Rationality, institutionalism
and accounting change
Understanding a performance management
system within an Australian public
sector entity
Wendy James
College of Business Sciences, Zayed University, Dubai, United Arab Emirates
Abstract
Purpose – The primary purpose of this paper is to put forward a framework grounded in new
institutional sociology (NIS) theory that examines the impact of national competition policy on the
design and implementation of a balanced scorecard (BSC) in a government-owned electricity corporation
in Australia. It examines the importance of the rational analytical deliberation of legitimacy as a
fundamental accompaniment to isomorphism in the continuing development of the new performance
management system.
Design/methodology/approach – A single exploratory/descriptive case study with embedded
multiple unit analysis is used in order to examine the adoption of a BSC as an example of the process of
evolution of a new initiative. It uses DiMaggio and Powell’s concept of isomorphism to explain the
initial adoption of the BSC.
Findings – The paper highlights the importance of the deliberation of both rational analytical
approaches and legitimacy as a fundamental accompaniment to isomorphism in the continuing
development of accounting systems in the public sector.
Originality/value – These results provide useful insights into the criticism of NIS theory, that is,
that it does not provide scope for organisations to adopt rationally technical practices as well as
isomorphic behaviour for legitimacy.
Keywords Performance management systems, Balanced scorecard, Public sector organizations,
Australia
Paper type Case study
1. Introduction
Performance measures have been advocated as a central strategy for gaining greater
control over public expenditure, increased value for money, accountability and as a
means to demonstrate improved managerial competence in the public sector (Osborne
and Gaebler, 1993). Both in the literature and practice of public sector reform,
performance measures have gained the status of rationalised, institutionalised myths
and are viewed as having a clear direction to better management and enhanced
accountability (Hood, 1998; Pollitt and Bouckaert, 2000).
Institutional sociological research emphasises the role of the external environment
as a determinant of the organisation’s internal structures and systems. In this regard,
the method of accounting adopted by an organisation reflects environmental pressures
imposed instead of the organisation’s technical operations in a rational way (Meyer,
1986, p. 352). Jarvinen (2006) who studied the adoption of activity-based costing in two
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JAOC
5,3
362
Received 14 April 2008
Revised 24 September 2008
Accepted 16 March 2009
Journal of Accounting &
Organizational Change
Vol. 5 No. 3, 2009
pp. 362-389
q Emerald Group Publishing Limited
1832-5912
DOI 10.1108/18325910910986972