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A Case Study of Capital Investment Decision-Making: Exploring

Practice and (Structuration) Theory

by

Deryl Northcott

(University of Manchester)

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A CASE STUDY OF CAPITAL INVESTMENT DECISION-MAKING:

EXPLORING PRACTICE AND (STRUCTURATION) THEORY

Introduction

In 1975 King asked “is the emphasis of capital budgeting misplaced?” His was an early

suggestion that conceptions of capital investment decision-making were too narrow in their focus

on analysis technique, and therefore the activity was poorly understood. More than twenty years

later King’s question is still relevant, as a majority of researchers in this domain continue along a

well-worn empirical path, monitoring the adoption of theoretically prescribed procedures and

techniques.1

In order to advance research into capital investment practice beyond the narrow focus which

King lamented so many years ago, it seems necessary for researchers to embrace methods and

methodological perspectives that differ from dominant mainstream approaches (Pike, 1996).

This is, of course, a sentiment expressed in many areas of accounting research. Throughout the

accounting literature there are repeated entreaties to embrace under-utilised methods and

methodologies (see for example Tomkins & Groves, 1983a & 1983b; Hopwood, 1983; Cooper,

1983; Hopper & Powell, 1985; Kaplan, 1986; Chua, 1986; Scapens, 1990; Klammer, Koch &

Wilner, 1991; Jones & Dugdale, 1994). To date this call has rarely been answered in capital

investment research, which has remained dominated by survey-based empirics2. The study

reported here attempts to illuminate the issues raised by King and others, and to consider ways in

which the “misplaced” emphasis of capital investment theory and research might be repositioned.

Anthony Giddens’ structuration theory is used as a framework for interpreting the evidence from

this study. Structuration theory has been advocated by a number of accounting researchers as a

helpful theoretical apparatus for guiding management accounting research (Roberts & Scapens,

1985; Macintosh & Scapens, 1990; Chew, 1993; Lawrence et al., 1997). Not all researchers

agree on the nature of its utility, however. Notably, a debate between Macintosh and Scapens

4 See for example: Oblak & Helm, 1980; Kim & Farragher, 1981; Petty & Scott, 1981; Lilleyman, 1984; Klammer &

Walker, 1984; Stanley & Block, 1984; Singer, 1985; Mills, 1988; Pike & Sharp, 1989; Patterson, 1989; Klammer,Koch & Wilner, 1991; Sangster, 1993; Jog & Srivastava, 1993; Chen, 1995; Pike, 1996. This list is by no meansexhaustive.

5 Exceptions include the work of Bower (1970), Marsh et al. (1988), Baxter and Hirst (1993) and Butler et al.(1993), each having attempted organisationally situated studies of capital investment practice.

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(1990; and Scapens & Macintosh, 1996) and Boland (1993 and 1996) has aired differing, and so

far unresolved, perspectives on structuration theory as a theoretical lens for management

accounting research. A clarification of the issues raised in this debate is desirable if structuration

theory is to be useful to accounting researchers, particularly for qualitative research where there

is a long-standing recognition that research needs to be informed by theory in order to advance

knowledge (Boland & Pondy, 1983; Otley, 1984; Hopper & Powell, 1985; Macintosh, 1985;

Ansari & Euske, 1987; Hoskin & Macve, 1986; Miller & O’Leary, 1987; Tinker & Neimark,

1987; Smith et al., 1988; Macintosh & Scapens, 1990).

Since the case study presented in this paper explores an aspect of management accounting

practice from a structuration theory perspective, it offers a vehicle for examining the points of

tension between Macintosh & Scapens’ and Boland’s perspectives. Issues arising from the

debate between these authors will be illustrated using the case evidence and themes, with a view

to attempting some reconciliation of their apparently disparate views of the utility of structuration

theory for management accounting research.

The paper will be structured as follows. First, the aims of the research project are related to the

choice of the case study method. The studied organisation is then described along with its

external and internal environments at the time of the study. The research method and sources of

evidence are outlined, together with a brief description of key capital investment projects which

formed a focus for this study. Evidence from the case study is then presented and interpreted to

develop themes which illuminate the ways in which accounting was used for capital investment

decision-making within the studied organisation.

Next, Giddens’ structuration theory is evaluated as a theoretical framework for this study.

Leading from this, the experiences of using structuration theory to inform this case study are

drawn on to consider the main points of departure in the views of Macintosh and Scapens and

Boland about the utility of structuration theory as a framework for management accounting

research. The paper concludes by suggesting aspects of capital investment practice which are

revealed by this case study, and by attempting to draw together disparate views on using

structuration theory so that the ‘debate’ about its utility may be progressed.

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Research question and aims

The agenda for this study was to explore the ways in which accounting information and systems

are drawn upon by organisational actors engaged in capital investment decision-making. The

focal research question was: how and why do actors use accounting information in their

organisational capital investment decision-making activities?

The study aimed to avoid traditional, narrow characterisations of capital investment as a purely

‘economic’ decision-making process. This perspective is based on an expectation of 'means-end

rationality' (Chua, 1986), which has focused much prior research on the assumed use of project

analysis techniques by ‘utility-maximising’ decision-makers for promoting 'rational' investment

decisions (Northcott, 1991). Instead, this research sought to recognise that multiple

‘rationalities’ might be at play as actors create and respond to financial information in a dynamic

process of interpretation, decision-making and action. The study explored the capital investment

activity from the perspective(s) of participants, seeking to uncover their perceptions of what is

considered ‘rational’ within organisational decision-making processes and outcomes.

This study drew, therefore, on an interpretive perspective (Chua, 1986, p.615) in an effort to seek

richer exploration of actors' uses of accounting information. Of interest for this study were the

ways in which financial information is drawn upon in producing a negotiated social order, as

outputs of accounting analyses are interpreted, acted upon and re-interpreted by actors within

their organizational context.

The case study method was chosen as an appropriate means of exploring the research question.

Previous questionnaire studies which have sought the perspective of only one actor in each

surveyed organization have failed to capture the social dimension of the capital investment

activity which this study aimed to explore. For this study, it was important to select an

organization which was substantially involved in capital investment, and which could be

expected by virtue of its size and the nature of its capital investment to use the kinds of

accounting analyses outlined in the normative literature. The comparison between theoretically-

based expectation and practice within the organization would then offer a focus for exploring the

research question.

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The emergent case study evidence suggested themes of understanding which are drawn on to

assemble “explanatory propositions” (Macintosh & Scapens, 1990, p. 470) about the ways in

which accounting is used in the capital investment decision-making activity. This supports the

central aim of this paper, to offer a contribution to extant understandings of capital investment

practice via the alternative evidence and theoretical perspective emerging from this case study.

The case study organisation: background and capital investment activity

The organisation selected for study was a New Zealand Crown Health Enterprise (CHE), a public

health care providing organisation. The CHE made substantial annual capital investment and a

wide range of people including managers, clinicians, medical support personnel and accountants

were involved in the capital investment decision-making activity. This offered an interesting

potential for exploring the ways in which accounting information was used by both accountants

and non-accountants. The CHE organisation was a dynamic and accepting environment for

research, where much was happening to reshape the capital investment activity due to recent

government-imposed changes within a process of health sector reform.

In 1990 a new government undertook to restructure the health care sector3 (New Zealand

National Party, 1990). The result of this restructuring, and of a new Health and Disability

Services Act (1993) was a "purchaser-provider split” in health care provision. This was

operationalized via the creation of four Regional Health Authorities or RHAs (the purchasers)

and twenty three Crown Health Enterprises (the public providers), to create a "two level system

of quasi-markets" (Jacobs, 1993, p.27) in which providers would compete for the purchasers'

business (Fougere, 1993). Several CHEs operated within each RHA's geographical area.

The CHEs were established as limited liability companies (Health and Disability Services Act

1993, Section 37) with their 'shareholders' being the Minister of Finance and the Minister for

Crown Health Enterprises, each holding 50% of all CHE shares. The CHE in which this study

took place incorporated one of the largest hospitals in New Zealand, plus fifteen regional

hospitals and a number of related health care programs and services. It had a staff of over 5000

6 The health care sector had been subject to restructuring since the early 1980s; the 1990 government aimed to build

on reforms that had already taken place. The so-called "Green and White Paper" (Upton, 1991) outlines thegovernment’s intentions in continuing health sector restructuring.

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people, an annual budget in excess of $250 million and a 1993/94 capital expenditure budget in

the region of $30-$40 million. A Chief Executive Officer headed the CHE and was responsible

to a board of seven Directors; the internal management structure was organized around key

“clinical” and “support” activities, each headed by a General Manager (GM).

The legislated objectives of the CHEs included that they each should operate “as a successful and

efficient business” (Health and Disability Services Act 1993, S.11), and it was a stated

government objective that CHEs should make “prudent investment decisions" in health care.

These organisations were now operating in an environment of dynamic expectations and

obligations which required them to be 'business-like' in a way never before required under

previous health sector structures. This change lead to a re-examination of decision-making

objectives, processes and activities within the studied CHE, making it an interesting organization

in which to study capital investment practice.

In response to the new external environment, a number of internal adjustments were made in the

CHE, including the introduction of Divisional Accountants (DAs). The General Manager of the

Finance Division (GM Finance) recruited seven qualified accountants and the accounting

function was moved away from the central administrative office to be decentralized and situated

in the operational field (Lawrence et al., 1994). The CHE’s need for financial information for

costing, reporting, pricing and decision making was perceived as greater now than ever before,

and the expansion of accounting personnel was thought to inject financial expertise which had

previously been lacking. This development has potential implications for capital investment, as

an increased resource of financial information became available to decision makers.

Capital investment policies and procedures

Prior to its re-incarnation as a CHE, the studied organization’s procedures for capital expenditure

evaluation and decision-making had little or no emphasis on financial evaluation. The most

common practice for prioritizing projects is said to have been a negotiation of "wish lists"

between the managers of business units, based on a regard for perceived equity in the 'sharing' of

funds between clinical areas (GM, Clinical Support Services Division, October 1993). Decisions

were informed by clinical rather than financial rationales, a mode accepted as appropriate by

those involved for choosing between projects with value-laden outcomes such as life and death,

quality of care or medical advancement.

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This changed in response to the 1993 health sector reforms. The CHE’s Finance Division

produced a “Capital Investment Policies and Procedures Manual”, outlining the information and

analyses now required to support a project proposal. The stated objectives of this manual were:

"... to ensure that a rational and rigorous process of scrutiny has been followedbefore the go ahead is given to expend funds on any major project, and to help ensurethat return on capital exceeds the CHE's cost of capital...” (emphasis added).

The manual specified approval hierarchies and post audit procedures. Project proposers were

encouraged to undertake market research and risk analysis, and to engage in information

gathering and interrogation methods such as brainstorming and scenario testing.

A standardised spreadsheet model was produced by a Project Accountant4 to assist managers and

accountants in presenting financial analyses, known as “workups”, now required for any

proposed capital project over $50,000 and recommended for smaller projects. The spreadsheet

model calculated a project’s net present value (NPV) and internal rate of return (IRR), and it was

expected that alternative scenarios would be presented where key variables were uncertain,

usually taking the form of ‘pessimistic,’ ‘most likely’ and ‘optimistic’ scenarios. An attempt

was made to encourage the correct use of these techniques, with worked examples guiding

unfamiliar users. Matters of detail such as how the discount rate is to be used, treatment of

inflation, and the identification of relevant cashflows were outlined and illustrated via examples.

Some aspects of the recommended analyses remained theoretically weak, however. For example

the cost of capital criterion was poorly constructed5, tax shields were inadequately considered,

the relationship between real and nominal discount rates was incorrectly stated, and IRR was

suggested as a basis for ranking mutually exclusive projects even where their sizes may differ

substantially. What rigour was lacking in the detail was overshadowed by the forceful

unequivocality of the new policies and procedures manual, however. The introduction of NPV

and IRR as recommended project analyses was a substantial move away from the almost

7 This Project Accountant worked at the direction of the GM Finance.

8 One General Manager (September 1993) claimed to have suggested an 11% cost of capital, from a CAPMcalculation using a beta estimate “pulled out of the air based on gut feel”. A Project Accountant gave a differentversion of events (August 1993), claiming that a 13% weighted average cost of capital was calculated within theFinance Division and later “fudged” to agree with an 11% figure suggested by external consultants. Theseconflicting explanations suggest that the cost of capital was less rigorously constructed than is suggested in theCHE’s formal documents.

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exclusively clinical project justifications that had previously been accepted. The new policies

and procedures manual clearly framed the new ‘rationality’ of investment decision-making as

economically driven and financially justified.

Research method and evidence

This case study was undertaken over eleven months from August 1993 to June 1994. For most

of this period a researcher was on site at the CHE for two or three half-days per week, and was

provided with an office and all necessary facilities and allowed wide-ranging access to

documents, meetings and personnel.

Fifty-eight unstructured interviews were conducted, involving thirty-eight interviewees ranging

from CHE directors and senior managers to clinical and accounting personnel.6 Each actor was

interviewed at least once, many were interviewed several times in order to explore issues

emerging from previous discussions or raised by other people. In addition, informal

conversations and discussions at meetings supplemented the research evidence. Many interviews

were tape-recorded and later transcribed, with transcripts or notes made available to participants

so they could ensure their views had not been misrepresented. Interviewees were aware of the

researcher's interest in the general area of capital investment, but remained free to focus on those

issues which they perceived as relevant to this domain. No set question list was used, although

questions were sometimes aimed at pursuing issues arising from other sources, or at validating

emergent evidence.

Dane (1990, p.161) advocates 'deviant case sampling', where the researcher observes

"individuals who do not seem to fit some pattern exhibited by others", and Booth and Chua

(1992) suggest that insights may come from comparing the views of new and old organizational

members. Both of these approaches were adopted for this study in order to seek diverse

perspectives on the capital investment decision-making activity. Actors with diverse views on

the CHE’s capital investment practices were identified for interview. Similarly, actors who had

recently joined the CHE (of which there were many) offered interesting contrasts to personnel

9 Many quotes disclose only the individual’s general job title for reasons of confidentiality. For example, all twelveGeneral Managers and eleven accountants were interviewed, many of whom are quoted here but not specificallyidentified. Where the individual was not concerned about anonymity, specific job titles are given if relevant.

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who had been there for many years. Anyone else involved with, or expressing interest in, capital

investment was approached as a potential interviewee, and most appeared willing to share their

views and memories of the decision-making activity.

Documentation of the CHE's capital investment policies and procedures was reviewed, as were

the capital budget, working papers on project proposals, and minutes of Board meetings at which

capital investment was discussed. A variety of occasional or informal documents was also

reviewed, such as memos, reports, minutes of meetings, and project files. Background papers on

the health sector and press reports added an external perspective.

The physical, operational context of this case study was observed during a tour of the CHE's

main hospital facilities. This tour, guided by a number of clinical personnel, provided an

appreciation of the physical appearance and location of capital assets, and an opportunity to

observe the attitudes of CHE personnel to the significance of clinical equipment. For example,

expensive items such as X-ray machines and cardiac surgery suites were displayed with some

pride, and a number of tour facilitators took care to point out the cost of even minor items such

as monitors and surgical instruments. As another source of evidence, attendance at project

control meetings concerning various capital projects offered a means of observing decision-

making dynamics and the interactions of the diverse group of involved personnel.

Five projects were selected for particular study as 'typical' of the capital items considered by the

CHE’s decision makers in the 1993/94 financial period. Two concerned the purchase of

information systems, an area of high investment during the CHE's transition to a 'business-like'

entity, one clinically orientated (a perinatal database) and one pertaining to support services (a

human resource information system). The other three main projects related to clinical equipment

purchases: an automated blood culture analyser in the Clinical Support Services Division, a

selectron machine for the Medical and Elderly Division and the replacement of theatre lights and

tables in the Surgery Division. These projects ranged in size, justification and the extent to

which financial analyses were performed and appeared significant in the decision-making

activity, though all were subject to the analysis and presentation requirements of the new capital

investment regime. Documentary evidence pertaining to these projects was reviewed prior to

conducting interviews, providing a focus for discussing capital investment practice.

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As these five main projects were discussed with CHE actors, other recent investments were

frequently referred to and became part of the domain of experiences from which interpretations

were offered and made. Two of these related to the construction of major new hospital facilities,

while others related to facilities upgrades (pharmacy, cafeteria kitchen, and carparks) and clinical

equipment (ultrasound machines and a sample delivery system for the medical laboratories).

Over the eleven month period a myriad of research evidence was collected from interviews,

documents, meetings and observation. The next section of this paper outlines the interpretive

approach used to make sense of this evidence, and the themes of meaning that emerged.

Interpreting the evidence

The interpretation of evidence had two stages. First, as is characteristic of an interpretive

methodology, an attempt was made to allow themes to emerge from the actors within the

research site. While the principles of grounded theory were drawn on to inform this interpretive

process, the entire analytical framework associated with grounded theory was not adopted7.

Rather than using elaborate coding procedures (Strauss and Corbin, 1990), broad patterns and

themes were identified and began to shape the subsequent collection of evidence.

As suggested by the research question, the aim of this study was to examine how and why

accounting was used by CHE actors in their capital investment decision-making activities. The

interpretations offered here are divided into these dual concerns.

How was accounting used?

Information for rational economic decision-making

The expectation of normative capital investment theory is that financial analysis is

employed to support economically rational decisions about the efficient use of resources.

There was evidence in this case study that many actors were concerned to benefit from

accounting analyses in this way. The following quotes illustrate the frustrations of some

: See Smith (1989) and Bryman and Burgess (1994) for arguments in support of the partial application of grounded

theory approaches. Ansari and Euske (1987) and Covaleski and Dirsmith (1990) provide examples of partialgrounded theory approaches in the accounting literature.

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CHE personnel that previous, non-financially orientated investment decisions had seemed

to waste precious resources:

“Health funding used to be allocated from the Department of Health and Hospital Boardsjust spent it without any economic justification, up until around one year ago. Now thereare more financially minded people in the organization.”

(Project Accountant, August 1993)

“It is reasonable to ask for financial justifications.... I have a nursing background, so Iunderstand how doctors and nurses will bleat about how they need things to do theirjobs. In the past this has been enough to get them the money they want; not any more.”

(GM Medical and Elderly Division, September 1993)

The analysis techniques prescribed in the CHE’s new capital investment policies and procedures

manual were seen to reduce the subjectivity of decision-making processes and improve

outcomes. Yet, while actors tried to engage with the newly prescribed techniques, it was not

without difficulty. A number of people, including accountants, commented on the problems of

capturing clinical or strategic projects in financial terms:

“Even to do a cost benefit analysis on some of these things is a laugh.”(Divisional Accountant, October 1993)

The standard format spreadsheet analysis required estimates of revenue streams, yet for some

projects ‘benefits’ were difficult to quantify. Some were indirect or intangible benefits, such as

in the case of the human resource information system and the perinatal database, while others

were measured against an uncertain base-case where existing revenues may erode if no

investment were to take place. A manager, discussing the perceived need for an item of clinical

equipment (a magnetic resonance imager or MRI), offered an example:

“Some issues are currently intangible in trying to justify the MRI, for example increasingthe skill base [of clinicians]. But they may become real in five to ten years, and realrevenues may be lost ... by not having an MRI.”

(Manager, Laboratory and Radiology, October 1993)

Even where projects were thought to offer clear financial benefits, project proposers

inexperienced with financial analysis found their quantification difficult. A Charge Technologist

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illustrated this, explaining the difficulty of assessing benefits from the purchase of an automated

blood culture analyser:

“It is hard to estimate the savings from equipment to tell the accountants. Much of thesaving comes from having results earlier - how do you put a dollar value on this? Willpatients go home earlier due to faster reports? .... It is hard to estimate these savingsthough. We need to be able to sell it to the beancounters.”

(Charge Technologist, Microbiology, September 1993)

In such instances, once project proposers had articulated the project’s dimensions to “the

beancounters”, accountants usually were able to generate assumptions that allowed for the

quantification of uncertain financial benefits. This is illustrated in the ‘workup’ produced by a

Divisional Accountant to justify the blood culture analysis machine discussed above:

“Positive cultures determined earlier @ 6 per day = 1,500 p.a. Say, 10% result in a 1 day reduction in bed stay: 150 x $300 = $45,000.”8

(Project proposal document, 1993)

The accountant was able to use the familiar reductionist facility of accounting to represent some

‘version of reality’ so that the project could be quantified and assessed. The assumptions

required for these kinds of solutions often left non-accounting personnel uncomfortable,

however, reducing their sense of commitment to the financial analysis as any satisfactory

representation of likely project outcomes. It was quickly recognised that accounting analyses

were a limited means of expressing the complexity and variety of capital projects, offering only

symbolic, simplified representations of ‘reality’.

The second problem of translating investment projects into cashflow data concerned a perceived

conflict with decision ends. Where projects were considered essential for either strategic reasons

(such as the carpark investment), or on clinical grounds (such as in the case of the operating

theatre lights and tables), CHE actors often felt that financial analyses was unnecessary. The

theatre lights and tables investments provide interesting examples. The brief narrative

justifications included in the proposal document for these purchases were as follows:

[For the theatre tables:] “Three tables are condemned and need replacement urgently.They are over thirty years old and parts are not available.... The tables are fast becomingdangerous.”

; The term “bed stay” indicates the number of days for which a patient occupies a hospital bed. Costings produced

by this accountant suggest that one day’s bed stay costs $300.

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[For the theatre lights:] “Good lighting is essential to good quality. Three theatres arein need of an urgent upgrade in lighting.”

(Project proposal document, 1993)

In accordance with new project proposal requirements, discounted cashflow analyses were

presented for both projects. The analysis of the theatre lights, for example, looked like this:

Figure 1: Theatre lights project financial analysis

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10

Capital requirement (100,000)

Repairs and maintenance (2000) (2020) (2040) (2061) (2081) (2102) (2123) (2144) (2166) (2187)

Tax on operating cashflows 0 2640 2666 2693 2720 2747 2775 2802 2830 2859 2887

Tax shield on depreciation 0 2762 2486 2237 2014 1812 1631 1468 1321 1189 1070

Total net cash flows (100,000) 3402 3132 2890 2673 2478 2304 2147 2007 1882 1770

Present value of cash flows (100,000) 3065 2542 2113 1761 1471 1232 1034 871 736 623

Project NPV (84,552)

In these financial analysis it is unclear how the “tax on operating cashflows” (apparently

assuming an operating loss which is not itself shown) and “tax shield on depreciation” figures

were determined, or why repair costs were inflated at 1% per annum. The bases for these figures

were not stated. The accountant who produced these ‘workups’ knew of their theoretical defects

and considered them to be “farcical” (Divisional Accountant, September 1993). Yet, despite

ambiguous financial analyses and negative net present value results the theatre lights and tables

were approved for purchase, suggesting that the espoused economic criteria were not binding on

all projects and that some financial analyses offered little information to decision-makers.

Accounting technologies were seen here as difficult to apply and unhelpful in informing

decisions, so why were they used? They were used because they had to be - they were imposed

as a routinized set of rules throughout the CHE.

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A routinized set of accounting rules

Accounting techniques were now imposed as a standardized set of rules for proposing capital

projects over $50,000, with no formal exemptions. One accountant described the task of

expressing clinical projects in these economic terms:

“We have to take a cold, inhuman approach to calculating the financial justification forcapital expenditure.”

(Divisional Accountant, August 1993)

This “cold, inhuman approach” sometimes resulted in financial analyses which were considered

“farcical”, but which nevertheless complied with the rules. The GM Finance was unperturbed by

this apparent contradiction, however. He remained convinced that the new project proposal

regime was necessary in order to “change the mind-set” of CHE actors so that they considered

the financial implications of all capital investment (GM Finance, September 1993). This change

of mind-set was promoted through the requirement to consider alternative options, collect

appropriate data and identify project costs and benefits, rather than by necessarily enforcing the

decision rules suggested by discounted cash flow analyses. The process of constructing financial

analyses was perhaps more important than their outcome.

Certainly, if the GM Finance of this organisation had been surveyed by a researcher concerned

with documenting practice, a strong degree of ‘sophistication’ would have been reported, since

the prescribed processes and analyses appeared on the surface to meet theoretically

recommended criteria. Yet from the closer examination facilitated by this case study, both the

construction and the application of these analyses were seen to differ from theoretical

prescription. Accounting technologies were used throughout the organisation as a requirement of

the new, routinized protocol for capital project appraisal, but appeared not to operate as the

textbooks might intend. This raises questions: why did CHE actors participate in using these

imperfect accounting technologies? What did they feel they gained from it?

Why was accounting used?

A number of issues emerged as relevant to understanding CHE actors’ uses of accounting in the

capital investment decision-making activity. As has been noted, there was some expectation that

the economic analysis of projects would enhance CHE actors’ ability to made “rational”

investments. This is the ‘textbook’ motivation for financial analysis. Other motivations were

also at play, however.

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A break with the past

The CHE’s new capital investment procedures were a response to health sector reforms that

explicitly required CHEs to be “business-like and economically “rational”. It was clear to CHE

actors that changes, imposed from the highest level, were taking place within their organization.

As one manager put it:

“There is a situation of old cultures and new cultures coming together, and transitions tobe made.... Some are more into the old way of thinking, but are slowly realising that thisis no longer the culture of the organization.”

(GM Women and Children’s Health Division, October 1993)

At the time of this study the changes were recent and some actors whose favoured modes of

decision rationality were challenged by the new economic focus, (namely medical personnel),

expressed an intention to resist accounting technologies. One accountant noted:

“I see a big perception of ‘them and us’.... Many medics perceive that financial workupsare just a time consuming waste of effort.”

(Project Accountant, August 1993)

To reject the new capital investment requirements was to reject the economic underpinnings of

health sector reforms, however. Although many CHE actors (and indeed New Zealanders at

large) did oppose the philosophy of the reforms, overt refusal to embrace new approaches was

generally considered to be an unproductive tactic. Many of those who remained unconvinced of

accounting’s contribution still spoke of the need to be seen to support the new approach to

capital investment. For example:

“The DCF is meaningless .... I can’t see the increased move to doing DCFs changingthings much, but it has to be seen to be done.”

(GM Commercial Support Division, September 1993)

Most actors were quick to realise that they could not sustain decision-making influence without

entering into the new discourse, and were aware of the need to present 'business-like' financial

cases for proposed projects. As a result, personnel with no background in accounting found

themselves struggling with the raft of accounting terminology which now pervaded the CHE.

A new language

As one manager with a clinical background noted:

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“People here have never had to think about IRR, NPV etcetera. Even payback period isa foreign language.”

(Manager, Laboratory and Radiology, October 1993)

Actors recognised that health reforms had introduced a foreign accounting 'language’ as the

accepted discourse of investment appraisal. Although many CHE personnel expressed

frustration at their inability to 'speak' this language, or were sceptical about its relevance in a

health care organization, they were motivated in two ways to participate in new procedures for

justifying capital expenditure. First, there was a pragmatic incentive to advance projects by

‘playing the game’, in a manner Brunsson (1982) describes as ‘action rational’. That is, the

translation of project cases into the ‘accounting language’ could be seen as a rational means of

securing action, rather than necessarily of seeking the best information for decision-making.

Second, participation in the construction of accounting analyses was a means of joining the

accounting discourse to which the locus of power was being forcibly directed. This response

could be seen as rational self-interested action - an attempt by disenfranchised subsets of CHE

actors to recapture their voice and influence in the decision-making activity. Harrison and Pollitt

(1994) offer an insight into how the introduction of an accounting discourse might be viewed by

clinical professionals:

“Professions are likely to retain considerable autonomy so long as they continue tomonopolise their particular skills.... Doctors ... continue to control an activity which ishighly uncertain ... managers remain unable to render this activity (and others)predictable, standardized and transparent - and therefore remain largely unable to controlit.... The reduction of professional judgement to programmable routines or algorithms ...tends to strengthen management’s hand.”

(Harrison and Pollitt, 1994, pp. 137-139)

The historically strong influence of clinicians over health care investment decisions was at risk of

being undermined by accounting technologies. By becoming familiar with the “routines and

algorithms” of accounting, clinicians (and other non-accountants) could themselves employ the

very discourse that threatened their influence in the capital investment activity. Preserving their

influence would allow clinicians to ensure that their own concerns and ideologies were not

alienated from the decision-making arena.

Contesting rationalities

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Prior to health sector reforms and the introduction of the new capital investment regime, clinical

arguments about the direction of CHE resources were the dominant rationality. One accountant

saw it in the following terms:

“Doctors always gave the justification that someone will die if they don’t get theircapital item.”

(Divisional Accountant, August 1993)

As the CHE’s language of investment appraisal changed, a transformation was also apparent in

what was considered a ‘rational’ approach to investment decision-making. The new accounting

rules were standardized and routinized across all CHE activity areas, formalised in a policies and

procedures manual so that everyone knew what they were. Financial “workups” symbolised

objectivity and rationality according to this set of recognised rules. A financial case could be

defended to others was therefore useful to project champions, as illustrated by this quote:

“The numbers are extremely important. If you can’t come up with a business case then itwon’t happen. I want a pretty good argument before I’ll face the [CHE] Board with aproposal.”

(GM Mental Health Division, September 1993)

The advocacy role of the accounting numbers was considered so important that figures were

sometimes changed to manipulate the outcomes of financial analyses. When unfavourable NPV

results occurred, some project champions were more concerned with ‘fixing’ the numbers than

with reconsidering their assessment of the project, as one Divisional Accountant revealed:

“... the financial workup looked bad, so [they] would look at things and say “change this,change that’. So, despite all the time I had put into deriving figures for the workup, a lotof it was changed at the last minute based on gut feeling.... It was a bad quality jobreally.”

(Divisional Accountant, September 1993)

In this instance, CHE actors had a “gut feeling” of commitment to the project, and the

unfavourable accounting results did not change their minds. They framed their project according

to the new ‘rules’ since it served their purposes, even when this meant undermining the

accountant’s efforts to produce a rigorous financial assessment. This is an example of the

purposive use of accounting in what Burchell et al. (1980) referred to as a legitimating /

retrospective rationalizing role. In cases like this, the new project proposal rules changed

nothing of substance in the actors’ decision-making, only the language used to express the

18

project case changed. Accounting’s main contribution seemed to be to clarify the terms of

project advocacy and provide rules which could be drawn on in purposive fashion.

Brunsson (1990) suggests that the possibility of rationalising choices by reference to established

routine and procedure can help to remove decision-making risk. The need for professional

judgement accedes to prescribed procedures which are accepted as rational and need no further

defence. In the CHE, the uncertainty associated with proposing capital projects was considered

by many actors to be reduced because procedures and criteria were now explicit. As a

consequence however, arguments which did not reflect the ‘objective’, ‘business-like’ mode of

decision-making could now be labelled emotive and irrational, and had become less influential in

the CHE’s capital investment activities.

Shifts in power

There is little doubt that one motivation for the government’s health sector reforms, and the

consequent requirements for greater financial accountability, was to forcibly re-orientate relations

of power within public health care organisations (Lawrence et al., 1994). A CHE General

Manager, herself trained as a nurse, said:

“Managers have never been seen to have power - the nurses and clinicians have thepower.”

(GM Surgery Division, September 1993)

Clinical actors had, in the past, been able to call upon arguments of life and death, quality and

caring, to support their cases for capital expenditure, while senior managers had been able to

justify expenditure in loose terms of ‘strategic benefits’. Neither of these discourses had been

transparent to non-clinicians or non-senior personnel, who may have felt that equally meritorious

projects were overlooked for want of an influential champion. The new requirements were seen

as changing this. As one general manager noted:

“The new process ... takes away the subjective judgement. In the past, the person whoscreamed the loudest and longest got the money .... The way [capital investment] ishandled now is a much fairer system. Everyone needs to look at the same features andjustifications, no matter what area they’re in.”

(GM Human Resources Division, September 1993)The ‘objectivity’ of accounting technologies seemed to offer little room for privileged discourses,

thereby diminishing the influence of clinicians and senior managers and opening decision-

making participation to any actor who could engage with the new language and rules. These new

19

rules were not neutral, however, and still conferred privileges but to different subsets of actors.

The senior financial personnel who made the ‘rules’ and the accountants who were ‘native

speakers’ of the accounting language now held an advantage. Many clinicians and other non-

accountants felt accordingly disadvantaged and disgruntled:

“We can’t move now without being financially accountable; the fact that people mightdie is not enough any more.”

(Manager, Women’s Health, (a trained nurse), January 1994)

The routinized and pervasive use of accounting for project appraisal legitimated the language of

accounting, while its underlying technical discipline gave it a strong base from which to contest

the professional ideology and status of clinicians. The CEO (a clinician) illustrates this point,

saying:

“You can’t run a 250 million dollar organization without financial structures. It isarrogant of clinicians to think that they have the monopoly on science - we needsophisticated techniques at the moment.” (CEO, November 1993)

Actors skilled in accounting “sciences” usually knew little about medicine and health care,

however. For many capital projects, it was the clinicians who retained crucial knowledge about

the capabilities and outcomes of the asset(s) in question, allowing them to retain much of their

power in what Giddens (1984) would call a “dialectic of control”. As an accountant ruefully

acknowledged:

“... clinicians can justify anything financially if they really want it, they just have tomake assumptions which will lead to a positive NPV!”

(Project Accountant, August 1993)

Although the requirement for financial analysis of capital projects was a constraint on the

language and actions now considered ‘rational’ and acceptable, it also enabled clinical and non-

clinical personnel to re-negotiate relations of power within the capital investment decision-

making activity.

As the “dialectic of control” operated to shape domination relations between subsets of CHE

actors, it seemed that the clinical discourse was more difficult to penetrate than that of the

accountants, however. As managers and accountants witnessed the assimilation of their

‘economic language’ by clinicians, it is perhaps unsurprising that CHE accountants were striving

to increase the sophistication of their accounting analyses. Their actions possibly were motivated

20

by a desire to strengthen their “ammunition” (Burchell et al., 1980) by reducing the transparency

of their technologies.

Summary

The themes identified here arose from the case study evidence. CHE actors expressed concerns

about changing rules, changing language and how best to present a persuasive, 'rational' project

case under the new capital investment regime. It was clear also that power shifts were perceived

as impacting on the ability of various subsets of CHE actors to successfully lobby for capital

funding. Accounting appeared to play a role in creating a new ‘language’ and formalising new

rules, and was a resource which actors could draw on in presenting a rational, defensible case in

order to influence capital investment decisions.

Although theoretically recommended accounting techniques were apparently in use within the

CHE, the evidence from this case study suggests that much can lie beneath the appearance of

‘sophisticated’ practice. In examining how techniques were used it is clear that both their

execution and influence differed from the expectations of the rational economic theory which

underpins these accounting algorithms. The calculations were not always rigorous due to errors

or problems of capturing project complexity, and the outcomes of these analyses were not always

employed as objective inputs to rational economic decisions. The reasons why the techniques

were used appear various and are not always obvious. Interpretations from this case study

suggest that accounting is used at multiple levels: as a way of generating relevant financial input

for decision-making, as a signal that discourse, rules and norms of behaviour have changed, and

as a means of expressing and shaping power relations amongst organisational actors. Only the

first of these dimensions has ever been explored by survey based empirical research and, for this

case study at least, would clearly have offered insufficient understanding of practice.

The potential to develop themes of meaning from case study evidence depends in large part upon

the theoretical perspective adopted. The next section of this paper discusses the contribution that

strucutration theory concepts offered for this study.

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Structuration theory as an interpretive framework

The central notions of rationality and of the restructuring of language, rules and power relations

within the CHE accord well with the elements of Giddens' structuration theory. Giddens is an

insightful contemporary social theorist whose work is increasingly being drawn upon in the

accounting literature. His work has a critical, (though not radically critical), agenda which seeks

understanding rather than necessarily advocating change, thus complementing the objectives of

this interpretive study. Giddens notes the utility of his theory of structuration when invoked as a

“... sensitizing device, to be used in a selective way in thinking about research questions or

interpreting findings" (Giddens, 1991, p.213). It is in this capacity that his theoretical

perspective is employed for this study.

A limitation of prior survey research has been that it does not reflect the rich, dynamic

organisational context surrounding the capital investment decision-making activity. Practice is

captured at a single point in time from a single respondent’s perspective and the impact of the

organisational environment on this practice, or practice on the organisation, is ignored. A

strength of structuration theory is that it recognises the interplay between individuals and the

organizational ‘structures’ which surround their decisions and actions. Giddens' theory

recognises the continuous change inherent in social systems, a perspective which fits well with

the dynamic context of the studied CHE. The use of accounting technologies by CHE actors in

their capital investment activities can, from a structuration theory perspective, be appreciated

both as an artefact of the organisation which shapes individual’s actions, and as a tool which

people use to reshape the organisation. This fluid and reflexive perspective helped to reveal the

multiple reasons for accounting’s use within the CHE. Structuration theory concepts that have

been particularly useful in interpreting evidence from this case study are considered next.

The duality of structure

Giddens suggests that no social structure can exist without social agents, since it is these agents

who continuously create and re-create structure. The subjective (action) and objective (structure)

dimensions of social reality are seen as inseparable media and outcomes of each other, together

comprising “the duality of structure” (Giddens, 1984, pp. xx -xxi). The reproduction of structure

22

is a chronic, though unintended, consequence of the social activity which forms “the duree of

day-to-day life” (Giddens, 1984, p.8).

This relationship between organisational structures and the agency of actors was evident in the

CHE case study. The introduction of accounting technologies changed the day-to-day

organisational discourse to reflect incoming “business-like” values, and re-directed the

structuration processes which shaped the CHE’s social environment. As actors used capital

investment analysis techniques, they reconstituted the place of accounting within the CHE’s

social structure and so a “duality of structure” could be observed. The recognition of

structuration processes and the duality of structure offered by Giddens’ theory illuminates the

inculcation of new rules and values as a motivation for introducing accounting technologies into

the CHEs capital investment activities.

Giddens (1984) notes that the memory of past structures also influences ongoing structuration

processes. This was evident during this study as CHE actors recalled either the good or bad ‘old

days’, depending on their perspectives, before health sector reform. By telling stories about prior

practice, and suggesting that accounting technologies were a necessary part of breaking with the

past, some CHE actors were able to rationalise change and to support their claims to greater

influence under the new regime. As they reasoned, communicated, acted and rationalised their

actions according to the new economic requirements, they reinforced the significance of this

economic perspective within the CHE’s organisational environment in a duality of structure.

Constraining and enabling structures

According to structuration theory, the rules and resources which structure makes available both

shape and constrain the action of individuals. That is, while actors are constrained by social

norms to act in a ‘rational’ manner, these norms also enable actors by providing a benchmark of

what is considered rational and acceptable behaviour.

This was evident within the CHE. The use of accounting techniques for framing capital projects

made transparent the decision rules and facilitated project acceptance where actors (champions)

knew and ‘played by’ these rules. At the same time, new accounting requirements constrained

project acceptance when the rules were difficult to apply, or where actors (often clinicians) were

now less able to rationalize project proposals in alternative, non-economic terms. An awareness

of the corresponding nature of constraint and enablement allows us to understand why actors

23

might accept the constraints of a new accounting technology. Structuration theory suggests that

individuals have an unconscious need for “ontological security” (Giddens, 1984) and look to

structures and routines as ways of meeting this need. The capital investment policies and

practices at the CHE formed part of these structures and routines, so were enabling as well as

constraining of actors.

The dimensions and modalities of structure

Giddens identifies three “modalities of structuration”: interpretive schemes of communication

(signification), norms for sanctioning social action (legitimation) and facilities for the exercise of

power in bringing about outcomes (domination). Uses of accounting could be seen to provide

such modalities within the CHE, bringing about new language, new rules, and shifts in power.

While each of these effects can be observed in isolation, it is their combination which acts to

reshape the social structures and environment within the CHE, as articulated in Giddens’

structuration theory.

Interpretive schemes represent the common ‘language’ through which members of a social group

communicate. The language required to make a case for a capital investment project was

changing in the CHE at the time of this study. As structures of signification were modified, so

too was the day-to-day language used by actors, with non-native speakers such as clinicians and

technical personnel now referring to the cost and efficiency implications of capital projects. The

accounting discourse had not totally supplanted that of the medics however, and appeared

unlikely to ever do so. In many project cases, clinical justifications came first, followed by

financial justifications. A ‘translation’ process was undertaken by accountants to express

projects in the preferred financial language so that they may be presented as objective and

justifiable. As accounting language became absorbed into the everyday discourse and

understandings of CHE actors it fed into structuration processes and , just as Ansari and Euske

(1987, p. 654) have noted in another study, accounting systems that were initially called upon to

provide “rituals of rationality” were becoming institutionalised “technical systems”. As project

champions framed their case for investment, they were beginning to draw on a different

discourse.

Giddens’ notion of signification structures, and the need for shared interpretive schemes, helps to

reveal why accounting permeated the CHE as a new discourse for capital investment. Clearly it

24

was the perception of the validity (rationality) of accounting numbers, rather than their

underlying rigour, which gave them a role in structuration processes. Accounting expressions of

projects were a common ‘language’ to be assimilated by all actors, so were used and reinforced

in spite of their flaws and inadequacies. It is interesting to consider why it was that accounting

was seen as an appropriate and acceptable means of articulating the capital investment discourse

in the CHE. This issue is illuminated by Giddens’ notions of legitimation structures.

Structuration theory recognises that what is considered legitimate or valuable within a social

system is shaped by prevalent ideology and reinforced via systems of accountability. All social

relations rely on both an understanding of what is acceptable and an expectation that actors will

knowledgeably orientate their actions to extant legitimation structures. CHE clinicians have long

had their own professional norms for what is considered acceptable practice, but government

health reforms forcibly reoriented legitimation structures in health care organisations away from

clinical ideologies and towards the ideology of the competitive, business-like market place.

This was mirrored in the CHE’s norms for what constituted worthwhile capital investment. The

expressions of ‘value’ from capital assets now had to be mediated through accounting

‘translations’, and the introduction of standardised policies and procedures codified new norms

for what was considered a ‘legitimate’ project case. The rules were changing, as CHE actors

were well aware. Because accounting technologies gave shape and expression to these new

rules, actors needed to draw on accounting in order to meet changing expectations of acceptable

capital investment behaviour. Power lay with those actors who could best play by the new rules.

Power is articulated in structuration theory as domination structures. Giddens (1984, p. xxxi)

suggests that actors exercise power through their command over allocative resources (objects,

goods, and other material phenomena) and authoritative resources (the capability to organise and

co-ordinate the activities of social actors). His notion of power is not a pejorative one where

actors necessarily impose their will upon others. Rather, Giddens sees power as fundamental to

social interaction as a means of getting things done. Structuration theory assumes that the

“dialectic of control” (Giddens, 1984) allows both superiors and subordinates to exercise power,

albeit in unequal proportions which relate to the capacity of these actors to command allocative

and authoritative resources.

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This notion of power relations is useful in understanding capital investment activities within the

CHE. Influence over capital investment decisions was shifting away from clinicians and towards

managers charged with operationalizing the economic philosophies of health sector reform. As

the language (signification structures) and rules (legitimation structures) of investment decision-

making moved towards an economic discourse which specified project legitimacy in terms of

economic outcomes, clinicians lost command over authoritative resources. Accounting

expressions of project cases were now the legitimate tool of advocacy; clinical arguments had

become less persuasive. Managers and the CHE Board of Directors commanded the allocative

resources by making decisions about which assets would be purchased, and their command over

authoritative resources had strengthened now that they could direct actors to follow prescribed

policies and procedures.

But why did clinicians not rebel? Why did they, in the main, participate in the new capital

investment regime which was so clearly instrumental in attempts to reduce their power?

Structuration theory’s conception of domination relations, and the dialectic of control, provides a

means of interpreting and explaining these case study findings. Clinicians knew that they had

not lost their influence on capital investment decisions, and this was also clear to CHE managers

and accountants. As long as clinicians engaged with the new accounting discourse and framed

clinical project proposals in an appropriate fashion, they could ensure that the accounting

expression of projects would meet the rules of acceptability and could continue to “justify

anything financially if they really want it...” (Project Accountant, August 1993). Clinicians held

the information that accountants needed in order to translate projects into economic terms, and so

commanded a key authoritative resource. Operating in a dialectic of control, the clinicians were

drawing on this resource in order to maintain their position within the CHE’s domination

relations.

Even where this approach was not successful, the fact that alternative clinical arguments were

based on respected professional ideology and judgement meant that they remained influential.

Non-clinical CHE actors remarked that clinical concerns must still be paramount where lives

were at stake, and clinicians noted the reluctance of non-clinical actors to take risky decisions

concerning core (health care providing) activities.

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What is clear from the interpretation of evidence from this case study is that accounting had

utility for a diverse range of CHE actors; it was not simply a technology applied and interpreted

by accountants. Accounting offered an input into ongoing structuration processes of developing

language, norms and relations of power within the CHE. It was not the only input since other

professional ideologies offered alternative meaning and values, but accounting played a

significant part in the changes taking place in the CHE, and in the ways in which actors re-

orientated themselves to new organizational structures. The theoretical constructs offered by

structuration theory acted as a “sensitising device” for exploring the reasons why CHE actors

used accounting in their capital investment decision-making activities. Where actions might

otherwise have seemed irrational, such as where partial or flawed accounting analyses were

constructed and relied upon in project advocacy, structuration theory ideas illuminated

explanations which can be understood as rational within the actors’ organisational context.

While structuration theory was helpful for this study, its general usefulness as a framework for

accounting research has been the subject of a debate between Macintosh and Scapens (1990 and

Scapens & Macintosh, 1996) and Boland (1993 & 1996). The next section of this paper discusses

key elements of this debate in relation to the evidence and interpretations from this case study.

Reflections on the structuration theory “debate”

As a starting point, it is helpful to review the key elements of this debate which are presented

here in much simplified terms.

Macintosh and Scapens (1990) aimed to “illustrate the usefulness of structuration theory in

understanding management accounting” (p. 462) by using it to reinterpret Covaleski and

Dirsmith’s examination of the University of Wisconsin budgeting system (Covaleski & Dirsmith,

1988). They identified as a key strength of structuration theory its movement beyond the

structuralist versus agency dichotomy which has characterised much management accounting

research, to accommodate both concerns within an integrative theoretical framework. Further,

they claimed that a structuration theory perspective could reveal “the ways in which accounting

is involved in the institutionalization of social relations” (Macintosh & Scapens, 1990, pp. 475).

Boland (1993) was not persuaded that Macintosh and Scapens had demonstrated the utility of

structuration theory for management accounting research. His main objections to their thesis

27

appeared to be twofold. First, Boland suggested that Macintosh and Scapens had characterised

management accounting systems as “the interpretive schemes, norms and facilities used by

managers in making interpretations”, which inappropriately presented management accounting

systems as “monolithic sets of meanings” imposed on managers (Boland, 1993, p.140; emphasis

added). Second, Boland suggested that, by using structuration theory to reinterpret someone

else’s study, Macintosh and Scapens had failed to view structuration processes “up close”,

thereby losing any perspective on the actions and interpretive powers (agency) of individuals.

To illustrate his contrasting view Boland (curiously) repeated Macintosh and Scapens’ approach,

using structuration theory ideas to interpret someone else’s study of managers reading

management accounting reports (Milne, 1981). From this study, where he claimed to examine

the interpretive acts of his subjects “up close”, Boland suggested that “the modalities of

structuration being drawn upon by these readers are multiple and conflicting” (Boland, 1993, p.

136). They were not, as Scapens and Macintosh (1990) had seemed to suggest, necessarily those

modalities associated with management accounting systems. Scapens and Macintosh (1996)

replied that Boland had misunderstood them, and that they “did not seek to claim that

management accounting systems are the only interpretive schemes, moral norms and facilities for

domination in any organization” (Scapens and Macintosh, 1996, p. 677; emphasis added). They

suggested that it remained important to study the interface between management accounting and

other organizational processes if management accounting practices are to be understood.

Scapens and Macintosh (1996) also took issue with Boland’s criticism that they had failed to

observe the agency of actors “up close”, reiterating their view that the duality of structure in

Giddens’ theory relies entirely upon an equal appreciation of both structure and agency. They

launched a counter-attack, suggesting the Boland was guilty of the opposite infringement,

appearing to “privilege agency over structure and to ignore the process of structuration through

which [actors’] understandings ... are constructed” (Scapens and Macintosh, 1996, p. 680).

Scapens and Macintosh (1996) suggested an explanation for their and Boland’s differing views.

They pointed to Giddens’ distinction between “the analysis of strategic conduct” and

“institutional analysis” (Giddens, 1984, p.288 cited in Scapens and Macintosh, 1996, p. 681), and

suggested that while they had concentrated on the latter, Boland’s concerns lay with the former.

28

Scapens and Macintosh claimed that the two perspectives could be distinguished via a process of

“methodological bracketing” which places emphasis on one or other concern, thus explaining the

difference between their and Boland’s perspectives. They warned however that methodological

bracketing could, if taken too far, reintroduce “the division between objectivism and

subjectivism which the duality of structure was intended to dissolve” (Scapens and Macintosh,

1996, p. 683), a division which they felt Boland had created by “bracketing” too much and losing

something of the interrelationship between agency and structure.

Boland (1996) retorted that Scapens and Macintosh had misinterpreted Giddens’ intention in

proposing structuration theory, and that their reference to methodological bracketing as the root

of the debate was misleading. Boland (1996) again suggested Macintosh and Scapens’ had

overstated the effects of structure and under-estimated the potency of human agency. According

to Boland, actors were not necessarily purposive in their actions, nor did they act in response to

structures of common meaning and value. Instead, they were simply concerned to “make

themselves accountable ... by behaving in ways that can be understood by others as being

observable, reportable and coherent” (Boland, 1996, pp. 694-695). Further, what was provided by

management accounting practices was not structure but “common stocks of knowledge” which

provided a “language” for making meaning.

Boland had again insisted that Macintosh and Scapens’ perspective was overly structural;

Macintosh and Scapens still viewed Boland’s analysis as overly voluntaristic. And so the debate

remained un-reconciled. There are several identifiable points of departure between these

authors’ perspectives, which can be illustrated using the experiences and findings of the case

study reported in this paper.

Observing structuration processes: the focal length

Boland (1993) suggested that the focal length of the researcher, in viewing structuration

processes “up close” or “at a distance”, may shape the ways in which these processes are

observed and interpreted. In order to view structuration up close, as Boland advocates, it seems

29

necessary to observe individuals’ actions as they go about their activities, and to uncover these

actors’ own understandings of relevant meanings, norms and power relations. Although Boland

claimed that Macintosh and Scapens (1990) failed to achieve a level of ‘closeness’ which might

reveal agency at work, his own approach could be similarly criticised. He was not “up close” to

the actors in Milne’s study, and he knew little of the prior knowledge and experience which

might have influenced the ways in which the different managers interpreted accounts. It could be

argued, therefore, that both Boland’s and Macintosh and Scapens’ observations of structuration

processes are “at a distance”, limiting their findings in different ways and fuelling their

disagreement about what it was they saw.

For the case study of the CHE reported here, detailed research evidence came from prolonged

contact with actors who shared a common organisational environment. The actions,

interpretations and rationalisations of each actor could be observed “up close” and in repeated

instances. This offers the potential to consider Scapens and Macintosh’s and Boland’s other

points of departure from a position of having addressed Boland’s criticism of the limitations of

working “at a distance”.

Methodological bracketing: agency and structure

While Macintosh and Scapens and Boland all recognise the “duality of structure” linking

structure and agency within Giddens’ theory, it appears that both parties are, consciously or

unconsciously, engaging in some form of “methodological bracketing” (Scapens & Macintosh,

1996) in order to focus upon their particular interests in what a structuration theory analysis

might reveal of practice. The tendency of each to focus more on either agency or structure is a

consequence of the evidence they are interpreting.

Macintosh and Scapens did not have at their disposal the detailed case study evidence used by

Covaleski and Dirsmith to derive their original analysis of the University of Wisconsin budgeting

system. So, as Boland rightly notes, they were not able to observe instances of agency at work.

On the other hand, Boland drew on a laboratory study of the interpretive acts of 67 managers

participating in an MBA programme. The ways in which these actors understood language,

norms and issues of power were shaped by different organisational backgrounds prior to their

30

being brought to this exercise. Since management accounting is an activity that takes place

within organisations, this lack of any shared organisational context would seem to limit Boland’s

scope to reflect on management accounting practice as it is shaped and used within organisations.

He had no means of relating the actors’ interpretations to any broad organizational context, nor

of connecting the outcomes of their agency to its possible “duality of structure” effects on this

organizational context.

While the choice of studies perhaps suited the particular investigative purposes of the researchers

in both cases, neither could hope to explore the interface between agency and structure. Hence,

“methodological bracketing” was unavoidable and seems likely to have made substantive

differences in both the focus and interpretations of these authors.

The CHE case study drew on detail of actors’ perceptions and actions whilst interpreting this

detail against a shared organisational context. As a result, both the agency issues favoured by

Boland and the structural dimensions highlighted by Macintosh and Scapens were evident in

actors’ uses of accounting in the capital investment activity. Accounting technologies were seen

to constrain actors through their prescription of economic language and rules, that is they had

structuring properties. At the same time they clearly enabled both unconscious agency, offering

routine and ontological security to actors in their “mundane” day-to-day activities, and conscious

agency, by furnishing a transparent framework within which the “game” of capital investment

decision-making could be thoughtfully ‘played’. Accounting represented new signification,

legitimation and domination structures which became relevant within the CHE and required

actors to learn new (shared) understandings of economic-based meanings, norms and relations of

power. At the same time, the case revealed that the actors were free-thinking agents who drew

on accounting to the extent that they perceived it as useful for their rational purposes. It was

clear from this study that agency and structure were inextricably related, as suggested by

structuration theory.

While “methodological bracketing” may be a useful analytical device for some research purposes

as Scapens and Macintosh (1996) suggest, it seems that any attempt to separate the consideration

of structure and agency in this study would have reduced the insights of a structuration theory

perspective and limited emergent understandings of how and why actors used accounting. The

31

greatest opportunity for researchers is also the challenge: to understand how accounting (or any

other organisational activity) relates to both agency and structure in a duality of control.

Management accounting as ‘the’ or ‘one’ set of meaning, rules and resources

Although Boland (1993) accused Macintosh and Scapens of privileging accounting systems as

monolithic modalities of structuration, Scapens and Macintosh (1996) vigorously denied his

charge, noting that they saw the interface between management accounting and other

organizational processes as a key to understanding practice. While articulating it in different

ways, both parties seem in agreement that accounting is but one influence on actors. This was

certainly the case in the capital investment practices within the studied CHE.

In order to understand uses of accounting in the CHE’s capital investment activities it was crucial

to appreciate the multiple interpretive schemes and norms drawn on by actors. It was clear in

this organisation that accounting was not a “monolith set of meanings” (Boland, 1993, p. 140)

which guided actors. Accounting remained, however, a cohesive set of language and rules based

on a rational economic ideology, and it was for this reason that it offered utility in contesting

other influential “sets of meaning” such as clinical discourses. The evidence from this case study

reinforced Boland’s view that actors draw “selectively and skilfully” from alternative sets of

rules and resources in their reflexive monitoring and rationalisation of conduct (Boland, 1993, p.

127). CHE actors drew on accounting and other (notably clinical) languages, values and

resources of domination as they consciously and unconsciously reconstituted the organisational

environment in a “duality of structure”.

Any “debate” between Scapens and Macintosh and Boland on this issue seems to reflect

misunderstanding rather than opposing viewpoints in need of reconciliation. It is, however,

useful to note that the case study reported here was enriched by the identification and

interpretation of alternative, contested modalities of structuration. Actors were seen to draw on

those interpretive schema, rules and power relations which they considered most relevant in

influencing capital investment decisions, demonstrating that accounting cannot be understood in

isolation from other elements of organisational life.

Structuration for ontological security and structuration for change

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One possibility for exploring the departure between Boland’s and Macintosh and Scapens’

perceptions of structure and agency is the extent to which the dynamism of organisational

environments alters structuration processes. Macintosh and Scapens (1990) refer to Giddens’

distinction between “routine” and “crisis” situations, and note that while the reproduction of

social structures flows continuously and unnoticed as routines are unthinkingly repeated, “agency

comes to the fore” (p. 473) under crisis. They suggest that this distinction makes conceptualising

structuration processes problematic but do not pursue this issue in any depth, nor do they return

to it in their 1996 paper. Environmental dynamism is worth considering here, therefore, to

consider why Macintosh and Scapens’ view of how agency and structure interrelate differed from

Boland’s perspective.

Boland (1996) noted that action is not necessarily shaped by any shared understandings of

organisational structures, as Macintosh and Scapens seemed to suggest. Boland claimed instead

that, for the most part, actors merely engage in a “temporal flow of conduct” that is often

“mundane” and unconscious (Boland, 1996, p. 694). He may be right in many situations, but the

extent to which definite goals and known structures are the focus of action depends on context,

just as Macintosh and Scapens suggest. There may be little need to consciously react to

structures of meaning, norms and domination while action flows easily within accepted

organisational practice. The ontological security provided by routine is reinforced as people act

in a routine matter, and the influence of routine-providing structures becomes subtle and endemic

in its effect. Explicit rationalization of action is required where that action runs against accepted

norms however, such as in times of crisis or abrupt organisational change. It is here where actors

must attempt to rationalize their action by reference to those shared, accepted meanings and rules

which exist within the organisation. The ability to draw on these structures to legitimise action is

enabling of change. Meaning and norms can be facilities which give people the power to act in a

way which promotes change, but which can be justified as rational.

Whether actors are engaged in a process and environment of change, or whether they act merely

to reinforce taken-for-granted routine, impacts on the way in which structuration processes might

occur. Note that Macintosh and Scapens (1990) sought to observe structuration processes in a

case context of imposed change and political contest. For this reason, they saw actors drawing

on accounting as a set of structures that were helpful in rationalizing action directed at known

33

goals. Boland’s case (1993) contained no such crisis or change, so what he saw was a less

purposive or obvious recourse to any structures associated with management accounting.

The potential to see the agency and structure relationship in different ways can be illustrated by

reference to the CHE case study. The CHE was experiencing change. Since the rationale for this

change was not embraced by all actors, purposive action was often at the forefront of observed

uses of accounting and other professional technologies. Actors consciously drew on facilities for

making meaning and accepted norms which were defensible as rational, whether from an

economic or clinical perspective. Uses of accounting in the capital investment decision-making

activity were often not routine, but were thoughtful and purposive as actors sought to respond to,

and direct, processes of organisational change.

There was, however, an expectation among some CHE actors that the capital investment activity

would, in time, become less goal-orientated and more taken for granted. Some senior CHE

personnel expressed the hope that the use of accounting, and a corresponding awareness of the

economic implications of capital investment decisions, would become routinized to the point

where they unconsciously shaped action. If this development were to emerge, routine,

“mundane” use of accounting might be observed and the impact of structures of signification,

legitimation and domination upon decisions and action might become less apparent in the

manner which Boland (1993) suggests. Either way, whether implicit or explicit in their effect,

social structures are shaping the agency of actors while at the same time being reconstituted or

reshaped by the exercise of that agency.

What is “rational”?

A final issue relevant to the debate is the exploration of what is meant by “rationality”. Boland

asserts that, rather than acting in accordance with shared values and meanings, individuals act in

the way they do out of concern to present themselves as “rational” (Boland, 1996, p. 695). It

seems problematic to separate perceived rationality from commonly understood values and

meanings against which rationality is evaluated, however. In order to know what will be

perceived as ‘rational’, actors must share some sense of meaning and interpretation, based on

moral norms. When Macintosh and Scapens (1990, p.460) note that signification structures

provide for interpretive schemes by which “each actor makes sense of what others say and do”,

and that legitimation structures comprise shared sets of values about “what ought to happen and

34

what ought not to happen”, they describe the referents against which actors present themselves as

“rational” in the manner which Boland suggests - the modalities of structure.

The desire of actors to appear “rational” was a strong theme in the CHE case study. Actors drew

on accounting assessments of project cases for capital investment advocacy purposes since

accounting could be represented as objective and defensible and was the sanctioned ‘language’ of

project evaluation. The new capital investment ‘rules’ required that discounted cashflow

analyses be performed for all projects, so they were, even in cases where the decision-usefulness

of such analyses was minimal. Actors orientated themselves towards known structures of

legitimation because in doing so they could present their project case as “rational” rather than

“emotive”, as was a common criticism of clinical arguments. In their exercise of human agency

actors were, therefore, drawing on the structuring properties of accounting to provide context

against which the rationality of their actions and decisions could be demonstrated.

It seems that a reconciliation of Macintosh and Scapens’ and Boland’s views is possible simply

by accepting the socially constructed nature of the “rationality” which actors seek to demonstrate,

and the need for shared meaning and values to form the basis for common understandings of

what is rational.

Conclusions

This paper had dual purposes. First, it reported an organisational case study of the capital

investment activity which sought to examine practice in greater depth than has been afforded by

survey based empirics. This study of CHE actors took place in a context of imposed

environmental and legislative change, one result of which was the prescription of apparently

“sophisticated” financial analyses for all proposed capital projects. Prescribed accounting

analyses were used both in an effort to reflect the financial ‘reality’ of investment projects as

input to the decision making activity, and as a set of new rules which standardised practice and

project comparison across the CHE’s diverse range of capital assets.

Once accounting technologies were introduced into the CHE’ capital investment processes, there

appeared to be various reasons why actors engaged with these analyses. First, the use of

“rigorous” and “objective” accounting analyses signalled a break with past practice, and reflected

the imperative for the CHE to function in a more “business like” fashion. Those actors who

35

embraced accounting analyses were seen as on board with the changes; those who resisted

accounting technologies placed themselves in the precarious position of being seen to oppose the

intent of government-led health sector reform. Accounting represented the new set of “rules”

which CHE actors now needed to know in order to “play the game” of capital investment.

Second, accounting presented CHE actors with a new language for capital investment decision-

making. Actors were motivated to participate in this new discourse so as not to be excluded

from this activity. Finally, accounting presented CHE actors with a new way of rationalizing

their decisions and actions, and could be used as a basis for contesting the clinical rationalities

which had previously dominated the organisation’s investment decisions. Accounting was

therefore a resource which actors could draw on to secure influence over capital investment

decisions, and was used in this regard by both clinicians and managers.

The appreciation of accounting technologies as forms of organisational language, rules and

resources helped to explain two apparent anomalies in the practice of CHE actors. Why was

accounting seen as useful even where analyses lacked rigour and failed to reflect complex project

cases? And why was it used by clinicians when it contested their own professional judgement?

The case study revealed that even flawed financial analyses could convey the elements of

language, rules and resources sought in the utilisation of accounting practices. The study also

suggested that clinicians were prepared to participate in the translation of clinical projects into

financial terms because it allowed them to engage in a “duality of control”. Their choices on

what information to reveal, and how to articulate the outcomes of investments in clinical assets,

shaped financial analyses and potentially influenced decisions.

These findings add to extant understandings of capital investment practice by revealing social

dimensions of how accounting is drawn upon in this organisational activity. Even where surveys

report greater use of “sophisticated”, theoretically prescribed techniques, it is the ways in which

accounting techniques and information are used by actors which shapes investment decisions and

the strategic direction of organisations. Clearly, there is much more to be learnt and the

complexity of accounting in use warrants further detailed study within the organisational context.

Issues such as those emerging in this case study cannot be captured by survey based research

operating “at a distance”.

36

The second purpose of this paper was to demonstrate the usefulness of Giddens’ structuration

theory as a framework for management accounting research. In particular, the case study

evidence was used to explore and the points of departure between the perspectives of Macintosh

and Scapens (1990 & 1996) and Boland (1993 & 1996) and to suggest avenues for their

explanation and reconciliation.

The experiences of this study suggest that the perceptions of Macintosh and Scapens and Boland

are not altogether dissimilar, but are in many ways complementary ways of seeing the insights

offered by structuration theory. Boland’s concern with the focal length of the researcher helps to

explain why his view of the role of human agency differed from that of Macintosh and Scapens.

Also, Scapens and Macintosh identified the notion of methodological bracketing as a possible

explanation for why their perceptions of structuration processes differed from Boland’s. An

appreciation of the dynamism of the context in which strucutration processes are observed, and

the ways in which actors seek to represent the rationality of their actions within this context, can

also support both Macintosh and Scapens’ and Boland’s theses as interrelated dimensions of a

structuration theory perspective.

In order to recognise structuration theory as a useful framework for management accounting

research it is perhaps not necessary to resolve all points of departure between Macintosh and

Scapens and Boland. These differences merely seem to reflect the flexibility of the theory.

Alternative uses of structuration theory can be accommodated if it is accepted in the way

Giddens intended:

“...[structuration theory’s] concepts should be regarded as a sensitizing devices, to beused in a selective way in thinking about research questions or interpreting findings.”

(Giddens, 1991, p.213)

Structuration concepts were not proposed as an absolute, immutable theory - indeed Giddens

himself noted that such a theory is impossible to achieve within studies of social interaction.

Giddens suggests that aspects of structuration theory can be appropriately used “in a sparing and

critical fashion” without necessarily taking on the “entire apparatus of abstract concepts” (1991,

p.213). For the study reported here, structuration theory was employed in this way as an

organising framework for synthesising the many themes and issues that emerged from qualitative

37

research evidence. For Macintosh and Scapens’ and Boland’s work, structuration theory had

different utility for pursuing different research questions and making different interpretations.

All can be considered valid applications of the theoretical lens, as long as they assist the

researchers to gain insight on their subject of study.

At the conclusion of his 1996 paper, Boland (p. 697) notes that “if we want to know how action

is mediated by management accounting systems, we must look and see”. This paper has reported

a study that looked and saw, and structuration theory offered a helpful lens through which to

interpret what was observed of accounting’s use in capital investment decision-making practice.

38

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