Enterprise Resource Planning (ERP) systems have been recognised as the most important development in the corporate use of information technology in the 1990s (Davenport, 1998), promising seamless integration of all the information flows throughout a firm. A number of recent studies have investigated the impact of ERP systems on management accounting and control (e.g. Granlund & Malmi, 2002; Quattrone & Hopper, 2005; Scapens & Jazayeri, 2003). Furthermore, Chapman (2005, p. 685) argues that studies in this area should view ERP systems not as technological curiosities, but as vehicles through which fundamental questions concerning the nature of management accounting and control may be both asked and answered. The questions raised in this study concern the role of management accountants in ERP systems.
A number of writers have observed changes in the role of the management accountant over the last two decades (Pierce & O’Dea, 2003; Yazdifar & Tsamenyi, 2005). Installations of large-scale integrated information systems have been identified as a major cause of such change as the position and the practices of management accountants, relative to other actors within organisations, are re-established (Granlund & Malmi, 2002; Scapens & Jazayeri, 2003; Scapens, Jazayeri, & Scapens, 1998). Burns and Vaivo (2001, pp. 389–390) identify four particular roles in their summary of the literature on the changing role of management accountants—the provider of cost information, the controller/scorekeeper, the internal business consultant providing business support and the member of the strategic management team. Further to this, Caglio (2003), Newman and Westrup (2005), El Sayed (2006) and others observe that the role of management accountants in ERP environments becomes increasingly subject to hybridisation (where the role expands to encompass other business and information systems activities or where other actors expand their roles to encompass accounting activities). It is also observable, however, that other professionals may compete with management accountants in order to preserve their own domains (Burns & Vaivo, 2001, p. 391).
In popular management literature, the Chief Financial Officer (CFO) has a dynamic role in an ERP system, as exemplified in a book by the ‘mySAP team’ entitled ‘The CFO as Business Integrator’ (Read & Scheuermann, 2003). These ERP developers see the CFO ‘at the center of the drive for integration—pulling together critical business processes; planning, supporting and measuring’ and ‘linking the inside world with the outside world’ (Read & Scheuermann, 2003, preface). Local organisations in less developed countries generally are yet to reach this stage; accounting systems and the role of the management accountant tend to be more traditional, less evolved than those in developed countries (Wallace, 1997). However, the presence of multinational companies and international donor organisations in less developed countries does mean the contesting roles of the management accountant noted above are all apparent (Uddin & Tsamenyi, 2006).
In the case study presented here, the appointed Financial Controller (effectively the CFO) came with a view of his own role that was very much in line with the progressive ‘CFO as strategic manager and business integrator’. However, the external funding agency (the European Commission), in the process of developing performance-based budgeting (PBB), required an evolving mix of the management accountant as internal consultant and the management accountant as scorekeeper. The Egyptian government, who set up the organisation examined, in essence advertised for a management controller. The other agents inside the organisation resisted both any encroachment on their own roles and being controlled. The object of the contest over which the management accountant would prevail was the failed attempt (by the Financial Controller's Department) to install an ERP information system for the organisation as a whole. A stable accounting system was eventually achieved in which the ERP system was partially utilised, but in which the role of the management accountant became reduced to the very traditional one of the provider of cost information. Although the Accounting Department under the Financial Controller had responsibilities other than management accounting, this was their primary role and this study focuses on that role alone.
The obvious reasons for the failure of the actors involved to establish a full ERP system – that it was an unsuitable choice and there was a lack of suitable support given that it was a developing country – are not the full story. The project to implement the ERP system, which was customised to fit the programme and performance budgeting practices in the Industrial Modernisation Centre (IMC), was carried out using monies provided through a European Union (EU) agreement with the Egyptian government. The project was driven by the management accountants within the organisation and their attempts to dominate the project implementation, to take charge of the ERP system and to resist certain requirements of the EU and internal colleagues, form the narrative of the case.
The key relationships between the organisation in focus and external bodies are analysed using Stones’ (2005) strong structuration theory (a reinforced version of Giddens’ (1984) structuration theory). This version overcomes the limitations of both new institutional sociology theory and Giddens’ structuration theory. New institution theory has largely focused on the role of external institutions in shaping and constraining the actions of actors (Barley & Tolbert, 1997; Modell, 2002), whereas Giddens’ structuration theory has focused on the unlimited ability of actors to respond to institutional pressures. It has been noted by Whittington (1992, pp. 697, 703) and others (e.g. Archer, 1995 and Parker, 2000) that the notion of external structures and their influence on actors are seriously underdeveloped in Giddens’ work on structuration theory.
The authors have chosen to use a recent development denoted as strong structuration theory, which is presented in Stones’ (2005) book entitled Structuration Theory. This book has been described as the ‘most serious attempt to date to give structuration theory a new lease of life’ (Parker, 2006, p. 122) and although Parker expresses doubt over whether the inherent problem of duality rather than dualism in Giddens’ theory is overcome, he states that ‘Stones will undoubtedly be frequently and justifiably cited’ in the theoretical rationalisations of researchers seeking to explain the emergence of structure and action (p. 137). Edwards (2006, p. 911) sees Stones’ work as a ‘substantive development of the constructs around structuration theory’ that will be used to regularly inform future research projects (p. 913). This study represents an early attempt to apply these developments in the interpretation of accounting research.
The strength of strong structuration theory is in its formulation of a framework that can translate the ontology of structuration theory into the epistemological and methodological understanding required by researchers on the ground, designing and interpreting substantive, empirical work (Stones, 2005, p. 116). In this study, it has been used as an interpretative framework because strong structuration theory articulates the relationships and pressures between external and internal agents and structures much more clearly than Giddens’ original formulation. Dominance is recast in terms of resistance and force, signification and legitimation and the related modalities of structure in terms of understanding the context and conduct of agents, and the diagnostic analysis of internal and external structures. Parker (2006, p. 122) suggests that this is in fact a ‘radically different and original theory’ to Giddens’ structuration theory, which may explain to readers the lack of more familiar terms in the analysis. As a structuration study, the ERP case presented here has limitations. The case was originally interpreted, less successfully, using Giddens’ formula of signification, legitimation and domination; had strong structuration theory been applied from the start, more focused data could have been sought about the relationships with the external agents in the study. Thus, this study contributes on two fronts, by presenting an unusual case setting in which at least four interpretations of the role of the management accountant are contested and by presenting a first attempt to apply very recent developments of social theory to accounting studies. The study also provides some initial comments on the increasing use of PBB by international funding bodies and the practical implications of imposing ‘performance-conditionality’ on recipient organisations, which appears to be a development that has not yet attracted the consideration of academic researchers in accounting.
The Egyptian context is particularly significant because ERP systems are still in their infancy and face some specific challenges in developing countries, taking into account economic, cultural and infrastructure challenges (El Sayed, 2006; El Sayed & Westrup, 2003; Huang & Palvia, 2001). For example, Egypt is in economic transition from a central planning economy to a market oriented economy. In the 1990s, Egypt initiated privatisation and other reform programmes in order to facilitate this transition. There was reliance on international donors such as the World Bank, the International Monetary Fund, the USA and the EU to fund such programmes. The case organisation (IMC) was the executive arm of one of these programmes sponsored by the EU. This organisation received monies that in turn were to be allocated to other productive projects. Local organisational members were convinced that ERP was required to manage the systems needed. They implemented the software against the EU's advice, although within the rules of the agreement between the EU and the government of Egypt. In addition, poor technical support from the local ERP vendor and heavy reliance on foreign experts to provide technical assistance created difficulties for the organisation. ERP systems are a ‘new’ complex technology that needs specialised knowledge rarely available in developing countries (El Sayed, 2006). These circumstances make the findings of this case study different from those of other case studies conducted in more advanced countries.
The following section outlines the theoretical framework which draws on the recent synthesis of developments in structuration theory (Stones, 2005). Section 3 describes the research methods used in compiling the case study. Sections 4 and 5 provide the narratives relating to the organisational background and the sequence of events related to the adoption and implementation of the ERP project in the IMC. The final sections contain the discussion and evaluation of the findings.
In comparison with other published case studies on ERP and accounting, the case study reported in this paper offers some similarities, but also differences. Firstly, the implementation issues of ERP systems in developing countries such as Egypt have been a neglected area of research in the accounting literature. Those establishing ERP systems in developing countries face numerous difficulties (e.g. El Sayed, 2006; El Sayed & Westrup, 2003; Huang & Palvia, 2001; Soh, Kien, & Tay-Yap, 2000; Soh & Sia, 2004), as was found in this case. Secondly, ERP systems, as one of the most recent technological changes, are widely used in government bodies in Anglo-American countries (Booth, Matolcsy, & Wieder, 2000; Davenport, 1998). This study indicates that ERP systems are not yet easily integrated into similar bodies in less developed countries. Thirdly, ERP systems had been introduced in the 1990s to replace in-house-developed legacy systems, thereby mainly solving integration problems. However, the intervention of the EU in the decision to adopt the ERP system in the IMC limited the ability of the IMC to adopt the ERP package in all the IMC's departments and its branches in other governorates to achieve the integration. Unlike previous studies such as Dechow and Mouritsen (2005), this organisation failed to achieve integration. Finally, in the IMC case, the ERP system did not change the accounting systems and practices used. On the contrary, it was customised to manage the performance-based budgeting and stability, of sorts, was achieved. A similar result was observed in previous studies such as Themistocleous, Irani, and O’ Keefe, 2001, Granlund and Malmi (2002) and Scapens and Jazayeri (2003).
Another contribution of this study is to add to the growing evidence about the difficulties of establishing performance-based budgeting systems on an international scale. The EU imposes ‘performance-conditionality’ on its beneficiaries or partners, yet during the period under examination (ca. 2000–2006) the requirements of the system and the role of management accountants in establishing both the performance measures and the infrastructure to implement performance-based budgeting appears not to have been clearly defined or communicated. The resources and expertise available in less developed countries to achieve the required systems are limited, yet the attempt in the case of the IMC to appoint those who might have the knowledge and drive to lead such a project became entangled in unintended consequences and resulted in a stable, but not necessarily integrated, information system.
The main contribution of the study, however, is to explore the difficulties of establishing sustainable structures where there are conflicting dispositions and conjecturally specific understandings of the roles of different groups of actors within the boundaries of an organisation, and specifically here the role of management accountants. Using a theoretical framework based on Stones’ (2005) conception of strong structuration theory, the study also highlights that the perceptions of actors of the boundaries between internal and external organisations are significant when analysing both structure and action. From the point of view of the actors in focus in this study, the boundaries of the organisation were those of the IMC and the specific task of invigorating small business activity in Egypt. But the IMC was immediately part of a larger national project (the IMP) and further, part of an international construction by the EU to deliver on a major goal of reducing poverty. The role of the management accountant in this environment, where there were such conflicting expectations, became circumscribed by the position-practices of actors internally and externally in the organisational field. The object over which the contest was played out was the attempted establishment of an ERP system. Caglio (2003, p. 146) concluded that ‘ERP systems certainly provide management accountants with powerful modalities of structuration, which can be leveraged in order to provide new meanings to their activities, to increase the legitimation related to professional contributions and to the improvement of their power vis-à-vis the other stakeholders of firms’, but this does not appear to have been the case with the IMC. Here, the role of the management accountants was returned to that of data custodian and information provider for others who controlled the organisation, despite the more fashionable and dynamic dispositions of those actually appointed to the posts.