Military, ‘Managers’ and Hegemonies of Management Controls: A Critical Realist
Interpretation
Junaid Ashraf
Lahore University of Management Sciences
Pakistan
and
Shahzad Nasir Uddin
Essex Business School
University of Essex
Email: snuddin@essex.ac.uk
1
Military, ‘Managers’ and Hegemonies of Management Controls: A Critical Realist
Interpretation
Abstract
The paper aims to understand changes in the management control practices of a public
sector firm using a critical realist interpretation of hegemony (Joseph, 2002). The paper
links the changes in management control practices of the firm with the emergence of a
new ‘power bloc’ at the national level and at the level of the case firm. The military and
‘managers’ were two important players in this new ‘power bloc’. The arrangement that
originally emerged at the national level was that one group would look after the politics
and the other would oversee the economic sphere. However, economic managers had
political interests and the military had economic interests. This led to a ‘conflicted
compromise’ between the two groups, with each group trying to assert its ideology and
control over others. This conflicted compromise was obtained through compromises and
concessions on the part of both groups, which resulted in certain changes of management
controls in the case organization. However, this arrangement seriously compromised the
ideology of both groups vis-à-vis the management controls. This necessitated the use of
force to terrorize the less powerful groups such as lower pay grade employees and labour
to accept the change. However, the use of force without ideological support resulted in a
weak hegemonic arrangement at the level of the firm, with implications for changed
management controls.
Key words: Hegemony, management controls, public sector, critical realism
2
Introduction
Given the significance of accounting in overall control apparatus within organizations,
management control change is, and perhaps will always be, an important topic for
accounting researchers (Bryer, 2006). This research also stems from an interest in
understanding changes to management accounting controlsi in a public sector firm
operating in a less developed country. Previous accounting researchers have studied
different aspects of changes in management controls including large scale historical
narratives (Hopper and Armstrong, 1991) as well as firm specific case studies (Abernethy
and Chua, 1996; Armstrong, 2002; Arnold, 1998). Similarly, there is a large body of
accounting literature that tracks changes in management controls in public sector
organizations in the context of new public management reforms (Broadbent and
Laughlin, 1998; Broadbent et al., 2001). However, most of this research is done in a
Western context and comparatively little research has been conducted on changes to
management controls in emerging economies, especially in public enterprises. There are
a few intensive longitudinal case studies, but these are largely based on surveys and
secondary information (Hopper et al., 2009). These are also criticised for being largely
under-theorised (Hopper et al., 2009). The aim of this paper is to provide an account of
why and how did management controls change in a Pakistani public sector enterprise.
The paper also has theoretical aims. Joseph (2002)’ theory of hegemony is used to
provide better understanding of management controls and their transformations in an
emerging economy.
3
Previous studies have demonstrated that management accounting controls are shaped by
capital and class interests and political dispensation (Hopper and Armstrong, 1991;
Bryer, 2005 & 2006; Toms. 2005). In less developed countries, because of their unique
political and cultural circumstances, role of class conflict and politics become more
pronounced (Uddin and Hopper, 2001; Hopper et al., 2009; Uddin et al., 2011). One
powerful group, present in many less developed is military (Hopper et al., 2009).
Changes in management controls in organizations operating in less developed countries
thus cannot be understood without analysing the power struggles taking place at the
organizational and more importantly at societal level, including the role of military in
these struggles. In the present research for example, changes in management controls
within case firm were very clearly linked with power struggles between two dominant
groups i.e. military and economic technocrats. In order to understand management
accounting and control changes in the context of these power struggles, we have used
critical realist interpretation of ‘hegemony’ advanced by Joseph (2002). Utilising
Joseph’s (2002) scheme, this paper aims to explain the changes in management control
practices in a public sector organization by linking it with structural reasons for shifts in
the hegemonic arrangement emerging at the national level, the cascading down of this
arrangement to the case organization, and the strategies of players in the new ‘power
bloc’ within the case organization.
Prior Literature and Importance of Research
The ‘alternative’ accounting research movement (Broadbent and Guthrie, 1992; Baxter
and Chua, 2003; Lee and Humphrey, 2006), especially the more critical tradition within
4
these, had a clear agenda of locating management accounting and control practices in the
larger politico-economic context (Hopper et al., 1987; Richardson, 1987; Armstrong,
1987; Hopper and Armstrong, 1991; Bryer, 2005; Toms, 2005). However, with regard to
notion of hegemony and management control change, accounting literature is rather
smallii (Uddin and Hopper, 2001; Goddard, 2005; Allawattagee and Wickramasinghe,
2008). Accounting and Management literature linking hegemony with management
control change has been primarily inspired by the work of two scholars, namely Gramsci
(1971) and Burawoy (1979, 1985).
Gramsci (1971), in contrast to crude Marxism, suggested that hegemony of certain groups
over others does not only come through economic relations. Instead, Gramsci (1971) also
emphasized the role of ‘culture’ or ‘ideology’ in creating consent amongst the dominated
groups, in conjunction with the role of state and economy. The role of culture or ideology
in shaping the subjectivities of subordinates to create consent thus became a major
interest of management control researchers interested in Gramscian notion of hegemony
(Humphreys and Brown, 2002; Sallaz, 2004; Brown and Coupland, 2005; Brown and
Humphreys, 2006; Degiuli and Christopher, 2007). Gramsci (1971) also discussed
various strategies adopted by dominant groups to maintain their dominance including
alliance formation and the strategy of giving material concessions to dominated groups.
Organizational researchers, using Gramsci work have thus studied the relationship
between management and labour in this light (Sallaz, 2004; Degiuli and Christopher,
2007)iii.
5
Burawoy’s notion of manufacturing consent is utilised by accounting researchers to
explain control regimes, including the role of accounting (Uddin and Hopper, 2001, 2003,
Hopper et al., 2009). Employing Burawoy’s (1979, 1983) theory, Uddin and Hopper
(2001) reviewed how management controls changed in a manufacturing factory in
Bangladesh and linked these changes to changing historical control regimes within the
country. Goddard (2005) linked the emergence of new accounting practices within local
governments in the UK to a new post-Fordist hegemonic arrangement between the state,
the economy and civil society. This new hegemonic arrangement required new state
regulations and hence the emergence of new accounting practices. Allawattagee and
Wickramasinghe (2008) theorised the role of accounting in labour control in Sri Lankan
tea plantations, applying Joseph’s notion of hegemony and the concept of practice
advanced by Connell (1987). They argue that the practice of labour controls at the point
of production must be understood in the context of political hegemony constituted by
both structural and agential forces.
Our paper complements and contrasts with the previous studies on hegemony and
management controls. In keeping with the tradition of Burawoy (1983, 1985), this
research explores management control changes within an organization in the context of
changes within larger political and economic structures. Similarly, like many Gramscian
studies mentioned in the literature, this research explores the development of a ‘historical
bloc’ and hegemonic projects of ruling groups. However, it differs from the existing
research in three important ways. First, this paper studies a new hegemonic bloc as it is
emerging and is in a relatively unstable form. This helps us in better capturing its
6
dynamics and intricacies and its implications for management control changes. Second,
in contrast to existing research on hegemony, where the focus is on the relationships and
strategies of dominant vs. dominated groups; the primary focus of this research is on the
relationships and strategies of dominant groups vis-à-vis each other and their implications
for their relationship with dominated groups and changes in management controls. Third,
the presence of the military as a powerful group, its interests, its ideology and its
implications for management control practices make this an interesting case study and a
valuable addition to accounting literature on management control change.
The rest of the paper is organized as follows: the first section briefly describes the basic
tenets of critical realism, followed by a section that describes a critical realist theory of
hegemony (Joseph, 2002). The research methods are described next. The next two
sections present the empirical findings iterated with theoretical constructs of hegemony.
The concluding section summarises the theoretical and empirical findings.
Critical Realism and Hegemony
Before discussing the critical realist interpretation of hegemony, it is important to briefly
explain the philosophical position of critical realism. This is a social science philosophy
pioneered by Roy Bhaskar (Bhaskar, 1979; 1997), which attempts to explain social
phenomena through advancing the concepts of emergence, stratification, depth ontology
and dualism. According to critical realism, structure or collectivity is a system of internal
and external relationships between positions and objects that explain their way of acting
in a particular manner. This relationship within a firm operates within a larger set of
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internal relationships, i.e. the economic mode of production within a country that endows
these positions with certain powers and objective interests. However, unlike the
structuralist approach, another important concept in critical realism is recognition of the
independent ontological status of human agency. Agents occupying structural positions
are not structural dupes whose behaviour is exclusively determined by the dictates of
structures within which they are residing (Archer, 1995). Instead, critical realism fully
recognizes the powers of human agency, including the ability to interpret the structural
pressures and to reflect and organize for the pursuit of their objectives.
However, agents inhabit different structures at the same time and may be subject to
divergent structural pressures in different directions. The economic structure may push
the first agent to extract maximum labour from the other; however, religious beliefs may
push the same agent to ‘go easy’ on his fellow human beings. Such structural
arrangement opens up further space for human agency. Thus, the basic theoretical
architecture of critical realism enables it to come up with structural reasons for certain
courses of action to be followed by groups of agents or institutions. For example,
structural conditions create incentives on the part of certain agents to try and preserve the
existing structural conditions, but for others to bring about a change. The actions of
agents thus reproduce the existing structures or bring about a change in these structures.
This theoretical scheme thus helps to describe how structure and agency are interlinked
(Bhaskar, 1979) and at the same time can address the concept of hegemony (Joseph,
2002, p38).
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Famously associated with Italian Marxist Gramsci (1891-1937), this concept has been of
great interest to sociologists and organizational researchers. The notion of hegemony
primarily draws its existence from the Marxist concept that control (either through
coercion or consent) of particular classes is essential for the reproduction of the capitalist
mode of production. While the distinction is somewhat crude, some researchers seem to
adopt either structural or agential interpretations to explain hegemonies (Joseph, 2002).
The works of famous structural Marxists Louis Althusser (1918-1990) and Nicos
Poulantzas (1936-1979) are examples of structuralist interpretations of hegemony
(Althusser, 1970; Poulantzas, 1967). For them, the functional role of the state is to
ensure the reproduction of the capitalist mode of production in the country and to ensure
social cohesion. Due to this functional requirement of the state, it becomes incumbent on
it to mobilise hegemony. The state does this by developing the ‘power bloc’ and by
generating consent within the society.
The ‘agential’ theorists have criticised the structural camp for explaining hegemony
through ahistorical and static theoretical categories such as class, state etc. For example,
Williams (1982) views hegemony as a system of practices, meanings and values that has
become dominant in a particular society. This view of hegemony gives importance to
relations between different groups and their experiences, influenced by hegemonic
systems of meanings and practices. While the agential perspective emphasizes the
experiential and strategic aspect of hegemony, it often tends to forget where these
experiences have come from (Joseph, 2002). What is missing in agential theories of
hegemony is the existence of objective structural conditions that give rise to experiences,
9
exploitations and the need for hegemony etc (Joseph, 2002). Thus, Joseph (2002)
advocated the critical realist interpretation of hegemony discussed below.
Joseph (2002) draws on this basic critical realist explanation of hegemony by suggesting
that since society is comprised of multiple social structures, it is only the state that is in a
position to intervene in the social process to ensure the reproduction of social structures
and social cohesion. The most important structure to reproduce in this context is the
economic structure, as it is perhaps the most important activity in a society. The state thus
has a functional/structural role to play in ensuring the accumulation of capital. However,
the state is also the terrain where the hegemonic projects of various groups unfold, i.e.
where various groups vie to promote their vested interests through generating consent or
coercion. This hegemonic struggle between various groups means that strategies that the
state follows may not be in the best interest of capital accumulation.
However, given their importance, state strategies cannot be made with total disregard to
the demands of economic structures. An analysis of hegemony thus involves an analysis
of the structural/ functional role of hegemony in combination with hegemonic projects
and agents’ strategies (Joseph, 2002). Joseph (2002) asserts that, in order to extend
Gramsci’s concept of hegemony in a realist direction, it is important that the formation of
the ‘power bloc’ must be linked with the necessity of reproduction or transformation of
existing social structures through an elaborate political strategy (Joseph, 2002; p 28).
Furthermore, since the reproduction or transformation of diverse social structures within
10
a society can only be obtained through the role of the state, it is important that the
dominant hegemony is exercised through the state.
There are multiple structures operating within a society, with various groups operating
within it, each having different interests. The formation of a ‘power bloc’ thus requires
the role of the state in bringing these groups together. This is perhaps the structural aspect
of hegemony, i.e. the explanation of the structural origin of hegemony. The agential
aspect of hegemony involves the hegemonic strategies of leading groups to organize the
coalition of diverse groups in accordance with changes in social structures. These
agential efforts of dominant groups in accordance with changes in structure are perhaps
what Gramsci means when he explains that the formation of a historical bloc is tied to the
linking of structures and superstructures (Joseph, 2002). In the empirical sections of the
case, following the research method section, we will explore the structural conditions that
led to the emergence of the military as a dominant group, pressures for change, the
hegemonic projects of the new dominant groups and their effect on management control
practices within CAA.
Research Method
In line with the tradition of critical realism, this research is aimed at explaining social
changes (i.e. changes in management controls within CAA) through identifying structural
conditions as well as the agency of different agents. Our data collection efforts were also
in line with the basic tenets of critical realism. In order to identify the structural
conditions that led to the emergence of the military as a hegemonic force on the national
11
level, a review of the political and social literature was important. This review included
the work of eminent sociologists and political scientists such as Jalal (1995), Talbot
(1998; 2003) and Ahmad (2004). In order to understand the structural conditions that led
to the hegemony of the military at the level of the case organization, interviews with the
first generation of senior level officials that were involved in the setting up of the
organization were also critical. Since the organization was only around twenty-five years
old at the time of data collection, we were able to interview some key agents including
the first DG (director general) and the first general finance manager. While agents may
not be aware of structural conditions, interviews with them provide researchers with
important clues to identify these structural conditions at work (Sayer, 1992). Important
sources of data that helped us in identifying changed structural conditions at the time of
the military take-over in 1999 included a review of scholarly works by political
economists (e.g. Kukreja and Singh, 2005) as well as reviews of articles printed in
national and international newspapers. In order to identify relevant news and
commentaries appearing in newspapers, Lexis Nexus was used as an important source of
data.
In order to understand the agency of agents, interviews were perhaps the most important
source. In total, fifty-four interviews were conducted. A breakdown of these interviews in
terms of organizational affiliation and managerial hierarchy is given in Table One. These
interviews were key to our understanding of the ideologies, intentions, interpretations and
actions of various agents. This is the domain of agency. The interviews varied in length,
with most lasting for more than an hour. Notes were taken during the interview process
12
by the first author and every effort was made to ensure that these were later transcribed
verbatim.
In addition to interviews, review of official documents was another important source of
data. This included a review of official data such as operational and financial data as well
as official correspondence. Different sources of data helped us in corroboration of
information as well as deepening our understanding of the structural and agential aspects
of the social situation under investigation. In terms of data analysis, our preliminary
review of data (including interviews and official memos) suggested that what we were
dealing with in CAA were two contrasting perspectives on management controls: that of
the military and that of managers. This led us to further analysis of data with respect to
the two groups. This analysis involved the identification of respective groups’ interests,
ideologies and subsequent actions. The outcome in the form of management control
changes within CAA was a result of structural conditions within which the two dominant
groups were operating as well as their respective strategies. We also collected and
analysed the data from the perspective of dominated groups to understand their
perspective on management control changes that emerged primarily from the interaction
of the two dominant groups.
Formation of Historical Power Blocs: the Military and Management Controls
Joseph (2002) stressed that understanding the formation of historical power blocs is
crucial to understand the structural roots of hegemony. The state plays an important role
in bringing together dominant groups to maintain the hegemony. In our case, the military
13
was the dominant group in Pakistan. As Gramsi (1971) suggests, certain political,
economic and cultural conditions must be there for a group to assert itself as dominant.
The empirical section below examines those structural conditions and their implications
for management controls in a public sector enterprise.
The case organization (Civil Aviation Authority) operates in Pakistan. Pakistan gained its
independence in August 1947, when Britain left India after ruling it for more than a
hundred years. The roots of military dominance in Pakistan go back to the bureaucratic
and authoritative control legacy of the British (Jalal, 1995; p18). The British, during their
rule of India, relied heavily on the institutions of civil and military bureaucracy. Partition
of India and Pakistan was immediately followed by disputes about areas and states that
adjoined both India and Pakistan, with both countries claiming their right to these areas.
This situation triggered armed conflicts between the two neighbouring countries. The
military, even though weak in terms of resources, was immediately strengthened by
acquiring military resources primarily through foreign loans to ward off risks on both the
Eastern and Western borders of Pakistan (Talbot, 2003). This already strengthened
organization, when complemented with further acquisition of resources, resulted in the
formation of a strong military body.
Political commentators argued that the two wars with India in 1965 and 1971 were used
to create a sense of insecurity in the minds of Pakistani people to further strengthen the
institution of the military (Ahmad, 2004). Unlike neighbouring India, Pakistan’s weak
political organization further tipped the balance in favour of military bureaucracy (Jalal,
14
1995; Talbot, 1998). Pakistan became a state where ‘national interests’ became
synonymous with ‘defence interests’ or the defence institutions’ interests (Ahmad, 2004).
While there were some patches of civilian rule in the country in the 1950s, 1970s and
1990s; every civilian rule eventually culminated in the return of martial law. Military
governments enacted laws creating mandatory quotas for the appointment of military
officials in civilian organizations. This state of affairs resulted in the expansion of the
military’s influence across the state, civil society and the economy, including the case
organization CAA.
Management Controls - Earlier Period at CAA
The emergence of the military as a dominant group at the national level since the
inception of the Pakistani state has had consequences for the strategic and day-to-day
affairs of public sector enterprises such as CAA. Thus, it was not surprising to find that
management controls, including budgetary and performance measurement, were shaped
by the military ethos and command structure. These are discussed below.
CAA, the organization responsible for managing the aviation affairs of the country, was
operating as a department under the Ministry of Defence till 1982, when it was given the
status of an independent entity by the then military government. The task of setting up the
new organization, its policies and procedures was given to the Pakistan Air Force. The
newly created entity was given the mission to “promote a safe, efficient, adequate,
economical and properly coordinated civil air transport service and control and
15
regulation of civil aviation activities”1. While CAA was given independent status with its
own board of directorsiv, it was still under the control of the Ministry of Defence, which
is not an unusual phenomenon in less developed countries (Hopper et al., 2009).
The Ministry of Defence had the power to reject, amend or approve any decision made by
the CAA board. The Ministry of Defence was also given two permanent positions on the
board, including the position of Chairman of the Board of Directors. The executive head
(DG of CAA) and all other senior level appointments were made by the Federal
Government via the Ministry of Defence. These provisions were included in the CAA
Ordinance with clear intent to ensure that CAA should remain in the control of the
Ministry of Defence, so as to protect the ‘national interest’. The doctrine was that if left
independent, CAA could take decisions that could run contrary to ‘national interests’. For
example, according to Ministry of Defence officials, where to set up an airport in the
country was not only a commercial but also a ‘strategic decision’ made on the basis of
national interest. The Government of Pakistan made the strategic decision to link up
northern parts of the country through an aerial link, as a road link was difficult to
establish. If left to its own devices, CAA could have rejected the decision on commercial
grounds.
Similarly, CAA was a regulator of Pakistan’s air space for civilian purposes. Thus, CAA
had a business interest in allowing more national and international airlines to fly to and
from various Pakistani airports. Nevertheless, it was not in the interest of Pakistan
International Airline (PIA), a state-owned ‘national flag carrier’, controlled by the
1
Section 5(2) of CAA Ordinance, 1982.
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Ministry of Defence. In order to protect PIA, the Ministry would not let CAA exercise
this right of licensing airlines to fly on its own. This Ministry of Defence control over the
affairs of CAA was also extended to routine operational matters such as appointments
and transfers, as will be discussed later. With this domination by defence institutions and
bureaucracy totally at the mercy of the ruling class (military and political), CAA
appeared more like a microcosm of the state of Pakistan.
Not surprisingly, ideas and principles of military institutions such as PAF and the
Ministry of Defence had a major impact on organizational structure, recruitment and
promotion at CAA. These ideas were reflected in the matrix structure of CAA (with
directorates and regional command), unity of command on the ‘air base’ (airport manager
to head all functions taking place at airport), domination of Air Traffic Control over
important and senior positions (e.g. airport managers to always come from Air Traffic
Control) within CAA, a stark distinction between ‘officers’ and ‘staff’ etc. They had also
influenced the accounting, budgeting and cost management practices and performance
evaluation system, as discussed below.
Organizational Structure, Recruitment and Promotion
The organizational structure of CAA was developed on the same pattern as Pakistan Air
Force (PAF)v. It was divided into four major functional areas called directorates. Over the
years, the number of directors’ positions increased. In addition to the functional
directorate, the organization was divided vertically into twelve hierarchical positions with
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pay groups (PG) 1-6 belonging to ‘staff’ and 7-12 to ‘officers’. In 2006, the
organizational structure of CAA was as described in Figure One.
[Insert Figure One]
On a pattern similar to the PAF, it was decided early on in the life of CAA that every
employee who joined the organisation would join a particular directorate. Promotions to
higher ranks would be made only against vacancies available within their parent
directorates. In line with PAF management philosophy, the airport manager was given
immense power within CAA. The airport manager was responsible for both air operations
and airport management: i.e. for virtually all activities taking place at the airport.
Therefore, officers of all directorates working at airports were placed under the
administrative control of the airport manager.
According to PAF thinking, the operations directorate (responsible for flying aircraft) is
the main directorate and other directorates are ‘support’ directorates. All key positions in
PAF, including the position of Air Chief, were only occupied by operations directorate
personnel. Based on the pattern of the PAF, one directorate, which according to the
thinking of PAF personnel was the core operational directorate - i.e. Air Traffic Control
(ATC) - was given the most privileged status, with maximum senior positions allotted to
it. In addition to this, important field positions like that of airport manager were always
given to personnel from the air traffic control directorate. This policy of appointing air
traffic control personnel was also in line with the PAF ideology of ‘safety first’.
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Comments made by the former DG of CAA reflected the same sentiment: “In every
organization there is a VIP crowd. In the air force, VIP crowd is fighter pilots, and in
CAA, your VIP group had to be ATC guys. One of them is going to become your DG one
day… What if there is an emergency on the airport? Say an emergency landing - the
airport manager has to act as a bridge between Air Traffic Control and a host of other
departments. He can only perform his job effectively if he knows ATC operations”.
This led to a differential career progression pace for the air traffic control directorate as
compared to certain other directorates. Over the years, this problem became more acute.
Resultantly, in 2005, there were officers in slow moving directorates who had been at the
same pay grade for more than fifteen years, while others in fast moving directorates, such
as ATC, had been promoted twice in the same time period. This created considerable
resentment among the officers of directorates who were not going anywhere in terms of
their career progression. The continuous influx of PAF men and their occupation of
important positions and the domination of PAF ‘ideas’ over the working of CAA was a
consistent source of dissatisfaction for people in certain directorates. The domination of
the ATC directorate (combined with continuous induction from PAF) meant that
employees of other directorates could hardly ever reach senior positions within CAA.
There was also a divide between ‘staff’ and ‘officers’, and between ‘staff’ and ‘daily
wagers’. The lower grade employees (staff), according to ‘military rules’, were kept on a
tight leash from the beginning and were not allowed to form an organization for
collective pursuit of their demands.
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Accounting, Budgetary Controls and Performance Measurement
Accounting, Budgetary control and performance were subject to the requirements of the
Federal Government and its institutions. It was made clear in CAA Ordinance, 1982 that:
“The Accounts of the Authority shall be maintained in such form and manner as the
Federal Government may determine in consultation with the Auditor General of
Pakistan” (Section 17 of CAA Ordinance 1982). As with all other public sector
organizations, annual audits of accounts by the Auditor General of Pakistan were made
mandatory for the newly created organization to ensure compliance with all the rules and
regulations. It was also made mandatory for the organization to send the report of the
Auditor General to the Federal Government along with the management’s comments on
the Auditor General’s report. In the Ordinance, the Federal Government was given the
power to advise the newly created organization to resolve any issue identified in the
Auditor General’s report.
Similarly, CAA was required to present its annual budget before the Ministry of Finance
for approval. This budget gave a detailed breakdown of revenues and expenses. The
Secretary of the Ministry of Finance was also an ex officio member of the Board of
Directors. This arrangement further ensured that CAA would comply with all financial
rules and regulations of the Ministry, as was the case with all government organizations.
Since CAA had always been a cash-rich organization, the pressures on pro-actively
managing costs were minimal. These controls were primarily geared towards ensuring
that money was spent with proper authorization and approval. In order to do that, an
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elaborate budget system was in place, which would list all capital and revenue expense
items. This budget was eventually approved by the Ministry of Finance. Once the budget
had been approved, two major types of further controls were further put in place to ensure
that money was spent in accordance with approved budgets: documentation and
approvals. Any outflow of economic resources necessitated extensive documentary
support and multiple authorisations to ensure that money was spent efficiently and in
accordance with the approved budget. The main focus of this system was to ensure that
there was no embezzlement of funds. This was also a concern for the Air Force officials
who took charge of the CAA at its inception and later on. An ex-senior manager
commented: “What we didn’t want was a ghapla (fraud/embezzlement of funds). Our
reputation was at stake. Air Force reputation was at stake. We couldn’t afford that.”
Similarly, CAA adopted a performance measurement system that was typical of any other
public sector organization. The backbone of this performance measurement system was
the annual confidential report (ACR). This ACR was written at the end of each calendar
year for each employee by his immediate boss and counter-signed by the boss’s
immediate boss. The counter-signing authority had the right to overrule the original
assessment. The ACR for each employee was filed in a dossier called the ‘character roll’
of an employee. At the time of promotion, posting or training, the relevant authorities
could refer to this dossier to reach a decision with regard to the employee concerned.
While in theory, the report could range from adverse to excellent, in practice, a
predominant majority of employees received good performance ratings in their ACR.
Adverse opinions and less than average ratings were a rarity.
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With regard to managing costs or measuring performance, the ideology of the PAF was
crucial. For example, while referring to CAA’s priorities, a close aide of the first DG of
CAA said: “You see, his priorities were as follows, in the order in which they come.
First, operational efficiency: i.e. airworthiness, radars, fire engines etc. Secondly,
facilitation: i.e. security and upkeep of furniture etc, and thirdly, revenue: i.e. where it is
being spent…”. Earning financial resources was important so that these could eventually
be spent on infrastructure development. A first generation senior financial officer
described their approach as “we wanted to earn and burn”. The same approach was
followed by all incoming DGs, almost all of whom belonged to the PAF.
The role of accounting in decision-making and performance measures always took a back
seat to the overwhelming presence of military institutions and their command and control
strategies. Firstly, these institutions set certain primary objectives for the organization.
These objectives were set to ensure the safety of air traffic and to develop aviation
infrastructure for this purpose. Thus, economic criteria never appeared in managers’
decision-making frames. These decision-making orientations made certain kinds of
controls more important in the day-to-day running of the organization. These controls
were primarily targeted at the organization’s operations. The role of accounting in this
scenario was therefore of a different nature. Accounting information had little role to play
in business decisions. For example, in order to start new projects, the only significance of
accounting information was to reveal to CAA top managers how much money was
available in the kitty and what, if any, was the shortfall. According to senior financial
22
managers of earlier days (all the way down to the present day), the only financial
information that successive DGs consistently asked for was the financial position and
requirements.
In the empirical sections above, we have identified the structural conditions that led to the
emergence of the military as a powerful player in the country. These included political
and ideological conditions stemming from the historical circumstances within which
Pakistan came into existence and the rather hostile geopolitical conditions in which it had
to operate. Better organization of the military and its resource richness enabled it to
assume a dominant position with regard to the political and economic structures of the
country. The ideology of national security was another important factor that maintained
the hegemony of the military over the state of Pakistan (Ahmed, 2004). However, for a
group to remain in the dominant position, the underlying political, economic and
ideological structures need to be reproduced (Gramsci, 1971), as a breakdown in these
structures can result in a social upheaval, which may not be of benefit to dominant
groups. As will be explained later, poor economic conditions in Pakistan led to a situation
where the existing dominant group - i.e. the military - considered it necessary to form an
alliance with a new group, namely ‘managers’. This new power bloc had consequences
for the management philosophy of CAA: hence the changes to management controls.
Emergence of a New Dominant Group - ‘Managers’ - and Reforms to Management
Controls
23
The influence of the military began to face new challenges as economic problems were
compounded. Financial sanctions from the West after Pakistan’s nuclear tests in 1998
further affected the country’s economic health to a point where it almost reached the state
of bankruptcy. After another military coup against democratic government, in his first
address to the nation, General Musharraf, the then army chief, gave a list of seven
problems that were dragging the state down. Poor economic performance was at the top
of the list. In a bid to cure this economic disease, a high-ranking official of Citibank, Mr.
Shaukat Aziz, was called back from the USvi and appointed as Finance Minister in
General Musharraf’s caretaker government. This was perhaps the beginning of the
emergence of a new ‘power bloc’: a bloc which emerged out of the necessity for the State
to perform better on the economic front. The new bloc now included, apart from defence
personnel, economic experts and private sector managers.
The 2001 terrorist attacks in the US made Pakistan a front-line ally of the West in the war
on terror and international financial assistance and loans started flowing towards Pakistan
once again. In order to put a ‘legitimate’ civilian government in place, general elections
were held in the country in 2002, and as expected, a pro-military government came into
the power. Shaukat Aziz was retained by the new government as Finance Minister, while
General Musharraf assumed the position of President in the new set-up, without leaving
his position as Chief of Army Staffvii. The economic front was handed over to the finance
minister, who had developed a reputation for being a good economic manager in the
previous two yearsviii. The actions that he took included the program to expeditiously
24
privatize public sector corporations and to bring a private sector management style to
publicly owned corporations.
In 2004, Shaukat Aziz was made the Prime Minister of the country to give impetus to his
efforts for economic progress2. In this new arrangement, there was a division of tasks
between economic technocrats (managers) on one hand and military and the allied
political leadership on the other. The former group was given the task of economic
management of the country, while the latter would look after political affairs. In order to
accelerate the process of economic uplift, the new Government took a number of
initiatives. These included requiring Government departments and ministries to set
quantifiable targets and to periodically measure these, asking public corporations to
prepare their business plans and the appointment of some eminent private sector business
managers as executive heads of state-run corporations. CAA, the case study, was one of
the first public enterprises to be subjected to these reforms.
CAA’s change program started when the Prime Minister, as part of his efforts to ‘reform’
public sector firms, convened a meeting of CAA officials to assess their progress. The
instructions from the Prime Minister’s office were that the profit potential of the
organization needed to be first assessed and then tapped. In an effort to reorient public
sector firms towards commercial success, the Prime Minister decided to appoint exmanagers of large and commercially successful private sector firms as executive heads of
public sector firms. So, the former head of a large international oil marketing firm was
appointed as the DG of CAA in the latter half of 2006. This appointment was unusual in
2
‘New Pakistan PM is former international Banker’, Asian Tribune, August 28, 2004
25
the sense that this was the first time that a private sector business manager had been
appointed as the executive head of this military dominated civilian organization. It was a
gesture by the State of privileging of economic expertise and was not liked by the
Ministry of Defenceix. The new DG was appointed on a two-year contract with a mandate
from the Prime Minister ‘to bring about change in an old style public sector organization
that has not been able to do much in the past’.
In order to kick-start the change process, the new DG of CAA immediately formed a
small change team. If there were any common characteristics of the change team, these
were the following: they were all relatively young and well versed in the latest
managerial trends (almost all of them holding business-related degrees, which was an
uncommon thing in CAA) and were mid-level managers. The mandate of the team was to
identify the changes that needed to be brought about in this public sector organization.
The new DG was clear in his mind about the basic change that was required in CAA, and
that was to give primacy to economic criteria for decision making. On the issue of
protecting Pakistan International Airlines, he had the following to say in one of his
newspaper interviews: “The existing aviation policy provides a non-level playing field
and protects one airline, which does not allow the aviation sector to grow in the country
and international airlines to come into Pakistan…By protecting PIA, [we have] not done
any service but weakened it. There is a need for competition…” (Khaleej Times, 2007).
The change required, according to him, was to make all aviation-related decisions on a
commercial basis. In order to bring about the more-market oriented, finance driven,
26
modern management accounting control system, the change team sought to reduce the
influence of the Ministry of Defence and the PAF over CAA.
The general views of the ‘change team’ about the problems facing the organization
included the undue influence of the Pakistan Air Force and the Ministry of Defence,
overstaffing, an excessively tall and top-heavy organizational structure, dominance of the
air traffic control directorate, outdated managerial practices such as the obsolete
performance measurement system and a lack of requisite business expertise. In order to
cater to the last problem, CAA went on to hire a few ‘business professionals’ for key top
positions such as finance, HR and commercial. In order to attract these professionals,
they were offered salaries which were significantly more than existing salary scales of
CAA.
In order to change the public sector organization, a few suggestions were made by the
change team. The biggest change suggested was independence from the Ministry of
Defence for making licensing and other decisions. Other suggested changes included
trifurcation of the organization’s structure into three separate functions, i.e. regulatory, air
traffic control and airport management. While the first two of these already existed, to a
certain extent, the change team suggested treating airport management as a separate
‘trade’. This effectively meant that the aviation side of the airport would be managed by
air traffic control personnel, while the passenger side would be handled by personnel with
expertise in passenger facilitation, security and commercial aspects. At the senate
standing committee on defence, the DG of CAA commented: “Air tower controllers used
27
to become…airport managers. Now we are saying these are two separate roles… we did
not have trained people to handle passengers. They were not trained on that aspect. They
were not trained on the aspect of facilitation… [or] airport security.”
According to the change team members, the organization had too many layers in its
hierarchy and too many senior management positions: many more than was required in a
‘dynamic organization’. There were approximately seventy general managers (third
position from the top) working within CAA and the change team suggested cutting this
number to fifty-two. Similarly, there were sixteen director level positions (second
position after DG), which were cut to twelve by the change team in their proposed plan.
The change plan also involved the appointment of ‘the right person for the right job’.
This in turn meant reduced influence by the Ministry of Defence on appointments within
CAA. One change team member commented to the researcher: “Tell me
something…Does a Brigadier have any clue of what modern day human resource
management is?... They think that since this organization has the word ‘aviation’ in its
name, it must be managed by the Air Force…” Clearly, the change agents, supported by
the Prime Minster and the new DG, were very confident in their intended change
agendas. In terms of critical realist interpretations of hegemony, the change team
managers had the structural conditions that created incentives to win the consent (or
control) of others to bring about changes. Nevertheless, as we will see, this involves
agential projects such as forming alliances, concessions and compromises with the
existing dominant group - the military - to ensure structural reproduction and social
28
cohesion (Joseph, 2002). It may also involve coercion whenever necessary of the
dominated groups: in our case, lower level employees. This will be discussed below.
New Power Bloc (Military and Managers): Changes to Management Controls
This section aims to identify the contours of the compromises made by the two dominant
groups and its implications for changes to management controls, including the changes to
the organization’s structure, budgetary control and performance and overall control
strategies. The arrival of ‘managers’ in CAA was expected to produce private
management styles of control predicted by the advocates of New Public Management
(NPM). However, the nature of compromise between the dominant groups at the
organizational level gave a different shape to the changes. This was also a function of the
compromise made at the national level. This was unlike the Fordist compromise
(Gramsci, 1971), where state policies of wage increases, full employment and other
welfare policies were a way of ‘appeasing’ the working class to ensure their consent and
continued dominance of capitalist and allied groups (e.g. labour aristocracy). In this case,
policies of state, such as the tasks and targets of each of the ministries, business plans and
the appointment of business managers as heads of public sector corporations were part of
the process of formation of this new ‘power bloc’. In this new arrangement, appeasing the
working class was not a concern. Instead, low pay grade public employees were
diagnosed as ‘inefficient’, because they did not fear heavy disciplinary actions. In order
to cater to this problem, Removal from Service Ordinance, 2001 was promulgated by the
State, which made it easier for seniors to remove inefficient public servants. This new
29
arrangement cascaded down to the case organization where the military had formerly
been the only dominant group. As part of the new arrangement, the military and
managers were to form a new power bloc with serious implications for the new
management control regime. Changes to management controls are discussed below.
Taller, Broader and Top Heavier Organization
In order to take the intended change program (lean organization structure, independent
CAA and market oriented modern budgetary and performance measurement system)
forward to the Ministry of Defence for approval, it first needed to be ‘owned’ by senior
officers working within CAA. It was felt by the new managerial team that ‘alliances’
were necessary at the organizational level to make the intended changes. The intended
lean organization structure was the first hurdle to cross. When the change team presented
their estimation of the number of senior management positions to the senior officers of
CAA, they were ‘outraged’. The directors contended that going below the approved
strength of the organization was like chopping off their own hands. The DG had to ask
the change team to work with HR and come up with a ‘compromise’ solution.
The result of the compromise was the following: the total of 87 general manager
positions, which was cut to 52 by the change team in their original proposal, was raised to
129. Likewise, the 18 original director level positions that were cut to 12 by the change
team were revised upwards to 23. While this situation was against the ethos of a ‘lean
organization’ so valued by the change team and the new DG, they had to ‘bite this bullet’
30
to get the approval of senior managers of CAA. The new DG also took this opportunity,
with the support from the Prime Minister’s office, to appoint managers from the private
sector to key positions such as head of human resources and finance at salaries that were
much higher than the existing salary scales of CAA. The argument deployed was that
these were key positions that were important for the commercial reorientation of CAA
and the skills required for these positions were not available at salary scales offered by
CAA. The new DG, the change team and the new managers appointed thus became a prochange alliance that could potentially neutralise the future resistance of senior managers.
Once the change program had been approved by the senior managers at CAA, it then had
to gain the approval of the Ministry of Defence. Not surprisingly, Ministry and other
defence institutions such as PAF rejected the programme completely. A senior official
from the Ministry of Defence commented: “Everyone has an angle to ‘change’. [The new
DG] wanted more power … there was no need for any restructuring as such, as the rules
and structures were good enough. The best way to do it was to implement the rules and
regulations and to bring good governance to the organization.” When the DG felt that
the change program might be crushed in its infancy, he approached the Prime Minister to
intervene and salvage the program. The Prime Minister came to the rescue of the DG,
instructing the relevant state institutions to reconsider the change programx.
State institutions, especially the Ministry of Defence, accepted the programme with
certain conditions attached. As part of this compromise, a few things were taken off the
31
change program agenda. These included, most importantly, the continuation of the
existing arrangement of the Ministry of Defence retaining control over aviation licensing
and its right to appoint personnel in the CAA. The argument deployed was protection of a
national flag carrier (i.e. PIA) and hence ‘national interest’. According to a senior official
from the Ministry of Defence, “even a Prime Minister like Shaukat Aziz could not let PIA
die…” In return, the Ministry of Defence and other state institutions allowed CAA to
change its organizational structure, including separation of function of air traffic control
from airport management. As part of the bargain, another layer was created within the
organizational hierarchy above the position of directors (PG 11) and below the DG
position (PG12) to accommodate personnel coming from related state institutions. A total
of six such positions were created and were titled additional DGs. Also, as per the old
routine, the Ministry of Defence was allowed to continue sending defence personnel to
CAA. As a result of this ‘compromise’, the organizational structure actually became even
taller and more top-heavy. In return for this bargain, the new managerial regime was
allowed to make certain changes that they deemed appropriate. The most notable
amongst these were the split between the air traffic control and airport management
functions and the introduction of new performance measures and cost management
initiatives.
While the change program was marked with conflicts, compromises and concessions with
regard to the powerful groups, it was a different story concerning weaker groups such as
employees from slow career directorates, lower pay grade employees and daily wagers.
Some of these weaker groups, such as officers in slow career directorates, had high hopes
32
for the change, thinking that it would end the domination of the Air Force, the Ministry of
Defence and the directorate of air traffic control. This did not happen. There was a round
of promotions and appointments after the new structure was approved but many new
positions went to either people from the Ministry of Defence and the PAF or to newly
inducted managers or managers considered close to new regime.
The Ministry of Defence kept on sending new employees who were appointed in the
CAA to positions that apparently did not fall within their area of expertise. For example,
as part of the new structure, a new position of Director of Economic Oversight was
created. The responsibility of the position involved reviewing the financial statements of
airlines to ensure their financial stability and monitoring the industry to avoid any risk of
cartelisation. An air commodore (a fighter pilot) was sent to CAA by the Ministry of
Defence and was appointed to this position by the new regime. The compromises made in
the process of taking the change program forward ended the hopes of relatively less
powerful groups. It also resulted in a loss of credibility for the new regime. In the words
of one middle manager: “We had high hopes from the change, but these did not
materialise…Earlier it was ATC and Air Force, now it is them and DG’s
favourites…Before reorganization, we were unhappy, now (after reorganization), we are
most depressed….” However, given the path that change had taken so far, the sentiments
of weaker groups were of little importance to the pro-change managerial group. Some of
the changes that they wanted to bring about were conceded in the process and they
wanted to move quickly on others.
33
Accounting, Budgetary Controls and Performance Measurement
Changes to budgetary controls and performance systems were also at the top of the new
managerial regime agenda. With the concessions and compromise already made by the
‘managers’ on the other important aspects of changes, it was impossible for accounting
information to take centre stage for decision making within CAA. Nonetheless, new
managerial regime considered the old accounting system to be out-dated, ineffective and
most importantly unable to control costs. Not surprisingly, they believed that the
conventional spending controls put in place to ensure that money was spent in accordance
with budgeted amounts were inadequate. Similarly, there was dissatisfaction with
existing performance measurement system which was based on annual confidential
report.
A new performance measurement system was introduced within CAA with tasks and
targets to be supposedly agreed between subordinates and their seniors at the beginning
of the period. In accordance with the ‘best practices’ in the corporate world, the new
performance measurement system also involved a forced curve ranking where seniors
were required to rate twenty percent of their employees as ‘below average’ and
‘inadequate performers’. The board and senior managers had already given their approval
for the new system, even though they did not know much about it. One senior manager
revealed: “To be honest, we couldn’t even understand what they were suggesting. Some
of us did suggest … that it would be a better idea to introduce it on one site before rolling
it to the entire organization.”
34
However, the new system was introduced with immediate effect across the entire CAA.
Overall corporate goals were set by the new DG of the firm during the first half of the
calendar year 2007 and the directors were required to set targets for their respective
subordinates. It was decided that directorate-wide performance curves would be made for
all directorates. This meant that departmental supervisors working at airports were
required to make a forced curve for all employees working in their departments.
This curve would then be passed on to their senior officials, who would then make a new
curve incorporating all their juniors. Eventually, the directors were responsible for
making a curve for their entire directorate. Officers and staff of CAA resisted the
implementation of the new system, arguing that it was difficult for them to distinguish
between ‘tasks’ and ‘targets’ given the routine and repetitive nature of their job. They
also argued, for the same reason, that it was difficult for them to assign their employees
to different categories of the forced curve. However, none of this was taken into
consideration by the senior management. Successive letters were sent from CAA
headquarters to different functional heads and airport managers warning them of
disciplinary action if the system was not implemented. Later, to force the employees to
fill out the performance evaluation forms, a decision was made that the annual bonus
would not be given to those employees who would not submit their forms. It was also
decided that annual bonuses would be given to employees depending upon their
placements on the curve. Employees falling in the ‘below average’ and ‘inadequate’
categories would not get any bonus at all, whereas excellent performers could get a bonus
35
that would be equivalent to three months’ salary.
The fear of disciplinary action and the risk of losing out on the bonus forced employees
to reluctantly submit their performance evaluation forms. Lower down the organizational
hierarchy, there were tens of employees working for one senior, so it was impossible for
the seniors to evaluate the performance of their subordinates on a one-to-one basis.
Hence, employees were asked to sign blank forms and hand them over to their seniors!
Senior officers in airports allegedly prepared the curves in a very arbitrary manner. The
result, according to officers working on the field, was that, in general, lower pay grade
employees were rated as ‘below average’ or ‘inadequate performers’. The situation
became worse for lower pay grade employees, as successive forced curves were made at
higher layers in the organizational hierarchy. Senior managers creating the curves
inevitably placed their immediate juniors at the right end of the curve, thus pushing more
and more junior level employees to the ‘wrong end’. The end result was that in a
directorate-wide forced curve, senior level employees were placed in the top categories,
whereas lower level employees were generally placed towards the average, below
average and inadequate performance categories.
This whole exercise was generally seen by employees of CAA as rushed and unfair,
which did not serve the stated purpose, i.e. transparent and objective performance
measurement. However, this apparently unjust outcome of the performance measurement
system was not perceived in the same way by the new managerial regime. On the
question of problems associated with the new performance measurement system, the
36
view from the top was that there were no such problems, since they did not receive any
formal complaints from employees regarding the new system. For them, it was simply a
matter of people unhappy with change trying to raise a hue and cry. Senior managers felt
that if senior officials had been rated higher in the new performance measurement
system, there was nothing wrong with this per se: ‘they are good, which is why they are
seniors’. In any case, some collateral damage is bound to occur whenever a new system
is launched. A pro-change manager revealed: “We introduced a new system in the CAA,
and in the transition, if some people get hurt, so be it.”
Not linked with the forced curve performance measurement system per se, additional
measures were put in place to measure the ‘customer care standards’ of the facilitation
(the department that takes care of passengers) staff and officers at the airports. These
included ‘mystery shoppers’ and customer comment cards. An external firm was hired to
send mystery shoppers to various large airports in the country every month. These
mystery shoppers would rate various aspects of customer care on each airport and send
their reports to CAA headquarters. These reports would in turn be sent to all airport
managers, giving them their scores compared to the last month’s score and their peers’
scores. In addition to mystery shoppers, comment cards were placed in important places
in airports, encouraging all customers to fill them out. Facilitation staff were required to
summarise these comments and send them to headquarters every day. Again, field
employees of CAA, especially the facilitation staff, had many concerns about this new
system. They believed that the system was unjust, unfair and beyond their control.
37
According to facilitation staff, complainants frequently took out their anger on them
because they were being maltreated by Customs or by the Anti-Narcotics Department.
These were independent agencies with no accountability to the facilitation department of
the CAA. Also employees felt that mystery shoppers would give comments on petty,
uncontrollable things. For instance, in a given report, a mystery shopper made a comment
that “I found some employees in the airport to be perspiring profusely”. According to the
employees, sweating heavily in the summer was a normal thing “unless you are sitting in
comfortable air-conditioned offices”. However, none of these concerns were of
significance to the senior managers. They believed that the system had achieved its result
of improving the customer care standards in the airport. The effect of the introduction of
these measures, according to one senior manager, was that “now employees at the
airports are like mad men. They are running around, cleaning the airport, bathrooms,
changing bulbs etc. This system has made sure that they remain on their toes.”
The new managerial regime, in addition to the new performance measurement system,
extended their efforts to cost control in a bid to change the outdated accounting control
system at CAA. The team sought a more ‘pro-active’ approach to cost management. They
took the view that the starting point to cut down on costs should be the labour cost. The
team argued that there were far too many employees in the organization. The excess
labour force was dragging down the profitability of the organization and hence it was
crucial to bring it down. An interview with a pro-change senior manager revealed: “With
so much surplus labour, you cannot earn profitability… You need to bring it (labour cost)
down… Yes it (CAA) is profitable but it could become much more profitable… For an
38
organization to become dynamic and vibrant, its financial muscle should be strong….
With a small workforce, you can pay them well as well, which keeps their morale high.”
In line with this belief of the new managerial regime, the new DG instructed all
functional heads and airport managers to reduce the daily wagers’ head count by 30%. It
is important to note that this figure was not selected on any scientific basis. Many
mangers argued that this percentage was merely a ‘hunch’ of the new DG and of likeminded pro-change managers, rather than the outcome of any serious deliberations or
calculations.
Nonetheless, the choice of daily wagers for downsizing was fairly easy to achieve. Even
though they were generally believed to be more efficient than permanent employees, they
did not have the legal rights that were enjoyed by their permanent colleagues. Removing
them from service was considered much easier and hassle-free compared with removing
permanent employees. However, this effort was never seen in the organization as an
effort to ‘manage costs’. The cost saving agenda via the shredding of lower level
employees was overshadowed by the parallel promotions and fresh appointments at the
top of organizational hierarchy. Employees openly stated at operational sites and to the
media, on condition of anonymity that the actions of the new regime did not gel well with
their stated objective, i.e. economic efficiency of the organization.
The above case illustrations demonstrate how dominant groups, at the level of the case
organization, were vying for assertion of their ideology and control. One group, i.e.
39
managers, was trying to impose its desired controls in the name of ‘modern day
management’, while the other group, i.e. the military, was defending the existing controls
in the name of ‘national interest’. What emerged was a kind of ‘conflicted compromise’.
In an interview, one pro-change senior manager commented: “You see, there are certain
power bases within the CAA. These power bases consider it their right to appoint people
in the CAA. Now there were two approaches that we could take. We could either have
gone for a confrontational approach saying that things will only work [our] way…We
took the latter approach.”
The latter approach or the ‘conflicted compromise’ resulted in some management
controls being removed from the change program (e.g. rights of aviation licensing), while
certain other changes were made to the organizational structure (the organization
becoming taller and top heavier). These changes were not in accordance with the ideals
of the new managerial regime but had to be conceded as part of the compromise. While
managers were allowed to bring about certain other changes in management controls of
the case organization, their ideology was seriously compromised in the process.
The outcome of the compromise was that winning the consent of weaker groups was
impossible due to the weakening of the ideological power of both the military and
managers. In the absence of any apparent ideology, the change program appeared more
arbitrary and coercive to the weaker groups. Also, the compromises made earlier in the
program created a sense of frustration in the managerial group. Any suggestion to reflect
further on the proposed changes were seen by the new managerial regime as a ‘delaying
40
tactic’. As the initial appointment of the new DG was for two years, there was an
impending urgency to show some change to their credit.
The weak bargaining power of these groups (which had no union and no state social
security) made it easier for the regime to push the changes down their throats. “As in any
process of change management, there would always be some concerns and fears. There
was the fear that people would lose jobs. I have always assured you that this would not
happen as part of the restructuring process but the loss of jobs could take place because
of lack of work, poor performance, indiscipline or misconduct.” The strategy of the new
managerial system was to make the lower level employees and daily wagers fearful, as
loving this regime was no more an option (Machiaveli, 1988; p59). There were repeated
official memos and internal letters from the senior management, addressed to employees
of CAA, instructing them to embrace the change program or face disciplinary action. One
such memo threatened: “I am concerned about the slow progress (of filing new
performance evaluation reports)… I expect you as a senior and responsible individual to
take personal ownership and ensure completion of 100% of the performance evaluation
reports concerning your directorate without any further delay.’ Another memo revealed:
“There are, however, some individuals who have negative views on the entire restructuring process. I am always open to their views and suggestions but have always
emphasized that the organization comes first and individual interests come later and
cannot supersede organizational priorities…. I have so far given latitude to such
individuals, but a time comes when the interests of the organization need to be protected
and there will be no compromise on this aspect.” However, as far as the exercise of
41
hegemony is concerned, it is not the use of force, which is problematic in its own right. In
order for the dominant groups to exercise hegemony over the dominated groups, the use
of force must be legitimised through appeal to certain generally agreed principles or
ideologies (Gramsci, 1971, p80). In the case of CAA, because of the nature of
compromise between dominant groups, the use of force or the threat to use force
appeared devoid of legitimacy. The resulting changes created in management controls
through the use of force thus appeared very arbitrary, purposeless and fragile.
Concluding Remarks
The paper concludes by considering the research questions set out earlier in the
introduction, namely, why and how did the management controls, including the
organizational structure, the performance measurement system and accounting and
budgetary controls change and can they be understood through the notion of hegemony
advanced by Joseph (2002)? Figure Two summarises the findings of this paper with
respect to both theoretical and empirical questions.
[INSERT FIGURE TWO NEAR HERE]
Management controls operating within the case organization were a function of the
hegemonic position of the military at the national and organization level. These controls,
as described in the empirical sections above, represented the interests and ideology of the
military. This meant, at the level of CAA, dominance of the PAF personnel in key
positions, an organizational structure that mimics the structure of the PAF and a
42
performance measurement system that was typical of public sector organizations. The role
of accounting in this control scheme was to ensure that there was no embezzlement of
funds and it was also in line with ideals of PAF.
However, changing structural conditions at the national level forced the military to co-opt
another group within the folds of the hegemonic bloc, namely economic technocrats (or
managers, as we call them here). This strategic move on the part of the military at the
national level had implications for the case organization. A new managerial regime was
put in place at the case organization that had interests and ideology that were different
from and in conflict with the military. Managers tried to change the management controls
of the case organization towards their ideals. These included aviation rights with CAA, a
lean organization structure, induction of business professionals to key positions, a targetbased performance measurement system and a new accounting information system with a
focus on cost management. These moves were resisted by the military. The initial
confrontation between the military and managers eventually led to a ‘conflicting
compromise’, which had implications for the final shape of management controls within
CAA. Aviation rights still remained with the Ministry of Defence. New employees were
inducted from the military as well as business. This resulted in the organization becoming
even taller and broader. A new performance measurement system was thrust upon
employees, which systematically ranked lower level employees as poorer performers than
senior level employees. While decisions were still made arbitrarily, accounting numbers
were presented as reasons for cutting down the daily wagers’ workforce. However, in the
process of compromise, the ideals of both groups were compromised. The eventual
43
changes in management controls lacked any logical consistency or appeal. For example, it
was difficult to explain cost management efforts by reducing the labour count when
additional layers and positions were being created at the top. In order to implement these
‘compromised’ changes in the dominated groups, dominant groups were forced to use
coercive means.
The paper makes important contributions to the accounting literature on management
control change. We would argue that the emergence of new performance measurement and
cost management ideas that facilitate coercive controls must be seen in the context of the
new power bloc initiated by the military and managers. Using a critical realist
interpretation of hegemony (Joseph, 2002), it links management control changes in an
organization to the emergence of a new ‘power bloc’ at national and organizational level
and the strategies of dominant groups within the bloc. The form, direction and mode of
the control changes were linked to the emergence of the new ‘power bloc’ and the nature
of interaction between its members. The paper narrates the initial inclinations of dominant
players, their strategies for implementing their ‘ideal’ controls and the difficult path they
trod to reach a ‘conflicted compromise’. The despotic manner in which certain control
changes were thrust upon the weaker groups later on was, at least partly, linked with this
‘conflicted compromise’. This research thus explores a young and unstable hegemonic
arrangement and its implications for management control changes in a corporation at
close range, and is thus a valuable addition to accounting literature. As alliances mature
into stable hegemonies, groups make corrective repairs to their ideological positions and
are perhaps in a much better position to ideologically influence the dominated groups
44
(Archer, 1995). The paper also links changes in management controls to the interests and
ideology of the military, an important state player in many less developed countries.
Exploring this link is important because this is a group that has not appeared much in
accounting literature dealing either with ‘new public management’xi or less developed
countries (Hopper et al, 2009). Last but not least, the paper seeks to contribute to the
debate on NPM and private controls in the public sector. Controls at CAA after the
changes were far from the expected outcomes. As evidenced here, the change team had to
compromise on many of their ideals, such as a lean and decentralised organization
structure, independent and market-driven appointments and recruitment of personnel. The
regime of control following reforms produced coercive controls for workers. This is not
dissimilar to the studies in Western and emerging economies (Lapsley, 2009; Uddin et al.,
2011, Hopper et al., 2009).
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Table One: List of Interviewees
51
Figure One
Overall Organogram of CAA
52
Figure Two
Military as
Dominant
Player
Pressu
res to
reprod
uce
politic
al and
econo
mic
structu
res
National
Level
At the
Level of
CAA
Management
Controls
Ideology:
National
Interest/Nati
onal
Security
Ideology:
National
Interests/Pas
senger
Security
1-Aviation Licensing with
MoD
2-PAF Style Org. Structure
with induction from MoD and
PAF
3-ACR System of
Performance Measurement
4-Accounting to ‘avoid
embezzlement’ and not
importantfor decision making.
New
Powe
r
Bloc
Managers’
‘Ideal’ Mgt
Controls
Conflicted
Compromi
se
Ideology: Supremacy
of Economic
Criterion
Military+Man
agers
Ideology:
National
Interest/Eco
nomic
Interest
Ideological
contradictions
1-Aviation Licensing with
MoD
2-Organization becoming
heavier and taller with
induction of both military and
economic managers. Certain
changes in organizational
design.
3-New Performance
Measurement System with
severe negative implications
for low pay grade employees
4-Accounting still remain
unimportant for decision
making but pro-active cost
management.
Mgt. Ctrl Practices:
1-Aviation rights with
CAA
2-Lean organization
structure with
induction of business
professionals
3-Target Based
Performance
Measurement With
Rewards and
Punishment
4-Accounting for
decision making and
pro-active cost
management
53
i
This paper takes the broader definition of MAC as identified by Hopper et al., 2009. MAC embraces
processes, structures and information for organisational decisions, governance, control and accountability.
The individual ‘elements’ of the control apparatus include changes in vision, organization structure,
performance measurement systems and cost management techniques.
ii
There are a number of very insightful papers on the notion of hegemony (Lehman and Tinker, 1987;
Richardson, 1989; Cooper, C. 1995; Goddard, 2002). However, these are not directly related to the link
between notion of hegemony and management control change.
iii
In another stream of very insightful research, organizational researchers linked economic, political and
ideological aspect of hegemony in Gramsci’s (1971) work to strategies of corporations in an organizational
field (Levy & Newell, 2002; Levy & Egan, 2003; Levy & Scully, 2007). In this stream of research,
researchers have captured different strategies of corporations within an organizational field to protect their
hegemony against an incoming ideological threat (e.g. charge of environmental pollution). While insightful
and commendable, this stream of research however is not directly related with management control changes
within organization.
iv
The first Board was comprised of seven members, including the Secretary of the Ministry of Defence
(Chairman of the Board), Vice Chief of Air Staff, Additional Secretary for Military Finance (Ministry of
Finance), Secretary for Planning Division, Secretary for Culture and Youth Affairs, Managing Director
Pakistan International Airlines (PIA), Director General Civil Aviation Authority.
v
PAF is divided into four directorates, namely operations, maintenance, administration and electronics.
The operations directorate is the main directorate and is involved with flying aircraft.
vi
According to news reports, Mr Aziz left Pakistan in 1975, when he was appointed on his first out-ofcountry job by Citibank.
vii
Military influence in the political affairs of country was evident from the fact that the parliament made an
amendment in the constitution of Pakistan such that General Musharraf could hold the positions of
President and Chief of Army Staff at the same time.
viii
Euromoney and The Banker declared him Finance Minister in the year 2001.
ix
According to media reports, a letter was sent from the Ministry of Defence to the Federal Government
raising objections to the appointment. According to the report, the letter read: “Being highly technical and
complex …Civil Aviation Authority top management should have adequate experience, knowledge and
expertise to lead these organisations,”…[Appointed person] might have had vast experience in running the
business organisation(s) but he does not possess any experience to run a technical and complex
organisation…” Source: MoD Mantra: Fly high-but on merit’ The News Friday, February 23, 2007.
x
The following news report gives a summary of what happened: “For the last few weeks, the issue of
[change] kept on engaging all the key players, resulting in convergence of the Ministry of Finance,
Ministry of Defence and even the Minister of State for Defence at a jointly shared juncture against the
increasingly isolated CAA Director General … The CAA Director General approached Prime Minister
Shaukat Aziz, …urging him to intervene in the matter, since all those who matter at the decision making
level had one after another distanced themselves from the Director General on this specific issue…” (The
News, January 18, 2007).
xi
Unlike other professional groups like health, education and engineering professionals, which do appear in
accounting literature on management control change (e.g. Dent, 1991; Broadbent and Laughlin, 1998;
Broadbent et al., 2001).
54