The rhetoric and reality of an accounting change: A study of resource allocation

Accounting Organizations and Socte~v, Vol. 13, No. 4, pp. 333-358, 1988. 0361-3682/88 $3.00+.00 Printed in Great Britain Pergamon Press pie

THE RHETORIC AND REALITY OF AN ACCOUNTING CHANGE: A STUDY OF RESOURCE ALLOCATION

JANINE NAHAPIET Templeton College, Oxford

Abstract This paper presents a case study of health service resource allocation as a basis for exploring how organizational members come to understand the meanings and implications of accounting change within the enterprise. The analysis describes how the significance of a new calculative process emerges over time, during which accounting both shapes and is in turn shaped by organizational reality. The paper concludes with a discussion of the interplay between the rhetoric and reality of accounting, reviewing the ways in which, as an expressive order, accounting provides a language for discourse, rules for guiding action and a way of establishing legitimacy in an institutionalised organization.

A c c o u n t i n g has c o m e to o c c u p y an inc reas ing ly i m p o r t a n t p o s i t i o n in the func t ion ing o f m o d e r n indus t r ia l socie t ies , o p e r a t i n g as an inf luent ia l m e c h a n i s m for e c o n o m i c m a n a g e m e n t at the levels o f the f i rm and o f soc ie ty (BurcheU et aL, 1980; Earl, 1983). Compr i s ing a sys tem of sym- bo l i c classif icat ions, a c c o u n t i n g d e s c r i b e s and makes sense o f t he w o r l d t h r o u g h an es tabl i shed , if deve lop ing , se t o f ca lcu la t ive p rac t i ce s and p r o c e d u r e s .

The p u r p o s e s s e rved b y such ca lcu la t ions have b e e n c o n s i d e r e d in detai l , b o t h w i th in the a c c o u n t i n g p ro fes s ion and m o r e broadly . For example , in a r e c e n t analysis o f a c c o u n t i n g theory , four p r inc ipa l images w e r e iden t i f i ed as shaping f inancial a c c o u n t i n g processes . These t rea t a c c o u n t i n g as a h i s to r ica l r eco rd , as a d e s c r i p t o r o f c u r r e n t e c o n o m i c reali ty, as an in fo rmat ion sys tem and as a c o m m o d i t y (Davis etaL, 1982). In m a n a g e m e n t account ing , such images are c lose ly c o u p l e d to m o d e l s o f organiza t ion . Here, a c c o u n t i n g has b e e n r e g a r d e d p r imar i l y as a rep- r e sen t a t i on and too l o f b u r e a u c r a t i c c o n t r o l , a l though n e w p e r s p e c t i v e s on the po t en t i a l o f a c c o u n t i n g are e m e r g i n g f rom c o n s i d e r a t i o n o f a l t e rna t ive forms o f o rgan iza t ion (see , for example , H o p w o o d , 1979; C o o p e r etal., 1981 ).

In the l ight o f this c lose r e l a t ionsh ip b e t w e e n a c c o u n t i n g and o rgan iza t ion it is, pe rhaps , no t

surpr i s ing to f ind that jus t as o u r c o n c e p t i o n s o f o rgan iza t ion are c u r r e n t l y u n d e r g o i n g substan- t ial change, so t oo r e s e a r c h e r s have b e g u n to ques t i on the a d e q u a c y o f c o n t e m p o r a r y c onc e p - tual isa t ions o f t he ro les o f account ing . In bo th fields, t h e r e is g r o w i n g r e c o g n i t i o n o f the l imita- t ions o f the d o m i n a n t pa rad igm w h i c h em- phas ises the unde r ly ing un i ty and cohes iveness o f o rganiza t ions and ob jec t iv i s t a p p r o a c h e s to social s c i ence (BurreU & Morgan, 1979; Colvil le, 1981 ). F rom b o t h is c o m i n g a c o m m o n p lea for g rea t e r in te res t in the exp l ana t i on o f rad ica l change (Benson , 1977; Burre l l & Morgan, 1979; Coope r , 1981) and, m o r e especia l ly , for m o r e i n t e rp re t i ve w o r k a c k n o w l e d g i n g a m o v e in the d i r e c t i o n o f subjec t iv i s t a p p r o a c h e s to social s c i ence (Morgan & Smircich, 1980; Burchel l et al., 1980; Colville, 1981; Ot ley , 1984).

Al though t h e r e a re i m p o r t a n t d i f ferences be- t w e e n the severa l t heo re t i ca l and ph i l o soph ica l s t a t emen t s o f the sub jec t iv i s t p o s i t i o n ( s e e Bur- reR & Morgan, 1979; Morgan, 1980; Morgan & Smircich, 1980), this g row ing in te res t in m o r e i n t ep re t i ve w o r k ref lec ts the bas ic a s sumpt ion that b e h a v i o u r is to be unde r s tood , no t as the p a t t e r n e d r e s p o n s e to a clear , o b j e c t i v e and ex- te rna l rea l i ty bu t r a the r in t e rms o f ac t ions emana t ing f rom the mean ings p e o p l e a t tach to the i r socia l wor ld . F rom this pe r spec t ive , the

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334 JANINE NAHAPIET

processes by which such meanings are created and sustained are of central interest to those concerned with an understanding of social action. In the context of accounting, such an approach suggests that rather than assuming a role for accounting, for example as providing useful information for decision making, the ways in which accounting enters into the life of organizational actors remains to be discovered and understood. From this perspective, as Boland and Pondy propose, the research object ive "is not to study accounting per se, but to study indi- viduals acting in organizations as they make and interpret accounts" (Boland & Pondy, 1983, p. 225). It follows that such research must focus on accounting in its organizational sett ing (Hop-

wood, 1983). Notwithstanding the increasing recognit ion

of the importance of both process and context in the study of accounting, there are still relatively few empirical studies in this tradit ion which have taken accounting as their pr imary focus.1 Thus, although it is widely acknowledged that accounting gains much of its contemporary significance from the ways in which it helps to shape and guide organizational processes and social actions, it appears to be the case that we still "have a very l imited understanding of the forces that either influence accounting change or help to shape the different forms that the accounting craft can take" (Hopwood, 1983, p. 288; see also: Colville, 1981, and Otley, 1984). This paper is in tended to address this concern. Its aim is to contr ibute to our understanding of how accounting is implicated in organizational life by explor ing the findings of a study of resource allocation in the English National Health Service 2 (hereafter referred to as the NHS).

The study was undertaken in the late 1970s, at a t ime when the NHS was introducing a new formula as a mechanism to achieve a geographical

redistr ibut ion of financial resources. The research involved an observational study of the implementat ion of this formula in one of the Ser- vice's fourteen Regional Health Authorities. By observing the organization during a per iod of change, it was anticipated that the study would bring into focus the complex workings of the social system within which accounting is embedded and thus foreground many of the taken for granted assumptions about the workings both of these systems and of accounting (see Pettigrew, 1979; Boland & Pondy, 1983). The investigation thus provides the oppor tuni ty to explore what is involved in implement ing accounting change within the enterprise and to discover how organizational actors come to an understanding of the meanings and implications of such change.

The paper is divided into six parts. The first two descr ibe the organizational context for the study and the research methods adopted. The subsequent analysis begins by reviewing the problems facing the NHS in the allocation of resources and the factors leading to the development of an allocation formula. This is followed by a discussion of how the formula, and the philosophy on which it is based, was taken up within the Regional Health Authority. In examining how the new accounting both shaped and was in turn shaped by organizational reality, the discussion suggests that the relationship be tween accounting and organization processes is reflexive, with each defining and being defined by the other (Berger & Luckman, 1966; Bateson, 1972; Burchell etal., 1980). The final part of the paper is devoted to a considerat ion of the rela- t ionship be tween the rhetor ic and reality of this part icular accounting. Taking rhetor ic as being concerned with language and argument (Huff, 1983) and, in particular, with the use of language and other symbols for expressive purposes (Harr6, 1980; Gowler & Legge, 1983), the paper

i Notable exceptions include Bower, 1970, and Malvey, 1981.

2 Responsibility for this project lay with Anthony Hopwood and Janine Nahapiet. The project was one of several being undertaken at the Oxford Centre for Management Studies ( now Templeton College ) by a research group which also included Stuart Burchell, Colin Clubb and John Hughes. The author acknowledges the contribution of this group, Dan Gowler and other Centre colleagues to many of the ideas developed in this paper. She is also grateful to the Kings Fund College and the Regional Health Authority studied for their support for the research.

RHETORIC AND REALITY OF AN ACCOUNTING CHANGE 335

concludes with a consideration of accounting as a language for discourse, a set of rules for negotiating an understanding of organizational reality and a mechanism for establishing and maintaining the legitimacy of social action.

THE ORGANIZATIONAL CONTEXT OF THE STUDY

The Nat iona l Heal th Service The NHS was established in 1948 to provide a

comprehensive system of health care. It was, and continues to be, funded by central government and is today represented at the highest level by the Secretary of State for Health and Social Ser- vices, who is a member of the Cabinet. The Sec- retary of State is responsible to Parliament for the provision of health services in England and is helped in this by junior ministers and civil ser- vants at the Department of Health and Social Sec- urity. The NHS has undergone three major reor- ganizations in recent years, in 1974, 1982 and 1984. Since it was the 1974 structure which was in operation at the time the case study was undertaken, it is this structure, widely acknowledged to be complex (Levitt, 1976; OHE, 1977; Buxton & Klein, 1978; Haywood & Alaszewski, 1980), which will be described here.

Following the NHS Reorganization Act of 1973, the Service was organised along the following lines. First, the centralised functions of the Service were provided by the Department of Health and Social Security. Below Department level, the Service was organised into a three tiered structure comprising regions, areas and districts (see Fig. 1 ).

Each of these tiers represented a geographical entity charged with a particular set of duties and responsibilities as follows:

(a) Regional Heal th Authori t ies (RHAs). Fourteen of these were established as statutory bodies accountable to the Secretary of State. Although the RHAs were responsible for some medical activities, for example through the ap- pointment of certain senior medical staff and the provision of specified specialist services, their

I Social Security

Secretory of store for SocJat. Services

National HeaLth Service

Personal sociot services

Regional HeoLth Authorities

I Regional Officers

I I

Area HeaLth Authorities

Officers

I

District IV~nogerr~ L ~..-" "~" ~" ~" "" "J Teoms ]

Key: Corporate oc¢ountobility TndividuaL officer occountabiUty and joint teom responsibitity Monitorin 9 and coordinoting between

. . . . and individuoL counterport officers

Fig. 1. The structure of the National Health Service, 1972.

main responsibilities related to planning and to the allocation of capital and revenue resources to the levels below them. The Authority Chair- man and Members, all part-time, were appointed by the Secretary of State after consultations with interested organizations, including the main health professionals, the trade unions, the uni- versities and the main local authorities. Mem- bers were unpaid but the Chairman could be paid on a part-time basis. Members met formally as an Authority on a monthly basis, although they often worked in sub-groups and working parties between each Authority meeting. While some had a detailed and intimate knowledge of Health Service affairs, others were less knowledgeable, frequently representing agencies with which the NHS interacts.

Each RHA was supported by a team of full-time officers and their staffs. This regional team of officers (RTO) comprised a regional Medical Officer, regional Nursing Officer, regional Ad- ministrator, regional Treasurer and regional

336 JANINE NAHAPIET

Architect. Although each officer had specific responsibilities, as a team they had collective responsibility for framing plans and proposing allocations, under a system of "consensus management" (DHSS, 1972; Levitt, 1976). RHAs, thus comprised statutory bodies charged with major administrative responsibilities but with few duties directly related to health service provision, these being the concerns of the levels below the Regions.

(b) Area Health Authorities (AHAs). Each RHA comprised a number of AHAs and, when the 1974 structure was established, there were 190 of these. Like the RHAs, the AHAs were statutory bodies accountable directly to the Secretary of State. They carried full operational responsibilities for the Service, undertook much detailed planning as well as employing most of the NHS staff. In addition to holding responsibility for any teaching hospitals within their bound- aries, they had important duties in respect of local government authorities. Although most areas were further sub-divided into districts, there were some, generally those with small populations, which were not so divided. Other than in these cases of single district areas, AHAs also had responsibility for resource allocation to districts. Area Members were appointed on a part-time basis either by the RHA or by local authorities and staff and professional groupings, with the Chairman appointed by the Secretary of State. Members met on a basis similar to RHA Members.

Each AHA was supported by an area team of officers (ATO) and their associated staffs. The ATO, comprising Medical Officer, Nursing Officer, Administrator and Treasurer, also oper- ated under a system of consensus management. Although they had professional links to their regional counterparts, they did not report directly to them.

(c ) Health districts. Health districts were established in order to manage the operation of the Service at local level. They comprised the smal- lest units for which substantially the full range of general health and social services could be pro-

vided and also the largest ones within which all types of staff could actively participate in management through the representational systems (OHE, 1977). Each health district was managed by a district management team which was jointly responsible to the AHA.

In summary, the structure comprised three different and separate levels of statutory authority: the Secretary of State, the RHA and the AHA. Each of these was "corporately accountable" to the level above, with the relationship between the various levels seen as a progression from strategic planning and resource allocation at the centre to contingent practical activity at the lowest levels (OHE, 1977). In other words, the main mechanisms to achieve coordination between the legally separate levels were the planning system, resource allocation and what were termed "monitoring" relationships, i.e. the right to receive information and review performance (DHSS, 1972; Levitt, 1976).

The regional context The fieldwork on which this paper is based

was undertaken in an RHA which will be called Omega. Omega RHA comprised four areas, referred to here as Alpha, Beta, Delta and Gamma. Three of these areas were further subdivided into two districts, the fourth, Alpha, being a single district area, incorporating the region's only teaching hospital and medical school. The structure of Omega RHA is presented in Fig. 2. Geographically, Omega covered four shire counties. Contrary to the prevailing national trends, it was also experiencing population growth, largely through the inward movement of people to new towns.

RESEARCH METHODS

The data reported here were collected as part of a study of the role of information in the management and administration of the NHS. The project was stimulated by a widespread belief within the NHS that its information systems fell short of what was needed and that attention should be devoted to this topic, with particular


Atpl~ j Area Health Authority (teaching)

I Sing=Le District /~ reo

Omega Regional Health Authority

I I I Beta Area Gamma Area

Health AiJthority Health iAuthority

I I I I District District District District

I DeLta Area Hearth

I I District District

Fig. 2. The structure of Omega RHA.

emphasis on financial information (see, for example, DHSS 1972; Royal Commission on the National Health Service, 1978). Such was the primary reasoning given by the funding bodies for their interest in supporting research m this field.

The starting point for the researchers was the belief that a sound appreciation of the role and potential impact of financial and accounting information can only be developed by reference to the particular setting in which it is embedded (see Hopwood, 1983; Burchell et al., 1980). Hence, the research was guided by the desire to develop an understanding of the way people communicate, talk about, act upon, use or ignore information in the context of their everyday life in organizations. Given this objective, the researchers did not set out to test a set of specific hypotheses but rather to observe and describe the actions of members of Omega and to attempt to identify the meanings underlying such actions (Glaser & Strauss, 1967; Harre & Secord, 1972). It was anticipated that an initial, if substantial, phase of observation and sense-making would lead on to a subsequent phase of action research. In the event, the study did not proceed to the second stage. 3

Since a large part of the project funding came from the Omega RHA, it was agreed that fieldwork should be undertaken in the authority, across all three levels: region, area and district. By agreement with team members at each level, three main research methods were adopted by the author: semi-structured interviews, observation and analysis of documentation. This docu-

mentation ranged from reports and minutes of meetings to correspondence and press cuttings.

At the outset of the research, staff from all three tiers were interviewed individually at length across a wide range of topics. There were four main aims for these initial interviews: to establish relationships, to learn about the Region as a whole and the issues facing it, to discuss current and potential financial information and information systems and to clarify expectations about and secure practical support for the project. As a result of these meetings with over fifty people, a strong network was established, with the prime contacts at each level generally emerging as the Treasurer and/or the Adminis- trator. Thereafter, interviews took place regu- larly throughout a period of approximately nine months. They included discussions with members of the original network as well as numerous other staff and authority members. In the main, they were arranged in order to pursue particular issues which had arisen through fieldwork observations or the reading of NHS documentation or other literature. Although most of the interviews took place on an individual basis, the researchers met occasionally with a steering group from the funding bodies. Sometimes these meetings were organised around formal reports from the researchers; at other times, they constituted a more general discussion of issues emerging in the research or the health service more broadly. They provided an additional valuable forum for feeding back observations and testing out interpretations as well as for exploring the degree to which the experiences of Omega might be

3 The main reasons for this being developments within Omega, together with changes in the jobs of the researchers.

338 JANINE NAHAPIET

similar to those o f o t h e r par ts of the Service. In the cou r se o f the p r e l im ina ry in terviews, it

was agreed that the au thor shou ld spend t ime in the var ious par t s o f the Region, obse rv ing a w ide range o f mee t ings ident i f ied by i n t e rv i ewees as likely, in the w o r d s o f the Regional Adminis- t r a to r to officers, to "give a g o o d feel for wha t i t 's l ike here". In p rac t ice , this invo lved a t t end ing "publ ic" meet ings , such as the m o n t h l y Author- i ty meet ings , as we l l as a w i d e range o f "p r iva te" meet ings , bo th rou t ine and a d hoc, formal and informal, at each level and across levels. An office was p r o v i d e d wi th in the Regional Head- quar t e r s bu i ld ing and many informal con tac t s w e r e es tab l i shed there . After a shor t t ime of "be ing a round" the Region, it was ag reed mutu- ally that it w o u l d be useful for the r e sea rch if the au tho r concen t r a t ed , at least initially, on two act iv i t ies l ikely to t h r o w l ight on informat ional act ivi t ies wi th in the Region. The first was the annual r evenue a l loca t ion p roces s and the s e c o n d the i m p l e m e n t a t i o n o f wha t was k n o w n as the "Standard Accoun t ing System", a compu- te r -based package for f inancial in format ion be ing ins ta l led t h r o u g h o u t the NHS and in the ear ly s tages o f i m p l e m e n t a t i o n in Omega . It is the first o f these w h i c h cons t i tu tes the main focus o f this paper .

THE PROBLEM OF RESOURCE ALLOCATION IN THE NATIONAL HEALTH SERVICE

From its incep t ion , the NHS ra ised ma jo r issues o f financing. W h e n the Nat ional Heal th Service Act was p r e s e n t e d in 1946, it was recog- n i sed that t he re w o u l d be a heavy d e m a n d for r e sou rces as a resu l t o f the f ree ly avai lable provi- s i o n of hea l th ca re for all bu t i t was conf iden t ly p r e d i c t e d that this d e m a n d w o u l d dec l ine in due course , re f lec t ing the hea l th ie r s ta te o f the na t ion ' s peop le . In fact, the r e sou rce s sought for hea l th ca re have always b e e n g rea te r than the supp ly (Buxton , 1976; Klein, 1983). Moreover , the des i re to ach ieve a m o r e equ i t ab le dis t r ibu- t ion o f r e sou rces across the count ry , pa r t o f the

bas ic ra t ionale for a Nat ional Heal th Service, has pe r s i s t en t ly r e m a i n e d s o m e w a y f rom fulfilment. Two exp lana t ions are genera l ly g iven for this s ta te o f affairs. The first is "pol icy inertia", i.e. the a l loca t ion o f yea r ly i n c r e m e n t s largely on the basis o f ex is t ing c o m m i t m e n t s , thus pe rpe tua t - ing inhe r i t ed inequal i t ies (Wes t , 1973; Bux ton & Klein, 1978). The second , w h i c h has b e e n labe l led " d e m o g r a p h i c drag", r e p r e se n t s the fai lure to adap t the a l loca t ion of r e v e n u e and capi ta l to d e m o g r a p h i c changes ( B u x t o n & Klein, 1978). Toge ther , these p roces se s a re such that unless t he re are de l i be ra t e a t t emp t s to de- c ide o the rwise , the p a t t e r n of r e s o u r c e alloca- t ion in the NHS fol lows the p r o c e s s o f d i s jo in ted i nc r emen ta l i sm o b s e r v e d e l s e w h e r e (L indb lom, 1959; Wildavsky, 1974).

In r e c o g n i t i o n o f the p r o b l e m , t he re have b e e n th ree ma jo r a t t emp t s to a l ter the p i c tu re and to m o v e t ow a rds an equ i t ab le geograph ica l d i s t r ibu t ion o f resources . A cen t ra l e l e m e n t in each p o l i c y p r o p o s a l has b e e n the i n t r o d u c t i o n o f a fo rmula as a basis for secur ing m o r e ob jec - t ive r e s o u r c e al locat ions. The first fo rmula was p r e s e n t e d in the Nat ional Hospi ta l Plan o f 1962, a imed at equal is ing the d i s t r ibu t ion o f hospi ta l r e sou rce s (Min i s te r o f Health, 1962). The p lan es t ab l i shed "norms" for the ra t io o f hospi ta l beds to the p o p u l a t i o n and t hen t rans la ted these n o r m s into ob jec t ives to be ach i eved th rough the p lann ing o f hosp i ta l bu i ld ing ove r a t en yea r per iod . Wi th in four years, the p l a n n e d bu i ld ing p r o g r a m m e had f loundered , largely b e c a u s e in- suff icient funds w e r e avai lable to fulfil its re- qu i r e me n t s (Bux ton , 1976). None the less , the p lan had r e in fo rced the p r inc ip l e o f equa l i sa t ion and, at the same t ime, i n t r o d u c e d b e d usage as a p r o x y me a su re for m o r b i d i t y (Bux ton , 1976; Allen, 1979).

This formula a p p r o a c h to r e s o u r c e a l loca t ions has c o n t i n u e d in m o r e r e c e n t endeavours . 1970/ 71 saw the s e c o n d a t t e mp t to r ed re s s the ba lance w h e n the D e p a r t m e n t o f Heal th intro- d u c e d a fo rmula based on a p r inc ip l e o f equi ty, as o p p o s e d to equali ty, of provis ion . 4 This for-

.4 Equity is generally taken to mean "equal provision or equal access for equal need" (Buxton, 1976), whereas equality refers to similarity in the distribution of resources, regardless of relative need.


mu la c o m p r i s e d t h r e e variables: the p o p u l a t i o n o f the region , hosp i ta l b e d s t o c k and hosp i ta l case flow. Again, the p o l i c y ach i eved l imi t ed suc- cess la rge ly b e c a u s e the fo rmula was r e g a r d e d as unsat isfactory, be ing b a s e d o n supp ly and de- m a n d ra the r than an i n d e p e n d e n t m e a s u r e o f n e e d (OHE, 1977). I t thus p e r p e t u a t e d the f avoured p o s i t i o n o f those au thor i t i e s that w e r e w e l l - e n d o w e d w i t h beds . The th i rd campaign, and the mos t soph i s t i c a t ed in its ca lcula t ions , was the a p p r o a c h p r o p o s e d in the final r e p o r t o f the R e s o u r c e Al loca t ion W o r k i n g Party, RAWP as i t b e c a m e known.

G u i d e d b y the p h i l o s o p h y o f equal isa t ion, the w o r k i n g pa r ty ' s m a j o r p r e o c c u p a t i o n was the d e v e l o p m e n t o f an a p p r o p r i a t e m e t h o d o l o g y to enab le the i m p l e m e n t a t i o n o f w h a t had long b e e n a c c e p t e d as a des i rab le aim: "equal oppo r - tun i ty o f access to hea l th ca re for p e o p l e at equal risk" (DHSS, 1976, p.7) . In seek ing to d e v e l o p a fo rmula w h i c h w o u l d p r o v i d e an a c c e p t a b l e m e a s u r e o f the n e e d for hea l th care, it a rgued that such a m e a s u r e c o u l d no t be based on c r u d e popu la t ion figures alone, s ince the needs of differ- en t sec to r s o f the c o m m u n i t y vary. The fo rmula even tua l ly ag reed o n five di f ferent c o m b i n e d measu re s o f n e e d w h i c h w e r e then app l i ed se lec t ive ly to t he ma in e l e m e n t s o f se rv ice p ro- v is ion in o r d e r to p r o d u c e a "popu la t ion equivalent". 5 This p o p u l a t i o n equ iva len t b e c a m e the basis for es tabl i sh ing "target" a l loca t ions to the regions . A s imilar ca lcu la t ion was then under - t aken for d e t e r m i n i n g the ta rge ts for the o t h e r ma jo r NHS t iers t hen in ex i s t ence , i.e. areas and distr icts . Finally, b y c o m p a r i n g the exis t ing level of r e s o u r c e a l loca t ion for any r eg ion ( o r a rea o r d i s t r i c t ) w i th i ts ta rge t a l locat ion, it was poss ib le to ob ta in an assessment o f c u r r e n t levels o f u n d e r o r ove r resourc ing .

The p u b l i c a t i o n of the RAWP Repor t s t imu- la ted a v igorous d e b a t e ove r its con ten t s . Some w e r e h igh ly cr i t ica l o f the m e t h o d s a d o p t e d ( s e e

Barr & Logan, 1977; Radical Statist ics Heal th Group , 1977; Bux ton & Klein, 1978), wh i l e o the r s e x p r e s s e d m o r e c o n c e r n ove r the conse- q u e n c e s o f i m p l e m e n t i n g the p roposa l s con- t a ined in the Repor t (See Maynard & Ludbrook, 1980, for a g o o d rev iew) . However , the ear ly en- d o r s e m e n t b y the Secre ta ry o f State for Heal th and Social Secur i ty o f its r e c o m m e n d e d m o v e to- w a r d s equa l i sa t ion r e p r e s e n t e d for many the cu lmina t i on o f ove r t w e n t y years o f analysis and d i scuss ion o f r e s o u r c e a l loca t ion po l i cy and prac t ice . In a p e r i o d in w h i c h the d e m a n d for resources was increas ing ly ou t s t r i pp ing the i r availabil i ty, t h e r e had b e e n a g row ing commi t - m e n t to the v i ew that, w i th in the l imits of available resources , hea l th se rv ices shou ld b e pro- v ided m o r e fairly in re la t ion to needs . The ma in obs t ac l e to ach iev ing this was r e g a r d e d as the diff icul ty o f assessing need. At last, w i th the d e v e l o p m e n t o f the RAWP formula, t he re was n o w a me a su re of re la t ive n e e d and an assoc ia ted a c c o u n t i n g p r o c e d u r e avai lable to gu ide deci- s ion making.

The RAWP Repor t and its suppor te r s , bo th na t iona l ly and wi th in Omega , a rgued that the fo rmula a p p e a r e d to ach ieve th ree impor t an t re- qu i rements . First, it p r o v i d e d a w a y o f quantify- ing an ob j ec t i ve w h i c h it had b e e n difficult to pu r sue in the a bse nc e o f an a d e q u a t e measure . Second, it was a rgued that, as a result , it e na b l e d a change in the p r o c e s s e s and m e t h o d s o f al location. Specifically, it was sugges ted that the exis- t e n c e o f a fo rmula m a d e poss ib le cons i s t en t and de l i be r a t e p lann ing and thus faci l i ta ted a m o v e away f rom the p reva i l ing p a t t e r n o f i nc remen- ta l ism (DHSS, 1976). Third, it p r o v i d e d wha t was d e s c r i b e d as an ob jec t ive , equ i t ab le and effi- c i en t w a y o f r eso lv ing the diff icult ies invo lved in i m p l e m e n t i n g dif ferent p r io r i t i e s in t imes o f l imi t ed r e s o u r c e avai labi l i ty (DHSS, 1976). As e x p r e s s e d in the w o r d s o f one o f the O m e g a Region 's o w n a l loca t ion p o l i c y doc ume n t s :

s N e e d w a s a s s e s s e d in relation m: the population size, the age/sex distribution of the population, population mortality rates (used as a proxy of morbidity), cross boundary flows of in-patients, and medical and dental education. The service elements to which these factors were applied were: non-psychiatric in-patient services, all day and out-patient services, mental illness in-patient services, mental handicap in-patient services, community services, ambulance services and family practitioner administrative services.

340 JANINE NAHAPIET

"How can w e r o b Pe t e r to pay Paul w i t h o u t an

agreed formula?" ( e m p h a s i s added) . Fo l lowing p u b l i c a t i o n o f the RAWP Report ,

the Secre ta ry o f State for Heal th and Social Ser- v ices i nd i ca t ed that its r e c o m m e n d a t i o n s w o u l d b e used as the basis for fu ture a l loca t ions to the reg iona l hea l th au thor i t i e s and that he e x p e c t e d r eg ions to do l ikewise in making the i r alloca- t ions to the areas. The res t o f this p a p e r is con- c e r n e d wi th h o w RAWP e n t e r e d into the annual r e v e n u e a l loca t ion p r o c e s s in the O m e g a Regional Heal th Author i ty . The aim t h r o u g h o u t is to cons ide r w h a t RAWP came to m e a n to those mos t d i r ec t ly c o n c e r n e d wi th its imp lemen ta - tion.

H O W ACCOUNTING SHAPED ORGANIZATIONAL REALITY

NHS r e sou rce s are a l loca ted on an annual basis u n d e r the two ma in ca tegor i e s o f capi ta l and revenue . O n c e the a l loca t ion for the DHSS has b e e n es tab l i shed b y Gove rnmen t , this is t hen subd iv ided in to the d e p a r t m e n t a l b u d g e t and the reg iona l a l locat ions, the la t te r t hen b e c o m - ing the respons ib i l i ty o f RHAs for fur ther dis- t r i bu t ion to areas and distr icts . At the same t ime as the au thor i t i es a n n o u n c e the i r o n e year allo- cat ions, t hey are also e x p e c t e d to conf i rm re- sou rce as sumpt ions for a fur ther t h r e e yea r p e r i o d in o r d e r to assist the p lann ing process . Each s tage o f this a l loca t ion p roce s s is e x p e c t e d to take accoun t o f c u r r e n t po l ic ies and pr ior i t ies , these be ing c o m m u n i c a t e d in gu ide l ines i ssued b y the D e p a r t m e n t to the hea l th authori t ies . Thus, it is the formal respons ib i l i ty of the au thor i t i es to make the a l loca t ions taking in to accoun t the advice o f the i r officers and staff.

O m e g a RHA p l a n n e d to conf i rm its final alloca t ions to areas in February , be fo re the s tar t of the f inancial yea r in April. In the p r e c e e d i n g months , t he re w e r e n u m e r o u s formal and informal d iscuss ions abou t the f o r t h c o m i n g alloca- t ion process . Al though a lmost all o f those inter- v i e w e d d e s c r i b e d r e s o u r c e a l loca t ion as an essent ia l ly rou t ine activity, none the l e s s t he re s e e m e d to be a h igh level of in te res t in wha t the

Au thor i ty w o u l d do. Discuss ions w i th p e o p l e in O m e g a sugges ted t h r e e reasons for this. First, t hose in the areas and dis t r ic ts w e r e eager to k n o w w h a t the i r a l loca t ions w o u l d b e in o r d e r to d o the i r o w n p lann ing and budget ing . As o n e Area Treasu re r o b s e r v e d " the d iscuss ions t hey have at Region c o m e d o w n to ha rd rea l i ty at Area". Second, the p rev ious year ' s a l loca t ion and r e s o u r c e assumpt ions ag reed by the RHA had at- t r a c t e d adverse publ ic i ty . Beta Area in pa r t i cu la r had cha l l enged the Region ' s decis ions , be l i ev ing it shou ld have r e c e i v e d h ighe r levels o f resour- c ing in r e c o g n i t i o n o f its fast g rowing p o p u l a t i o n and c u r r e n t l o w level o f funding, assessed in RAWP terms. I t had d r a w n p u b l i c a t t en t ion to its dissat isfaction, invo lved p r o m i n e n t local dig- ni tar ies inc lud ing its M e m b e r o f Par l iament , and the re had b e e n c r i t i c i sm of the RHA in the local p re s s and radio. As a result , many o f the Regional Officers and Author i ty M e m b e r s w e r e acu te ly aware of the sensi t iv i t ies invo lved in r e s o u r c e al- l oca t ion and w e r e eager this t ime to avoid w h a t one p r o m i n e n t M e m b e r of the RHA d e s c r i b e d as "pol i t ica l screaming". Third, many p e o p l e at Re- g ional level, pa r t i cu la r ly the t reasurers , r e p o r t e d a feel ing o f g rea te r than usual u n c e r t a i n t y abou t b o t h the l ikely a m o u n t of m o n e y the Au thor i ty w o u l d r e c e ive and also the basis for the allocation. The cause o f this unce r t a in ty was a t t r i bu ted to RAWP and its i m p l e m e n t a t i o n b y the DHSS.

Iri the m o n t h s p r io r to the a l loca t ion dec i s ion d e s c r i b e d here , the Regional Officers and Mem- be r s c ame to k n o w abou t RAWP and its r e com- me nda t i ons in a n u m b e r o f ways. These ranged f rom the w i d e s p r e a d pub l i c i t y given to the Re- p o r t in the na t ional m e d i a and the ma in publ ica- t ions o f the Heal th Service to d i r ec t c o m m u n i c a - t ions f rom the Minis t ry o f Heal th giving detai ls o f the p roposa l s and ind ica t ing the Minis ter ' s l ikely s u p p o r t for the RAWP r e c o m m e n d a t i o n s . N u m e r o u s l ec tu res and seminars w e r e organised b y Heal th Service g roups and severa l o f these w e r e a t t e n d e d by staff of the O m e g a Region and its cons t i t uen t areas and distr icts .

The Repor t was ve ry qu ick ly v i e w e d by the Regional Officers and M e m b e r s as s o m e t h i n g to b e taken ser ious ly for at least two reasons. First, it was assoc ia ted wi th the goal o f equal isat ion.


In t e rv i ews and analysis o f ea r l i e r r epo r t s and RHA minu t e s i nd i ca t ed that staff and M e m b e r s s u p p o r t e d the gene ra l p r i n c i p l e o f equal isa t ion, w h i c h t h e y f r equen t ly r e f e r r ed to as "fair shares". Indeed , O m e g a had i tself a t t e m p t e d an e x e r c i s e no t m a n y years be fo re in an e n d e a v o u r to d e v e l o p w h a t o n e o f the admin i s t r a to r s des- c r i b e d as "a m o r e sys temat ic w a y of d i s t r ibu t ing resources" . Moreover , the e x p e r i e n c e s o f the p r e v i o u s year, in w h i c h Beta Area had p u b l i c l y cha l l enged the RHA, had r e in fo r ced the des i re to r ind a w a y o f ach iev ing a "fair" d i s t r i bu t ion o f re- sou rces as soon as poss ib le . Second, RAWP was r e g a r d e d as po t en t i a l l y s ignif icant b e c a u s e the ear ly indica t ions , in min is te r ia l s ta tements , p ress c o m m e n t and informal d i scuss ions w i th de- p a r t m e n t a l staff, w e r e that it w o u l d b e u sed b y the Minis te r as a basis for making a l loca t ions to the regions . Since O m e g a was o n e o f five r eg ions assessed as b e i n g o v e r - r e s o u r c e d in r e l a t ion to the i r RAWP targets , this c o u l d have m a j o r consequences , for no t on ly migh t it imp ly that t h e r e w o u l d b e l i t t le "growth" m o n e y avai lable b u t t h e r e migh t even b e a cu t in the ex i s t ing level o f resources . RAWP was thus seen as a "real force" that c o u l d adve r se ly and i m m i n e n t l y affect the f inancial p o s i t i o n o f the Region.

This r e c o g n i t i o n o f the po ten t i a l s igni f icance o f RAWP was a c c o m p a n i e d by confus ion and concern . The vast ma jo r i ty w e r e confused b e c a u s e a lmos t e v e r y o n e found the fo rmula e x t r e m e l y c o m p l e x and the de r iva t ion o f ta rge ts a lmos t imposs ib l e to fol low. This i n c l u d e d mos t o f the t r easure r s and the i r staff, the off icers mos t heavily involved in prepar ing papers and proposals on r e s o u r c e a l loca t ion for the i r author i t ies . A g rea t dea l o f w o r k had thus to b e d o n e if t hey w e r e all, as o n e admins t r a to r p u t it " to t ry to c o m e to t e rms w i th w h a t RAWP is about". To ach ieve this, n u m e r o u s in te rna l mee t ings w e r e he ld to discuss, e x p l o r e and famil iar ise bo th Of- r icers and M e m b e r s wi th the deta i l s o f the RAWP fo rmula and the ca lcu la t ion o f targets , t o g e t h e r wi th the i r imp l i ca t ions for Omega . A c c o m p a n y i n g the gene ra l confus ion was the c o n c e r n o f the small g r o u p o f s ta t is t ic ians and c o m m u n i t y phys ic ians in Omega . Al though d r a w n f rom across the Region, the ma jo r i ty w e r e

based e i the r at Regional Headqua r t e r s o r in the Alpha Area. It was these p e o p l e w h o had the t echn ica l e x p e r t i s e to u n d e r s t a n d the deta i l s o f RAWP and, on see ing the RAWP Report , t hey i m m e d i a t e l y e x p r e s s e d s t rong rese rva t ions a b o u t the a pp rop r i a t e ne s s o f severa l e l e m e n t s and the i r w e i g h t i n g in the formula. These m i r r o r e d those be ing e x p r e s s e d nat ional ly. A w o r k i n g g roup o f t reasurers , s ta t is t ic ians and c o m m u n i t y phys ic ians d r a w n f rom all levels in the Region was soon es tab l i shed to e x a m i n e the p o l i c y and the fo rmula m o r e closely.

Thus, shor t ly after its appea rance , RAWP had a c q u i r e d a s ignif icance for t hose invo lved w i th r e s o u r c e a l loca t ion in the O m e g a Region, al- t h o u g h the na tu re and level o f that s ignif icance had ye t to b e w o r k e d out. Far f rom having c lear and u n a m b i g u o u s c o n s e q u e n c e s for the alloca- t ion o f r e sources , the me a n ing and po ten t i a l im- p l i ca t ions o f the a p p r o a c h w o u l d n e e d to b e ident i f ied. However , even t hough the re was m u c h stil l to ' d i s cove r abou t the me a n ing o f RAWP, it c o u l d a l r eady p lay an i m p o r t a n t ro le in shaping the p r o c e s s e s o f u n d e r s t a n d i n g and hence , o f the ac t ion w h i c h ensued. First, it re- de f ined the r e s o u r c e pos i t i on o f the Region and thus affected Officers ' and M e m b e r s ' p e r c e p t i o n o f Omega ' s p rob l ems . Second, it s h a p e d the i r v iews o f w h a t was i m p o r t a n t b y re-def in ing the agenda for r e s o u r c e a l loca t ion c ho i c e s and by focuss ing a t t en t ion on pa r t i cu la r i t ems in that agenda whi le , at the same t ime, b a c k g r o u n d i n g o t h e r i tems. Third, it c r e a t e d the c i r c ums t a nc e s for the d i s c o v e r y and r e d i s c o v e r y o f organiza- t ional reality.

RA WP re-defined the Region's resourceposition The story goes that three umpires disagreed about the task of calling balls and strikes. The first one said 'I calls them as they is.' The second one said, 'I calls them as I sees them.' The third and cleverest umpire said 'They ain't nothin' till I calls them (Simons, quoted in Weick, 1979).

The task to be a c c o m p l i s h e d by the O m e g a Regional Heal th Au tho r i t y in the p e r i o d u n d e r r e v i e w was to d e c i d e on the r e v e n u e a l loca t ions to its four c o n s t i t u e n t areas for the yea r 1978/79 and to es tabl ish the i r r e s o u r c e a s sumpt ions for

342 JANINE NAHAPIET

th ree years ahead to m e e t the needs o f the plan- n ing process . This was seen to r equ i r e an analysis of the c u r r e n t f inancial pos i t i on o f the organiza t ion in o r d e r to ascer ta in the s ta r t ing p o i n t for cons ide r ing the fac tors w h i c h w o u l d d e t e r m i n e fu ture a l locat ions and r e s o u r c e assumpt ions .

The en t ry o f RAWP on to the s cene was re- g a r d e d as c o m p l i c a t i n g the a l ready difficult p ro- cess o f d i scove r ing wha t one o f the t r easure r s d e s c r i b e d as the " t rue f inancial pos i t ion" o f the region. Several p r ac t i ce s make it d i t~cul t to es- tabl ish or "call" an accura te p i c tu r e o f the end o f yea r r e s o u r c e p o s i t i o n o f the r eg ion and areas. These i nc lude the ways in w h i c h au thor i t i es manage the i r " reserve" funds and the i r a t t empt s to mod i fy r e p o r t e d ove r and u n d e r spend ings to ensure that t hey fall w i th in the marg ins a l lowed b y cash l imits p o l i c y (See Nahapiet , 1984). The effect of RAWP was to add ano the r f rame o f re- f e r ence for i n t e rp re t i ng the Region 's c u r r e n t re- sou rce si tuat ion. Not on ly was it c o n c e r n e d w i th spend ing levels and c o m m i t m e n t s bu t also wi th the assessment of its overa l l pos i t i on in re la t ion to target . A n e w "call" was n o w available to inter- p r e t the s ta te o f play.

This n e w defini t ion, de r i ved f rom the RAWP formula, l abe l led the O m e g a Region above ta rge t and hence , ove r - re sourced . This had been , for mos t o f those in te rv iewed , an u n e x p e c t e d i n t e rp re t a t i on o f its pos i t i on because in the In- t e r im Repor t o f the Resource Al loca t ion Work- ing Party, w h i c h had p r o p o s e d a different formula, the O m e g a Region had b e e n assessed as b e l o w target . A change in the fo rmula had thus a l t e red the i r app rec i a t i on o f Omega ' s r e s o u r c e pos i t ion . A c c o m p a n y i n g this app rec i a t i on was the r e c o g n i t i o n that, if the RAWP analysis was w i d e l y a c c e p t e d and, as a consequence , they w e r e taken to b e ove r - r e sourced , t hen this cou ld s ignif icant ly inf luence the i r fu ture f inancial situation. Par t ic ipants thus found themse lves in a s i tua t ion in which , at the same t ime as they w e r e t ry ing to c o m p r e h e n d the deta i l of the fo rmula and to evalua te its c redibi l i ty , t hey w e r e c o m i n g to a n e w unde r s t and ing of the i r o rganiza t iona l s i tua t ion and its po ten t i a l p rob lems , an under - s tanding resu l t ing f rom the m a n n e r in w h i c h the same fo rmula had def ined and then re -def ined

the i r r e s o u r c e pos i t ion .

RA WP created particular patterns o f organizational visibility

O v e r and above its s ignif icance in p rov id ing an overa l l assessment of the Region 's re la t ive re- s o u r c e pos i t ion , the RAWP a p p r o a c h p l ayed an i m p o r t a n t ro le in s t ruc tu r ing the c o n c e r n s and issues ra ised in d i scuss ions and analyses con- ce rn ing r e s o u r c e al locat ions. Specifically, t h r o u g h ca tegor i s ing r e sou rce s in pa r t i cu la r ways and a t t ach ing ce r ta in labels to them, RAWP b r o u g h t s o m e e l e m e n t s c lear ly in to focus whi le leaving o the r s less p rominen t .

Four i t ems in pa r t i cu la r w e r e f o r e g r o u n d e d in all the Region 's d i scuss ions and d o c u m e n t s relat- ing to the a l loca t ions to be m a d e to Areas. Th ree of these w e r e d i r ec t l y r e l a t ed to c o n c e p t s and issues p r e s e n t e d in the RAWP Repor t , the four th c o n c e r n e d the m a n n e r o f its i m p l e m e n t a t i o n in the p e r i o d u n d e r review.

Targets. Despi te the many, con t inu ing reser- va t ions e x p r e s s e d abou t the detai ls , a ma jo r and signif icant p r o d u c t o f the RAWP formula was the ca lcu la t ion o f a single f igure to r e p r e s e n t wha t an Author i ty ' s a l loca t ion shou ld b e on the basis of its re la t ive need. This f igure was p r e s e n t e d as "an ob j ec t i ve yards t ick" (DHSS, 1976) p rov id ing e v e r y o n e w i th a d i r ec t and quant i ta t ive basis for assessing and c o m p a r i n g the i r re la t ive r e s o u r c e posi t ions . In the c o n t e x t of Omega , a l though all the Region 's four areas w e r e above the i r na t ional target , w h e n assessed on a Regional basis, t he re was a c ons ide r a b l e d i spar i ty b e t w e e n them. O n e o f the areas, Alpha, was cons ide rab ly above ta rge t w h e r e a s a second , Beta, fell b e l o w targe t by an equ iva len t amount . The r ema in ing two Areas apea red to be m o r e o r less c lose to the i r ta rge t pos i t ions . This d i f fe rence b e t w e e n Alpha and Beta in re la t ion to the i r d i s tance f rom targe t b e c a m e the focal po in t for mos t o f the r e s o u r c e a l loca t ion d e b a t e and discussions. The c o n c e p t and ca lcu la t ion of targets thus d e t e r m i n e d a par- t icu lar i n t e rp re t a t i on and eva lua t ion of the in t ra Regional s i tuat ion.

Equalisation. Al though the p r inc ip l e of re-


source equity had long been endorsed, in the NHS generally and specifically within Omega, it had been difficult to pursue in the absence of an agreed measure. With the emergence of a me thod for calculating target allocations, the goal of equalisation became both more visible and more tangible. The term equalisation was used frequently in documents and dicussions and, within Omega, it was generally agreed that al location decisions should ensure movement in the d i rec t ion of target - - a posi t ion formally ap- p roved by the RHA early in its dicussions of revenue allocation policies for the year in question.

Funding by formula As discussed earlier, the high pr ior i ty at tached to the goal of equalisation was seen as requiring a change in the prevail ing method of resource allocation, a process which Omega itself character ised as disjointed in- cremental ism in one of its reports. In its place would come a system descr ibed by Omega as "funding by formula". The nature of this formula approach was a theme which surfaced re- pea tedly throughout the allocation process.

Growth money. In the months leading up to the allocation decision, the statements by the Minister and the messages coming from the DHSS were first in terpre ted by Omega as imply- ing that the Region might exper ience a cut in its existing level of resourcing. Subsequently, it seemed more likely that it would remain at its current level. When, in March, Omega was in- formed that it would be given extra resources, i.e. "growth money", almost all discussion swi tched from existing funding levels to the use of this money. The figure available amounted to only 0.7% of the Region's total allocation, but it established the limits and became the almost exclusive focus for explor ing the feasibility of equalisation. Moreover, being labelled "growth" money, those authorit ies receiving it could be regarded as being given an oppor tuni ty for services deve lopment and extension. By implica- tion, those not promised growth in the allocations or resource assumptions were seen as held back, even if in o ther terms, for example, posi-

t ion in relat ion to target, they were already well placed.

Just as the language and logic of the accounts d rew at tention to these four aspects of the situation, by the same token, many other items of equal or greater significance in absolute financial terms, were so backgrounded that they were hardly discussed in allocation meetings, formal or informal. Three were part icularly striking and all of them having labels with associations of in- visibility or transience. They were:

"Off the top" items. One of Omega's allocation documents stated that "the allocation to the region includes some items for which distr ibution by formula would be inappropriate . . . these items need to be deduc ted from the total alloca- t ion so as to arrive at that part that can be apor- t ioned by formula." These items include allocations "earmarked" for part icular purposes, such as new towns, "first charges" for items such as the costs of Regional Headquarters, the service increment for teaching, London weighting, and, in the case of Omega, items for which it had not yet been possible to endorse the RAWP formula calculations, such as the costings for mental illness and mental handicap. These deduc ted items were descr ibed as "off the top" elements. Al- though together they amounted to just under 20% of the total allocation, they were barely discussed in any of the resource allocation meetings and no modifcations were made to proposals for these items.

Authority "reserves" It is not unusual for health authorities to "hold back" some of the available resources in the form of a regional or area reserve, to provide funds for special needs and unexpec ted contingencies. Omega RHA was no exception. Its allocation proposals contained recommendat ions for holding a sizeable Reg- ional reserve, but no explanat ion or clarification was reques ted of the need for this and no challenge was made to its use or appropriateness.

"Non-recurring sums" Much of the discussion at meetings was st imulated by and focussed on pictorial representations, pie charts and

344 JANINE NAHAPIET

graphs, of the proportions of money allocated to various areas and to their positions in relation to target. All of these were based exclusively on proposals for recurring allocations. At the same time, there were sizeable amounts of money to be distributed on a"one offbasis", often available through underspending of previous "reserves". These non-recurring items were, in practice, more than the available growth money although they generaUy received very little attention. As one of the Members commented in a private meeting: "The graphs do not represent the full picture. For example, Alpha might react on the basis of the situation as depicted graphically, when in fact the figures show that they are get- ting more money through the funds allocated on a non-recurring basis".

Together, these less visible items added up to an amount of money many times the size of the "growth" money, yet they were barely acknowledged in the discussions and debates about allocations. The categories and labels adopted to describe them appeared to take them com- pletely out of the picture, leaving attention focussed almost exclusively on targets and growth money.

RA WP created the circumstances for organiza- t ional discovery and renewal

The explicit purpose of RAWP was to stimu- late organizational change. By providing a lan- gnage and a logic for assessing current and future resource distribution, the approach created the circumstances conducive to a reconsideration of NHS policy and practice.

A frequent topic in Officer meetings and informal discussions was speculation about whether .or not a real change in allocation policy and practice would happen. In the early stages of the resource allocation round, the RTO became committed to the view that change should and would come about, a view that was subsequently publicly endorsed by the RHA. It was argued that it should because allocation on the basis of equalisation was "fair". It was anticipated that it would because the Department was expected to base its allocations to regions on RAWP, a practice which would then be followed across the

other tiers. As one Officer, strongly committed to equalisation, put it "the day of Corkscrew Charlie is over; the emphasis now is much less on working the system, which is now accepted as inappropriate, and more on the logical distribution of resources". At the same time, however, some doubts remained. History and experience had shown that, notwithstanding numerous attempts to introduce redistribution policies, there had never been major changes in the allocations to health authorities. The position thus seemed uncertain. If new procedures based on RAWP were really to be applied, Omega would face severe financial difficulties; if experience was anything to go by, then the proposals would probably be modified and the Reg- ion's position would be relatively unaltered. Herein lay a dilemma discussed by Officers with increasing frequency - - would RAWP really herald a change in NHS allocation policy and practice?

While RAWP undoubtedly stimulated debates about NHS decision making in general and the position of the Omega Region in particular, the resolution of these debates lay outside RAWP itself. Although RAWP played an important role in shaping organizational reality, fieldwork observations suggest that the interpretation and significance of RAWP were, in their turn, significantly shaped by the particular circumstances of the time.

HOW ORGANIZATIONAL REALITY SHAPED ACCOUNTING

The close relationship between organizational characteristics and the RAWP formula was recognised from the outset. In their final Report, the Working Party themselves point out that the elements of the formula were restricted by the need to include variables for which information was readily available at regional, area and district levels. Although other factors were recognised as being both important and relevant to the measurement of health care needs they stated that "we had perforce to consider only those criteria, the supporting statistical data for which are read-


ily available and reliable at all three levels of dis- aggregation required" (DHSS, 1976, p.8). Thus, what went into the formula was a function of the information already collected and its analysabil- ity in ways consistent with the major groupings in the NHS.

If organizational factors determined the content of the formula, they also provided the context within which its implications were to be worked out. This too was acknowledged by the Working Party who identify the need to allow for local circumstances in the application of their recommendations. They suggest, for example, that "the proposals . . . should enable health Authorities to determine allocations in accor- dance with common criteria and a common methodology while allowing necessary flexibility to meet local variation" (DHSS, 1976, p.44).

Observation of the implementation of RAWP in the Omega RHA suggests that these local circumstances shaped the accounting in important ways. First, since RAWP was but one of several possible indicators of resource need, its validity and importance were evaluated in the context of these other representations of need. Second, the implementation of RAWP as an objective and systematic method, based on common criteria, involved reassessing the place of such an approach in the ongoing process of selecting appropriate ways of managing the enterprise. As a consequence, the meaning and interpretation of targets, together with the manner in which they were applied in support of the equalisation policy, were inextricably bound up with organizational reality as perceived and interpreted by participants.

RAWP is bu t one a m o n g several measures o f need

Although RAWP emerged as a way of resolving the difficulty of assessing the relative need for resources of different parts of the NHS, in practice it was but one of several indicators of need. Speci- fically, within Omega, the picture presented by RAWP had to be set against the different interpretations suggested by the planning system and demands to open new capital schemes.

RAWP and the p l a n n i n g system. The NHS planning system was launched in 1976, the same year that the RAWP Report was published. This system set out a structure for the development of strategic and operational plans and provided guidelines on planning methods priorities. It soon became apparent that RAWP and Planning constituted contrasting bases for identifying health care needs. RAWP was primarily concerned with the allocation of resources whereas planning addressed itself to their deployment (See Bevan et aL, 1980). Working from the DHSS, RAWP represented a top down approach to health care in contrast to the bot tom up analysis of the planning process. In terms of their information, they drew on some common but also some different data bases as a result of which the two systems sometimes came to different conclusions. For example, in the context of Omega RHA, although the RAWP formula suggested that Alpha Area was above its target and hence over- resourced, according to the planning system Alpha was in need of extra resources to bring it into line with service norms. Thus, when it came to deciding whether Alpha should be given additional revenue the RHA had to choose between conflicting interpretations of the Area's financial position. Although Alpha presented vociferously a strong case for its needs on planning criteria, informal discussions and interviews at Regional level suggested that most, though not all, people felt that RAWP painted the truer picture. As one Officer commented "by whatever criterion you take, Alpha can be shown to be fat". On this basis, Omega continued to support the principle of equalisation, accepting that it implied the allocation of additional resources to Beta and not to Alpha.

RA WP and capital schemes. In contrast to the broad assessments of need to emerge from administrative systems such as RAWP and planning, there were other more specific claims for resources. In the period of this study, the most pressing of these was a call for the revenue to open newly completed capital schemes. Many of these hospitals had been planned at a time when the Government was attempting to encourage

346 JANINE NAHAPIET

new capital developments by providing the revenue required to operate those developments which it had approved. The provision of the revenue consequences of capital schemes, RCCS as it became known, was withdrawn during the 1970s, although some of the buildings, including major hospitals, which had been planned under the scheme had not yet been completed. Within the Omega Region there were several schemes nearing complet ion and the Region had commit ted itself to trying to find the resources to open them.

Herein lay the basis of the di lemma that was to face the Authority in making its allocations to areas. In the months leading up to the revenue allocation for 1978/79, the Omega RHA had commit ted itself at different times to meet ing two wor thy and important needs: the need to equalise and to open new hospitals. However, only when the Authority sent the Regional Offi- cers away to develop detai led proposals on how it could achieve these, did it become clear that in the context of Omega, the two policies were in direct conflict. In o rder to equalise, it would be necessary to find additional resources for Beta, the area clearly be low target. But the main need for RCCS was for the new teaching hospital in Alpha, the area already well above its target (see

Fig. 3). In reconsidering their support for equalisa-

tion, the Officers and Members now had to assess the relative importance of two different and

legitimate claims for additional resources. Both in interviews and in several of the regional documents the decision was descr ibed in terms of choosing be tween "funding by formula" or "funding needs". Support for equalisation im- pl ied endorsement of a part icular approach and a method of allocation. The RAWP Report itself acknowledged that its work and the formula it p roduced dealt with the distr ibution of resources rather than their deployment and "in this sense it is concerned with the means rather than the end" (DHSS, 1976, p.8). But the claim compet ing with equalisation in Omega der ived precisely from a part icular deployment of revenue and represented the visible and pressing problems of a new but unopened teaching hospital. The implementat ion of RAWP thus involved balancing the general pr inciple of equalisation against the specific demands of an identifiable in- stitution. As expressed in the words of one of the Authority Members, the choice came down to a basic dilemma: "Which is our greater duty: to equalise or to support the medical school?"

Account ing change reflects rather than deter- mines the resolution o f adminis trat ive dilemmas

Within the l i terature on organizations, there is a stream of analysis which interprets the task of managers and administrators as being able to find an appropriate balance be tween a number of persis tent and conflicting pressures (see, for

Omega Regional Health Authority

Overspending Above RAWP target

Growing population RCCS needed

I I I I I

ALpha Area Beta A~ Gamma Area DeLta Area HeaLth Authority Health Authority Health Authority Health Authority

Spending in Line High overspending Spending in L i n e Overspending with budget with budget Above RAWP target Below RAWP target CLose to RAWP target CLose to RAWP ~orget Growing population Fast-growing population Growing population Fast-growing population High RCCS needed RCCS needed RCCS needed RCCS needed

Fig 3. Financial position of the Omega RHA and its Constitutent AHAs.


example, Drucker, 1977; Self, 1977; McLaren, 1982). Writers argue that the balance struck between say, centralisation or decentralisation, formality or informality, is not a once and for all achievement but one which is to be accom- plished continually through assessing and reassessing the particular organizational and en- vironmental situation as it develops over time. In this section, it is argued, that the emergence of RAWP acted as a stimulus which resurfaced explicit consideration of three fundamental organizational dilemmas. However, rather than de- termining choice, the eventual impact of RAWP within Omega was itself determined by participants' interpretation of how these dilemmas should be resolved in the light of the way they saw their organizational circumstances. The main dilemma encountered was the relative importance to be attached to objective analysis versus subjective judgements in the making of allocations. Exploration of this issue also raised questions about how far such decisions can be viewed as requiring a judgemental or compromise decision strategy and the related issue of the degree to which to which the grounds for choice should be made explicit or kept ambiguous.

Objective analysis vs subjective judgement. Most of the advisory reports proposing the need for a formula approach to resource allocation in the NHS recognise several limitations in the use of such formulae. Three appear to receive particular attention in the documents and discussion of RAWP.

First the elements of a formula are a function of the information available and there may be reservations about the validity of reliability of this information. The most obvious concern in the context of RAWP was the validity of using of mortality data as a proxy for morbidity (see Bux- ton & Klein, 1978). The RAWP Report states that it was the data on mortality that had the greatest effect on the changes they recommend and that there might be doubts about the suitability of this data. Nonetheless, the Report endorses its general validity.

Second, formulae can only include variables

that can be quantified yet there may be other factors which are important but which are not amenable to inclusion in a formula.

Finally, the logic for the formula is that it rep- resents a standard approach which should be applied consistently. But standardisation and consistency undervalue local variations and these may be significant when assessing local need.

Because of these limitations, what was vari- ously described in Omega as the "rational", "mechanistic" approach had to be adjusted in the light of judgements.

Most of the RAWP documents represent a dialectic between the need for objectivity and the need for subjective judgements in the making of allocations. For example, the Working Party Report says: "too rigid an interpretation ought not, in our view, to be placed upon revenue targets assessed on the lines recom- mended" but it goes on to add "they nevertheless provide an objective yardstick . . . against which the need for resources and therefore the crucial allocation process can be determined". However, they conclude that "in the final analysis judgement must play a considerable part" (DHSS, 1976, p. 41). Similarly, a letter from the DHSS to the Omega Region, giving details of their allocation and the guidelines for distribut- ing it, presents the same dialectical approach: "Authorities should not seek to apply mechanis- tically a predetermined rate of change from existing allocations towards 'targets'. The Sec- retary of State's decision on the pace of change as between regions took account of a range of unquantified factors and of special local pressures affecting the service . . , nevertheless, the Secret- ary of State expects to see a significant redistribution of revenue resources achieved generally in 1978/79 and he wishes authorities to make clear the reasons why it is not practicable in particular instances." RAWP as an accounting procedure now appears to represent an objective but restricted approach requiring judgement in its application, judgement based on an appreciation of local circumstances and unquan- tiffed variables. However, each of these documents remains unspecific as to the precise

348 JANINE NAHAPIET

weight to be given to the "unquantifiables" or to "local factors". They do, however, recommend two processes which are to be followed in the making of such judgements. First, they argue that the approach can work only if the criteria and methods of allocation are made absolutely clear to those receiving allocations at all levels in the NHS. Second, they recommend that there should be continuing, open discussion between all concerned as part of an ongoing process ofclarhqca- tion and improvement.

Explicitness vs ambigui ty in the explanation o f decisions. The guidelines from the DHSS to Omega accepted that it may be necessary to make judgements about how RAWP is applied but stated that the reasons for deviations in the manner of its application needed to be explained. Faced with the dilemma of choosing between providing resources for equalisation or for new buildings, the Officers in Omega encountered this recommendation as a problem. First, it was difficult to discover what the DHSS had itself done in making allocations to regions. Frustrated by the ambiguity of the guidelines, several attempts were made, in the words of one Officer, "to nail the Department to see just what their guidelines do mean". These involved tele- phone conversations, correspondence and meetings with DHSS officers. Nonetheless, it was still not possible to find out precisely how their calculations had been arrived at and therefore to consider whether it would be appropriate for the region to do likewise. Second, it was recognised that being too explicit made it difficult for the Authority to alter its plans at a later date even if such change seemed appropriate in the light of different circumstances. This difficulty was high- lighted by one of the Members when the Author- ity was beginning to reassess the options for future resource assumptions and the priority to be attached to equalisation. Although in the months prior to the allocation round, public opinion and the statements of the Minister had seemed to endorse the importance of equalisation, the failure to open newly completed hospitals was now creating adverse publicity nationally about management in the NHS. The tide of

opinion as measured by the content of ministe- rial statements, press reports and informal discussions, was now moving in the direction of re- garding the opening of hospitals as a high priority. Discussing the need to reassess the initial resource proposals favouring equalisation, proposals which had been circulated but not yet endorsed by the Authority, a Member pointed out "we need to be able to justify the movement away from a nearly declared policy. The situation has changed but Members need to be able to justify new policies". In a context which they regarded as characterised by change and uncertainty, there appeared to be sound reasons for following the behaviour rather than the advice of the DHSS by attempting to preserve rather than reduce ambiguity (see Nahapiet, 1984). Thus the view expressed by another Authority Member that "one of the problems now is that we are giving out too much information" and "this should be avoided in the future", met with widespread approval. This seemed to be especially important given the competing and conflicting interests of the Region's four areas.

Judgemen t vs compromise as a basis fo r choice. The formal documents providing advice on the application of RAWP, with their emphasis on choice through a combination of computa- tion and judgement, presume a model of organization in which the goals and objectives of the various groupings are known and shared (see Thompson & Tuden, 1959). The situation per- taining in Omega differed from this model in two important respects. First, the four areas in Omega were, in practice, in direct competition with each other for the limited resources available. Each was trying to make the strongest case possible for its share of the cake. Second, for a period during the allocation process, the Reg- ional Authority was unsure what its own objective was or should be. It had yet to decide between equalisation and capital schemes. The es- poused logic of RAWP, with its emphasis on open discussion and shared analysis appeared to ignore the political reality of the situation and the searching and compromise which it in-


volved. Thus many of the discussions in the Region also constituted a dialectic between the need for an analytical approach and the need for political sensitivity in its application. For example, the Regional Officer who stated in an Officer meeting that he was "wedded to a logical approach which involves spelling out one's ob-

/

jectives, having all the facts available, debating the options and making explicit the reasons for choice" was later heard to argue for the careful and selective presentation of a new option on the grounds that "basically, what is needed now is for us to play politics". From an early endorsement of the rational analytic aproach, there was increasing recognition of the need for a political compromise. By now, it was accepted by the Officers and Members that the Region's early emphasis on equalisation had to be tempered by the growing concern over unopened hospitals. The application of RAWP would need to recognise this political reality, difficult though it was. In the words of one of the DHSS officers invited to attend a Regional Health Authority meeting:

I don' t envy the Officers their task, for they have to look up to the DHSS and down to the Areas in an a t tempt to please all. What is wanted is for you to produce a package which is f lee from criticism, does justice and sends the chi ldren to school wi th shoes on.

Accoun t s are reinterpreted to m e e t organiza- t i ona l needs

There followed a period of frequent meetings and intense discussions to find a solution to the dilemmas. Observation of these meetings and interviews with participants suggest that three factors were important in the way Omega resolved the need to do justice, avoid criticism and provide for at least the basic requirements of areas. These involved applying the same approach as the DHSS had done in making its allocations to Regions, using the pace of change as a variable to allow flexibility in the achievement of equalisation and third, reinterpreting the meaning and calculation of targets.

"Do as done u n t o " The RAWP Report placed considerable emphasis on the need to establish targets on a compatible basis throughout the

country, arguing that "there would be little point in using one basis for remedying disparities between RHAs if RHAs were free to distribute finance to, their AHAs. . . using different and in- compatible criteria" (DHSS, 1976, p.38). Although the point was made to stress the importance of using the RAWP formula to calcu- late area targets, the argument for a consistent approach was one which the Omega Region attempted to pursue in every detail. However, their reason for doing so appeared to derive as much from the justification it provided for managerial action as from support for the principle of consistency. As one of the Officers explained when discussing the intricacies of the RAWP formula: "this is generally very complex. I know I shouldn't bring politics into it, but someone has to explain to the whole Region and also to those Areas that are potentially losing by modification to the RAWP formula; it might be better to stick with the national formula on a do as done unto basis, even recognising its limitations; if we change, the issue is: how do we justify it?" And on another occasion, in explaining the basis for revised proposals, a treasurer explained that the regional team of officers (RTO) "had tried to find out what the Department had done; the RTO therefore applied a similar analysis within the Region; we were trying to apply a similar reasoning to that of the Department".

In discussions about this adherence to the behaviour of the DHSS, staff in the Region offered two explanations. First, they pointed out that it is often hard to generate better technical work than that of the Department. Second, and more important, they drew attention to what they described as the "vulnerability" of Officers and Members. As one senior administrator commented "the NHS is a non-risk taking, non-in- novative environment. People are not prepared to comment or make choices until they are sure that they are absolutely correct. This applies particularly to the management side, who are more vulnerable in this respect." This view was endorsed by another senior member of staff who observed that "we listen too much to the Depart- ment and are too mechanistic in considering their guidelines . . . the reason is the organiza-

350 JANINE NAHAPIET

tional culture; people are vulnerable to public criticism and therefore need to protect themselves. This is an absolute shame and a tragedy but people do it for reasons of safety." The insec- urity and uncertainty experienced by the Offi- cers and Members thus produced an apparently rigid conformity to the Department's approach to RAWP. This conformity resembles that observed in other sectors, such as education, in which the efficiency and effectiveness of decision making are notoriously difficult to establish (see Meyer & Rowan, 1978). It has been argued that, where such organizations are dependent on their environment, they remain successful to the extent that they incorporate the practices and procedures defined by prevailing rationalised concepts of organizational work and institutionalised in society (see Meyer & Rowan, 1977, and Scott, 1983). Not infrequently, this leads to actions which imitate those of key exter- nal agencies, as in the Omega Region. Moreover, this attempt to follow the reasoning of the DHSS was also supportive of the second mechanism used by the Region to resolve its allocation dilemma.

Pursue equalisation but slow down the pace of change. It had always been recognised in discussions of RAWP that by lengthening the time it took to achieve equalisation it would be possible for authorities to cope with particular local difficulties. The case for this argument was, in the view of the Omega Region, strengthened by the behaviour of the DHSS which, by continuing to give additional resources to above target regions, had itself been prepared to accept some movement away from target in the short term although remaining committed to equalisation in the longer term. This argument was supplemented in Omega by a third and potentially more significant element.

Reinterpretation of targets. It has already been observed that the Omega Region began this allocation round committed to pursuing the general philosophy of equalisation although ex- pressing some reservations about the details of RAWP. As time went on, it slowly began to re-

assess the central element of the equalisation approach proposed by RAWP, i.e. targets. Speci- fically, the fieldwork evidence shows that the interpretation of both the meaning and methods of calculating targets changed over time to accom- modate the competing pressure to provide money to open Alpha's new hospital.

Early reinterpretations essentially involved restatements of the limitations acknowledged in the RAWP Report and already reviewed earlier in this paper. Thus, talking to the Omega regional team of officers, one of the DHSS staff pointed out that "The (Region) and, perhaps, some of its areas, have been too preoccupied and concerned with targets. Targets are not to be regarded as absolutes . . . . The RAWP formula and the document itself point out that there are a large number of unquantified variables which might influence the interpretation of targets". This was followed by statements within the Region of the sort: "the unquantifiables are being given greater weight than equalisation". Simi- larly, reservations were again expressed about the validity of the calculations, as was suggested by one of the treasurers: "The figures are not ac- curate enough to justify tremendous effort to get Alpha and Beta exactly on target". Perhaps the final undermining of targets came in an informal meeting of Authority Members when it was stated that "the point about a target, at region or area, is that it is arbitrary. That is, it is calculated taking certain things into account; having calculated it it is then necessary to make judgements".

Notwithstanding these reservations and pro- visos, Omega had publicly committed itself to, and wished to maintain, a level of support for equalisation. At the same time, it now recognised and accepted the need to provide extra resources for Alpha to open the new teaching hospital. The question facing the RHA was "how?".

The possibility of achieving both came through a reinterpretation of the nature of targets and the development of a modified way of calculating them. This breakthrough involved a new concept, the concept of "banding". The term first appeared in a discussion between statisticians and community physicians in which it was suggested that instead of viewing targets

RHETORIC AND REALITY O F AN A C C O U N T I N G CHANGE 351

as a single figure, they could be regarded as falling somewhere within "a band of error" of plus or minus 2%. This process of banding would explicitly acknowledge that the calculation of targets inevitably involved a degree of statistical error. Moreover, if targets were assessed in this way, then it would be possible both to equalise and give Alpha some growth money for its hospital. The idea seemed a good one to Regional staff and led to the development of a rationale and method for calculating the banding limits. This was explained in the following terms: "we looked for a factor that would relate Alpha to Beta and took a factor of six times; in other words, whatever growth money Alpha gets, Beta should get six times as m u c h . . , it is difficult to provide an alternative argument; the justification for the factor is that it achieves its objectives; it gives some growth to every Area and pulls up the worst off Area; the factor may change as areas approximate target."

Having provided a new interpretation of targets, together with a systematic method for calculating them, it was proposed and agreed that the objective of equalisation should be pursued within the banding limits. In financial terms, this meant allocating all the growth money to Beta for one year, and then linking future growth funds to the Region's main capital schemes, of which Alpha's was the largest. Thereafter, the resource assumptions proposed allocations calculated in order to equalise across areas while at the same time ensuring that each area could look forward to some growth. It was calculated that these proposals would bring three areas within the 2% equalisation band within a four year period, with Beta falling just outside it. In administrative terms, the concept of banding provided a pragmatic resolution of conflicting objectives. This interpretation was summarised by one of the Regional Authority Members in the following way: "this is a band of acceptability, coping with the opposing pressures of equalisation and capital developments and the general problem of the relationship between equalisation and planning".

The significance o f accounting change emerges and evolves in the context o f a complea6 ambiguous and changing environment

In the introduction to this paper, it was stated that the primary aim in undertaking the research and analysis presented here was to explore what is involved in developing and implementing accounting change within the enterprise and, in particular, to discover how organizational actors come to an understanding of the meaning and implications of such change.

In general terms, the RAWP case indicates that a formal method of accounting seemed a necessary but not sufficient condition to achieve a long sought after change in Health Service policy and practice. The formula developed was undoubtedly complex, little understood by the majority but was nonetheless influential in re- framing allocation discussions and redefining the financial position of different parts of the Ser- vice. The evidence suggests that it has had some impact on the distribution of resources, both within Omega and more broadly (see Maynard & Ludbrook, 1980). To achieve this, the formula appears to have had a greater measure of credi- bility and statistical validity than previous calculations, combined with sufficient political will and support.

Within Omega, the implementation of RAWP demonstrates that, as elsewhere, people had to work hard to understand the accounting and statistics. Moreover, the significance and implications of RAWP emerged only slowly. The weeks following the final decisions on resource allocations and assumptions were a period of much internal discussion and reflection within the Omega Region. In interviews undertaken during this time, several explanations were given for what had happened. For many outside the RTO and RHA, these two groups were regarded as having made an initial misjudgement on the relative importance of RAWP. The view expressed was that they had become too clearly committed to RAWP in a situation in which there were other competing, yet legitimate claims. As a result, they had enacted a situation to which they then had to respond. However, most of the Officers and Members who had been

352 JANINE NAHAPIET

closely involved felt that, whatever the statistical problems, target calculations had shown a fair approximation of the position of areas. Their support for equalisation, when combined with their desire to avoid a recurrence of public criticism of their lack of support for Beta, h a d en- couraged them to make a definite and open commitment to acting on RAWP. Moreover, they had felt further justified in this by their expectation that regional allocations would themselves be largely established on the basis of RAWP. Only when they perceived reduced support for RAWP by the DHSS and increasing public and political pressure to open new hospitals did they begin to question the implementation of RAWP. At this point, they had taken the view that they wished to demonstrate continued support for the principles of RAWP whilst simultaneously achieving different objectives, at least in the short term. As a result, the Region had continued to frame its discussions, presentations and its decisions in terms of RAWP, although modifying the calculative process substantially through banding.

As an example of accounting change, the implementation of RAWP in the Omega Region demonstrates how the significance and implications of a calculative process emerge and develop over time. In a setting in which organization members are continuously coming to new understandings about their situation and the environment in which they work, their experience of accounting can only be understood with reference to the context in which it takes place. For the Officers and Members of Omega RHA, RAWP addressed several ongoing dilemmas in NHS decision making, apparently offering a method for resolving them. However, although the formula appeared initially to serve predo- minantly instrumental purposes, by providing a means to achieve the equitable allocation of resources, its significance within the Region became increasingly expressive, symbolising continued commitment to the values of fairness and justice, within the context of a particular administrative and normative order (Daft, 1983). To explore this transition, and the role of accounting as an expressive symbol, the paper will now examine RAWP from the perspective of

rhetoric, defined by Harr6 (1980) as the use of language for expressive purpose.

RAWP: THE RHETORIC AND THE REALITY

The literature on organizations draws on several sources for a consideration of rhetoric, two of which will be considered here. The first perspective adopts the discipline of literary criticism and undertakes an analysis of rhetoric as language and argument (see, for example, Huff, 1983). The other has its roots in social an- thropology and examines rhetoric as the use of language for expressive purposes, exploring the multiple layers of meaning it conveys (see Harr6, 1980; Gowler & Legge, 1983). Both perspectives will be adopted for this examination of the rhetoric of RAWP.

RA WP as a r g u m e n t a t i o n In undertaking her study of strategic change,

Huff (1983) analysed a series of documents in terms of their structure, content and style of argumentation, together with the main themes presented in support of the arguments developed. Analysis of the written documents for RAWP, both national and within Omega, demonstrates that the case for RAWP is typically made in the three staged sequence of argument presented earlier in this paper. The reports begin by establishing that there is a general problem widely experienced in that the demand for resources exceeds their supply and is likely to do so for some considerable time. This is followed by an expression of concern that the current pattern of resource allocation has per- petuated an historic pattern of geographic inequality and that this inequality goes against one of the main principles of the Health Service: to provide for a fair distribution of resources in relation to need. The third stage in the argument concludes that what is required for the situation to alter is a satisfactory measure of need and that, when available, this should permit a change in current practice. The recurring themes within the documents concern the principle of equalisation, the need for an objective and quantitative


measure, the importance but limited availability of appropriate information as a basis for such a measure, the desirability of adopting a different way of making allocations and the recognition that the pace of change towards this will vary in different parts of the country. Within this analysis, writers acknowledge that the application of RAWP raises a number of basic dilemmas. While espousing a primary commitment to formal, open and logical analysis, the several documents constitute a dialectic between the importance of calculation versus judgement and consistency versus diversity in decision making.

Participants in Omega experienced RAWP as resurfacing a number of basic and recurring organizational dilemmas while at the same time increasing the difficulty of resolving them. Al- though the rhetoric of RAWP emphasised clarity, openness, reason and change, their understanding of their situation was characterised by ambiguity, caution, conflict and compromise. Change did occur, but it was perceived as en- vironmental change gradually focussing increasing attention on the pressing need to open new hospitals. As such, in the context of Omega, it un- dermined rather than underlined the immediate importance of equalisation. The reality of RAWP as experienced in Omega was thus far removed from the conditions supportive of its basic reasoning. Nonetheless, in the compromise achieved and the formal presentations of this compromise, much of the argumentation and the vocabulary of formula funding remained. Rhetorical consistency was sustained throughout the allocation process although the financial consequences of the revised interpretations were substantially different from those anticipated at the outset. Analysis of RAWP as an expressive order provides a possible explanation of why this was the case.

RA WP as an expressive order In their analysis of management as an oral trad-

ition, Gowler & Legge explore the significance of accounting as one of several important themes in what they call "the rhetoric of bureaucratic control". This they define as "highly expressive language that constructs and

legitimizes managerial prerogatives in terms of a rational, goal-directed image of organizational effectiveness" (Gowler & Legge, 1983, p. 198). From this perspective, RAWP as rhetoric provides a language and a vocabulary for discourse, defines a set of rules prescribing the goals to be pursued and the appropriate ways of achieving them, and constitutes a way of establishing legitimacy in a highly ambiguous situation.

R A W P as a language f o r discourse. A recurring theme in this paper has been that the significance of the RAWP approach was its provisiOn of a vocabulary and method for reconsidering the nature of resource allocation. Following the argument of Gowler & Legge (1983), the power of this vocabulary comes from its ability to trans- late moral aesthetic issues into techno social terms thus facilitating the task of decision makers. First, RAWP turned an apparently intractible world into a defined and limited collection of tangible variables. For example, the concept and measurement of targets reduced the over- whelming complexity of assessing health care requirements to the calculation of a single figure and, in so doing, rendered measureable the seemingly unmeasureable. Second, by substitut- ing the concept of "population equivalent" for our every day language of people and patients, the formula obscured and diffused the huge moral and social values involved in decision making. As Gowler & Legge point out, the rhetoric of bureaucratic control "typically con- flates management as a moral order with management as a technical-scientific order whilst submerging the former" (Gowler & Legge, 1983, p. 198). Now we can see the significance and value of the sequence of argumentation reviewed earlier, in which the initial appeal to the undeniable moral imperative to meet relative need is gradually translated into the more specific principle of equalisation until it ulti- mately appears as an essentially technical task, involving the detailed calculation of targets. Finally, by linking the economic order to the moral order, targets operate as both descriptors and evaluators of the current situation and use the apparent clarity of plain speaking to direct future behavior (Gowler & Legge, 1983). In so

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doing, the language and logic of targets becomes a potentially powerful stimulus to action.

RA WP as n e w rules f o r the g a m e The analysis so far has made much of the fact that RAWP was heralded as representing a new approach to resource allocation. Thus, allocation reports within Omega were replete with statements to the effect that: "the rules of the game have changed so much that old procedures are no longer generally acceptable".

One of the early reports summarised the change thus: "Members will no doubt com- prehend that the RHA is, to quote Abraham Lin- coln, 'swapping horses while crossing the river', in so far as the distribution of revenue is concerned. Hitherto the RHA has deployed funds in response to identified need, whether this was specified in a long term strategy or was evi- denced by more current symptoms of a problem. However, the current vogue, nationally, is for equalisation by formula: there is an urgent need, therefore, to develop a new strategy and the intrinsic methodology to accompany it, to enable the Authority to respond to the new ideology." This belief in the need to respond to the new ideology was sustained notwithstanding the change in circumstances. Thus it was that the concept of banding appeared so useful. As a method of analysis it allowed the Authority to abide by the rules, if not the total spirit, of the approach and thus provided a device for achieving an acceptable compromise between incompati- ble pressures and objectives. As one of the treasurers observed when discussing the need for banding: "we are playing a game with set rules and everyone is having them applied to them". To move away from the approach, so widely endorsed, would be difficult to justify and ran the risk of rendering the Region open to criticism.

RA WP as a w a y o f e s tab l i sh ing legi t imacy. One of the reports in Omega describes the problem of resource allocation in the following terms: "it has to be emphasised that in the matter of resource allocation, there can never be a 'correct ' answer; neither is it possible to evaluate the

effect on health care needs of the almost limit- less number of factors that could be inferred to be relevant". The situation was thus perceived as one in which there were multiple and conflicting goals and for which outcomes were both difficult to measure and to explain in causal terms. At the same time, resource allocation had become a very visible process within the NHS. In- deed, some authors have suggested that one of the main benefits of RAWP was that it made the whole allocation process more visible and thus open to scrutiny (Maynard & Ludbrook, 1980). Decision makers in Omega thus found themselves in a situation combining high ambiguity with high visibility. In such circumstances, as we have already observed, the criteria for choice place as much stress on the need t.o avoid criticism and to do justice as on more definite achievement in relation to health care provision. This reflects the pattern observed elsewhere in- dicating that where the criteria for assessing performance are themselves ambiguous, organizations must resort to social tests (see Thompson, 1967; Meyer & Rowan, 1977; Meyer & Scott, 1983). Moreover, since the regions are primarily administrative bodies, with the direct provision of health care falling within the remit of the area authorities, the assessment of justice turns largely on an evaluation of administrative and procedural justice and institutionalised organizational action (Meyer & Rowan, 1977).

In this setting there seemed to the Officers to be strong grounds for sticking with the formula approach, providing as it did an apparently objective analysis while enabling, through banding, the achievement of a pragmatic political compromise. If the performance of the Region was to be judged in procedural terms, the formula approach would help structure the decision and present the necessary picture of rational analysis and reasonable behaviour expected by interested parties. In so doing, it would meet the social and political criteria of acceptability widely regarded as being so important in such circumstances (Thompson, 1967; Meyer & Rowan, 1978; Hofstede, 1981). When viewed from this perspective, perhaps the most succinct summary of the organizational implications of


RAWP was made by one of the Officers in Omega. When reflecting on RAWP's contribution to the task of resource allocation in the NHS, he suggested very simply that "RAWP is a way of stabilising the debate that you have and putting a kind of objectivity and respectability on things". As an example of accounting, it both created the agenda for debate and, although modified substantially in the course of that debate, it established through its rhetoric the legitimacy of the administrative process involved.

CONCLUSIONS

The examination of the implementation of RAWP undertaken in this paper has been stimulated by the desire to understand more about how accounting is implicated in organizational life. The analysis suggests that the relationship between accounting and organization is a complex and intricate web of multiple connections and mutual influence evolving over time.

Both at a national level and below, the case demonstrates how the development of new accountings can play an important role in enabling organizational change. The history of NHS resource allocation indicates that the specifica- tion of a satisfactory calculation was regarded as necessary for the implementation of the long sought after equalisation policy. The RAWP formula met the apparent need for a way of quan- tifying an objective which it had been difficult to pursue in the absence of an agreed measure. Ex- perience shows that it has achieved some suc- cess in redistributing resources (Maynard & Ludbrook, 1980). Accounting thus constitutes a powerful stimulus to action since it renders tangible the previously intangible, thereby both increasing the clarity and visibility of particular objectives and providing an alternative basis for administrative choice. Its development and extension into new domains has the potential for significantly redefining the context and agenda for action.

However, although the case shows how accounting changes may substantially redefine the situation to a degree which actors cannot ignore,

it also demonstrates that such changes are not sufficient to determine administrative choice. First, to become meaningful, these objectified (Berger & Luckman, 1967) accountings have to be internalised, through learning and experience. This internalisation is not a passive process but an active one in which actors attempt to make meaningful for themselves the objectifica- tions they encounter. Second, the case of RAWP indicates that the process is an essentially retie- xive one, in which the meaning of accounting both shapes and is in turn shaped by the social world. The actual impact of new accountings thus depends on the relationship between the model of reality implicit in the philosophy and methodology of the calculations and the model of reality derived from everyday experience within the enterprise. This perspective on the nature of accounting change raises important practical, methodological and theoretical issues.

First, it demonstrates how those engaged in implementing new accountings may find themselves having to work within and mediate between potentially contradictory rationales for administrative choice. In the Omega case, these contradictions were experienced most acutely by the treasurers, who had responsibility for both the accounting calculations and the presentation of options and recommendations to the RHA. On more than one occasion, the Regional Treasurer faced a direct conflict between what one administrator termed "the logic of accounting" and the "logic of the situation". For example, in preparing papers for the Authority, the Trea- surer introduced several modifications to figures contained in early draft proposals, often for technical accounting reasons, such as the availability of more up-to-date information, changes in the baseline, redistribution of money between accounting categories, etc. Authority Members were, however, often reluctant to accept such changes, since they were seen to offer areas a basis from which to argue and challenge proposals. On at least one occasion, they requested that the Treasurer omit accounting modifications and reinstate the original figure. Initially, he de- clined to do so, arguing that the figure in itself did not mean anything, since it was essentially a

356 JANINE NAHAPIET

proportion of the baseline. Since the base had changed, so had the derived figure. However, this accounting logic did not dissuade the Mem- bers who stated that "the figure did mean some- thing, because it had appeared. It should therefore remain the same". Such instances, together with the development of banding demonstrate how, instead of providing an unequivocal basis for action, accounts can themselves be shaped, even reformulated, in line with other organizational rationales (see also Gambling, 1977). Moreover, they suggest that the meaning of such accounts is both emergent and intersubjectively negotiated within a particular setting. In such settings, accountants are likely to face particular conflicts as they work at the interface between these rationales. As one administrator observed during the case presented here, '~we all accept that (he) is a good Treasurer, but what we need now is a politician and not a Treasurer". It is suggested that future research could usefully explore further the conflict and ambiguity encountered by accountants, particularly in their dual roles as professionals and managers. A deeper understanding of the conditions giving rise to such conflicts and the ways in which they are resolved in practice by accountants and treasurers working in different organizational settings would further our understanding of the relationship between accounting and management.

Second, this perspective on accounting change implies that future research should con- tinue to study the workings of specific accountings over time within particular organizational settings. If the relationship between accounting and organization is reflexive, detailed case studies are necessary to explore the dynamics of their interrelationship. As Legge e t al . (1985) have stated, "a good case study can provide rich 'thick description' (Geertz, 1973); it can be

holistic and convey a feeling of what it is like to experience an organization, or a problem, from the 'inside'. It can explain attitudes and be- haviours in context and form their actors' own frames of reference" (p. 11 ).

Third, and closely related, this perspective on accounting requires conceptualisations of accounting which elucidate the ways in which its meanings are created and sustained in social settings. Several such approaches have emerged in recent years (see Colville, 1981; Boland & Pondy, 1983; Roberts & Scapens, 1986). In this paper, the concept of rhetoric has been presented as a vehicle to explore such meanings and this is for three main reasons. First, rhetorical analysis draws attention to the intricacies of argumentation in which major social and moral issues become tractable through their transla- tion into questions of accounting technique. Second, the concept of rhetoric encourages exploration of the interplay between instrumental and expressive symbolism in accounting. De- spite its apparent precision, the meaning of accounting remains ambiguous, permitting multiple and sometimes conflicting interpretations to emerge over time. Nonetheless, imbued with the rhetoric of bureaucratic control, accounting symbolises a continued commitment to rational action, thereby securing wider legitimacy for administrative behaviour. Finally, such a perspective locates the study of accounting in the main- stream of interest in organizational control in which there is a strong and growing interest in management as the management of meaning (see Smircich & Morgan, 1982; Gowler & Legge, 1983). This is likely to prove an especially important line of analysis for those engaged in the theory and practice of institutionalised organizations, such as health care, in which the interplay between the rhetoric and reality of accounting is likely to be especially intriguing.

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The rhetoric and reality of an accounting change: A study of resource allocation

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