A Study of The Emergence of Management Accounting System Ethos and Its Influence On Perceived System Success

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Accounting, Organizations and Society

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A study of the emergence of management accounting system

ethos and its inuence on perceived system success
Alnoor Bhimani
Department of Accounting and Finance, London School of Economics and Political Science, Houghton Street,
London WC2A 2AE, UK
Abstract
This study considers how certain notional organisational culture elements became embedded in the design of an
innovative management accounting system (MAS) and how the alignment between the cultural premise of the MAS
and that espoused by MAS users inuenced the perceived success of the new system. The research data for the study
were obtained over a three and half year period and derive from interviews, questionnaire responses and public as well
as internal corporate documents. The site chosen for the study is a division of Siemensa global rm in the electronics
and electrical components industry. Two employee groups with functional expertise in engineering and business economics respectively comprise the MAS user groups. During the development and implementation phases of the new
MAS, Siemens was actively engaged in a corporate-wide culture change programme that was supportive of the new
MAS initiative. The study results are in two parts. First they report on the manner in which the organisational programme of culture change aected the cultural premise of the new system. Second, they indicate that the degree of
alignment between the organisational culture elements which were embedded within the MAS and the organisational
outlook of the two user groups signicantly inuenced the systems perceived success. # 2003 Elsevier Science Ltd. All
rights reserved.
1. Introduction
Past research suggests that dierent groups of
MAS users within organisations exhibit dierent
rationales, priorities and cultural orientations
(Ahrens, 1996, 1997, 1999; Appleyard & Pallett,
2000; Bamber, 1993; Birnberg & Shields, 1989;
Bruns & McKinnon, 1993; Ko & Mock, 1988; Loning, 1994; Markus & Pfeer, 1983; Young & Selto,
1991) and that these may inuence their perceptions
of the success of MAS changeovers (Brewer, 1998;
Broadbent, 1992; Dent, 1991; Ezzamel, 1987; Goddard, 1997a; Hopwood, 1989; Mouritsen, 1996;
OConnor, 1995; Roberts, 1990). Some researchers
suggest that changes in organisational control
systems tend to be deemed successful when

accompanied by organisation cultural values which
support the new systems (Das, 1986; Dent, 1987;
Robey & Farrow, 1982; Rowlinson, 1995; Zmud,
1979). Moreover, user involvement in the design
of information systems has been reported to
enhance the perceived success of a systems change
because user value assumptions become embedded
into the new systems architecture (Argyris &
Kaplan, 1994; Birnberg, 1998; Caplan, 1988; Fisher,
1998; Franz & Robey, 1986; Markus & Pfeer,
1983; Shields & Young, 1989).
Whilst evidence exists that the introduction of a
novel management accounting system can bring
about desired consequences when the system users
0361-3682/03/$ - see front matter # 2003 Elsevier Science Ltd. All rights reserved.
PII: S0361-3682(02)00025-9
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A. Bhimani / Accounting, Organizations and Society
consider the organisational values of their working environment to be consistent with those
embedded within the new system, there has been
little research on how such consistencies emerge.
The present study aims to address this concern by
exploring how certain notional organisational
culture elements became embedded features of a
newly implemented MAS within a specic organisation. It also aims to investigate how the alignment between the organisational culture elements
which were embedded within the MAS and the
organisational outlook of two MAS user groups
inuenced their perception of the success of the
new system.
The site chosen for this study is the Fibre Optics
business unit (HLFO) of the Semiconductors
Group of Siemens AGa global electronics and
electrical components rm. Operational ocers
within HLFO have specic expertise either in
engineering (Technisch) or in business economics
(Kaufmannisch). Engineering and business ocers
educational training diers in that the former tend
to possess engineering based qualications
whereas the latter have a business economics academic background. These two distinct functional
expertises provide a basis for categorising operational ocers at HLFO into two dierent
employee groups. The new management accounting system adopted by HLFO is called processbased target costing (PBTC) which was designed
by HLFO engineering ocers between September
1995 and May 1996. PBTC became operational in
August 1996.
The information collected to achieve the two
aims of the investigation is derived from dierent
sources. Interviews were carried out between early
1995 and mid-1998 with company ocers. Internal documents, accounting reports, statistical
data, graphical charts and ocial company histories were consulted. Two questionnaires were
also used for collecting data on the MAS users
organisational culture orientation. One questionnaire was administered to engineering and business ocers prior to the introduction of the new
accounting system and the other was administered
following its implementation. Whilst HLFO was
in the process of designing and implementing the
new MAS, a corporate-wide culture change pro-
gramme was in progress at Siemens. The two

questionnaire administrations enabled changes in
the users organisational outlooks over this time
period to be assessed. The second questionnaire
also included a question on the users perception
of the success of the new MAS.
The paper is structured as follows: following a
review of the literature dealing with organisational
culture and MAS ethos alignment, the paper discusses the emergence of the new MASs ethos in
the light the corporate culture change programme
being put into eect throughout Siemens. The
questionnaire and interview-based approach and
hypotheses for investigating how the alignment
between the organisational culture elements
characterising the MAS and the system users
orientation towards a developmental culture relate
to the new MASs perceived success are subsequently considered. Following a discussion of the
results of the investigation, the papers concluding
section addresses some of the implications of the
study and future research possibilities in the area.
2. Literature review
2.1. Management accounting systems and
organisational culture
The management accounting literature has only
recently started to show empirical concern with
the concept of organisational culture (Dent,
1991; Goddard, 1997a, 1997b; OConnor, 1995)
though the potential of studying links between
organisational culture and systems of control has
long been posited (Flamholtz, 1983; Hopwood,
1987; Markus & Pfeer, 1983; Ouchi & Johnson,
1978). More recently, Shields (1995) and Birnberg
(1998, 2000) have reiterated the desirability of
investigating how cost management systems
adoptions and eects are conditioned by variables
such as organisational culture.
Whilst there is evidence to suggest that the perceived implementation success of a new MAS is
inuenced by whether its information output is
considered easy to use, accurate and timely,
investigations of organisational culture and control practices indicate that successful information
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systems changes tend to result when supporting

and compatible organisational values are in place
(DeLone & McLean, 1992; Doll & Torkzadeh,
1988; Earley & Kanfer, 1985; Hogarth, 1993;
Shields, 1995). Research studies suggest that the
introduction of novel information systems may
not bring about the desired eects if users do not
perceive the organisational characteristics and climate of their working environment to be consistent with the values embedded within the new
system (Cushing,1990; Das, 1986; Robey & Farrow, 1982; Rowlinson, 1995; Zmud, 1979). How
closely the cultural orientation of management
accounting information users aligns with the value
assumptions factored into the design of a MAS
has likewise been reported to have an inuence on
the perceived implementation success of a new
system (Argyris & Kaplan, 1994; Birnberg, 1998;
Caplan, 1988; Shields & Young, 1989). Some
scholars posit the existence of direct linkages
between accounting systems characteristics and
corporate culture (Goddard, 1997a; OConnor,
1995; Soeters & Shreuder, 1988) and between
organisational culture and accounting systems
design (Bourn & Ezzamel, 1986; Broadbent, 1992;
Dent, 1991).
In the context of cost management innovations,
Shields and Young (1989) and Young (1997) suggest that often, novel systems are administrative
rather than technical in nature and as such, their
implementation fate is not independent of the
preferences, goals and strategies of top managers.
Foster and Swenson (1997), McGowan and
Klammer (1997) and Friedman and Lyne (1995,
1999) provide empirical support in this light.
Cooper, Kaplan, Maisel, Morrisey, and Oehm
(1992) oer some evidence that a variety of
behavioural and organisational factors are intertwined with the implementation of activity based
costing (ABC) systems and Anderson (1997) and
Anderson and Young (1999) explore the existence
of relationships between contextual variables
such as organisational commitment and shared
organisational values and ABC implementation
success.
Following an investigation of Canadian rms,
Gosselin (1997, p. 8) has reported that:
. . .administrative innovations such as ABC are

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easier to adopt and implement in mechanistic

organizations. Based on a study of Finnish
organisations, Malmi (1997, p. 21) concludes that
user resistance can lead to ABC systems failure
and that organizational culture is important in
explaining such resistance. Argyris and Kaplan
(1994) identify organisational culture change strategies that can be eected to overcome employee
resistance to the introduction of ABC and Henning and Lindahl (1995, p. 58) stress the importance of having an ABC system implementation
. . .t the current culture of the organization.
Dierent levels of success in management information systems implementations have also been
argued to depend on organisational groupings
(Cooper & Zmud, 1990; Cushing, 1990; Lucas,
1975; Newman & Rosenberg, 1985). Research on
group polarisation suggests that group interaction
enhances the salience of value conformity (Barki
& Hartwick, 1989; Brown, 1965) and that it
increases familiarity with dierent information
elements (Bates, Amundson, Schroder, & Morris,
1995; Rutledge & Harrell, 1994). Moreover, intergroup interaction causes bonding to a choice or
system as well as leads to a convergence of utilities (Whyte, 1989, p. 49). Studies of the implementation of management accounting innovations
suggest that their information output . . .is used
for various purposes by various organizational
sub-groups (Malmi, 1996, p. 243) with eects
that are far from unambiguous (Ibid.).
Shields and Young (1989, 1994) believe that cost
management systems implementation success
depends on specic group based behavioural variables. Attention must be given to how well an
innovation such as the implementation of a new
MAS matches the preferences, goals, strategies,
agendas, skills and the resources of dominant
employee groups (Shields, 1995). In this light,
Scapens and Roberts (1993) have investigated the
emergence of resistance to the implementation of a
new information system within an organisation
with dierent subcultures. They report that
although dierent organisational participants can
be agreed on the desirability of altered information systems for controlling internal operations, there may be . . .very dierent
perceptions of the precise nature of these infor-
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mation needs (Scapens & Roberts, 1993, p. 31).

They document the disparity between divisional
managers predilection for information dened
primarily in economic terms and unit company
managers preference for accounting information
focusing on production factors, scheduling
resources and delivery issues. These ndings lend
appeal to Argyriss (1990, p. 503) contention that
an accounting systems technical features will be
premised on accounting information system
designers technical theory of control which
may not accord with the views of users. Markus
and Pfeer (1983) have similarly documented
instances of information system implementation
failures whereby the ethos of newly implemented
information systems are at odds with the underlying departmental culture of information user
groups.
Whilst this literature has sought to explore ways
in which systems changeovers are aected by their
designers and users organisational culture orientations, it has not addressed the question of how
the technical conguration of management
accounting systems can evolve such as to embed
particular organisational culture elements. This is
one intent of the present study which also investigates how far the alignment between the organisational culture elements espoused by two
functional employee groups within a business unit
of Siemens and those embedded within a new
MAS are associated with the users perceptions of
MAS success. To this end, a methodological
model to assess organisational culture orientation
is considered below.
2.2. The competing values model of organisational
culture
Organisation research concerned with the role
of organisational culture has had to contend with
a wide variety of denitions of organisational culture (see Martin, 1992; Reichers & Schneider,
1990; Weick, 1985 for reviews). For the purposes
of this paper, organisational culture is taken to refer
to the patterns of values and ideas in organisations
that shape human behaviour and its artefacts
(Zammuto & Krakower, 1991). This denition is
suciently broad as to be, in the main, identiable
with most quantitative and/or qualitative organisational culture studies (Pettigrew, 1979).
Although some researchers contend that organisational culture cannot be eectively examined
using quantitative methods (Frost, Moore, Louis,
Lundberg, & Martin, 1991; Louis, 1983; Schein,
1985; Smircich, 1983) and that culture needs to
be observed, more than measured (Schein, 1996,
p. 229), others see statistical analyses as being able
to contribute signicantly to investigations of
organisational culture (Hofstede, Neuigen,
Okayre, & Sanders, 1990; Rousseau, 1990; Saffold, 1988; Siehl & Martin, 1988; Wilkins &
Ouchi, 1983; Zammuto & Krakower, 1991). The
present study makes use of qualitative information
regarding cultural changes within Siemens
obtained from internal corporate documents,
external publications as well as from interviews
with HLFO and other Siemens executives. The
study also derives information from the administration of two questionnaires based on a model
concerned with organisational culture elements.
Within the organisation study literature, a
number of dierent models exist for quantitatively
analysing organisational culture (see Xenikou &
Furnham, 1996). The present study focuses on
aspects of organisation culture which are explored
using the competing values model (Cameron &
Quinn, 1998; Quinn, 1988; Quinn & Kimberly,
1984; Quinn & Rohrbaugh, 1981, 1983). The
competing values model dierentiates between
underlying values which create meaning in organisational settings and the cultural artefacts that
reect them. This model relies on the premise that
although cultural artefacts such as myths, language, rituals and symbols are specic to organisations, values are not. The model assumes that it
is not dierent sets of values which give rise to
dierent organisational cultures but varying
emphases on the limited set of values prevalent
within the larger society. This perspective is one
that is gaining favour among researchers interested in the relationships between national culture
and management accounting and control systems
(see Harrison & McKinnon, 1999).
Quinn and Kimberly (1984, p. 298) argue that
the competing values model can enable . . .such
things as the means of compliance, motives, lea-
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dership, decision-making eectiveness, values and

organizational forms to be explored. This is
made possible by identifying dierent axes of
organisational eectiveness. Quinn and Kimberly
(1984) propose that one of these relates to an
organisational focus ranging from, at one end, an
internal and micro-emphasis on the well-being and
development of people within the organisation to
stressing the well-being and development of the
organisation itself at the other extreme. Another
value dimension which they advance relates to
organisational structure ranging from emphasizing stability and control to stressing exibility
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and change. The competing values model thus

enables four resulting cultural types of organisational orientations to be posited: group, developmental, hierarchical and rational (see Fig. 1).
Quinn and Kimberly (1984) consider that the
group culture is based on norms and values
associated with aliation. It emphasises exibility
and internal focus and stresses cohesion, morale
and member participation in decision making as
means and human resource development as ends.
The group cultures strategic orientation is one of
implementation through consensus building. The
developmental culture which stresses exibility
Fig. 1. The competing values model [adapted from Quinn and Kimberly (1984)].
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and an external focus is permeated by assumptions

of dynamic change. Growth and resource acquisition as ends are enabled by readiness and exibility as means. It is the ideological appeal of the
task undertaken which motivates individuals.
The hierarchical culture underscores the relevance of control and internal focus. Information
management and communication as means enable
the achievement of stability and control as ends.
Eectively, this cultural type reects the values
and norms associated with bureaucracy. Signicance is given to orderly work situations with
sucient co-ordination and distribution to provide organisational participants with a sense of
security, continuity and stability. Individuals
actions are directed by formally delineated roles
and enforcement is ordered by rules and regulations. Finally, the rational cultural type stresses control and external focus. Productivity and
eciency as ends are brought about by planning
and goal setting as means. Achievement is
emphasised and individual motivation comes from
the meritocracy-based belief that competent performance and achievement of designated organisational objectives are to be rewarded.
Quinn and Kimberly (1984, p. 300) arm that
although no organisation is likely to identify
purely with only one culture, . . .a distinctive culture reective of one characteristic grouping as
opposed to another in terms of the competing

values model will prevail. Table 1 identies characteristic elements of each cultural type based on
the competing values model.
The following section discusses the organisational programme of culture change at Siemens
and the emergence of the new management
accounting systemprocess based target costing
at HLFO. Its purpose is to delineate the manner in
which the culture change programme shaped the
cultural premise upon which the new MAS features were founded in terms of the competing
values model dimensions. Whilst the study makes
use of several sources of information, for the following part, general information on Siemens was
obtained from ocial external and internal publications as well as from published interviews with
company executives. Interviews were also undertaken with Siemens managers both from within
and from outside the Fibre Optics unit (see
Table 2).
3. Culture change at Siemens

3.1. In pursuit of exibility and external outlook
In early 1993, Siemens launched a companywide culture change programme referred to as
Table 1
Organisational culture type characteristics under the competing values modela
Culture types
Characteristics
Group
Developmental
Hierarchical
Rational
Flexibility vs control
Flexibility
Flexibility
Control
Control
External vs internal
Internal
External
Internal
External
Means
Member participation,
cohesion, morale
Adaptability, readiness
Communication information
management
Planning, goal setting
Ends
Development of
human resources
Growth, resource
acquisition
Stability, bureaucracy,
control
Productivity eciency
Compliance
Aliation
Ideology
Rules
Contract
Motivation
Attachment
Growth
Security
Competence
Leadership
Concerned supportive
Inventive risk taking
Conservative cautious
Directive goal oriented
Based on Quinn and Kimberly (1984).
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Table 2
Interviews undertaken with managers at Siemens
Interviewee
Siemens unit
Duration (min)
Information Manager
TOP Programme Executive
Innovation Management Director
Innovation Management Ocer
Management Development Consultant
General ManagerBusiness Improvement
Human Resources Manager
Engineering Manager
TOP Programme Ocer
ManagerHuman Resources Strategy
Information Systems Manager
Finance Director
Deputy Director
Engineering Consultant
Management Training
Regional Manager (Europe)
Information Systems Manager
PBTC Software Developer
Phoenix Technical Project Leader
Head of Production Planning
Strategy and Marketing Manager
Assistant to General Manager
Product Developer A
Product Developer B
PBTC Project Leader
Financial Manager
General Manager
Head of Accounting
Defence Electronics
Siemens Plessey Sytems
Siemens Nixdorf
Siemens Nixdorf
Siemens Corporate Communications
Siemens PLC (UK)
Private Communication Systems
Siemens-Matsushita Components
Drives and Standard Products
Semiconductors
Semiconductors
Private Communication Systems
Public Communications Networks
Electronic Components
Corporate Human Resources
Development
Infrastructure Services
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
HLFO
30
30
45
30
30
15
30
20
30
45
60
30
20
45
30
30
45
45
90
45
30
30
20
45
90
90
120
90
time optimized processes (TOP). At the heart of

this organisational drive, was an attempt to
engender greater exibility of operational practices and an enhanced outward management
orientation. Many managers across the organisation perceived a need to alter their business
units accounting information systems once the
implementation of the TOP initiative had started
to take eect. The TOP programme aimed to
achieve greater customer and process orientation, faster decision making, team-oriented
management, enhanced self-initiative and selfresponsibility (Siemens, 1994, p. 3). Alongside
these goals, managers sought more powerful cost
consciousness and more eective cost management (Innovation Management Director commenting on the TOP initiative, 3/6/1996). To
understand how the Siemens-wide programme of
culture change aected the design of the new MAS

at HLFO, it is essential to consider the emergence
of TOP at Siemens.
The idea that it is essential to simplify and to
reduce decision processes and to place ourselves
closer to the market and to our customers (Karl
Heinz Kaske, President of Siemens, cited in
Michel & Longin, 1990, p. 161) was a concern
which had been expressed by Siemens top management since the mid-1980s. Kaske had articulated a need for the organisation to become more
exible, dynamic and competitive. He had sought:
. . .an internal structure to enable us to discover, develop and encourage our managers
entrepreneurial talents in order to allow them
total managerial control over projects rather
than simply partial authority (Ibid.)
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In 1985, Kaske restructured Siemens activities

into three distinct elements (divisions, regional
units and central services) to . . .enhance eciency, reduce costs and avoid duplication of
activities (Ibid.). In 1989, the company put into
place further decentralization measures which culminated into the present company structure consisting of divisions, groups and business units.
During the 1990s, senior company executives
continued to voice concerns similar to Kaskes.
For instance, Siemens General Works Manager
indicated that:
. . .we harbour some doubts about whether
thinking in terms of competitive, market and
cost advantages truly permeates our corporation (Siemens, 1990, p. 2).
A major problem according to him was that
personal goals and business goals often take
separate or even divergent paths (Ibid., p.3). One
diculty faced by the organisation was perceived
to relate to information exchange and communication channels. A Senior Innovations Manager
had noted that
Within the organisation, there are obvious
inter-company
communication
barriers.
There is talk of a wall of silence between the
upper levels and the rest of the sta, who are
left in ignorance regarding the background to
many decisions (Siemens, 1991a, p. 2).
Likewise, an Engineering Works Manager had
remarked that stumbling blocks stood in the
way of commitment and entrepreneurial action:
Many regard change primarily as a risk.
Innovative, entrepreneurial action becomes
shipwrecked on the jagged rocks of rigid
demarcation (Siemens, 1991b).
A year after his appointment as President and
Chief Executive Ocer in 1992, Heinrich von
Pierer launched the time optimized processes
(TOP) culture change programme to tear down
barriers within the company (interview excerpts
form The Economist, 13/11/1996, p. 12). Heinrich
von Pierers basic strategy was to give equal weight

to both cost-cutting and reaping the rewards of the
cultural revolution (Ibid) through increased
exibility in the way organizational processes were
carried out and greater awareness of external
market factors. Under TOP, two hundred and
sixty independent business units were created each
with responsibility for bringing about a change in
culture. Employees were to be remunerated on the
basis of results rather than rank as had been the
case traditionally. Sta were expected to assess
their superiors as well as be assessed by them. An
internal employee magazine noted TOPs aim to
achieve accelerated optimisation of all processes
in the value chains (Siemens, 1994, p. 2) and to
. . .design more ecient structures, decision patterns and processes (Siemens, 1994, p. 2). The
TOP initiative singled out productivity measures
as having three dimensions: quality, time and cost.
One Financial Manager noted that:
If we shorten and simplify our development
and marketing processes, then costs will go
down . . . quality will go up. Our aim is to be
faster, better and cheaper than our competitors (4/6/1996).
During the early 1990s, senior managers within
the Semiconductors division at Siemens identied
a variety of problems including long decision processes, excessive bureaucratic hurdles, repair and
quality problems arising from high levels of labour
demarcation, uncontrollable document complexity, illogical process ows, inadequate interdepartmental communication and ineective
information systems structures. The TOP programme attempted to fuel the implementation of
innovations such as time based management,
total quality management, total cycle time
analysis and kaizen among others so as to
foster . . .customer and process orientation, faster
decision making, team-oriented management,
enhanced self-initiative and self-responsibility
(Siemens, 1994, p. 3).
Once the implementation of TOP was under way,
it had an impact on work attitudes according to a
number of managers at Siemens. An Engineering
Manager indicated that a TOP motivated re-engi-
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neering project had led to . . .teamwork, jobrotation, group meetings, speaking your mind
which were practically inconceivable before, are
now all part of a days work (3/6/1996). An Innovation Management Director noted that: Today
there is a powerful cost consciousness in the company together with a broad palette of cost controls
(3/6/1996). He nevertheless believed that:
It further stressed that:

. . .improved results. . . are dependent not only
on costs but also on the relationship between
productivity and costs which can be improved
. . . if infrastructure and processes are
improved as well as time and quality parameters (Siemens, 1996).
In comparison to our competitors, we cannot

claim to be front-runners in cost cutting... We
are prot-minded but the follow-through is
weak and inconsistent (Ibid)
These elements of the TOP initiative were to

become embedded in the design of the new MAS.
and stressed that:
At HLFO, the belief that costing information of

a dierent type to that being provided was necessary had began to be voiced from early 1995. Until
late 1994, HLFO had controlled a large portion of
the bre optics market for IBM mainframe computers. But at this time, a foreign competitor
entered the market with the objective of taking
over a major part of Siemens market share in this
sector primarily by oering the same products at a
lower price. This led HLFO managers to consider
ways of reducing product costs initially through
more exible production practices and eciency
drives and subsequently by redesigning production
specications and processes so as to reduce overall
resource consumption over the longer term.
In order to remain competitive, HLFO managers believed it was necessary to bring down the
total manufacturing costs of its subcomponent
parts to around one third of their original level in
the face of the emerging competitive threat.
HLFO started to focus on the emerging market
and nancial information needs of design engineers. In September 1995, HLFO initiated the
development of a target cost based accounting
system which aimed to provide accounting information on market imposed cost ceilings for dierent product functions. The system was developed
by a team of HLFO designers with engineering
functional expertise who interfaced with other
engineers in operational departments about their
information requirements. The design engineers
also liaised with HLFO accountants trained in
business economics about implementation issues
concerning PBTC.
In the future, we will commit ourselves to

eective cost management at all levels and in
all functions . . . since consistent prot is an
important indicator of whether we are doing
the right thing and doing it right. TOP provides
a framework for moving in this direction
(Ibid.).
The TOP culture change programme continued to
receive wide publicity across all groups and divisions
and was made visible through a multitude of platforms: logos, oce stationary, internal newsletter
articles and corporate confectionery among others.
Certain dimensions of the TOP initiative were to
become extensively reected in the target cost
management system (process based target costing)
which was to be implemented at HLFO. In
particular, cost, quality and time concerns of the
programme of cultural change, were to be central
elements of the new MAS. Concurrently, factors
which underscored the relevance of exible work
practices and high sensitivity to the enterprises
external environment were to be important
characterising features of the new system. One
TOP initiative publication stated that:
Time and quality are key to improved performance and lowered costs. Signicant cost disadvantages with competitors are attributable
to inadequate product design and wasteful
processes. It is here that out greatest potential
lies (Siemens, 1996).
3.2. Process based target costing
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Whilst the newly perceived information needs of

design engineers were being addressed, HLFO also
launched what it termed the Phoenix project in
September 1995 which was a re-engineering exercise to alter the manufacturing process. Phoenix
entailed the reconguration of manufacturing
such that all basic products would run on one
automated line prior to mass-customising the
product. All products were to use modularised
production steps according to individualised product specications.
Design engineers at HLFO had not traditionally
desired or been provided with extensive accounting information relating to either manufacturing
processes or to the selling prices of bre optics
products. Their primary role had been to develop
leading edge technological innovations and to seek
ways of further improving product specications,
performance and eciency. The accounting system in place at HLFO had been designed with the
object of allocating rather than tracing costs in
line with Siemens-wide accounting procedures.
This costing system divided material and production elements into cost blocks and used volumebased allocation methods. Direct material and
direct labour costs served as a basis for the application of dierent overhead costs using predened
overhead rates. This practice did not seek to relate
resource changes in components to changes in
production or to enable costings for dierent generations of re-engineered products to be compared. Thus, if for instance, a process change
resulted in the production time being reduced by
50%, the accounting system allocated the same
overhead cost amount to a smaller base by doubling the allocation ratio without providing design
engineers with information on the origins and
ows of costs.
The Phoenix project teams focus of attention
was mainly on analysing the production process.
But the production process was itself in large part
reective of product design which determined the
basis of production workow, timing and ultimately
costs. It was dicult for the design engineers to
address questions about the impact of a component change on the cost of the production process. What was deemed desirable was to have
linkages between the decisions made at the design
stage and the resultant eects on the production

costs. If such information could be made available, it would enable design decisions to take
account of production implications which themselves had to be considered in the context of customer requirements. A key element of the project
was the application of target costing concepts to
set market-dened parameters aecting production cost, timing and quality factors. To enable
this, the engineering ocers working on the
Phoenix initiative integrated engineering and cost
management information relating to costs, time
and quality factors into single reports. PBTCs
information output was thus intended to assist the
design and production engineering ocers to relate
product function areas to the production process.
PBTC became operational in August 1996 and
by April 1997, an HLFO ocer who had set up
the software requirements for producing PBTC
information reports indicated that: All new
design projects are now using the tool and it is also
used for all existing products (24.4.97).
The implementation of PBTC necessitated
interaction among dierent operational departments and extensive communication between
engineering and business ocers. TOPs basic
concerns included the transparency of organisational processes, quality accountability, team
orientated co-operation, market competition
awareness and cost consciousness which were also
central to PBTC. PBTC reports were intended to
enable the costs of functions to be compared to
the perceived customer value for those functions.
Moreover, functional cost drivers could be backtracked from functions to the production processes so as to depict the trade-os between
materials and processes, or automation and
labour costs. PBTC was to delineate production
ows visually at the design stage by producing
graphic images of time, cost and quality resource
consumption across processes. The design engineers who had traditionally only dealt with product specications could now obtain direct visual
information on the eects of dierent design decisions on specic production processes through the
availability of PBTC reports.
PBTC was also intended to enable responsibility
for achieving quality requirements to be tied to
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Table 3
Users of PBTC information at HLFO
Department
Number of users
(ex-ante)
Usable
questionnaires
Number of users
(ex-post)
Usable
questionnaries
Production
Purchasing
Marketing and Strategy
R&D
Accounting
Quality Control
Top Management
6T
1K
2 T, 1 K
16 T
4K
3T
1K
4T
1K
2 T, 1 K
15 T
4K
2T
1K
6T
1K
2 T, 2 K
13 T
5K
3T
1K
5T
1K
2 T, 2 K
12 T
5K
3T
1K
Total
34
30
33
31
T=Technisch (Engineering ocer); K=Kaufmannisch (Business ocer)
specic operational personnel. Consequently, a

product defect at one stage of the overall production sequence could be associated with a particular
prior production step which gave rise to the problem. This would lead to further cost allocation
possibilities and the potential to rene existing
responsibility accounting relationships.
The conventional accounting information prepared by HLFO accountants was based on extensive calculative rules and detailed allocation
procedures. It was primarily a management information collection and resource control tool. By
contrast, the PBTC system was exibly designed
to provide engineers with information they could
visualise and act upon in operational terms. PBTC
reports were not prepared on the basis of pregiven standards, formats or rules, but were reective of design engineers proclivities regarding
information representation and communication.
Whereas traditional accounting systems were
focussed on internal economic allocations, PBTC
was externally orientated in that it tied market
imposed time, quality and price specications to
internal operational constraints. Under the competing values model, the PBTC system might be
seen as most closely embedding external and exibility orientated values and thereby, of stressing
developmental culture characteristics.
The above discussion has focused on the manner
in which certain organisational culture change
elements became embedded within the new MAS.
This was the rst objective of this investigation.
The paper now considers the methodology for
investigating how the alignment between the
organisational culture ethos of PBTC design features and the system users orientation towards a
developmental culture related to the new MASs
perceived success.
4. Measuring perceived MAS success

4.1. Questionnaires and interviews
A questionnaire was administered in May 1996
prior to the implementation of the novel management accounting system (PBTC) to its two groups
of users categorised as engineering ocers (Technisch) and business ocers (Kaufmannisch). The
questionnaire contained a series of questions
about their perceptions of the degree to which
organisational culture types as delineated by the
competing values model are representative of their
functional department (see Appendix).1 This exante questionnaire was completed by 34 HLFO
ocers (see Table 3 for information on the questionnaire respondent group). Another questionnaire
1
The competing values model questionnaire as used by Zammuto and Krakower (1991) in their surveys enables scores (from 0
to 100) to be aggregated by cultural types. Within the questionnaire instrument, the four cultural types based on the Quinn
and Kimberly (1984) typology are as follows: Department A
accords with the group type, B accords with the developmental type, C accords with the hierarchical type and D
accords with the rational type. Zammuto and Krakower (1991,
p. 109) discuss the validity of the approach based on large scale
surveys. They note that the data met the criteria of internal
consistency, predictable relationships with other organisational
phenomena and discrimination among groups.
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was administered to the same group of PBTC

information users in April 1997 (see Table 3). This
ex-post questionnaire, asked respondents once
again about their perception of the organisational
cultural types represented within their functional
departments and sought their judgement as to the
overall success of the newly implemented management accounting system. Interviews were undertaken prior to and following the administration of
the ex-post questionnaire to explore respondents
views on PBTC s implementation process and the
systems consequences as a further source of
information for the study.
The ex-ante and ex-post questionnaires were
administered in German. The German versions of
the questionnaires were translated from English to
German by a German academic and back translated to English by another German academic.2
Some stylistic revisions were made to the German
questionnaire as a result of the double translation.
The rst questionnaire was administered in May
1996. The ex-post questionnaire was administered
in April 1997 after the new accounting system was
fully operational. This questionnaire was structured in the same way as the rst but included an
additional question asking respondents to assess
the overall success of PBTC using a scale from one
to ve (1=totally successful, 2=mainly successful,
3=neither successful nor unsuccessful, 4=mainly
unsuccessful, 5=totally unsuccessful).
4.2. Hypotheses development
Business ocers who staed the Accounting
Department at HLFO had traditionally prepared
internal accounting information for operational
departments. This information was extensively
calculative and in accord with predetermined
company accounting reporting procedures. Business ocers within Siemens accounting departments receive training in the preparation of
detailed accounts of the ow of economic resources
within the organisation and are taught to apply
an extensive set of company specic rules and
2
This was the case as the questions draw on the competing
values model instrument used in prior Anglophone studies.
standards for structuring accounting information.

Prior to being hired by Siemens, business ocers
will have obtained university qualications in
business economics.
It is necessary to briey consider business economics education in Germany to provide some
insight on the intellectual background of Siemens
business ocers. Ordinarily, the university level
degree (Diplom-Kaufmann) follows the study of
business
economics
[Betriebswirtschaftsleher
(BWL)] which emphasises the understanding of
sophisticated economic concepts underpinning
management principles including costing approaches. Traditionally, German business economics
universities do not have close relationships with
industry (Lane, 1990; Lawrence, 1989, 1994).
BWLs science-based tradition (Wissenschaft)
stresses systematic and disciplined conceptual
research sometimes at the expense of closeness to
industrial issues or practical concerns according to
some writers (Randlesome, Brierley, Bruton, Gordon, & King, 1990; Sheridan, 1995). In this light,
Locke (1989, p. 249) observes that . . .the Wissenschaft tradition isolates the German professors
of business economics from praxis and notes that
German BWL today. . .is primarily undergraduate pre-experience and specialist research
graduate education (Locke, 1989, p. 176).
Locke (1989) provides various examples of
companies working with academic engineers but
seldom with business scholars. He cites one Siemens manager who states that the rm tends not
to bring in German professors of business economics to provide advice because they are too
inexperienced (Hermann Baumann cited in
Locke, 1989, p. 171).
HLFO accountants predilection for a structured numerical and procedural approach to the
preparation of accounting information was not
independent of their prior educational training.
The professional conception of the legitimate role
of Siemens accountants with BWL training was
not conducive to the integration of accounting
information with other types of operational data.
The characteristic Wissenschaft-based approach
to economic representations of organisational
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activities which demarcate costs, functions and

departments via numerical data was at odds with
the precepts embodied within Siemens TOP programme (Siemens, 1995) of cultural change. It was
also at variance with the cross-functional and diagrammatic form of information representation
which characterised PBTC information reports.
The TOP programme confronted the basis of historically derived precepts concerning the correct
role, format and presentation of nancial information. It emphasised exible internal structures
and receptivity to external and market derived
inuences which accord with the competing values
models developmental culture. By contrast,
business ocers employed within the Accounting
Department could not be described as sharing the
same high level of developmental culture
orientation.
Contrary to business ocers training, the educational background of engineering ocers is
more closely aligned with a exible orientation to
structuring data which makes little appeal to regimented procedures and standardised information
formats or structures of communication. This is in
line with a developmental cultural orientation
under the competing values model. Educationally,
engineering ocers at HLFO possess a DiplomIngenieur qualication following university level
engineering studies spread over 46 years. By tradition, engineering education in Germany combines the search for knowledge with practical
purposefulness. Consequently, German engineering degrees are characterised by a unique combination of scientic knowledge and craftsmanship
(Technik) (Head, 1992; Randlesome, 1988, 1993;
Randlesome et al., 1990; Sorge & Warner, 1986).
University engineering faculties maintain close
cooperation with industry: Where engineering
training is concerned, there is little formal detachment of academic from practical aspects of training (Warner & Campbell, 1993, p. 93). In a
similar light, Lawrence (1989, p. 98) states that:
Technik is a force for integration. The German company is Technik in organisational

form. The skilled worker, the foreman, the
superintendent, the technical director are all
13
participants in Technik . . . Technik is something which transcends hierarchy.

Locke (1989, p. 264) likewise notes that for
engineers: Technik is the combination of knowledge and know-how necessary to make a product. Moreover, . . . technical expertise is as
close to the shop-oor, and as close to the production/line hierarchy, as possible (Warner &
Campbell, 1993, p. 98). Unlike BWL which is
generally more remote from practice, Technikbased engineering education blends Wissenschaft
and functional purposefulness (Lawrence, 1994;
Maurice, Sorge, & Warner, 1980).
Past research suggests that the past learning of
an individual can be expected to inuence the persons perceptions of the organisational and task
variables (Das, 1986, p. 217). Information channels
and modes of exchange can be shaped by users
prior professional training (Joyce & Sloam, 1990;
Kim, 1989). Within HLFO, the extent of integration
of conceptual and applied engineering concerns was
evident in the structuring of technical information
reports. Engineering analyses were indicative of the
systematic fusion of diagrammatic and quantitative
data and the blending of theoretical concepts and
practical issues. The engineering ocers operational concerns and proclivities inuenced the
structuring of PBTC information which contrasted markedly with accountants prior notions
of legitimate information form and content.
There is also research evidence which indicates
that dierences in cognitive styles and organisational culture dimensions lead to consistent
relationships with decision making preferences
and information systems design (Dermer, 1971;
Driver & Mock, 1975; Hulin & Blood, 1968;
Huysman, 1970; Ives & Olson, 1984; Macintosh,
1985; Ouchi & Johnson, 1978; Seddon & Yip,
1992; Senn, 1978). Whilst individuals with an
internal locus of control (Reitz & Sewell, 1979,
p. 73) react favourably to certain organisational
settings, others with an external locus of control
do not (Reitz & Sewell, 1979, p. 73). In the light of
what the prior literature suggests about the role of
past learning, it is argued here that engineering
ocers will uphold a developmental culture by
virtue of their training and functional expertise
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more so than business ocers. The following

hypothesis is advanced:
Hypothesis 1. Engineering ocers will indicate
higher developmental culture scores under the
competing values model than business ocers
prior to PBTC implementation.
Although one might expect that engineering
ocers will tend to generally remain culturally
more developmental than business ocers, it is
important to ascertain that the contrast between
engineering and business ocers cultural orientations did not signicantly alter during the implementation of Siemens corporate-wide culture
change programme. Whilst transformations in
organisational values may take place over protracted lengths of time, it is unlikely that the cultural change which Siemens sought to mobilise
through the TOP programme could have signicantly altered the organisational culture orientation of business ocers such that it would have
become more developmental than that of engineering ocers over the eleven months time period
between the two questionnaire administrations.
To establish that no such transformation took
place, the hypothesis that HLFO engineering ocers are culturally more developmental than business ocers after the implementation of PBTC is
tested via the following hypothesis:
Hypothesis 2. Engineering ocers will indicate
higher developmental culture scores under the
competing values model than business ocers following PBTC implementation.
Hypothesis 1 is essential for establishing the
more extensive developmental cultural orientation
among engineering as opposed to business ocers
prior to PBTC implementation given the inuence of their highly specic educational and
training background. Hypothesis 2 is necessary to
establish that neither the ongoing cultural change
programme nor the process of PBTC implementation materially altered this relationship.
Taken together, they provide the basis for assessing how the alignment between the developmental orientation of MAS users and that
embedded within the MAS inuenced the perceived success of the new system.
Zammuto and Krakower (1991) suggest that a
departmental culture which stresses exibility as
opposed to control is more conducive to favouring
an accounting innovation that can potentially
redirect managerial attention and alter organisational processes. An internally oriented outlook
may be expected to coincide with a low inclination
to adopt management innovations which alter the
stability and continuity of control procedures as
opposed to an external orientation (Zammuto &
OConnor, 1992). Thus a developmental culture
orientation under the competing values model can
be expected to be more receptive to any accounting innovation which alters the status quo especially where the accounting innovation enhances
information on the impact of external market and
customer inuences on organisational activities.
Since PBTC attempts to provide enhanced
information on ways in which resources can be reallocated, a exible orientation on the part of
users can be expected to heighten the relevance
and potential success perceived of PBTC more so
than a control orientation. In this respect, a
developmental culture orientation can be expected
to be more receptive to PBTC since it does not
favour structured information and extensive calculative procedures and rules which characterise a
control orientation.
A developmental orientation does not favourably view the running of internal operations via
formalisation, structure and extensive administrative rules. Such characteristics are antithetical
to the design and objectives of PBTC. PBTC provides information by integrating nancial, operational, internal and market-based data. Its reports
are structured as a dynamic mix of visual, graphical,
quantitative and qualitative information. Financial
content is blended with operational data in PBTC
reports. Thus a user group with a high developmental culture orientation will tend to consider
PBTC as more successful relative to a user group
which is less developmentally oriented. A low developmental orientation would suggest lesser receptivity
to viewing PBTC as successful as this new MAS
stresses an external and exible orientation rather
than an internal and control oriented outlook.
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Table 4
t-Tests of developmental culture orientation of engineering and business ocersa
Ex-ante developmental orientation (H1)

Ex-post developmental orientation (H2)
Engineering
Business
Mean (standard deviation)
Mean (standard deviation)
39.04 (20.99)
41.00 (24.87)
19.05 (11.15)
18.89 (14.16)
t (P-value)
3.291 (0.004)
3.115 0.005
a
A two-sided t test was used to test the hypotheses, H1 and H2, that the true means of the developmental scores under the competing values model of the engineering ocers group is signicantly higher than the business ocer group before and after PBTC
implementation.
The following hypothesis is posited:

Hypothesis 3. ocers with higher developmental
culture scores under the competing values model
will consider PBTC to be more successful than will
those with lower developmental scores.
To provide a deeper organisational perspective
to the questionnaire results, interviews were held
with users of the PBTC system following the
administration of the ex-post questionnaire. These
interviews were semi-structured in that questions
generally attempted to retain some focus on the
users outlook toward PBTCs usefulness and
consequences. The interviewees included employees with Research & Development, Production and
Marketing & Strategy responsibilities. In addition,
interviews were held with individuals who had
played a role in the design and implementation of
the PBTC system. The next section discusses the
questionnaire results and their implications for the
hypotheses being tested in the light of the qualitative
information derived from these interviews.
5. Questionnaire results and interview analyses

The ex-ante questionnaire was distributed to the
34 relevant PBTC accounting information users at
HLFO identied in Table 3. Four questionnaires
were returned partially lled and were excluded
from the analysis. The ex-post questionnaire was
distributed to the corresponding group of 33 relevant PBTC information users. Of the 33 questionnaire returns, two were partly lled and
unusable.
Hypotheses 1 and 2 are tested by reference to

two sided t-test scores and hypothesis 3 is tested
using regression analysis. Table 4 indicates that
engineering ocers have a more developmental
orientation than business ocers both prior to
and following PBTC implementation thereby
conrming hypotheses 1 and 2. The results conrm that engineering ocers exhibit a higher
developmental value orientation than business ocers both before and after PBTC implementation.
The interviews undertaken with various ocers
at HLFO also provided qualitative evidence
underpinning the diering organisational value
orientations between engineering and business
ocers both prior to and following PBTC implementation. These interviews suggest that beliefs
about the usefulness and eects of PBTC were
infused with judgements about how departmental
attitudes diered. Individuals in some departments dierentiated themselves from others in
terms of cultural outlook and as to how their
conception of the role of cost information diered
from that of business ocers stang the
Accounting Department. For instance, the Phoenix Technical Project Leader viewed the R & D
Department as being the
. . .driver of PBTC since the accountants did
not realise that such a tool was required in
such a form (24.4.97).
The PBTC Software Developer likewise noted
that accountants are . . .conservative. They full
their function and manage by the numbers but do
not accept new ideas easily (23.4.97). He indicated that traditionally: . . .the accountants tasks
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are dened by formal constraints (23.4.97) and

observed that:
. . .before, we used to use overhead allocations
and when there were questions, the accountants simply analysed the problem in more
cost detail (23.4.97).
The Head of Production Planning oered a
similar view of the accountants:
PBTC had to come from one of us in R and
D or Production or from somebody in Sales
or Marketing but not from the Accounting
Department. We cannot expect this approach
from a classical Accounting department.
They only expect the right numbers and then
have a help yourself mentality in relation
to other departments. Just pick from our
numbers what you need they seem to say
(3.7.97).
The Strategy and Marketing Manager was particularly critical of the accountants in that,
according to him PBTC calculations always better match the reality than the results from the
accountants (25.4.97). He remarked that:
Accountants live in their own world, closed to
the outside, living within numbers and staying remote from the rest of development.
They believe more in their numbers than in
what is actually happening. To them, PBTC is
not thinkable. They just hide behind their
overhead costings (25.4.97).
He further noted that PBTC information users
intuitively recognise the advantages of the
system:
Tools allowing function analysis, forward
pricing, design to cost and customer discussions are more and more in demand. But the
accountants who should be promoting these
tools react negatively (25.4.97).
An assistant to the top management team also
remarked that:
Accountants only want to use standard Siemens accounting tools. They focus on existing
products and they full standard Siemens
functionsand there are a lot of standard
functions at Siemens (24.4.97).
In commenting on the type of information
provided by the Accounting Department, a product developer from the R & D Department
(here referred to as Product Developer A) stated
that:
Accountants are more conservative because
of their structure and their approach. But
nothing is more deadly than columns and
columns of numbersthese are the so-called
number cemeteries (Zahlenfriedhof). Conversely, PBTC shows us the results more
clearlythis helps (27.6.97).
In echoing this view, the Head of Production
Planning indicated that:
Accountants have their rules and nancial
report regulations. You cannot expect exibility in their representation of data (3.7.97).
He pointed in humour that: . . .only if they
have time and they are bored, will they help us
(3.7.97) and noted that a specic type of
. . .accounting information is needed by R and
D, but accountants do not really care where
the costs come from (3.7.97).
The Head of Production Planning commenting
on the accountants cultural outlook noted that:
The accountant is cool. He is not emotionally
involved and hence, not as committed (3.7.97).
He indicated that:
I hope I did not give a too bad blow to any
accountant from the Accounting Department
but we could expect that they could help us a
little more in cost controlling. They are too
involved in their nancial regulations. Their
transparency is only nancial and thats the
big problem (3.7.97).
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He further added that:

I am always amazed at how little transparency we have at HLFO. There is only an
apparent transparency. It seems that the only
important thing is that the numbers add up
together nely. But the meaningfulness of the
information is missing. So it happens that we
bet on the wrong horse when we make a
decision (3.7.97).
The PBTC Project Leader also commented on
the diering outlooks between engineers and
accountants regarding PBTC based information:
With the Production people, communication
has been easy because they already were
thinking about manufacturing processes in
the same way. For the accountants it has been
more dicult because with PBTC, they have
had to procure data in a form and depth they
have not been used to (25.4.97).
The tenor of these interviews are indicative of
perceived dierences between engineering ocers
and accountants and between traditional accounting information produced by the accountants and
the form and nature of PBTC information. Engineering ocers in R and D, Production and Sales
and Marketing considered themselves as being
more open than accountants to departing from
traditional precepts governing accounting information content and form. Under the competing
values model, this view of accountants accords
with a lower developmental orientation in comparison with engineering ocers. The questionnaire based results of hypotheses 1 and 2
therefore nd some corroboration by way of the
interview results.
The results suggest that the enterprise-wide culture change programme was not signicantly associated with changes in the organisational outlooks
of engineering and business ocers over the eleven
month time period between the two questionnaire
administrations. As might be expected, the organisational value orientations of the functional ocers are not subject to change over short periods of
time. It is plausible also that any association
between organisational value orientation and perceived MAS success which is tested in hypothesis 3
will remain equally stable over short time periods.
Hypothesis 3 is tested by reference to the following regression model:
PBTC
Success bo b1 DEVELOP e
where DEVELOP=Developmental culture score

under the competing values model.
The results of this regression are shown in
Table 5 and provide support for Hypothesis 3.
PBTC users with higher developmental scores
perceived PBTC to be more successful than
those with lower developmental culture scores.
The R-square for the model is 0.683 and the coefcient for DEVELOP is in the expected direction
and is signicant. The coecient for DEVELOP is
negative because lower scores for PBTC Success
signied higher perceived success.
The results of Hypothesis 3 are also corroborated by the interview results. A number of engineers who were users of PBTC information
commented on the usefulness of the information
provided by the new MAS. The PBTC Project
Leader for instance, stated that:
PBTC gives a structured way of talking about
cost elements with our partners. It is a progress in the way that Accounting, Production,
Table 5
Developmental culture orientation and perceived PBTC success: regression resultsa
Intercept
Develop
Expected sign
Coecient (S.E.)
5.058 (0.340)
0.041*** (0.006)
Adjusted R-square=0.638; ***P <0.01.

a
The model is Perceived PBTC success=bo+b1 DEVELOP+e. Perceived PBTC success is measured on a scale from
one to ve (1=totally successful, 2=mainly successful, 3=neither successful nor unsuccessful, 4=mainly unsuccessful,
5=totally unsuccessful). DEVELOP is measured by the aggregate score from 0 to 100 allotted to Department B which corresponds to developmental culture in the questionnaire
instrument. The signicance level of the coecient of
DEVELOP was determined using two-tailed t-test.
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Marketing and Purchasing talk to each other

. . . This is a tool which creates an aha
eectwhat a sheet of paper with only rows
and columns would never be able to do
(25.4.97).
Product Developer A likewise thought that with
the PBTC system, you do not consider single
pieces but complete work processes and product
functions (27.6.97). He noted that: All existing
processes should be broken down using the
methodology of PBTC (27.6.97). He considered
that this would make accessible to everybody, the
knowledge of the functionality and processes of
existing products (27.6.97). He believed that
PBTC is a progress compared to the old system
because the cost transparency is much clearer
(27.6.97). Product Developer A explained that:
In R and D, we always have the same problem: we know vaguely the cost but it is very
dicult to know the real cost of diodes which
for example is an important cost driver. . .
PBTC helps a lot in relation to new developments to get the cost of components (27.6.97).
The Head of Production Planning was also
receptive to the new MAS. He remarked that:
PBTC is the only report that I can really use
(3.7.97). He added that:
Our cost structure is more like mud in a
swamp even if you could call mud clean. We
need cost details. . . Previously, we could not
really tell how much a function of the product
costed (3.7.97).
He observed that PBTCs information output is
useful in terms of . . .knowledge of cost drivers,
the ow of material and the visual stimulation of
problem areas and plans versus real comparisons
(3.7.97). A similar opinion was expressed by the
Phoenix Technical Project Leader from the R and
D Department who viewed PBTC as enabling to
look for the reason for a deviance within a process and to look at how to reach our target
(25.4.97). The Phoenix Technical Project Leader
added that it is a tool to show the Strategy and
Marketing people what we are good at

(25.4.97).
Another Product Developer (here referred to as
Product Developer B) believed that:
PBTC as a product calculation tool, has to be
accepted and hence integrated into Siemens
standard procedures (13.1.98).
Product Developer B stressed that control
responsibility was an important issue:
PBTC should be used not only for the planning of new products but also for cost controlling. From this controlling, the
optimisation of processes can be achieved
(13.1.98).
He thought that PBTC helped match processes
and product functions to dierent individuals and
departments and that with the new MAS:
. . .problems such as the question of who is the
cost responsible person will be resolved
(13.1.98).
Such a view did not depart from one of the TOP
initiatives aims to replace division of labour with
division of responsibility (Siemens, 1995, p. 5).
Evidence of the perceived alignment between
functional users organisational outlooks and their
views as to the potential of PBTC further stemmed
from interviews. Product Developer B for
instance, noted that PBTC had quite signicant
inuences on product design decisions. He
thought that this was the result not so much of a
heightened cost focus on the part of engineers:
PBTC has not changed much in the heads of
the Project team because Phoenix was from
the beginning, a very cost conscious redesign
project and all employees were very sensitised
to this (13.1.98).
Rather, Product Developer B believed that product design decisions were aected because PBTC
represented and highlighted costs in a particular
way. He cited various examples where particular
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decisions were made because . . .PBTC helped

make certain interconnections obvious (13.1.98).
Product Developer B explained that with PBTC:
. . .the possibility to visualise the numbers had
emphasised the importance of the processes.
The employees of the Technical Production
Support division who are in charge of planning the production were directly, by the
information gathering and with the questions
associated with this, made attentive to possible cost drivers and have got through this, a
higher awareness of cost origins (13.1.98).
The PBTC Project Leader had commented that
. . .the way in which data is communicated, that
is, visually as opposed to just numbers, is very
important to some departments (25.4.97). A
similar view had been expressed by the Head of
Production Planning who thought that PBTCs
visual approach is very user friendly (3.7.97).
In line with the structuring of information conventionally adhered to by engineers, PBTCs
structuring of information output was graphic and
visually diverse. The imagery of process ows, the
visual depictions of the magnitude of resource
allocations at dierent process steps and the diagrammatic displays of cost incursions at various
operational stages are characteristic features of
PBTC reports. Engineering ocers predilection
for integrating numerical and diagrammatic
representations is a hallmark of PBTC that is not
independent of their involvement in its design and
development. It is likely that prior conceptions of
the nature and role of the Accounting Department
and engineering ocers contrasting perceptions
of the potential role of cost management information inuenced their judgements concerning the
new MAS. Engineering ocers were predisposed
to consider the viability of an accounting system
which not only departed from the structural
representation of data favoured by accountants
but which was also intended to convey information that was broader in scope, encompassing
operational, rather than just procedural nancial
concerns. The expectation on the part of engineering ocers that accounting information produced by accountants was unlikely to be useful,

Version 7.51e
19
aected their predisposition to accounting information stemming from the PBTC system. Beliefs
about the propriety and success of the new MAS
were conditioned by its origins as much as its form
and substance. The business versus engineering
subcultures within HLFO in this light could be
dierentiated in terms of their perception of the
new MASs success.
6. Discussion
The study has considered how certain notional
organisational culture elements became embedded
within the PBTC systems design features at
HLFO. It has also suggested that the degree to
which the notional organisational culture elements
embedded within the new MAS aligned with the
organisational outlook of the user groups was
signicantly associated with the perceived success
of the new system. The study results support those
of other investigations which suggest that dierent
employee groups can subscribe to dierent organisation cultural values and that a MAS which is
more reective of the organisation culture values
of one group is likely to be seen as being more
successful by that group. The study however goes
beyond the scope of prior investigations in that it
considers quantitative and qualitative information
collected prior to and following the implementation of the MAS under study.
Within the organisation investigated, there were
context specic factors underpinning the results of
the study. The TOP programme of culture change
at Siemens for instance, played a role in shaping
the MASs design features and by upholding certain notional culture elements, inuenced what
came to be deemed as successful accounting
change within the organisation. During the time
period between the rst and second questionnaire
administration, Siemens was actively engaged in a
programme of enterprise-wide culture change. A
principal objective of this programme was to alter
the form and extent of communication between
dierent parts of the organisation. Siemens TOP
initiative sought to . . .design more ecient
structures, decision patterns and processes (Siemens, 1994, p. 2) and new forms of co-operation
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Version 7.51e
(Siemens, 1995, p. 5). It encouraged organisational

participants across the enterprise to develop
greater sensitivity to external market changes,
increased exibility in carrying out work activities
and interacting with individuals across functions.
Whilst TOP was being implemented across Siemens, HLFO initiated the Phoenix project in September 1995 which entailed the reconguration of
manufacturing by modularising production steps.
Phoenix was viewed as necessitating altered forms
of information exchange between departments in
relation to dierent operational processes. Just as
TOP was intended to reduce . . .the unending
series of co-ordination meetings (Siemens, 1995,
p. 5) and to tear down the barriers between different departments (Siemens, 1995, p. 5), so
Phoenix aimed to reduce production complexity
by manufacturing basic products within single
automated lines before mass-customising through
subsequent individualised production processes.
The Phoenix exercise adhered to the ethos of the
TOP culture change programme.
Whilst Phoenix was focused on production simplication, supporting information provision was
seen as an essential corollary. The idea of providing HLFO design engineers with detailed information concerning production costs coincided
with the implementation of the Phoenix initiative.
PBTC stressed three dimensions: market-led quality, process time tracking and cost resource ow
data. This premise underlying PBTC information
output was also broadly embodied within TOP
which sought to make Siemens faster, better and
cheaper than our competitors (Financial
Manager, 4/6/96) and to attain eective cost
management at all levels and in all functions
(Innovation Management Director, 3/6/96). Like
the Phoenix project, PBTCs aims were also characterised by objectives subsumed within the TOP
programme of cultural change. The ability of the
PBTC system to achieve its aims was, in this light,
not independent of Siemens pursuit of TOP
objectives.
Aside from altered information monitoring and
reporting, Siemens progression towards a meritocratic and individualistic rewards-based culture
whereby traditional functional boundaries are
transcended in the pursuit of eectiveness and
transparency also aected the form and eects of

PBTC. Accountants had traditionally internalised
a professional conception of the need to economically map the organisation in terms of functional
boundaries and to allocate costs based on generic
procedural rationales. PBTC by contrast, represented an attempt at connecting and linking
resource ows by focusing on processes rather
than functional demarcations. The object was on
integrating time, resource, quality and cost concepts rather than on merely reporting on overhead
allocations across individualised cost objects.
PBTCs embodiment of engineering ocers information structuring and reporting idiosyncrasies
contrasted with the procedural formality which
had permeated the Accounting Departments
approach to information development and representation. The internal ethos of the organisation
which had in the past emphasised centralised
modes of control but which now stressed devolved
responsibilities, more dispersed information distribution and receptivity to alternative forms of
information ows, was at odds with the traditional
precepts still embedded in the functional priorities
of the Accounting Department.
The study brings to light the complex ways in
which a wide diversity of organisational factors
can inuence the form and consequences of a new
accounting system. The qualitative information
derived from interviews and internal documents
suggests that perceptions of the impact of PBTC
were not unrelated to the notion that the new system provided accounting information which in
content and form, was not originally conceived by
HLFO accountants. It has been argued that engineering ocers prior training which emphasised
the integration of Wissenschaft and applied concerns inuenced their preferences in relation to the
structuring of PBTC reports. The signicance of
Technik as the embodiment of both conceptual
engineering knowledge and craftsmanship as part
of engineering ocers training was not, within
HLFO, independent of the structure and content
of the PBTC systems output which diagrammatically integrated costing data with other
forms of operational information. Additionally,
the new MASs form and content brought into
sharp focus the absence of representations of
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purely economic data which had traditionally been

provided by the Accounting Department.
The analysis suggests that the interview comments of PBTC system users are broadly in line
with the questionnaire results which indicate that
dierent users organisational outlooks aected
their perception of the success of the newly implemented MAS. The interviews provided a backdrop
of organisational detail to the statistical analyses of
respondent replies. The qualitative comments are
indicative of the perceived success of PBTC as having been possibly tied to the pre-existing proclivities
of the engineering ocers toward information
representation and how they sought to understand
the cost implications of design changes. The study
is, in this regard, indicative of the potential of
methodological triangulation whereby quantitative
and qualitative analyses can be coupled to shed
greater light on the subject under investigation
(Ashton, 1982; Bamber, 1993; Birnberg, Shield, &
Young, 1990; Brownell & Trotman, 1988).
A void continues to exist in our knowledge of
the diversity of factors which can aect user
receptivity to novel accounting systems. The present investigation posits the existence of contingencies between dierent cultural orientations
espoused within the organisation under study,
those factored into its new accounting system and
perceptions of the propriety of a user based
accounting system design as opposed to one procured by the Accounting Department based on
traditional accounting information precepts. In
this light, the study points to the usefulness of
examining some of the conditioning forces aecting the ultimate perceived impact of a novel
accounting system within an organisation and of
exploring ways in which an accounting system can
a priori embody organisational value elements of
primary signicance and utility to its designers. A
possible avenue for further research might thus be
to contrast the present study with a similar analysis of the implementation of a MAS designed outside the organisation and to assess whether under
such circumstances, dierent groups of users perceive the impact of the system dierently.
There exists little analysis within the accounting
literature of the interrelationships between factors
inuencing accounting transformations which

Version 7.51e
21
arise from outside and from within the organisation. Whereas a number of past studies have
focused on the external origins of internal
accounting changes and on the inuencing forces
at the margins of accounting (see Hopwood &
Miller, 1994; Luft, 1997; Miller, 1998), the present
study leans more toward an examination of forces
conditioning an emerging MAS from within the
organisation. The predisposition of engineering
ocers to structuring information in ways that
contrast with accountants notions of appropriate
accounting data representation has here been
argued to nd possible origins outside the organisation. This investigation suggests that a variety of
intra-organisational forces shaped the new MASs
form, content and eects. Siemens historical shift
from being highly centralised to adopting a
decentralised form with more autonomous business units, its ongoing programme of culture change
and its traditionally focussed and detailed standard
accounting procedures were instrumental in inuencing the structure and consequences of process
based target costing. The emergence and receptivity
of the new MAS can in this light, be argued to have
been conditioned by intra-organisational forces
which themselves are partially shaped by more protracted extra-organisational factors. This study is
thereby suggestive of accounting change being tied
to transformations that are multifaceted in origin
and which inhere it with a specicity that is intra- as
well as extra-organisationally rooted.
Acknowledgements
The comments made on an earlier draft of this
paper by Thomas Ahrens, Robert Chenhall,
Maurice Gosselin, Graeme Harrison, Anthony
Hopwood, Peter Miller, Cedrik Neike, Neale
OConnor, Michael Shields and Holger Vieten are
gratefully acknowledged. The paper has also
greatly beneted from the comments of participants at the Manufacturing Accounting Seminar
held at the University of Edinburgh in June 1997
and at the Manufacturing Accounting Workshop
held at the Copenhagen Business School in March
1999. The review suggestions of two anonymous
reviewers have greatly contributed to the paper.
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Version 7.51e
Appendix. Competing values model questions3

The questions below will provide information on whether process based target costing is associated with
the type of department that your department is most like. Each of these items contains four descriptions.
Please distribute 100 points among the four descriptions depending on how similar the description is to
your department. None of the descriptions is any better than the others; they are just dierent. For each
question, please use all 100 points.
For example, in question 1, if department A seems very similar to mine, B seems somewhat similar, and
C and D do not seem similar at all. I might give 70 points to A and the remaining 30 points to B.
(a) Department Character (Please distribute 100 points)
______ Department A is a very personal place. It is a lot like an extended family. People seem to share a lot of
themselves.
______ Department B is a very dynamic and entrepreneurial place. People are willing to stick their necks out
and take risks.
______ Department C is a very formalized and structured place. Bureaucratic procedures generally govern what
people do.
______ Department D is very production-oriented. A major concern is with getting the job done. People are not
very personally involved.
(b) Department Leader (Please distribute 100 points)
______ The head of Department A is generally considered to be a mentor, a sage, or a father or mother gure.
______ The head of Department B is generally considered to be an entrepreneur, an innovator, or a risk taker.
______ The head of Department C is generally considered to be a coordinator, an organiser, or an administrator.
______ The head of Department D is generally considered to be a producer, a technician, or a hard driver.
(c) Department Glue (Please distribute 100 points)
______ The glue that holds Department A together is loyalty and tradition. Commitment to this institution runs
high.
______ The glue that holds Department B together is commitment to innovation and development. There is an
emphasis on being rst.
______ The glue that holds Department C together is formal rules and policies. Maintaining a smooth running
operation is important here.
______ The glue that holds Department D together is the emphasis on tasks and goal accomplishment. A
production orientation is commonly shared.
(d) Department Emphases (Please distribute 100 points)
______ Department A emphasises human resources. High cohesion and morale in the institution are important.
______ Department B emphasises growth and acquiring new resources. Readiness to meet new challenges is
important.
______ Department C emphasises performance and stability. Ecient, smooth operations are important.
______ Department D emphasises competitive action and achievement. Measurable goals are important.
3
Used with permission from Zammuto and Krakower (1991).
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