i l o r . T h i s c l a s s i f i c a t i o n r e f l e c t s t h e m a r k e t in w h i c h a t a i l o r c o m p a n y w a n t s t o c o m p e t e . A s i n d i c a t e d b y its n a m e , m e n 's t a i l o r o n l y s e r v e s m a l e c u s t o m e r , a n d s o d o e s w o m e n ’s t a i l o r .

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The International Journal of Accounting and Business Society 25

Cultural and technical reasons are the main causes for this classification.

C u l t u r a l r e a s o n m e a n s t h a t g e t t i n g t h e s p e c i f i c a t i o n o f a n o r d e r ( e .g . s i z e ) r e q u i r e s measurement of the customer s body.

F e m a l e c u s t o m e r u s u a l l y is m u c h m o r e convenient to be served by female tailor. Technical reason refers to different characteristics between male and

Consequently, such different characteristics cause different capabilities needed to tailor the clothes. Certainly, there

female clothes.

r e q u ir e d and s p e c if ie d in t h o s e l i t e r a t u r e s , it h a s its o w n p r o c e d u r e s , t e c h n i q u e s a n d a c t i v i t i e s w h i c h c a n o n l y

b e u n d e r s t o o d in its s p e c i f i c c o n t e x t a n d m e a n i n g .

G e n e r a l M a n u fa c tu r in g P r o c e s s e s in th e C o m p a n y

f o r d e t e r m i n i n g t h e p r i c e a n d p r e d i c t i n g h o w l o n g it t a k e s f o r f i n i s h i n g t h e o r d e r . T h e cloth and the accessories needed may be provided by either the customer or the tailor

c o m p a n y . It. t h e m a t e r i a l s a r e p r o v i d e d b y th e c o m p a n y . T T w ill d e t e r m i n e a d d i t i o n a l

c o s t a n d a d d it to th e p r ic e .

A m a j o r f e a t u r e o f T T T a i l o r m a n a g e m e n t is t h e d o m i n a t i o n o f t a i l o r s in a ll functions and processes. The designing stage consists of making

th e b lu e p r i n t (the p a t t e r n ) o f th e s e w i n g a n d d r a w i n g th e p a t t e r n in a s p e c i a l p a p e r . T h i s is a c r u c i a l s t a g e w h o s e o u t p u t w ill d e t e r m i n e th e q u a l i t y o f t h e f i n a l p r o d u c t o f t h e w h o l e p r o c e s s e s . T h i s s t a g e is a l s o o n e o f t h e m o s t i m p o r t a n t f a c t o r s w h i c h d e t e r m i n e t h e p o s i t i o n i n g o f t h i s k i n d o f c o m p a n y in t h e m a r k e t . T T . a s t h e d e s i g n e r a n d m a n a g e r o f t h e c o m p a n y is t h e o n ly p e r s o n w h o d o e s s u c h a p r o c e s s . T h e p a t t e r n d r a w n in t h e p a p e r , t h e n , w ill b e d i s t r i b u t e d to b e f u r t h e r p r o c e s s e d in t h e n e x t s t a g e .

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26 A structuration Perspective ot'Management Control System:

O v e r v ie w o f th e ( 'o m p a n y 's ( 'o n t r o l S y s te m

T h e c o n t r o l s y s t e m o f T T T a i l o r m u s t b e s e e n f r o m t h e c o m p a n y 's o w n perspective.

U s i n g t r a d i t i o n a l c o n t r o l s y s t e m lik e t h o s e d e s c r i b e d in t r a d i t i o n a l t e x t b o o k s w ill r e s u l t in m i s l e a d i n g c o n c l u s i o n . T h e s y s t e m h a s b e e n c o n s t r u c t e d f r o m t h e c u l t u r e o f t h e c o m p a n y w h i c h is a l m o s t to ta lly b a s e d u p o n p e r s o n a l , i n d i v i d u a l r e l a t i o n s h i p . P e r s o n a l r e s p e c t a n d f r ie n d ly r e l a t i o n s h i p a r e t h e

keys to make the

e m p l o y e e s o b e d i e n t a n d t o e n s u r e t h a t th e o b j e c t i v e s o f t h e c o m p a n y a r e a c h i e v e d . T h i s s i t u a t i o n c a n n o t b e s e p a r a t e d f r o m th e p e r s o n a l c h a r a c t e r i s t i c s o f T T w h o e m p h a s i s e s

i n f o r m a l i n t e r a c t i o n r a t h e r t h a n f o r m a l i s e d r e l a t i o n s h i p b e t w e e n d i f f e r e n t le v e l o f m a n a g e m e n t , s u c h a s b e t w e e n e m p l o y e r ( m a n a g e r ) a n d e m p l o y e e s in m a n a g i n g t h e company.

T T d o e s n o t u s e an y f o r m a l d o c u m e n t s a n d r e p o r t s t o u n d e r s t a n d a n d t o

c o n t r o l t h e p e r f o r m a n c e o f th e e m p lo y e e s . T h e r e a r e t w o r e a s o n s f o r d o i n g s o . F i r s t l y . T T c a n s till m o n i t o r t h e p e r f o r m a n c e o f t h e e m p l o y e e s w i t h o u t s u c h f o r m a l p r o c e s s . T a i l o r m a n u f a c t u r i n g p r o c e s s is q u i t e s i m p l e a n d . e a s y t o m o n i t o r . T e c h n i c a l l y , it d o e s n o t e m p lo y a n y h ig h ly ad v a n c e d te c h n o lo g y t h a t n e e d s p e c i a l s k ill t o c o n t r o l . S e c o n d l y , t h e p r e s e n t i n f o r m a l c o n t r o l s y s t e m h a s m a d e t h e e m p l o y e e s fe e l t h a t t h e y a r e t r u s t e d by T T . A s a r e s u l t , th ey t h e m s e l v e s s o f a r a c tiv e ly t r y t o m a k e t h e i r w o r k s f a i r l y g o o d

e n o u g h to av o id a n y d i s p u t e w ith t h e i r e m p l o y e r .

T h e e s t a b l i s h m e n t o f th e c o m p a n y 's c u l t u r e c a n n o t b e s e p a r a t e d f r o m t h e r e c r u i t m e n t p r o c e s s . T h e p r o c e s s in t a i l o r i n g i n d u s t r y is q u i t e u n i q u e . T h e r e is a k i n d o f i n f o r m a l n e t w o r k b e t w e e n t h o s e w h o w o r k in t a i l o r i n g c o m p a n y . T h e w o r k e r s in t h i s k i n d o f i n d u s tr y s h a r e i n f o r m a t i o n a b o u t w h i c h c o m p a n i e s n e e d n e w w o r k e r s , h o w is t h e w o r k c o n d i t i o n in t h e c o m p a n i e s ( f o r e x a m p l e t h e s a l a r y , w o r k i n g h o u r s , w o r k i n g r u l e s a n d s o o n ) . O n t h e o t h e r h a n d , m a n y o f t h e e m p l o y e r s in t h i s in d u s t r y c h o o s e t o

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The International Journal of Accounting and Business Society 27

a s k t h e i r e m p lo y e e s t o f i n d n ew e m p lo y e e s f o r t h e m i n s t e a d o f u s i n g m a s s m e d i a t o s e e k e m p l o y e e s . In t h i s r e s p e c t , th e n e t w o r k m e n t i o n e d a b o v e is p r o v e d t o b e a n effective means of communication and exchange of information. The mam reason for th i s is b e c a u s e p e r s o n a l c h a r a c t e r i s t i c s , f o r e x a m p l e h o n e s t y , d i l i g e n c e a n d o b e d i e n c e

a r e th e m o s t i m p o r t a n t c r i t e r i a b e s i d e s t h e i r s k ills . T h e e m p l o y e r s u s u a l l y b e l i e v e t h a t p e r s o n a l r e c o m m e n d a t i o n is m u c h m o r e e f f e c t i v e to a c h i e v e t h a t r a t h e r t h a t t h r o u g h

a n n o u n c e m e n t in m a s s m e d i a .

T T is a m o n g t h o s e w h o p r e f e r t o u s e s u c h a n i n f o r m a l n e t w o r k t o r e c r u i t n e w

e m p lo y e e s . A ll o f th e c o m p a n y 's c u r r e n t e m p lo y e e s a r e a c c e p t e d t h r o u g h t h i s w a v o f r e c r u i t m e n t . B e f o r e a c c e p t i n g a n a p p l i c a n t r e c o m m e n d e d b y t h e w o r k e r s . T T w ill t e s t t h e q u a lity o f t h e a p p l i c a n t 's w o r k b y g i v i n g h i m / h e r a t a s k / o r d e r t o b e d o n e . T h e t e s t

u s u a lly t a k e s o n e d a y . T h e a p p l i c a n t w ill b e a c c e p t e d i f h i s / h e r w o r k is r e g a r d e d s a t i s f a c t o r y by T T .

There are at least two major consequences of this recruitment process for the

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28 A structuration Perspective o f Management Control System:

c o n t r i b u t e d t o t h e e s t a b l i s h m e n t o f t h e c u l t u r e o f th e c o m p a n y w h i c h , in t u r n , s h a p e s t h e c o n t r o l s y s t e m o f it.

t y p e s o f ( 'o n tr o l

It is i m p o r t a n t to o b s e r v e th e m e c h a n i s m s o f t h e c o m p a n y 's * c o n t r o l s y s t e m . T h e c o n t r o l s y s t e m c a n b e c l a s s i f i e d in to t h r e e c a t e g o r i e s , i.e . f i n a n c i a l , q u a l i t y a n d s o c i a l c o n t r o l s . T h e f i n a n c i a l a n d q u a lity c o n t r o l s o f th e c o m p a n y a r e t e c h n i c a l l y y e n ’ s i m p le . F i n a n c i a l c o n t r o l is m a i n l y u s e d to d e t e r m i n e t h e p r i c e o f t h e o r d e r , q u a l i t y

c o n t r o l is u s e d t o c o n t r o l th e q u a lity o f t h e o r d e r , a n d s o c i a l c o n t r o l is m a i n l y d i r e c t e d to make the workers obedient and to prevent conflict of interest between the employer

a n d th e w o r k e r s .

I 'w c m e ia l ( ' o n tr o l

It is i n t e r e s t i n g to n o t e t h a t T T h a s n o f i n a n c i a l r e c o r d t o e n s u r e t h e e f f i c i e n c y o f th e c o m p a n y . T h e f i n a n c i a l c o n t r o l m a in ly t a k e s p l a c e b e f o r e a n o r d e r is p r o c e s s e d .

A s m e n t i o n e d a b o v e , w h e n a c u s t o m e r c o m e s to th e c o m p a n y t o d i s c u s s h e r o r d e r . T T w ill e s t i m a t e th e t o t a l c o s t s o f it i n c l u d i n g t h e m a t e r i a l s n e e d e d a n d f a i r s a l a r y t o b e p a i d to w o r k e r f o r th e o r d e r . T h e n , th e e s t i m a t e d c o s t s w ill b e a d d e d b y p r o f i t m a r g i n desired.

T h e o t h e r a r e a w h i c h n e e d s f i n a n c i a l c o n t r o l is w h e n p a v i n g t h e w o r k e r s ' s a la r y . T h e w o r k e r s a r e p a i d w e e k ly . T h e r e is n o f i x e d s a l a r y ; t h e a m o u n t o f t h e payment

Vol. 5, No. 2. Dec 1997 © Centre lor Indonesian Accounting and Management Research

The International Journal o f Accounting and Business Society 29

several unwritten standards for determining the salary of an order. Thus, the salary per order received by a worker may be different from the other depending upon the

c h a r a c t e r i s t i c s o f t h e i r jo b .

T h i s s y s t e m o f p a y m e n t l ia s b r o u g h t a b o u t a n o t h e r i m p a c t . T T d o e s n o t n e e d to make a firm policy regarding how many working hours per day for them. The

f o r m a l p o l i c y o f t h e w o r k i n g h o u r s is f r o m 8 a .m . t o 5 p .m . H o w e v e r , t h i s p o l i c y is very flexible. The workers are allowed to come to work and to go home at any time th e> w a n t . T h e i m p o r t a n t t h i n g r e g a r d i n g t h i s m a t t e r is t h a t t h e y a r e a s k e d t o t e l l T T

b e f o r e h a n d i f t h e y w ill b e a b s e n t in t h e n e x t d a y ( s ) . M o s t c o m p a n i e s i n t h i s i n d u s t r y have the same system of payment. Consequently, although the working hours in this

c o m p a n y is f l e x i b l e , m a n y o f th e w o r k e r s p r e f e r t o c o n t i n u e w o r k i n g t w o o r t h r e e

h o u r s a f t e r 5 p .m . S o m e o f th e m o f t e n v o l u n t a r i l y c o m e t o w o r k in S u n d a y a l t h o u g h TT does not ask them to do so.

Quality' C ontrol

In t h e q u a l i t y c o n t r o l , t h e e m p h a s i s e is u p o n t h e c o n f o r m i t y o f t h e r e s u l t t o t h e design of the order. Although the quality control can be done in every stage of the m a n u f a c t u r i n g p r o c e s s e s , it t a k e s p l a c e m a i n l y a f t e r a l l t h e p r o c e s s e s h a v e b e e n

c o m p l e t e d . T h i s is b e c a u s e t h e s e w n i t e m m u s t b e t r i e d o n t h e c u s t o m e r in o r d e r t o k n o w w h e t h e r it f i t s h e r o r n o t. T h e b e t t e r t h e w o r k o f t h e w o r k e r , t h e l e s s l i k e l y r e w o r k i n g p r o c e s s is n e e d e d .

T h e r e s p o n s i b i l i t y o f a w o r k e r is t o f i n i s h a n o r d e r u n t i l t h e c u s t o m e r is s a t i s f i e d . I f t h e r e w o r k i n g p r o c e s s is n e e d e d , t h e w o r k e r in c h a r g e o f t h e o r d e r w i l l r e w o r k it w i t h o u t a d d i t i o n a l p a y m e n t . T h u s , t h e m e s s a g e is v e ry ' c l e a r , d o it r i g h t in t h e

first time and no question means no problem. The possibility of the reworking process makes the workers attempt to do their work very carefully. Although the order-based salary may direct them to finish their works as soon as possible, the risk of reworking p r o c e s s f o r c e s t h e m t o p ay a t t e n t i o n t o t h e q u a l i t y o f t h e i r w o r k s .

Usually. if the workers have questions regarding the work being done, they w ill a s k T T t o f i n d t h e a n s w e r s b e f o r e t h e i r w o r k s a r e c o m p l e t e d . T h e d e c i s i o n s a r e