RE-THINKING AND RE-BALANCING RULES AND ROUTINES: A
FRAMEWORK ON INSTITUIONALISATION PROCESSESS IN
MANAGEMENT ACCOUNTING
João 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First draft, please do not quote without authors’ permission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:
João Oliveira, joao.oliveira@fep.up.pt
Martin Quinn, martin.quinn@dcu.ie
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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.
Oliveira’s (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 Clegg’s (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, Quinn’s (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 Pentland’s (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, Oliveira’s 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
Oliveira’s (2010) case. Section Four likewise develops our conceptualisations on routines,
also briefly drawing from Quinn’s 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 described
to 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
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through time” (2000, p.9). The B&S framework somewhat arbitrarily starts at the point of
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.
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
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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 Clegg’s (1989) framework
of ‘Circuits of Power’ was found to adequately explain the empirical setting.
Exploring Clegg’s conceptions of power is beyond the scope of this paper (see Oliveira, 2010
and 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 material conditions (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 Clegg’s
framework, and how they were incorporated in the analysis of the RuleCo case.
3.2. Rules in OIE
Within the old institutional economics literature, which we have primarily drawn uponi,
conceptualisations of rules different from B&S’s 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
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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 agent’s 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
people’s 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
individual dispositions, then—“formal” or not—they 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.
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3.3. Rules and material conditions in Clegg (1989)
Clegg’s 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 of meaning refer 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 locallyspecific) 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.
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.
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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
RuleCo’s “central actors” (roughly referring to managers at RuleCo’s 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
country’s 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
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.
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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).
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
1
2
Cardboard boxes in common speech.
The software was integrated with an existing ERP system.
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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
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
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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 actor’s 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
routine per 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 Pentland
(2003), highlights a duality of routines. Finally, Burns (2009), in a similar vein to Hodgson
3
See also, subsequent papers by Pentland and Feldman (2008, 2005).
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(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 of
routines provides potentially improved explanations on the process of institutionalisation of
management accounting practices as outlined by B&S. This is because it provides a method to
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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 Oliveira’s (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&S’s 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
Section 3, conceptualising rules merely as a set of formal rules only partially captures the
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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-based behaviours.
Fourth, and finally, Volkoff et al.’s (2007) discussion on the material dimension of routines
actually concerns the multiple rules underlying routines being hard-coded in information
technology. Although Volkoff et 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 systemexecuted 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 ongoing performance” of a routine, the performative dimension disappears and even the
ostensive definition, though it may still exist, “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.
16
5.2.2 Recurrence: … but not necessary for the existence of rules
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 also
Boland, 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 individual’s 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 pathdependency (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.
17
5.2.3 Rules when recurrent actions do not develop into routines
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 Yazdifar et 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 all and 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.
5.3. Towards a conceptualisation of interactions between 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
18
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
Institutionalised practices
Performative routine
Technological
devices
Material realm
Ostensive routine
Repeated practices
Practices
Rules
(cognitive
structures)
Action realm
Psychological realm
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
19
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 accounting
practices (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.(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.
5.3.2. 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
4
The introduction and acceptance of rules in a particular social context (e.g. an organisation) is itself a worthy
research topic (see Oliveira, 2011A, 2010), but beyond the scope this paper.
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 provide
significant flexibility to embed most rules envisaged by organisational actors, through the selection amongst the
multiple alternatives offered by the software.
20
detailed variance reporting improves control and that this is desirable6. The rule at stake is
“we must produce a twice-monthly, detailed variance report”7, 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.
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
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 relations
between rules and routines. See Oliveira (2011A) for a related approach explicitly accounting for intraorganisational diversity.
7
This rule by nature requires repetition, since it specifies frequency of report production. However, a similar
rational would apply to a rule such as “depreciation should be not be part of product costs”, yet repeated
practices would emerge as this rule is continuously enacted in on-going product costing decisions.
21
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 one’s 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
performative routine) is essential for the ostensive dimension to emerge and be sustained. In
time, without action, routines may become meaningless, diminish and even dissipate9. In turn,
ostensive routines provide the idea of a routine and hence influence how it is performed
(Feldman and Pentland, 2003).
8
Notions such as tacitness and automaticity align with the Carnegie school findings whereby behaviour is not
entirely deliberative, conscious and intentional, as noted earlier.
9
Although, as shown by Birnholtz et al.2007 “dormant” routines can be re-enacted.
22
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 Creed’s 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 Creed’s ideas to the proposed framework is beyond the
scope of the paper, but the two frameworks are tentatively compatible, with Seo and Creed
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.
23
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 strengthened rule. 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 of psychological jurisprudence for the future interpretation
(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.
24
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&S’s 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 and rules. 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 become
accepted in organisations. Fruitful lines of research here may include exploring how the
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”
25
underpinning our synthetic framework and thus bringing a more realistic view of
organisations.
26
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i
It should be noted that other eminent scholars such as Giddens (1984) and Wittgenstein (1953) have also
discussed “rules” 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 of rules, 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 which offers more detailed conceptualisations of routines. See also Stones (2005, pp.
46-48) for a critique of Giddens’ use of rules)
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