1. Behind the habits, routines and institutions of management accounting Reinaldo Guerreiro Fábio Frezatti Tânia Casado UNIVERSITY OF SÃO PAULO

2. Justification The Paradox: In spite of motivating and facilitating factors from the internal and external environments.... Organizations hardly use new management accounting techniques and procedures in companies. Institutional Theory: Appears as a sociological approach that helps to explain the existing paradox.

3. Hypothesis and Objective Hypothesis: Concepts originating in psychology and organizational cultures can contribute to a better understanding of the institutional approach applied to management accounting Objective: Achieve a broader understanding about the causes of the existing gap between management accounting theory and practice.

4. Methodological Framework 1.Assumption that management accounting practice can be explained by institutional theory. 2.Assumption that basic concepts of institutional theory (habits and routines) are rooted in the sociological dimension of organizational culture as well as in the human psychology dimension. 3.Correlation between the institutional approach, the organizational culture approach and the psychological concept of the unconscious.

5. The contemporary social and business environment Social changes in the 1980’s.... New list of values accepted by people, Extreme capitalism, New production forms, Technological development, Market deregulation, New economic financing forms, Intensification of capital accumulation, New forms of financing, Global communication intensified by technological development... Society in the 1980’s is very different from previous decades: IMPACT ON ORGANIZATIONS

6. Impact of changes on organizations Organizations are forced to implement change processes in their way of acting; Managers’ decision models are new in function of new environmental variables; Changes in the organization’s external environment should (theoretically) lead to changes in the companies’ management accounting systems; New specific information are demanded to support the needs for decision making in an environment characterized by increasing uncertainty; Tendency towards convergence between management accounting concepts in global terms.

7. The phenomenon of stability in management accounting systems In spite of powerful inducing and facilitating factors for management accounting modernization, few changes have occurred. Otley, 1985 Choudhury, 1986 Johnson e Kaplan, 1987 Edwards e Emmanuel, 1990 Cohen e Paquette, 1991 Brigth et al., 1992 Emore e Ness, 1991 Gree e Amenkhienan, 1992 Ask e Ax, 1992 Drury, et al., 1993 Scapens e Roberts, 1994 Covaleski et al., 1996Evans e Ashworth, 1996, Libby e Waterhouse, 1996 Granlund e Lukka, 1998Burns, 2000 Burns e Scapens, 2000 Granlund, 2001

8. Institutional Theory: Old Institutional Economics The institution is the focus and no longer the rational and maximizing behavior of individual decision makers; Institutions develop by turning human activities into a routine; Routines are formalized and institutionalized habits - “The recognized formal means through which things should be done”; Routines represent thinking and acting forms that are habitually adopted by a group of individuals and taken for granted; Routines are important for people to face the uncertainty and complexity of the environment. INSTITUIÇÕES ROTINAS HÁBITOS INSTITUTIONAL DIMENSION INSTITUTIONS ROUTINES HABITS

9. Management Accounting as an Institution Accounting practices are institutionalized routines which, over time, start to be part of the organization’s set of premises and beliefs that are taken for granted; Accounting practices help to represent the performance of persons and groups, define rights and establish guidelines for implementing actions; Management accounting practices provide social coherence, give meaning to organizational behavior; New practices can be introduced and fit into others. However, new accounting systems may lead to conflict and resistance; Implementing a new model entails insecurity, risks, inquiries on individual competencies to handle new variables and displacement of the power axis.

10. Unconscious Factors in Human Psychology Behavioralist approach Cognitive approach: Not conscious... Psychoanalytical Approach: Unconscious... CONSCIENTE INCONSCIENTE PESSOAL INCONSCIENTE DE GRUPO CONSCIENTE INCONSCIENTE PESSOAL INCONSCIENTE DE GRUPO CONSCIOUS PERSONAL UNCONSCIOUS GROUP AND COLLECTIVE UNCONSCIOUS

11. Unconscious Factors in Organizational Culture Culture: set of assumptions shared by group members and accepted without discussion, which the group learned throughout its history. ARTEFATOS E CRIAÇÕES VALORES PRESSUPOSIÇÕES BÁSICAS SUBJACENTES ARTEFATOS E CRIAÇÕES VALORES PRESSUPOSIÇÕES BÁSICAS SUBJACENTES ARTEFACTS AND CREATIONS VALUES BASIC UNDERLYING ASSUMPTIONS Basic Underlying Assumptions: The deepest and most fundamental level of organizational culture. They are unconscious.

12. The influence of Unconscious Factors on the construction of management accounting

13. HABIT: present in all dimensions

14. Conclusion The gap between normative theory (when proposing efficient concepts) and management accounting practice (when using inadequate concepts) is a relevant problem for companies. The OIE – Old Institutional Economics approach of Institutional Theory contributes to the understanding of the nature of the management accounting problem.

15. Conclusion The institutional focus discloses the social and not technical nature of the problem. The approaches presented here show that the causes of the problem are installed habits in the organization. Psychoanalytical approach: Habits are largely unconscious. They are neither rational nor easy to change.

16. Conclusion Habits rooted in individual minds and group culture are simply taken for granted. It does not matter how adequate or inadequate they are for the organization. Organizational culture approach: Habits lie in the deepest layer and are characterized as basic underlying assumptions.

17. Conclusion Successful intervention strategies for changing habitual behavior depend on the understanding that maintains routine answers. Formulation of explicit plans (conscious intent) to implement new behavior; Implementation of short-term rewards; Impede the realization of unwanted behavior; Facilitate the realization of desired behavior.

18. Conclusion Actions to minimize the management accounting gap: (i) Awareness: need to discuss the concepts used in practice; (ii) Understanding: understanding the meaning of the concepts used and alternative concepts; (iii) Criticism: critical analysis of the adopted concepts; (iv) Conscious choice: choosing alternatives; (v) Creation of new desired habits: The new concepts must be institutionalized.