Re-thinking and Re-balancing Rules and Routines

7/28/2019 Re-thinking and Re-balancing Rules and Routines

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RE-THINKING AND RE-BALANCING RULES AND

ROUTINES: A FRAMEWORK ON

INSTITUIONALISATION PROCESSESS IN

MANAGEMENT ACCOUNTING

Joo Oliveira, Faculdade de Economia da Universidade do Porto (FEP.UP, Portugal)

Martin Quinn, Dublin City University Business School (DCU, Ireland)

Interdisciplinary Perspectives On Accounting Conference 2012

Cardiff, 11th 13th July 2012.

First draft, please do not quote without authors permission

Authors contact details:

Joo Oliveira,[email protected]

Martin Quinn,[email protected]

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mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Abstract

This paper addresses the ongoing debate about rules and routines in institutional theory, in

particular the debate building on Burns and Scapens (2000). Their seminal contribution was

used as one initial springboard to inform our interpretations of the processes of management

accounting change in two case studies. However, we both separately encountered some

vulnerability in Burns and Scapens (2000) conceptualisations of rules and routines.

Oliveiras (2010) case highlighted how rules, accepted and enacted by organisational actors,

were crucial to a far reaching change process. The case adopted a wide conception of rules,

beyond merely formal rules. Instead, the case drew on Cleggs (1989) concepts of rules of

meaning and rules of membership, therefore emphasising the conception of rules as

internalised and a part of actors cognitive structures. In turn, Quinns (2011, 2010) case led

to focusing on routines. Formalised (i.e. written) management accounting rules were found

to be less prevalent, with routines seemingly portraying structural and more formalised

properties. A broader conceptualisation of routines was deemed to be required, leading to

Feldman and Pentlands (2003) two dimensions of routines - the ostensive and the

performative. This allowed explaining the apparent lack of any formalised, documented

rules: in their absence, routines could portray a structural quality, i.e. a guiding and referring

function for actions (Quinn 2010, pp. 167-181).

Bringing together our two strands of research, we realised both rules and routines play a part

in the formation of potentially institutionalised management accounting practices. We

integrated our conceptualisations on rules and routines to build a distinctive, more detailed

framework on the interactions of rules and routines, when compared to Burns and Scapens

(2000). We thus propose a framework which explains how rules (as internal cognitive

structures) and routine dimensions (ostensive and performative) interact to first embody a

management accounting practice, which in turn may be repeated and, eventually, may become

a routine. We thus draw a distinction between repeated practices and routines. The framework

also considers a material dimension of rules (Volkoff et al, 2007) which, together with the

notion of rules as internal cognitive structures, makes a case for the importance of rules in the

formation of repeated practices, routines and institutionalised practices.

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1. Introduction

We both set out on the road to our doctoral thesis five or six years ago now. We were (and

are) both interested in studying change and stability in management accounting and we both

included Burns and Scapens (2000) (hereafter B&S) among our theoretical perspectives.

However, we began to realise that we needed to think more about the concepts contained

within B&S. That is not to say that we disagree with B&S, but we both found some further

conceptualisation on the nature of rules and routines was necessary to interpret the empirical

data presented from both our cases.

Our sense-making guided us in different directions. Oliveira (2010) studied a long-term

process of organisational change. Whereas formal rules were also at stake, the most

interesting insights concerned rules of meaning and membership (Clegg, 1989), as

internalised and/or enacted in practice. As such, Oliveiras study analysed in particular the

rules component of B&S framework, although adopting a different conceptualisation of

rules (the way things should be done) from that put forward by B&S. On the other hand,

Quinn (2011, 2010) studied an information systems change project. Initially conceptualising

rules as formalised and written, he realised such rules were scarce in his case study. So, he

tended to focus more on routines as per the B&S framework (the way things are done),promoting a more detailed conceptualisation of routines compared to that proposed by B&S.

Based on joint reflection, our perhaps excessively one-sided focus on rules (Oliveira, 2010) or

routines (Quinn, 2011) does not do justice to the process of what B&S refer to as the

routinization of management accounting practices. Here, we propose that both rules and

routines play an important role in the bringing about of institutions (i.e. taken-for-granted

ways of doing things). B&S do not detail the very nature of rules and routines, nor do they

explore their interactions in detail. Work by Clegg (1989), Coad & Herbert (2009), Morgen

and Olsen (2011), Reynaud (2005) and Stones (2005) have provided some further theoretical

clarity on the nature of rules; and work by Feldman & Pentland (2003), Pentland & Feldman

(2008) and Volkoff et al.(2007) has provided some further theoretical clarity around routines

(see also Quinn, 2011). We attempt to bring the contributions from this work to our

understanding of B&S, offering a different model of the process leading to the

institutionalisation of management accounting practices. Based on our respective studies and

more recent theoretical perspectives as outlined above, in this paper we attempt to re-think

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and re-balance rule and routines in the process of institutionalising management practices. To

this end, the developed framework explores the interactions of rules and routines in the

bringing about of repeated practices in the first instance, and ultimately routines. The

framework (see Section 5) highlights the importance of rules, which we conceive as accepted

cognitive structures, in the formation of repeated practices (and routines). It also explores how

material factors such as technology are encompassed within the process of routine formation.

The rest of the paper is structured as follows. Section Two provides a brief overview of B&S

framework. Section Three develops our conceptualisations on rules, briefly drawing from

Oliveiras (2010) case. Section Four likewise develops our conceptualisations on routines,

also briefly drawing from Quinns case. Finally, Section Five brings together

conceptualisations from our cases and some further literature, to offer a potentially useful

framework for management accounting researchers. Section Six concludes the paper with

some final remarks.

2. Rules and Routines in Burns and Scapens (2000)

The conceptual framework proposed by B&S depicts a process of how management

accounting practices can become taken-for-granted. Their concepts are now briefly describedto set a context for remainder of this paper. The B&S framework portrays management

accounting as a routine and potentially institutionalised organisational practice (2000, p. 5).

Hamilton defined an institution as a way of thought or action of some prevalence and

permanence, which is embedded in the habits of a group or the customs of a people (1932, p.

34, as cited in B&S). Premised on this definition, an organisation could be said to exhibit

characteristics of an institutional nature. That is, organisational behaviour (such as

management accounting) generally portrays some consistency, and in some instances

behaviour can become a permanent feature. A starting assumption of the B&S framework is

that management accounting can be interpreted drawing on concepts such as rules and

routines. B&S defined routines as the way things are done (2000, p. 5), which can be

contrasted with rules, the ways things should be done (2000, p. 6). They also recognise a

link between institutions and actors, proposing that institutions define relations between social

groups and group members. This explains the two realms of institution and action

encompassed by B&S. These realms represent an on-going cumulative process of change

through time (2000, p.9). The B&S framework somewhat arbitrarily starts at the point of

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encoding new ideals in rules and routines. This is typically influenced by existing routines

as these incorporate existing institutional values. Actors act out rules and routines over time,

which eventually may become institutionalised practices. The B&S framework outlines in

particular the importance of existing institutional factors such as rules and routines. The B&S

framework also suggests routines can become institutionalised. Such institutionalised routines

may, or may not, be in line with rules (see Lukka (2007) for an example). Institutionalised

routines imply a deeply embedded set of assumptions on how things are done and are a

potential source of inertia, continuity and inflexibility (Becker, 2004; Feldman and Pentland,

2003).

Thus, in summary the B&S framework proposes that a study of management accounting

change requires an understanding of, first, the historical and institutional context of existing

rules and routines and, second, the processes by which new rules and routines can become

embedded and taken-for-granted. This paper by and large supports the general process as

proposed by B&S. That is to say, the interaction of rules and routines is important to interpret

how management accounting practices can remain stable, or how these same practices,

although taken-for-granted, can also change. Where this paper differs is in both the

conceptualisation of rules and routines and the interactions between them. The next section

explores, proposes and justifies alternative conceptualisation of rules, stemming from the

Oliveira (2010) RuleCo case. Then, Section Four takes similar steps as regards

conceptualisations of routines, drawing from the Quinn (2010) RoutineCo case. Finally,

Section Five brings together our conceptualisations of both phenomena, proposing a more

detailed framework of their interactions in the potential institutionalisation of management

accounting practices.

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3. Theoretical development and empirical insights from the

RuleCo case study

3.1. Setting the scene at RuleCo

The insights presented in this section emerged during a three year case study of a large

European manufacturing company (Oliveira, 2010), called RuleCo for the purposes of this

paper. This paper only provides a summary of some key points of the case study, to support

the theoretical developments. This case study was motivated by the suggestion in the

literature that such systems have the potential to drive management accounting change

(Scapens and Jazayeri, 2003). So, this case study aimed at studying management accounting

changes subsequent to the implementation of an Enterprise Resource Planning (ERP) system,

based on a company that had embarked on a long and yet on-going process of ERP

implementation.

Institutional theory was initially adopted as lenses to explore management accounting change

and stability. However, power issues emerged during the case study. Formally powerful

central actors had been confronted with important limitations in the past, but which at the

time of the case study had been largely overcome. It was apparent that these limitations could

be construed as lack of power. However, institutional theory provided little guidance in

explaining power (and lack of power), in spite of some efforts and calls for research in this

literature (Burns, 2000; Ribeiro and Scapens, 2006; Seo and Creed, 2002; Siti-Nabiha and

Scapens, 2005). This required researching literature on power and Cleggs (1989) framework

of Circuits of Power was found to adequately explain the empirical setting.

Exploring Cleggs conceptions of power is beyond the scope of this paper (see Oliveira, 2010and 2011 for a synthesis of the framework and a proposal for its development). Here, the two

types of structures setting the standing conditions in which organisational action is produced

are particularly relevant. These structures are materialconditions (related with techniques of

discipline and production) and prevalent rules of practice (rules of meaning and membership).

The following subsections analyse these two types of structures in OIE and in Cleggs

framework, and how they were incorporated in the analysis of the RuleCo case.

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3.2. Rules in OIE

Within the old institutional economics literature, which we have primarily drawn uponi,

conceptualisations of rules different from B&Ss were helpful to interpret the empirical

insights about prevailing rules of practice. In the scarce discussion of B&S specifically on

rules, the main emerging dimension concerns their formal / informal nature. In particular, in

B&S rules tended to be associated with formal rules e.g., as codified in a procedure manual.

However, as Hodgson (2006, p. 18) argued, the term formal has been differently associated

with notions such as legal, written, explicit, codifiable. In addition, the contextualisation

and operationalization of formal rules always depends on non-legal rules and inexplicit

norms and, importantly, there is not clear distinction between the formal and the informal.

The notion of prevailing rules of practice goes beyond formal / informal dimensions.

Instead, it emphasises rules acceptance and enactment by organizational actors. Within

institutional theory, rules thus conceived are included in what Coad and Herbert (2009)

described as internal structures, within the agent (p. 179, emphasis added) (also, Busco,

2009). These internal structures are cognitive representations, internal to the agent, providing

orientations for action and decisive in influencing the way the external structures constrain the

agent and the agents perceptions. Rules are connected sets of precepts (Englund and

Gerdin, 2008 p. 1129) and create dispositions among actors to behave in certain ways. Becker

(1998) also adopted this concept of rule as a cognitive representation to replace the abstract

(rather than action) level of routines. This corresponds to what Burns (2009) described (as

regards habits, routines and other rule-like structures), as embed[ding] themselves within

peoples minds and cognitive armoury (Burns, 2009, p. 18). In a nutshell, what is at stake is

becoming a rule to that particular agent.

Consistently with such views, for eminent OIE theorist Geoffrey Hodgson (2006, p. 3) a rule

is broadly understood as a socially transmitted and customary normative injunction or

immanently normative disposition, that in circumstances X do Y (p. 3). Prevailing rules (and,

indeed, institutions themselves) are subsequently enacted in, and therefore shape, actors and

organizational practices. At stake is the reconstitutive downward causation mechanism that

OIE attributes to institutions, acting to some degree upon individual habits of thought and

action (p. 7). The crucial aspect in this conceptualisation lies in rules becoming an internal

structure to the actor. If laws or declarations are neither customary nor embodied in

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individual dispositions, thenformal or notthey have insignificant effects. They are mere

declarations or proclamations, rather than effective social rules (Hodgson, 2006, p. 18). The

key is therefore, as stated above, becoming a rule to particular actors - rather than being

externally defined or proposed, in whatever form, but without having become accepted.

3.3. Rules and material conditions in Clegg (1989)

Cleggs framework also dealt with the issue of actors dispositions deriving from prevalent

rules of practice, conceptualising rules in a broader way than merely formal rules. Clegg

(1989) identified two types of rules: rules of membership and rules of meaning. Rules of

membership refer to what actors believe to be appropriate behaviours. The desire to adopt

appropriate behaviours is considered to derive from the actors status of members of certain

groups and, in particular, from the actors ambitions to be accepted, retained and promoted

members in those groups (Munro, 1999). Membership must be achieved, since it is

provisional, rather than reified. In turn, rules ofmeaningrefer to the ways actors make sense

of the world, events, the others and themselves. Therefore, rules of meaning shape the way

actors knowledge is constructed.

Rules of meaning and membership are related. In particular, rules of membership indicating

to actors which behaviours are appropriate may include, and require, the endorsement of

certain rules of meaning. For example, a rule of membership may indicate that the production

of accounting reports should be oriented towards organisation-wide (rather than locally-

specific) decision-making. Underlying such rules of membership, rules of meaning must be

endorsed by accountants producing accounting information, orienting how they should

interpret the business transactions they will record in the accounting system.

Likewise, different conceptions about a particular business transaction (different rules of

meaning) may reflect different rules of membership. In fact, a particular conception may

address the interests of certain actors, rather than other actors. Hence, the rule of meaning is

underpinned by a rule of membership, regarding whose interests the actor should consider as

objectives to be attained.

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Finally, for Clegg (1989, p. 201) rules are indexical, because they can never provide for their

own interpretation. Indexicality occurs regarding the context of interpreters, i.e., the agents;

and indexicality occurs regarding the context of interpretation, i.e., the actual situation in

which the rule is interpreted and potentially enacted. Rules indexicality thus creates

considerable leeway for divergence in the interpretation and enactment of rules.

3.4. Rules and material conditions at RuleCo

An in-depth analysis of the case is beyond the scope of this paper, so this section will only

provide some relevant insights for the discussion held here. A key reason for difficulties of

RuleCos central actors (roughly referring to managers at RuleCos headquarters) resided in

the rules that local actors accepted and enacted in their daily activities, in accounting and

other areas such as production. More than formal rules were at stake and could be considered

prevalent rules of practice. Typical rules at stake within the accounting area concerned, e.g.,

how to organize the charts of accounts, how to classify business transactions within the

adopted chart of accounts, the timings to report to the headquarters, what accounting control

mechanisms should be adopted (e.g., reconciliations), etc.. Although some formal rules

defined by central actors were accepted and enacted by local actors, there were also other

types of rules influencing local practices.

In daily organizational activities, local actors could be confronted with conflicting rules,

reflecting local and central conflicting objectives and interests. Traditionally, prevalent rules

of membership of local actors at RuleCo were oriented to the local level the plant or the

subsidiary-, rather than the organization as a whole. Likewise, locally relevant rules of

meaning were often preferred over others addressing the interests of central actors. Local

practices were often the enactment of locally-oriented accepted rules of practice, as

highlighted by a Corporate Centre manager:

each one () [at a local level gave] total and absolute priority to the

countrys reporting, and not the internal group reporting.

In turn, material conditions had an important role in the initial lack, and subsequent rise, of

central actors power. Without going into details, at RuleCo, historically, available techniques

were particularly limited to promote acceptance and enactment of centrally-oriented rules of

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practice. However, three key technological and organizational innovations (techniques in a

broad sense) were introduced by central actors: the introduction of the financial accounting

module of SAP; the relocation of the Corporate Centre; the creation of a Shared Services

Centre. These three innovations were crucial in attaining the objectives of particular actors by

changing prevalent rules of practice, particularly as internalised by local actors.

The telegraphic empirical account above does not fully convey the insights supporting the

theoretical choice of adopting a wider conception of rules and, in particular, emphasising their

dimension of internal cognitive structures, orienting actors practices. However, the above

suffices to highlight that rules and material conditions were important structures to introduce

practices and fix them within that organisation setting. This insight was useful to develop our

framework, by bringing these two elements thus conceptualised into our account of the

routinisation and institutionalisation of practices

4. Theoretical development and empirical insights from the

RoutineCo case.

4.1 Setting the scene at RoutineCo

The genesis of the concepts proposed in this section stem from an eighteen month

longitudinal case study of a corrugated container1 company (see Quinn, 2010). This case

study set out to interpret why management accounting practices within the industry had

remained apparently stable despite the increased use of information systems like ERP systems

and other large-scale information systems. As with Oliveira (2010), precise details of the case

are not given here and this case also set out using B&S as a starting point.

The case company referred to above is called RoutineCo for the purposes of this paper. At the

time of the study, RoutineCo was installing additional software2 to help increase its ability to

work more like an integrated group, rather than a collection of separate companies. While no

change to management accounting practices was planned, the nature of the software and its

associated change project implied change to management accounting can accompany

information systems change (Scapens and Jazayeri, 2003).

1 Cardboard boxes in common speech.2 The software was integrated with an existing ERP system.

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During initial visits to RoutineCo, it emerged that little in the way of management accounting

rules were present. Or, more precisely, using a working understanding of what B&S

implied by the term rules, there were no rules in management accounting. At this point in

the research at Routine Co, rules were being interpreted as written or documented, which

transpired later could be a mis-understanding (see also Section 3.1 above, where Oliveira

(2010) interprets B&S rules). Based on this premise, this presented a potential issue if

formalised documented rules did not exist, how could B&S be used in the RoutineCo case to

interpret change and/or stability in management accounting practices? As the research

continued, the nature of management accounting practices at RoutineCo were revealed as

more routine- than rule-like, with almost no written procedures or manuals in evidence as

guide to practices. It was also apparent that management accounting routines were tightly

inter-woven with other organisational routines (e.g. performance-related pay, legal (financial)

accounting) and, thus, it seemed change to management accounting practices was quite

unlikely. Nonetheless, some change to management accounting practices was found, albeit

emergent and grounded in existing routines (see Quinn, 2010 for more detail). On example

was the introduction of a performance measurement called the Contribution Factor (CoFa),

which was derived from a previous contribution margin measure.

The CoFa actually became formalised and written, and was used by managers at the case sites

visited. In fact, the CoFa as it became formalised, written and taken-for-granted, was one of

very few (written) management accounting rules found at RoutineCo. But, rules had been

misinterpreted as being written, or had they? If rules, assumed as written, did not exist, where

then did management accountants get guidance from? As shown by the CoFa example, this

new management accounting routine (c.f. B&S how things are done) existed prior to it

being formalised as a (written) rule. B&S seem to propose that rules may be in existence

prior to routines, but evidence at RoutineCo seemed to show that routines may in fact be in

existence prior to any (written) formalisation of management accounting practices. In such a

scenario, were existing management accounting routines (i.e. the contribution margin, which

was not formalised in any way) themselves a source of guidance for actors rather than rules?

However, following the logic of B&S, routines are actions, not structures. And management

accountants do engage in purposeful, structured, guided practices (action).With such

questions presenting from the evidence at RoutineCo, some further conceptualisation on the

nature of routines and rules was needed. So, what began as a misunderstanding (on the

interpretation of rules) actually became a key focus in the analysis of the findings at

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RoutineCo. The next sub-section begins to address the issues poised by the RoutineCo,

namely: 1) can management accounting routines represent both structure and action?; and 2)

what are management accounting rules? Although Section Three has already provided details

on rules in line with the interpretation of RuleCo, the interpretation of rules in the RoutineCo

case differs in some respects.

4.2 Ostensive and performative routines

During the course of the research at RoutineCo, the concept of a routine as defined by Burns

and Scapens (2000) was found to require some conceptual development. A number of

scholars in recent years have recognised the duality of routines, or put another way, that a

routine does not represent just behaviour. Winter distinguished between a routine in

operation at a particular site and a routine per se- the abstract activity pattern (1995, pp.

169-170). Similarly, Feldman and Pentland state that organisational routines consist of two

aspects or dimensions, namely: (1) the ostensive dimension; and, (2) the performative

dimension (2003, p. 101). According to Feldman and Pentland, the ostensive dimension of a

routine may have a significant tacit component which moulds the perception of what the

routine is, may be codified as a standard procedure and may exist as a taken-for-granted

norm (2003, p. 101). Pentland and Feldman describe the ostensive aspect as abstract,

cognitive regularities and expectations that enable participants to guide, account for and refer

to specific performances of a routine (2008, p. 286). The latter part of this quote suggests

that an actors perception of the ostensive aspect is subjective, which is supported by Feldman

and Pentland where they note the ostensive incorporates the subjective understandings of

diverse participants (2003, p. 101). The performative dimension of a routine is the specific

action(s) taken by people [] when engaged in an organisational routine (Feldman and

Pentland, 2003, p. 102) at specific times, in specific places (Pentland and Feldman, 2008, p.

286). Thus, Feldman and Pentland (2003)3 also distinguish between the abstract concepts of a

routineper se and associated behaviour (see also Hodgson (2008, 2006)).

Hodgson (2008) defines routines thus: routines are not behaviour; they are stored capacities

or capabilities (2008, p. 19). This suggests that routines are separate from action. Hodgson

does, however, state that routines depend upon a structured group of individuals, each with

habits of a particular kind (2008, p. 22). This, in a similar way to Feldman and Pentland3 See also, subsequent papers by Pentland and Feldman (2008, 2005).

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(2003), highlights a duality of routines. Finally, Burns (2009), in a similar vein to Hodgson

(2008), proposes routines as dispositions, which separates routines as a concept from

behaviour.

The above mentioned literature suggests there is both a structure and action aspect to

routines. B&S, while depicting both structure (the institutions) and actions, do not make any

distinction between a structural and an action component of a routine. In the accounting

literature, Englund and Gerdin (2008) argue:

[] we need notions both to describe the situated and recurrent management

accounting practices as such, and to denote the non-situated modalities that inform

those management accounting practices (p. 1130).

Englund and Gerdin (2008) refer to conceptual disparity (p. 1131) in management

accounting research, where some writers view management accounting as modalities (i.e.

structures) which are drawn on to reproduce practices, whereas others view management

accounting as recurrent practices (i.e. actions). They further argue that to combine both

conceptualisations in the same study may be ontologically problematic, suggesting that there

is a risk of social structure and action becoming conflated (p. 1131).

Given the above literature on routines which provides some further conceptualisations on

organisational (and management accounting) routines, and the nature of the data unveiled in

the RoutineCo case (i.e. few written rules), it is proposed here to adopt the notion of duality in

management accounting routines. Given the apparent lesser importance of rules in

management accounting at RoutineCo, proposing routines as having a structural component

which guides action is potentially more suited to analysis of the data. Adopting this approach

avoids any conceptual disparity on the nature of routines (Burns, 2009; Johannson and

Siverbo, 2009; Englund and Gerdin, 2008) by making a clear distinction between the tacit

dimension of a routine and the action dimension. In other words, it argued here that routines

are best described as having ostensive and performative dimensions as per Feldman and

Pentland (2003). A clear distinction between these two dimensions (as defined earlier) allows

a researcher to interpret how and why in the apparent absence of rules (as at RoutineCo),

aspects of routines changed or remained inert. In turn, this dual-dimension interpretation ofroutines provides potentially improved explanations on the process of institutionalisation of

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management accounting practices as outlined by B&S. This is because it provides a method to

utilise B&S in organisations where formalised rules may not exist e.g. small business.

However, rules are an important component of B&S and, as highlighted by Oliveira (2010),

are important in a management accounting context as evidenced at RuleCo. The

conceptualisation of routines described above does not exclude rules from process of

institutionalisation of management accounting practices. Feldman and Pentland (2003) and

Pentland and Feldman (2008) describe rules as artefacts of routines. If rules are

conceptualised as artefacts of routines, then by definition routines would have a tendency to

exist before rules. This point is reflected on in the next section.

The conceptualisation of routines proposed here, alongside Oliveiras (2010) earlier depiction

of the importance of rules, raises a number of discussion points which are explored in the next

section. We bring together our respective notions of rules and routines as noted here and

Section 3 to derive a framework which will begin to address the complex interactions of rules

and routines in a management accounting practices setting.

5. DISCUSSION

5.1. Making a case for rules within institutional theory

Among the various components of B&Ss framework, routines, next to institutions, have been

the main focus of attention by researchers. The findings by the Carnegie School (see a review

in Hodgson, 1988) that behaviour is not entirely deliberative, conscious and intentional, and

in particular that individuals adopt satisficing (rather than maximising) strategies (March and

Simon, 1958), downgraded the emphasis in the precise calculation of consequences.

Alternatively, they placed rule following in centre stage and, particularly, routinised rule

following - even if mere rules of thumb are involved, rather than maximising ones

(DiMaggio and Powell, 1991; Hodgson, 2008; Scapens, 1994).

The previous two sections highlighted the empirical importance of both rules and routines and

refined conceptualisations to capture the complexity of both phenomena. However, it should

be noted that the emphasis on routinised rule following still leads to the issue of knowing

what the followed rules are and highlights that there are still rules involved. As suggested in

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Section 3, conceptualising rules merely as a set of formal rules only partially captures the

relations between rules and routines. Alternatively, an expanded conception of rules

encompasses the notion of formal rules but places a distinctive emphasis on rules as an

internal structure of agents. This conception emphasises the cognitive dimension of rules -

rules as accepted by agents, which may then be enacted by agents in their activities. In

addition, it also makes a case for rules to regain a centre stage in institutional research, next to

the current emphasis on routines and institutions.

Oliveira (2010) argued that rules, in the broad conceptualisation discussed in Section 3, are

implicated in all recent conceptions of routines reviewed by Becker (2004), Quinn (2011,

2010) and Volkoff et al. (2007): the dispositional, ostensive, performative and material

dimensions of routines. Each dimension is analysed next. In the first conception, restricting

routines to generative dispositions, orienting agents, Johansson and Siverbo (2009)

highlighted that routines can be expressed as rules (p. 148). This is in line with the view of

(accepted) rules as part of agents internal structures, also influencing agents dispositions

towards actions.

In the second conception, the ostensive dimension of routines also has underlying rules, given

its guiding properties. Indeed, the characteristic of guiding behaviour is shared by both rules

and the ostensive dimension of routines. As Quinn (2010, p. 295) noted, [i]t could be argued

that the ostensive aspect of a routine is similar to an informal (undocumented) rule a

conception which is included in a broader conceptualisation of rule. As regards the third

dimension, performative routines (i.e., the action dimension of routines as behaviour), the

underlying rule being enacted (albeit in a routinised way) should not be ignored; as mentioned

above, this perspective concerns programmatic rule-basedbehaviours.

Fourth, and finally, Volkoffet al.s (2007) discussion on the materialdimension of routines

actually concerns the multiple rules underlying routines being hard-coded in information

technology. Although Volkoffet al. do not mention rules in their paper, their definition that

[o]rganizational routines are embedded in the ES [Enterprise System] in the form of system-

executed transactions - sets of explicitly defined steps that require specific data inputs to

automatically generate specific outcomes (p. 839) reveals that they are referring to rules

intended to define transactions and their sequence.

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It therefore seems to be impossible to expunge rules out of the debate on routines, routinised

rule following, and routinised action. Routinely producing a monthly variance statement (an

example of a routine in B&S) is the enactment of an accepted rule stating that such a report

should be produced every month even if potentially mostly unconscious. The above analysis

highlighted the importance of rules, in as much as they underlie routines. The next subsection

discusses another issue of crucial importance: rules influence behaviour even when, and

particularly when, there are no routines.

5.2. Rules when there are no routines filling a gap of routine-based frameworks

5.2.1 Recurrence: necessary for the existence of routines

The concepts of routines and rules are not synonymous, in spite of the linkages highlighted

above. Indeed, one of the crucial differences is derived precisely from a key characteristic of

routines: recurrence. As Becker (2004) noted, based on a wide literature review (see also

Quinn, 2011), [t]he only commonality amongst [the various definitions of routines] is that

they have to do something with repetition or regularity (p. 664, emphasis in the original) (see

also Pentland, 2011). Indeed, recurrence of behaviours is required both to create a routine and

to maintain it (Feldman and Pentland, 2003). Previous recurrence of behaviours is required so

that one can evoke the concept of routine in the first place indeed, in any of the alternative

concepts, even those which are not within the realm of action. Realistically, one would be

hard pressed to call something happening only once a routine (Becker, 2004, p. 646).

Additionally, even after being constituted (in whatever ontological form), a routine needs

recurrent performance to be sustained. As Feldman and Pentland (2003) argued, without on-

going performance of a routine, the performative dimension disappears and even the

ostensive definition, though it maystillexist, becomes meaningless (Feldman and Pentland,

2003, p. 108) and may diminish over time, or even disappear (Quinn, 2010, p. 296).

The requirement of recurrence, or repeated occurrence, clearly restricts the field of

application of the concept of routine. If an action has never been repeated or even performed,

no routine exists. Likewise, if a routine ceases to be performed, even its ostensive dimension

may diminish or disappear (Feldman and Pentland, 2003; Quinn, 2011). However, repeated

occurrence is a striking difference between routines and rules, as discussed next.

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5.2.2 Recurrence: but not necessary for the existence ofrules

Unlike routines, rules do not necessarily derive from, and so do not necessarily require,

repeated occurrence of behaviours. Actors may draw on specific rules for a number of other

reasons, other than due to routines. One approach draws on a Parsonian account of human

behaviour, which deeply influenced OIE. This approach emphasises the individuals

evaluative judgment based on wider values, norms and attitudes, largely a result from the

commitment derived from socialisation. Rules are, above all, morally accepted. In an

alternative approach, Ribeiro (2003) drew attention to a more calculative perspective of

human behaviour, in which individuals may enact certain rules according to strategic

purposes, rather than genuine internalisation and moral acceptance of those rules (see alsoBoland, 1996). This possibility of calculative order, nonetheless, provides an account of

behaviour different from the downward causation from institutions (putatively embedding

shared values) upon individuals, suggested by the Parsonian account endorsed by B&S.

It is acknowledged that it is plausible, as B&S suggest, that repeated behaviours may create

(ostensive) routines - which may be conceptualised as rules, as below in this section and

then eventually even be codified as (formal) rules (see also Quinn, 2011). However, they did

not claim explanatory exclusivity, and did not claim that all rules which individuals draw

upon in their social life derive from previous behaviours.

Therefore, unlike routines, rules do not derive necessarily from past behaviour. A rule may be

a part of an individuals internal structure without the underlying prescribed action having

ever been performed. This does not mean, of course, that past behaviour ( any past behaviour,

and particularly past and recurrent behaviour) may not leave its mark on actors and their rules.

The importance of past actions is, for example, reflected in the related notion of path-

dependency (e.g., Becker, 2004; Burns, 2000; B&S; Coad and Cullen, 2006; Coad and

Herbert, 2009; Modell et al., 2007; Nelson and Winter, 1982; Powell, 1991). Indeed, as we

explore later, how routines and rules (as agents internal structures) may evolve in a

cumulative interaction to bring about routinized behaviour, and ultimately institutions, is

worthy of more detailed study.

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5.2.3 Rules when recurrent actions do not develop intoroutines

Finally, it should be noted that past behaviour does not necessarily translate into the

development of routines. This applies to all conceptions of routines. In a conception of routine

as a recurrent behavioural pattern, past behaviour may not be as sufficiently recurrent as to

qualify as a pattern (the degree of empirical recurrence required for such qualification is,

clearly, not amenable to an easy quantification). In the conceptions of routine as a cognitive

representation or a disposition, the emergence of such cognitive representations or

dispositions is also not guaranteed to occur after (any given number of) reiterations of past

behaviour.

Although the cognitive revolution highlighted that much behaviour is routinised (Cyert and

March, 1963; DiMaggio and Powell, 1991; Hodgson, 1988; March and Simon, 1958), some

authors are cautious about not exaggerating their claims about the extent of routinisation.

Routines () comprise programmatic, rules-based behaviour () grounded in repeatedly

following such rules. () The above is not to say, however, that all accounting becomes

routinised (), but that there is potential for routinisation () to occur (Burns, 2000, also

cited by Yazdifaret al., 2008).

The current literature emphasis on routines may leave researchers with an inadequate

conceptual toolkit to account for empirical situations in which actors cognitive structures

orient their actions, but in which routines have not consolidated, or have not consolidated yet.

As noted above, routines may not emerge at alland surely do not emerge immediately after

an action is first performed. Conceptual frameworks in the literature to date have neglected

these insights. The next section will present a framework which addresses these gaps, by

providing a greater emphasis to rules and identifying characteristics which distinguish

between routines and merely repeated practices.

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5.3. Towards a conceptualisation of interactionsbetween rules and routines.

5.3.1 A framework on interactions of rules and routines

Rules are an important, and arguably an essential, component of understanding potentially

institutionalised management accounting practices. The relationship between routines (in their

varying conceptual guises) and rules seem a tightly bound and conceptually inseparable one.

However routines may not emerge, as repetition is an essential component of routines (Becker

2004, 2008; Feldman and Pentland, 2003), and rules do not necessarily derive from past

behaviour. This is where rules may provide researchers with a potential starting point in the

analysis of organizational (and management accounting) practices. Once routines emerge

however, they are a fundamental building block and arguably the primary means by which

organizations accomplish much of what they do (Feldman and Pentland, 2003, p.94).

In Figure 1, we attempt to answer this which comes first, rules or routines question, in a

processual account bringing together the concepts of rules and routines outlined earlier

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Material realm Actionrealm Psychologicalrealm

Rules(cognitivestructures)

Practices

Technologicaldevices

Repeatedpractices

Performative routine Ostensiveroutine

Institutionalised practices

Figure 1 a detailed conceptualisation of the interactions of rules and routines.

Figure 1 depicts three realms material, action and psychological which encompass the

ontology of the elements which we argue ultimately lead to institutionalised practices. The

material realm encompasses rules (as eventual routines) that are engrained within

technological devices such as enterprise resource planning software and other similar

technologies. The action realm encompasses the actual acting out of practices by actors. The

psychological element encompasses cognitive understandings of how practices are to be

performed. Each three realms work together to help us interpret how management accountingpractices (and other organisational practices) can become routinized, or indeed not. Before

elaborating on Figure 1, it should be noted that all three realms presented in Figure 1 are

assumed to represent actions at a collective or group level within organisations.

The conception of rules depicted in Figure 1 refers to rules as internal cognitive structures i.e.

rules which have been accepted by organisational members4. In the material realm, accounting

software typically includes encoded rules as described by Oliveira (2010) and Volkoff et al.

4 The introduction and acceptance of rules in a particular social context (e.g. an organisation) is itself a worthyresearch topic (see Oliveira, 2011A, 2010), but beyond the scope this paper.

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(2007) (see earlier). These encoded rules have been selected by organisational members

according to the cognitive rules they had accepted and considered desirable5. Together,

cognitive and material rules are structures which inform new practices. Most organisational

practices are repeatedly performed (supported by technological devices), and eventually gain

a routinized nature. This routinized nature encompasses performative routines (actions) and

ostensive routines (Feldman and Pentland, 2003), with the latter representing a rule reinforced

by routinization. Ultimately, if both routine dimensions are sustained, in time, they may

assume a taken-for-granted status within the organisation and become institutionalised

practices. A more detailed analysis of the framework, supported by a fictitious example,

follows.

5 Technology is not infinitely flexible to accommodate whatever rules human actors may wish (Volkoff et al,

2007). However, we argue that parameterisation capacities of contemporary software such as ERPs providesignificant flexibility to embed most rules envisaged by organisational actors, through the selection amongst themultiple alternatives offered by the software.

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5.3.2. Exploring the framework

To illustrate the conceptualisations within Figure 1, suppose the following fictitious example,

which although fictitious, is typical of how we observed many practices evolve at our

respective case studies (see Oliveira, 2010; Quinn, 2010). Let us assume an organisation is

adopting a new management accounting system, which includes some form of enterprise

software (such as an ERP). Managers may consider, for example, that more frequent and

detailed variance reporting improves control and that this is desirable6. The rule at stake is

we must produce a twice-monthly, detailed variance report7, which is a rule of membership

that is expected to bring and sustain successful organisational membership for these

managers. In turn, this rule of membership requires rules of meaning, such as a conception

about a good report (it should be detailed) and good reporting (it should be frequent and

detailed) (see Section 3). According to the orientation for action provided by this accepted

rule, managers will attempt to shape the information system in order to embed this rule in it,

through parameterisation (or eventually customisation) of the software. Accepted rules and

encoded rules represent respectively the circuits of social and system integration (Clegg,

1989). At this stage, standing conditions at the psychological and material realms have been

set, which both enable and constraint possibilities of action.

Within this structural context of accepted and encoded rules, the organisational practice of

producing the variance report takes place. Through rules enactment, the first report is issued

and, subsequently, it happens on a twice-monthly basis. At the time when a practice is first

performed, it is premature to suggest that a routine is already in place (cf. van der Steen,

2011), since the fundamental characteristic of routines is repetition (Becker, 2004). As the

report is repeatedly produced, according to the accepted and encoded rules, the practice may

achieve a routine status. As argued, repetition is a necessary, but not sufficient characteristic

to grant routine status to a practice. Hence, the separation of both concepts in our framework.

6 We acknowledge that this unitary view of organisations, endorsing the managerial perspective, overlooks

diversity within organisations. The crude simplification of a unitary view, common to other synthetic

institutional frameworks such as B&S, merely intends to focus the discussion on the concepts and relationsbetween rules and routines. See Oliveira (2011A) for a related approach explicitly accounting for intra-

organisational diversity.7

This rule by nature requires repetition, since it specifies frequency of report production. However, a similarrational would apply to a rule such as depreciation should be not be part of product costs, yet repeatedpractices would emerge as this rule is continuously enacted in on-going product costing decisions.

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The degree of necessary repetition (as regards the length, quantity or intensity of repetition)

for a routine to emerge is not fully debated here. Repetition is inherently a time-related

concept but most likely in a non-linear way. For example, a new once a year management

accounting task might not be regarded as routine for a number of years, whereas a task

performed multiple times per month may be considered a routine in a much shorter

timeframe. In other cases, the decisive perspective of repetition can be spatial, even more than

time or the number of repetition (see Quattrone and Hopper, 2005 on the importance of time

and space dimensions). E.g., the extent to which a practice is repeated throughout a company

may promote that such practice gains a routine status more quickly. The literature has not

provided a definitive answer on when a merely repeated practice becomes a routine and

probably can never do so.

Alternatively, we tentatively suggest characteristics of routines, to allow researchers to

recognise one when they see it. We argue that characteristics like inertia (Becker, 2004; van

der Steen, 2009), automaticity and tacitness (Lorenz, 2000) are required to classify a repeated

practice as a routine. Inertia can be conceptualised as routine rigidity (Gilbert, 2005), referring

to how routines preserve the underlying logic of an organisation, creating a virtuous circle

which supports the routine. As noted by van der Steen (2009), inertia in routines manifests

itself through limited change in behaviour. Looking at it another way, as noted by Feldman

and Pentland (2003) and Pentland and Feldman (2008) (performative) routines can fade away

over time if not enacted, thereby loosing inertial properties. Inertia of routines is thus similar

to inertia of physical objects, resisting to change its state of: 1) rest, since a routine does not

get constituted immediately; and 2) motion, since a routine tends to remain stable in time.

Inertial tendency to remain in motion is strongly influenced by some automaticity in

performative routines. Automaticity refers to the ability to undertake tasks in an almost

unconscious fashion, as typical of ones everyday habits. Finally, tacitness implies an

unspoken and inferred way of doing things8. Thus, characteristics such as inertia,

automaticity and tacitness have a sedimentary effect (Clegg, 1989), whereby repeated

practices evolve into a settled routine.

Our framework also includes the interdependence between the performative and the ostensive

dimensions of routines. As argued above in this section, the acting out of the routine (the

8 Notions such as tacitness and automaticity align with the Carnegie school findings whereby behaviour is notentirely deliberative, conscious and intentional, as noted earlier.

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performative routine) is essential for the ostensive dimension to emerge and be sustained. In

time, without action, routines may become meaningless, diminish and even dissipate 9. In turn,

ostensive routines provide the idea of a routine and hence influence how it is performed

(Feldman and Pentland, 2003).

Some points on the framework presented in Figure 1 are worthy of mention. First, the

framework adopts some simplifying assumptions. The framework starts with the assumption

that rules have been accepted by organisation members. As already acknowledged, we do not

examine how acceptance of rules occurs. As our framework emphasises routines and

routinization, it has by definition a collective focus. However, to fully explore the nature of

rules and their origin in an organisational context (e.g. an external or internal source, an

individual or collective initiative) is beyond the scope of our framework and worthy of further

study. Also, whether what we term cognitive rules are derived from formal or informal rules

(Hodgson, 2006), or whether they have a constitutive or regulative nature (Searle, 2005) is not

debated here, as such notions do not detract from the fact that the rules (in our framework)

have been accepted by organisational members. As we depict in Figure 1, rules, as accepted

cognitive structures, underpin (with material rules) the formation of repeated practices.

Second, for the purposes of illustration and explanation, Figure 1 depicts a scenario where a

single instance of institutional practices is (potentially) formed. However, dynamically,

institutions are the basis of the downward causality underlying OIE, a stabilising

mechanism that the current framework accommodates (and could be represented by a

downward arrow from institutions to rules). But institutionalised practices can change based

on, for example, exogenous factors such as technological change or economic shocks (see

also B&S). Thus, the process depicted in Figure 1 is on-going and dynamic, but may require

an exogenous shock to re-start, i.e. for new rules to become accepted. In an alternative,

relevant contribution, Seo and Creed (2002) have proposed change triggers from within

institutional theory itself, i.e., dispensing totally exogenous forces. Seo and Creeds proposal

is based on the heterogeneity and interconnectedness of multiple institutional areas. Emerging

perceptions of institutional contradictions function as triggers, leading actors to re-evaluate

their own institutional arrangements and, consequently, their accepted rules. Again, a detailed

analysis or application of Seo and Creeds ideas to the proposed framework is beyond the

scope of the paper, but the two frameworks are tentatively compatible, with Seo and Creed9 Although, as shown by Birnholtz et al.2007 dormant routines can be re-enacted.

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offering other detailed processual mechanisms and a particular attention for diversity. Finally,

we are not suggesting that the process depicted within our framework will necessarily unfold.

For example, it may not be possible to embed accepted rules into technological devices as the

generic rules available for selection within technologies such as ERP software may match the

requirements of the organisation. Or, as already mentioned, a repeated practice may not

evolve into a settled routine.

Third, we depict institutionalised practices as being underpinned by action and psychological

realms, but not the material realm. While encoded rules, in the material realm, are a

component in the formation of repeated practices and routines as depicted, they are not an

essential component of routines per se and, inherently, of institutions. Nevertheless, the

importance of material conditions (e.g., software) in management accounting is amply

documented (e.g., Volkoff et al., 2007; Dechow and Mourtisen, 2005), justifying the inclusion

of material rules in the framework.

Fourth, based on the interactions and processes depicted in Figure 1, we propose that an

ostensive routine - a rule enacted over and over again and that achieved a routine nature - is in

fact an empirically strengthenedrule. At least two factors contribute to this greater strength.

The first contributing factor relates directly with the conception that an ostensive routine is a

rule, thus providing guidance for actions. This guidance means that an ostensive routine has

dispositional properties, representing a propensity to act (Burns, 2009; Hodgson, 2008) in

similar ways to the (repeated) actions which built and sedimented to form that same ostensive

routine. The second contributing factor to think of an ostensive rule as an empirically

strengthened rule is that its previous enactment allows to somewhat reduce the uncertainty

caused by the inherent indexicality of rules (Clegg, 1989; Oliveira, 2010). As discussed in

section 3, indexicality of rules is related with processes of interpretation: regarding the

context of interpreters, i.e., organisational members; and regarding the context of

interpretation, i.e., the actual situation in which the rule is interpreted and potentially enacted.

A first (and then repeated) enactment of a rule to particular circumstances is arguably an

important step to increase clarity around the rule. Its enactment implied the interpretation of

the rule by organisational actors, in their particular context; and it implied the interpretation of

the particular empirical context at stake. Although both contexts (of the interpreters and of the

empirical context) are likely to change, the performance of these two interpretations may

promote the emergence of a kind ofpsychologicaljurisprudence for the future interpretation

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(and enactment) of the rule by organisational members, thus potentially further strengthening

the rule as a orienting, cognitive structure. However, it should also be highlighted that the

interpretation and enactment of rules in particular circumstances also creates an opportunity to

clarifications and even changes to rules rules as accepted by actors, and even rules as

externally available, regardless of their formal or informal nature.

Overall, this empirical strengthening of rules is likely to contribute to a greater resilience of

those rules. As Modell et al. (2007) noted, B&S mainly ascribe resilience (e.g., of

institutionalised controls) to organisational routines. Our proposal that ostensive routines

provide greater strength and resilience to those rules is in line with B&Ss ascription, but

suggests a more detailed account of underlying processes.

6. Concluding comments

The preceding sections have outlined our respective case studies and a framework which has

been informed by both our empirical findings and recent literature on organisational routines

in particular. As mentioned briefly in the introduction, we both set out on our research

projects using B&S as a backdrop to help us understand change and/or stability in

management accounting practices resulting from large-scale information systems change.

However, as outlined in Sections 3 and 4, our outcomes in terms of interpreting and

understanding our empirical data differed somewhat, in particular in relation to the relative

importance of rules and routines in our respective studies. These differing outcomes prompted

us to critically evaluate the nature of rules and routines and the part played by both in the

bringing about of institutionalised management accounting practices the outcome of which

is the proposed framework.

Our framework offers several potential contributions to the furtherance of research in

management accounting routines andrules. Recent literature has tended to concentrate less on

rules. We adopted a wider conception of rules and focused on the dimension of rules as

internal cognitive structures, orienting action. As conveyed in Figure 1, rules are an essential

component in the ultimate formation of routines and should remain a focus of management

accounting research. To this end, we encourage further research into how rules becomeaccepted in organisations. Fruitful lines of research here may include exploring how the

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material realm may also affect rules acceptance (and not only rules enactment) and

introducing intra-organisational diversity, as in Oliveira (2011A). We also encourage further

empirical research on the distinction between repeated practices and routines, and on the

factors which may sediment repeated practices into becoming routines. Finally, we also

encourage empirical research on how processes we described may not unfold, become

interrupted or divert from their original direction, problematising the virtuous cycle

underpinning our synthetic framework and thus bringing a more realistic view of

organisations.

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i It should be noted that other eminent scholars such as Giddens (1984) and Wittgenstein (1953) have also discussedrules and rule following behaviour. However, such works do not provide clarity of what exactly a rule is. Given

our starting point of B&S, and somewhat more detailed attempts in associated OIE literature to clarify the meaning ofrules, our work here remains focused on this strand of literature. Similarly for example, the work of Giddens (1984)

refers to routinized behaviour, but does not clarify the meaning of routines. Hence later, we examine literature whichoffers more detailed conceptualisations of routines. See also Stones (2005, pp. 46-48) for a critique of Giddens use of

rules)

Re-thinking and Re-balancing Rules and Routines

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