Behind the habits, routines, and institutions of management accounting (*)

Reinaldo Guerreiro Department of Accounting and Actuarial Sciences School of Economics, Business and Accounting University of So Paulo, Brazil <reiguerr@usp.br> Fbio Frezatti Department of Accounting and Actuarial Sciences School of Economics, Business and Accounting University of So Paulo, Brazil <frezatti@usp.br> Tania Casado Department of Business Administration School of Economics, Business and Accounting University of So Paulo, Brazil <tcasado@usp.br>
Corresponding author: Prof. Luciano Gualberto School of Economics, Business and Accounting University of Sao Paulo 908 Cidade Universitaria Sao Paulo 05508-900 Brazil Phone: 55-11 818-5820 Fax: 55-11 818-5822 (*) Paper to be presented at 4TH CONFERENCE ON NEW DIRECTIONS IN MANAGEMENT ACCOUNTING: INNOVATIONS IN PRACTICE AND RESEARCH BRUSSELS, BELGIUM, DECEMBER, 2004.

Behind the habits, routines, and institutions of management accounting

Abstract
In spite of motivating and facilitating factors in the external environment, the implementation of new management-accounting techniques and concepts in companies is disappointing. Institutional theory is a sociological approach that can be applied in accounting to study this phenomenon. It focuses on accounting as an institution within the companythat is, as a routine made up of habits that make sense to a certain group of people. The essential tenet of institutional theory is the idea of group habitswhereby the institution is understood to be structured on the basis of routines and habits. The research hypothesis of the present study is that certain concepts from psychology and organizational culture can contribute to the application of the institutional approach to management accounting. In particular, this study examines the causes of the existing gap between management-accounting theory and management practice. The study adds new elements to the institutional approach, and integrates it with concepts from psychology and organizational culture, to create a better understanding of management accounting. Keywords: management accounting, institutional theory, organizational culture, archetypes.

1. Introduction
There is a paradox in current management-accounting practice. Despite the presence of motivating and facilitating factors in the external environment, and despite many new techniques and instruments being available to business managers, the level of implementation of new accounting techniques and concepts is, in practice, low. Institutional theory is a sociological approach that can been applied to accounting to explain this paradox. Institutional theory rejects the premises of the neoclassical theory that has thus far been normative in management accounting. Rather, institutional theory focuses on management accounting as an institution within the company. It perceives accounting practice in terms of a routine of habits that make sense to a certain group of people. These habits are widely accepted within the institution; indeed they are taken for granted. If habits become formalized and institutionalized, they mould institutions. The personal and social dimensions within an institution are interconnected. Individuals influence the group and the group influences individuals. The psychological concept of the unconscious allows a clearer understanding of how personal and group habits are formed. By using certain sociological and psychological conceptsincluding institutional theory, habit formation, and the unconsciousthis study offers a new perspective on the gap between theory and practice in management accounting.

2. Environmental changes and management-accounting inertia

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The social and economic environment of developed countries has changed significantly in the past two decades (Baines and Langfield-Smith, 2003). Such developments as market deregulation, new forms of economic financing, the intensified accumulation of capital, new financial resource flows, and rapid technological developments in communications have changed the ways in which organizations function. Zeffane (1996) has observed that creating and maintaining organizational success is more complex nowadays than it was ten years ago especially as a result of the significant interdependence that now exists between national economies. At the same time, the world has become much more dynamic as a result of the explosion in global communications. This complexity and dynamism mean that organizations cannot remain unchanged in a rapidly changing world. In the business sphere, this post-modern period (Harvey 1998) has seen profound changes in the production of goods and services and in communication. Businesses are more aware of the need to attend to client needs in an extremely competitive global environment. In theory, companies have been induced to implement profound changes in their business management models, in their management instruments, and in management accounting. Baines and Langfield-Smith (2003) have noted a common theme in normative management-accounting researchthat changes in companies management -accounting systems are guided by changes in the external organizational environment. This theme is based on the idea that managers require specific management information to support their decision-making in an increasingly uncertain environment and to monitor their progress in strategic achievements. Granlund and Lukka (1998) have used the concept of convergence and divergence drivers in arguing that there is a global tendency towards a convergence of concepts in management-accounting systems. Kasurinen (2002) classified the forces that influence changes in management accounting as being motivators, facilitators, and catalysts. However, in spite of the existence of these motivators, facilitators, and catalysts, the present authors argue that little change has occurred in management accounting. The problem can be termed management-accounting inertia. This refers to the fact that accounting research has exerted little impact on business practiceresulting in a significant discrepancy between theory and practice. Various studies have examined this issue directly or indirectly. These include Otley (1985), Choudhury (1986), Johnson and Kaplan (1987), Edwards and Emmanuel (1990), Cohen and Paquette (1991), Bright et al. (1992), Emore and Ness (1991), Green and Amenkhienan (1992), Ask and Ax (1992), Drury et al. (1993), Scapens and Roberts (1994), Scapens (1994), Covaleski et al. (1996), Evans and Ashworth (1996), Libby and Waterhouse (1996), Granlund and Lukka (1998), Burns (2000), Burns and Scapens (2000) and Granlund (2001).
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Green and Amenkhienan (1992) have noted a lack of synchronization between innovations in manufacturing and innovations in management accounting. Although changes in the latter are occurring, companies largely continue to rely on outdated accounting models. Bright et al. (1992) made a similar observationnoting that many companies are still introducing and developing costing systems that they consider innovative, whereas many observers would characterize such systems as already being well established. Granlund (2001) has noted that accounting systems are frequently difficult to changein spite of the influence of significant market changes and other pressures for modification of accounting practices.

3. Neoclassical theory as the basis for normative management accounting

Scapens (1994) has noted that the theory of management accounting has been strongly influenced by neoclassical economic theory, but that this theory is an inadequate theoretical framework to explain the development of management-accounting systems. According to Burns (2000), the conventional wisdom has conceived of accounting change as a product of rational behavior that seeks to optimize company profit through the creation of effective informationa perspective that is based on neoclassical economic theory. In contrast, institutional theory conceives of accounting as an institution that makes sense to a certain social group. This institutional perspective is a relatively recent phenomenon. Neoclassical theory was developed by economists to assist in forecasting behavior and in making market analyses. The original intention did not include an explanation of management behavior. The theory is based on two important assumptions: (i) the rational maximization of economic agents; and (ii) the general equilibrium provided by market forces. The theorys premise of economic rationality implies that individuals will always take rational decisions. Market equilibrium is thus seen as the sum total of the rational economic behavior of individuals. According to the neoclassical model, other human dimensionsincluding psychological and sociological factorsare not considered to be part of economic analysis. Under the influence of the neoclassical school, this belief in the economic rationality of individual economic agents has been transferred to an understanding of the internal dynamics of companies. Employees, managers, and owners have been perceived as rational economic agents, and the role of management accounting has been to provide adequate information for decisionmakers to optimize their economic decisions. These views have also influenced the development of management-accounting studies. The aim has been to seek the best decision model, the best measuring concepts, the best system solutions, and so onall with a view to maximizing company profits. Management accounting displays an abundance of ideal modelssuch as activity-based costing (ABC), the balanced scorecard, the theory of
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constraints, and so on. Many of these are now a decade old, but empirical research demonstrates that few companies are actually using these new models (Green and Amenkhienan, 1992; Bright et al., 1992). Some basic questions thus arise: * Why are companies not making more use of the new conceptual models? * Why are inadequate theoretical management concepts still used? * Which conceptual models proposed in the normative neoclassical approach are really efficient for business management? The present study addresses the first of these questions.

4. Institutional theory
Burns and Scapens (2000) have noted that an increasing interest in institutional theory has led to two approaches from this theory appearing in the accounting literature: (i) new institutional sociology (NIS); and (ii) old institutional economics (OIE). According to Burns (2000), OIE is the aspect of institutional theory most applicable to analytical studies of changes in management accounting. According to the OIE perspective, the institution is the main object of analysisrather than the rational behavior of individual decision-makers (as proposed by neoclassical theory). Burns and Scapens (2000, p. 8) follow Barley and Tolbert (1997) in defining an institution in terms of ... shared assumptions that are accepted and taken for granted, which identify categories of human actors and their activities and appropriate relations. Scapens (1994) has observed that, in the context of OIE, Veblen (1919) supplied the first definition of an institution: ... a certain way of thinking a set of persons have in common. According to Burns (2000), Walton Hamilton (1932) considered an institution to be a prevailing manner of thinking or acting which then becomes part of the habits or customs of a group of people. In this context, Rowsell and Berry (1993) used Selznicks (1957) definition of an institution as a natural product of social needs and pressures. The institution is a social system that gives sense to the integrated aspirations of a group of people. Selznick (1957) contrasted an institution with an administrative organizationdescribing the latter as a rational instrument, defined to carry out a task. The relationships among institutions, routines, and habits can be understood as illustrated in Figure 1. Habits involve a predisposition to engage in previously adopted forms of action. The existence of habits does not exclude the idea of intention in individual behavior; habits can be modified. Whereas habits are located in the personal sphere, routines involve a group of people. Routines are thus formalized institutional habits. Routines incorporate behaviors that are guided by rules, and they are strengthened by repetition of actions in compliance with these
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rules. Routines represent ways of thinking and acting that are usually taken for granted by a group of individuals.

Figure 1: Elements from Institutional Theory

INSTITUTIONAL DIMENSION
INSTITUIES INSTITUTIONS
ROTINAS ROUTINES

HBITOS HABITS

Burns and Scapens (2000) have characterized rules as being the formal declarations of procedures, whereas the term routines refer to the actual use of the procedures. Making reference to Bowman (1994), Zeffane (1996) noted that organizations are restricted by routines, although organizations cannot function without them. Bowman (1994) noted that routines cause problems to organizations when they block strategic change and hinder innovative thinking.

5. Management accounting as an institution

According to Scapens (1994), the set of ideas contained in OIE represents a more adequate intellectual framework for understanding management-accounting systems than does the neoclassical model. According to this author, institutional theory is not the only (nor the best) approach, although it is a valid structure for understanding management-accounting practices as institutionalized routines and for exploring the interaction between management accounting and other social institutions. Burns and Scapens (2000) used the concepts of habits, routines, and institutions to explain how accounting practices can turn into routines and, over time, become part of a set of organizational assumptions that are taken for grantedand thus become institutionalized. This institutionalized management accounting is both molded by and impacts upon other institutions in the organizational context. Budgets are elaborated, performance is monitored, and reports are regularly and routinely produced through clearly specified rules and procedures. Management accounting establishes a fundamental structure to present and represent economic events to organizational members. Organizational performance is reported upon, both internally and externally, according to rules and conventions. Economic

events do not speak for themselves; people consider organizational activities in accordance with the logic of accounting measuring. Apart from reflecting performance, accounting rules and procedures also define the rights of groups of individuals (owners, financers, managers, workers, and so on) and establish the guidelines for implementing actions (resource allocation, operational decisions, price decisions, and so on). Management-accounting practices thus provide social coherence and meaning to organizational behavior and daily activities. When accounting practices turn into institutionalized routines, organizational members fully accept their roles in the organizational process and in decision-making. Accounting thus becomes a mechanism that gives sense to business activities and prevents potential conflicts in the organization. However, if new accounting systems are introduced, such institutionalization can also be associated with resistance to the new systems.

6. Unconscious factors in human psychology

According to Hall and Lindzey (1984), the following sources have influenced personality theory: (i) personality studies based on clinical observations (a tradition that was started by Charcot, Janet and mainly by Freud, Jung and MacDougall); (ii) the Gestalt tradition and William Stern (with an emphasis on behavioral unity); (iii) experimental and learning psychology (with an emphasis on rigorously controlled research); and (iv) the psychometric tradition (with an emphasis on measuring and studying individual differences). Goleman (1997) has noted that, during the initial decades of the twentieth century, behaviorists dominated academic psychology. These behaviorists followed Skinner (1953), who stated that only externally and objectively observable behavior could be studied with scientific accuracy. According to Goleman (1997), a cognitive revolution occurred at the end of the 1960s when clinical psychology shifted its focus to the study of how the mind records and accumulates information and the nature of intelligence. In their research on the gaps in the organizational literature, Marshak et al. (2000) noted the importance of the unconscious in two conceptual formulations. The first was based on the pioneering studies of Freud, Jung, and their followers. The second was based on cognitive sciencemore recently referred to as the cognitive unconscious. This second perspective proposes that the majority of individual thoughts are not unconscious in the Freudian and Jungian sense of being repressed, but are unconscious in the sense of operating below the cognitive level of consciousness (and therefore inaccessible to consciousness). Quellette and Wood (1998) used cognitive psychology to deal with habit and conscious intention in peoples daily lives. According to Quellette and Wood (1998), habits are tendencies to repeat answersgiven a stable and facilitating context. According to cognitive psychology,
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there is a high probability that past behavior will explain future answers if certain factors are present. These include: (i) well-practised (well-learned) behavior; (ii) a stable context (few changes in goals); and (iii) high frequency (with much repetition). If these factors are present, an initiated action does not require conscious control; rather, answers become automatic. The action can be performed very quickly and, together with other activities, with little need for focused attention. If the above-mentioned factors are absent, the action is guided and controlled by conscious intention. Quellette and Wood (1998) suggested that the creation and control of the action can follow two processes: (i) automatic, unconscious repetition of past acts; and (ii) controlled, conscious trust in behavioral intentions. In the sphere of cognitive psychology, the general idea is that behavior can be controlled through conscious (rather than unconscious) cognitive processing. It should be emphasized that this psychological approach does not use the term unconscious; rather, the preferred term is non-conscious. In this context, although actions are carried out in a non-conscious way, they are guided by cognitive, rapid, and easy processing. This processing requires minimal attention, and is carried out in parallel with other activities. The concept of the unconscious is characteristic of psychoanalytical psychology, whose pioneers were Freud and Jung. Carr (2002, p. 477) observed that: The psychiatrist Gustav Jung (18751961) is perhaps best remembered for the ideas on the collective unconscious and for the belief that these ancestral experiences were recorded in the brain as archetypes. In accordance with Jungian psychology, as shown in Figure 2, the total personality of an individual can be visualized as a sphere composed of various layers. The external layer is the field of consciousness, the layer immediately below corresponds to personal unconscious, and the inner layer is referred to as the group and collective unconscious.

Figure 2: Individual personality according to Jung

PSYCHOLOGICAL DIMENSION CONSCIENTE CONSCIOUS
INCONSCIENTE PERSONAL UNCONSCIOUS PESSOAL
GROUP AND INCONSCIENTE COLLECTIVE DE GRUPO UNCONSCIOUS

Santos (1976) has noted that: ... our consciousness stops at the end of our knowledge of things external to us. The personal unconscious is completely individual. It is formed as the individual is formed, and it consists of things that have simply been forgotten. Thus, the individuals level of consciousness is closely related to the quantity of knowledge he or she acquires by living in a specific environment and relating with a social group. Jung (1995, p. 58) characterized the personal in these terms: The personal unconscious contains lost, suppressed (forgotten on purpose) memories, painful evocations, perceptions that, let us say, did not cross the limit of consciousness (subliminal), that is, perceptions of the senses which, due to a lack of intensity, did not reach consciousness and contents that have not ripened yet to reach consciousness. Jung (1995) thus emphasized negative concepts established in the personal unconscioussuch as suppressed memories and painful evocations. In contrast, Santos (1976, p. 21) emphasized simply forgotten thingsthings that happened around the individual, but to which the individual did not pay attention. The individual might have been more interested in other things (leading to suppressed thoughts) or might have even made an effort not to remember (leading to repressed thoughts). Jung (1995) asserted that, apart from personal memories, certain great primordial images are contained in every individual. This represents the hereditary aptitude of human imagination as it was in primordial times. According to Jungian psychology, this explains the surprising phenomenon that certain themes and motifs of legends are replicated in identical form in various parts of the world, and explains why mentally ill persons can reproduce exactly the same images and associations known from ancient texts. Jung (1995) thus characterized the unconscious as consisting of two layers. He distinguished the personal from the impersonal, and called the latter the collective unconscious. In Junguian theory of psychology, the idea of the archetype is as important as that of collective unconscious. By attending to people with mental problems and reflecting on his
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observations, Jung (1995, p. 57) gradually characterized the concept of the archetype in these terms: therefore, this more advanced stage of treatment, in which fantasies no longer rest on personal reminiscences, is about the manifestation of the most profound layer of the unconscious, where universal and primitive human images lie sleeping. I called these images or motifs archetypes (or dominants). According to Silveira (1994), archetype can be characterized as a kind of aptitude to reproduce the same mythical ideas constantly. Silveira (1994, p. 80) noted that the archetype functions as a node of concentrated psychic energy, whatever the origin of the individual. When this potential energy becomes actualthat is, when it takes formit has the archetypal image. Precisely how such archetypal images are configured on the basis of physical energy is unknown. However, as Silveira (1994) observed, exactly how the energy of a waterfall is transformed into light is unknown, as is the precise mechanism of how light is turned into heat. Mathews (2002, p. 461) has observed: Jung saw archetypes as primordial patterns all human beings have in common, affecting the way we perceive, imagine and think, structuring physical apprehension and deeply influencing behavior. The idea of a collective unconscious incorporates universal traits within various races, ages, and religions. Referring to this Jungian idea, Santos (1976) has noted that just as race, tribes, and families can be differentiated in other ways, these human groupings can also be differentiated on the basis of a certain shared layer of the unconscious. Santos (1976, p. 125) called this part of the unconscious the collective unconscious of a certain groupthus adding the words of a certain group to avoid terminological confusion with the idea of the more general collective unconscious. Krystal (1990, p. 112) used the expression thought forms and stated: ... from birth till death, all of us are influenced by symbols or thought forms. Some of them we are aware of, but many are sent or received at an unconscious or subliminal level. According to Krystal (1990) behavior is not only affected by what the individual consciously thinks, but also by what occurs at an unconscious level. Everybody is influenced in different ways. Every child is bombarded by various familial and societal customs, taboos, fears, superstitions, beliefs, and habits. All of these are thought forms that contain the energy of many people who accepted and used specific forms of thinking and acting and, by doing so, increased their potency. Some of these thought forms are timeless and remain useful, whereas others are ancient or inapplicable to current ways of life. The concept of the unconscious has been studied from various perspectivesincluding management accounting, auditing, decision-making, organizational culture, and organizational change. Harung (1993) emphasized the importance of integrating the objective and subjective approaches in the decision-making process. Willcocks and Rees (1995) have observed that, in
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adopting a psychoanalytical perspective, organizational theorists have emphasized the importance of personality. Using a Freudian psychoanalytical approach, Willcocks and Rees (1995) follow Morgan (1986) in declaring that a large part of daily reality, which is considered rational and taken for granted, actually realizes preoccupations that rest below the threshold of consciousness. Morgan (1986) stated that individuals can become stuck in a trap of their own thoughts, which are influenced by the unconscious preoccupations deriving from their personal history. With respect to factors influencing the decision-making process, Harung (1993, p. 40) observed: I consider two main factors that influence our decisions: past experience and conditioning. According to this author, experience is the accumulated memory of past impressions, actions, and conquests. Experience is considered as a friend, although, through conditioning, it can turn into an enemybecause past habits can impede objective attention to present conditions, and thus produce systematic errors of judgment. Bazerman et al. (2002) used a similar concept when contemplating the problem of accounting scandals. These authors asserted that the fundamental cause of problems is not intentional corruption; rather the fundamental cause is a vulnerability to unconscious bias. They noted that psychological research demonstrates that desires strongly influence the way in which people interpret information, even when they wish to be objective and impartial. Bazerman et al. (2002) quoted examples of bias in ruling for ones own sakewhereby different persons with the same information reach different conclusions that are favorable to themselves. Harung (1996) presented an holistic way of integrating the elements of the administrative process using a model of human consciousness that was inspired by the teachings of the Vedic knowledge tradition. This model contemplates: (i) action and sense; (ii) desire; (iii) mind; (iv) intellect; (v) feeling; (vi) the being; and (vii) transcendental consciousness. Harung (1996) noted that one of the models main points is that all personality levels are always operatingboth consciously and unconsciously. OConnor (1993) incorporated the concepts of conscious and unconscious behavior in a matrix of kinds of resistance against changes. The author noted that: ... when resistance is unconsciously motivated, colleagues really do not perceive that their behavior is destroying change. In this case, their actions are based on wrong information, poor training or deeply nested habits deriving from ancient work routines (OConnor, 1993, p. 4).

7. Unconscious factors in organizational culture

Schein (1990) asserted that culture is a set of assumptions, learned throughout history, that is shared and taken for granted by group members. Drawing on this general understanding of culture, Schein (1992) defined organizational culture as: A set of shared basic assumptions
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learned by the group, to the extent that they solved their external adaptation and internal integration problems, which has functioned well enough to be considered valid and, therefore, to be taught to new members as a correct way of perceiving, thinking and feeling in relation to the mentioned problems. In a survey of the literature, Lundberg (1990) noted that the term organizational culture has certain connotations. These include: * a common reference frameworkthat is, a framework that is widely accepted, taken for granted, and shared by an important set of social group members; * an acquired and motivating frameworka socially learned framework that is transmitted by group members and supports them with behavioral rules within an organization; * a common psychologydemonstrating the particular characteristics of an organization and contributing to its identity; * a notion of permanence over timea stable social unit of any size (as long as it has a reasonable history); * a symbolic frameworkan observable framework to which meanings are attributed (for example, through language); and * a configuration of deeply embedded values and assumptions. Such features of an organizational culture are modifiable, but this is not achieved easily. Locatelli and West (1996) noted that several researchers (Schein, 1985; Schein, 1990; Lundberg, 1990; Payne, 1991) have conceived of organizational culture as a layered phenomenonranging from relatively observable phenomena to more invisible phenomena. Schein (1985) presented a cultural typology with the following levels: (i) artifacts and creations; (ii) values; and (iii) basic underlying assumptions (as depicted in Figure 3).

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Figure 3: Cultural typology proposed by Schein

CULTURAL DIMENSION
ARTEFACTS ARTEFATOS AND CREATIONS E CRIAES
VALORES VALUES

PRESSUPOSIES BASIC BSICAS UNDERLYING SUBJACENTES ASSUMPTIONS

Hofstede et al. (1990) studied organizational culture in different companies in different countries. The authors classified the manifestations of culture in terms of values, rituals, heroes, and symbols. Lundberg (1990) proposed three levels of cultural meaning. The first level was called manifested. This covered symbolic artefacts, language (jargons, sayings, and slogans), histories (myths and sagas), ritualistic activities (rituals and ceremonies), and standardized conduct (norms, conventions, and customs). The second level was called strategic. It con sisted of strategic beliefs. The third was called the focal level. It was made up of ideologies, values, and assumptions. This third level was considered by Lundberg (1990) as the most profound layer of the organizational culture model. It incorporated values, assumptions, and ideology, and corresponded to the organizations true characterthus guiding most thoughts and actions in the organization. Lundberg (1990, p. 20) noted that: ... this deepest meaning level is essentially taken for granted and, to get to know it, we can infer its components on the basis of other, more visible things. Locatelli and West (1996) used proposals from previous studies (Martin and Siehl, 1983; Schein, 1985; Ott, 1989) to establish a typology of organizational culture. Their structure included three levels: (i) artefacts and behavioral patterns; (ii) values and beliefs; and (iii) basic underlying assumptions. According to Buch and Wetzel (2001), the basic underlying assumptions of organizational culture are unconscious perceptions, thoughts, and feelings that are taken for granted. These are difficult to analyze and modify because they are not directly observable and must therefore be inferred from what can be seen and heard in the organization. Schein (1992) has noted that the observable manifestations of organizational culture refer to ancient artefacts and preserved values. The artefacts are physical and visiblesuch as a dressing code, physical environmental characteristics (architecture, offices, and status symbols), and signs, signatures and flags placed in certain locations. The preserved values that are are heard and spoken include justifications, aims, philosophies, sayings, slogans, and strategies.
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Locatelli and West (1996) have observed that the concept of such basic presuppositions is relatively new, and that it has only recently received attention in the literature. However, some organizational theorists, particularly Schein (1985), have defined organizational culture in terms of its basic assumptions. These assumptions can start as values, but are gradually taken for granted over time. According to Schein (1985): Thus, basic assumptions can be understood as a powerful and integrated system of beliefs, perceptions and values that is established outside consciousness. Scheins concept of basic assumptions (1985) is closely connected with the unconscious characteristics of a specific group, as characterized by Santos (1976) in the context of Jungs psychological theory. They are embedded in the personal uncon scious and organizational group unconscious. They lie outside consciousness but motivate the organizational groups behavior. The organizational culture typology proposed by Locatelli and West (1996) posits beliefs as conscious, although the authors mentioned that the level characterized as behavioral patterns incorporates things that the organizational members continue doing frequently without thinkingwhich are thus automatic and not conscious. It is therefore apparent that important constituent elements of an organizations culture reside in the unconscious layer of organizational members. These motivate interpersonal and inter-group relations, judgments, evaluations, strategies, and actions. According to Scheins (1990) typology of organizational culture, artefacts include the physical environment, the dressing code, and the way in which people address one another. Other manifestations include company records, products, declarations of company philosophy, and annual reports. This category also covers the adopted technology and language, histories, ceremonies and celebrations, ritualistic activities, and management standards and practices. In this context, management accounting can be perceived sociologically as an organizational artefact that is largely configured and structured by the behavioral standards and basic assumptions of the organizationthat is, by elements that lie outside the conscious dimension of the organization and its members.

8. The influence of unconscious factors in constructing the management-accounting institution

Three approaches have been presented above: (i) the institutional approach; (ii) the psychological approach; and (iii) the organizational culture approach. As demonstrated in Figure 4, these approaches (which are characterized here as dimensions), can be correlated and integrated. On the basis of this integration, a more complete understanding of management

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accounting from the institutional approach can be constructed, incorporating the concept of unconscious factors. Figure 4: Integration between the dimensions

INSTITUTIONAL DIMENSION INSTITUIES INSTITUTIONS

ROTINAS ROUTINES

HBITOS HABITS

PSYCHOLOGICAL DIMENSION
CONSCIOUSNESS CONSCIENTE INCONSCIENTE PERSONAL UNCONSCIOUS PESSOAL

CULTURAL DIMENSION ARTEFACTS ARTEFATOS E AND CRIAES CREATIONS

VALORES VALUES

INCONSCIENTE GROUP UNCONSCIOUS DE GRUPO

PRESSUPOSIES BASIC UNDERLYING BSICAS ASSUMPTIONS SUBJACENTES

Figure 4 demonstrates that unconscious factors are present in psychology (personal unconscious and group unconscious), as well as in organizational culture (basic underlying assumptions). The influence of unconscious factors on management accounting in terms of institutional theory can be explained through the psychological and cultural approachesthat is, the basic underlying assumptions of a specific social group (cultural dimension) are present in the personal and group unconscious of individuals (psychological dimension), and these structure the habits (institutional dimension) that create the routines and the institution of management accounting. Figure 5 displays the relationship. In one direction, the group unconscious (psychological dimension) affects the basic underlying assumptions (cultural dimension) and establishes the habits (institutional dimension) that create the management-accounting routines. In the opposite direction, routine practice (institutional dimension) strengthens group habits and the acceptance

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of the basic underlying assumptions (cultural dimension), conditioning the unconscious behavior of individuals and specific groups within the organization. Figure 5: Relations between the dimensions

PSYCHOLOGICAL DIMENSION

CULTURAL DIMENSION

INSTITUTIONAL DIMENSION

Personal and group unconscious

Basic underlying assumptions

Habits and routines

From the institutional point of view, management accounting can be considered as an institution constituted on the routines and habits of a specific social group. The concept of habit is the fundamental element of the institutional approach, and explains the formation of routines (and the subsequent constitution of institutions). From the standpoint of organizational culture, accounting can be characterized as one of the artefacts that externalize the culture of a specific social group. As shown in Figure 4, the so-called artefacts from the cultural approach realize certain (conscious) organizational values, although they are strongly influenced by basic underlying assumptions (which are now unconscious, but were conscious values in the past). The basic underlying assumptions (the unconscious elements of the cultural dimension) are the fundamental elements of the organizational culture approach, and are responsible for the formation of habits (which, in turn, are the unconscious elements of the institutional dimension and responsible for the structuring of the management-accounting institution). The integration of institutional and psychological theory is based on Santos concept (1976) of the unconscious characteristic of a specific group. The persons directly and indirectly related to accounting constitute a specific group. This group consists of accounting professionals, students, authors, teachers, and users of the information created in this areain short, everybody who researches, teaches, practises, or uses accounting ideas. As observed by Guerreiro et al. (2004), accounting has a history of more than a thousand years and possesses a shared basis that is similar to the concept of group unconscious. This constitutes a kind of collective unconscious of accountants with specific thought forms. These thought forms incorporate the thoughts, beliefs, and experiences of many persons over a long time in relation
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to specific issues. They are not truly archetypes, but they function in a similar way and possess a strong psychic energy. The thought forms that exist in the unconscious of the accounting group are strong. They include customs, traditions, and habits that have been accepted for centuries. Krystal (1990) has noted that a thought becomes more powerful as it is loaded with emotion. Furthermore, when a large number of persons grasp it and feed it with their energy, its power is substantially increased. This process explains the formation of habits in the accounting social group, which turn into routines and institutions. These then constitute the basic assumptions of the cultural heritage of this group. The habits from the institutional dimension and the basic underlying assumptions from the cultural dimensions are stored in the minds of individuals in a specific social groupthus contributing to their individual personalities and to the configuration of group culture.

9. Implications and future research

In the introduction to this study, a paradox in management accounting was characterized in the following general terms: Why do companies not make more practical use of the new conceptual models proposed in theory? This question is based on empirical research that has demonstrated the existence of a gap between theory and practice in management accounting. The current environment demands new management instruments and the environment is favorable for the use of new and more adequate instruments of business management. Companies who make better use of more efficient instruments will have greater chances of optimizing their results and surviving in a competitive environment. The existing gap between normative theory (which proposes the use of new concepts for result optimization) and management-accounting practice (which uses inadequate tools for result optimization) constitutes a real problem. Institutional theory thus criticizes the assumptions of neoclassical theory that have previously directed the theoretical development of management accounting. Institutional theory, according to the OIE approach, perceives management accounting as an institutionthat is, as a set of routines habitually performed by a group of individuals. It emphasizes the social nature of the management-accounting problem. The present study adds new elements in identifying and understanding the causes of the problem. According to the approaches presented in this essay, it can be inferred that the fundamental causes of the management-accounting problem correspond to the habits of the organization. The organizational culture approach perceives habits as being embedded in the deepest layers of company culture as basic underlying assumptions. The psychologicalpsychoanalytical approach perceives habits as being largely unconscious. The habits that are

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deeply rooted in the minds of individuals and group culture are simply acceptedno matter how inadequate they might be for needs of the organization. This sort of conceptual understanding of habits entails practical consequences (Quellette and Wood, 1998). Successful intervention strategies for changing habitual behavior require an understanding of the factors that maintain the routine answers. Such an understanding can enable social scientists to establish efficient strategies to help people to change inappropriate behavior. Changing existing behavior in stable contexts requires a conscious decision to implement new solutions and to suppress established undesirable behavior. Efficient change strategies must incorporate the formulation of explicit plans to implement new behavior. The implementation of such behavioral change should favor short-term rewards (as well as longterm rewards), so that immediate positive consequences stimulate a continuous focus on the new, desired behavior. The most efficient change strategies impede the performance of established behavior while they facilitate the transformation of new behavior into habits. Inspired by the psychoanalytical school, Johann (2004) has emphasized the importance of understanding the influence of unconscious factors, noting that an awareness of the unconscious elements of a certain company opens up possibilities to access the aspects of its organizational collective unconscious that influence its cultural values. This enables the company to analyze and judge its true motifs in a qualitative revalidation of its culture. Because the habits and routines that structure management accounting are largely unconscious, they are neither rational nor easy to change. The distance between theory and practice in management accounting can be minimized by: * awareness: making management-accounting professionals and users aware of the need to discuss the concepts used in management-accounting practice; * understanding: increasing the level of understanding of the concepts that are actually adopted in management accounting (using a collective process of reflection and searching for the meaning of the adopted concepts, as opposed to alternative concepts); * criticism: making a critical analysis of the operational and strategic effects of the concepts currently used in the organization, as well as the new models proposed in theory; * conscious choice: making a conscious choice among rational conceptual alternativesa choice that is compatible with the groups basic values; and * creation of new habits: efficiently converting new concepts and models into habits and routinesthus ensuring that the new cultural artefacts are truly institutionalized.

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This study adds new elements to the study of management accounting using an institutional approach. It seeks to integrate this approach with the approaches of organizational culture and psychology by highlighting the existence of unconscious factors. Further research is required with a view to achieving a better understanding of the relations between the institutional, cultural, and psychological approaches, and with a view to empirically validating the influence of unconscious factors on the structuring of management accounting.

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