The Process
And The Consequences Of Organizational Restructure
The Case For A Central Bank
Veer Singh
Varma
Department
of Accounting and Financial Management
University
of the South Pacific
Laucala Campus, Suva, Fiji
Islands.
Ph: (679) 212825
Parmod Chand
Department
of Accounting and Financial Management
University
of the South Pacific
Laucala Campus, Suva, Fiji Islands.
Ph: (679) 212824
THE PROCESS
AND THE CONSEQUENCES OF ORGANIZATIONAL RESTRUCTURE
THE CASE FOR A CENTRAL BANK
ABSTRACT
Today’s organizations, be it
in a private sector or a public sector, face an environment of intense
competition, rapid change and uncertainty.
Therefore, managers are continually searching for new structures and
processes to help their organizations to keep pace with such developments.
Factors such as commitment to Total Quality Management (TQM), performance
contract and organizational restructuring by a regulatory authority like the
state by separation of the departments and the broader roles all serve to
enhance the commercial status of an enterprise. This study provides an analysis
of the nature and effectiveness of Management Accounting and Control Systems
(MACS) within a developing country public sector organizational context. This study is extending the domain of
research done in the area of change to incorporate a Bank, and further
describes and interprets the role of control mechanisms in maintaining and
directing the momentum of strategic change.
The Lewins (1947) three-stage model of organizational change will be the
lens through which the restructuring process will be examined.
1.0 Introduction
It is a widely held notion that changes in the
public sector management are geared towards promoting efficiency,
effectiveness, cost saving and streamlining managerialism (Broadbent and
Guthrie, 1992; Covaleski et al., 1993). In particular, research has focused on
the role of MACS to enable organizations to respond to environment of intense
competition, rapid technological change and uncertainty about future. As an organization’s MACS is expected
to provide timely, accurate, reliable and relevant information on performance,
with such changes, a firm’s internal accounting and control mechanisms also has
to undergo changes (see Hoque and Alam, 1999).
Studies have indicated that organizations are
structured by phenomena in their environments and tend to become isomorphic
with them (Meyer and Rowan, 1977; Whitley, 1999). As a result it has been
claimed that institutional isomorphism increases the success and survival of
organizations. Factors such as commitment
to TQM, performance contract and organizational restructuring by a regulatory
authority like the state by separation of the departments and the broader roles
all serve to enhance the commercial status of an enterprise.
This study provides an analysis of the nature and
effectiveness of MACS within a developing country public sector organizational
context. The major aim of this study is
to show how the wider institutional factors have impacted on the changes in
MACS at the Reserve Bank of Fiji (RBF). It identifies the reasons for the implementation
of the TQM, the management performance based contract systems and the need for
changing the appraisal, reward and rating system. It also identifies the
efficiency and effectiveness concept related to change, the forces behind these
changes, the reaction of employees to these changes, and the impact of the
state on the organization restructures. This research discusses the diversity
of influences that shape accounting and control systems in organizations. The
Lewins (1947) three-stage model of organizational change will be the lens
through which the restructuring process will be examined. By investigating MACS
changes in a public sector, this study adds to the limited knowledge of MACS in
developing economies, which has been a neglected area of accounting research
(see Hoque & Hopper, 1997; Nandan, 1997a; Archary, 1998; Sharma, 2000).
The remainder of the paper is structured as
follows. Section two provides the
motivation for the study and the research design is then discussed. Section three examines strategic change,
process restructuring and management control system redesign at the RBF and
section four identifies the impediments to MACS change. Finally, the case study findings are
interpreted against the extant literature; utilizing the Lewins (1947) model.
2.0 Motivation for the study and the research
design
Today’s organizations, be it in a private sector or a public sector, face an environment of intense competition, rapid change and uncertainty. Therefore, managers are searching for new structures and processes to help their organizations respond and attain advantage in the marketplace (Lawson and Lillis, 2001). The aspect of organizational adaptation that has received considerable attention is the role of management control systems in facilitating the organizational response (see Shields, 1997 and Dent, 1990).
Performance
is measured and evaluated so that efforts and allocation of resources can be
more rationally managed (Stewart and Walsh, 1994; Jones, 1991; Jackson, 1988;
Emmanuel and Otley, 1985). The outcomes
from use of performance measure can lead to changes in employee attitude,
improvements in service delivery, and improvements in decision-making (Keavney,
1996; Jones, 1991; Smith 1990; Kenis, 1979).
Primarily, studies in the past have focused on the matching of control
system attributes with strategic context (see Langfield-Smith, 1997).
This
study examines the relatively unexplored area of MACS change, whereby
performance feedback mechanisms are used as part of strategic renewal. As Lawson and Lillis (2001) have observed
these routine self-regulating mechanisms are potentially powerful in their
capacity to ‘freeze’ organizations on either desirable or undesirable strategic
pathways. This study is extending the
domain of research done in the area of change to incorporate a Bank, and
further intends to describe and interpret the role of control mechanisms in
maintaining and directing the momentum of strategic change.
Reserve
Bank was selected for this research project because of its significant role as
the Government’s Central bank. It was agreed upon to study MACS changes at the
Bank, which has gone through very difficult times during the last four years.
Beginning in 1998, and accelerating in 1999 and the year 2000, the Bank
executives have been launching committees to investigate a growing list of
change prospects such as management hierarchy, organizational performance
appraisal and rating systems and adoption of TQM principles. The years of 1999
and 2000 were filled with recommendations for the Bank staff and the public at
large.
The Bank’s response to these calls was swift. In a
speech to faculty members marking the celebration of the Silver Jubilee in year
1998, the Bank’s Governor indicated the need to restructure.1 In this forum, the Governor also
announced that he had been given a mandate by the Bank’s Board of Directors to
restructure the Bank into a more effective and efficient operation. The Governor asserted that:
“Change is not optional. The Board, who represent our stakeholders, have endorsed the action plan that has been developed in consultation with you. Directors will be monitoring the change process and contributing to it. We have a mandate for change.” (RBF Board Paper No.24/1998)
Most
changes were expected to yield efficiency in organizations operation for
example TQM facilitated the organization to be customer focused. The Reserve
Bank was also chosen for an in-depth investigation because it had recently
changed its organizational structure and the MACS operations.
Lewins (1947) three-stage model of organizational
change has been used to illustrate the process of strategic change within the
RBF. Lewins model shows that that not
all new systems and processes will work perfectly as planned. Consequently, feedback mechanisms are
required to identify and correct problems. This study illustrates how the RBF
unfroze in response to competitive pressures moved through the development of
strategic responses (process restructuring and the redesign of management
control systems) and refroze with these new processes, approaches and control
systems in place (Lewins, 1947; Lawson and Lillis, 2001).
Furthermore, the study has used Laughlin’s (1995)
framework to present the data. In
Laughlins framework there are three main elements of an organization; the
interpretive schemes, the design archetypes and the subsystems. The
interpretive schemes, design archetypes and sub-systems are in some ‘dynamic
balance’; that is, there is some acceptance of the dominant perspective of the
organization which gives it coherence despite voices of dissent (Laughlin,
1995; Gurd, 2001).2
This is a case based research whereby the researcher interacts with the phenomena, which is investigated. Researchers utilizing a case study approach could either employ a scientific or a naturalistic method or a combination of the two research methods to collect the data. In this case a naturalistic research method (Tomkins and Groves, 1983) was utilized. Accordingly, semi-structured interviews and informal discussions with the RBF representatives were held. Interview schedules were prepared and forwarded to the interviewees and were used as the basis for the interviews. Once the interviews were completed and responses recorded, the completed transcripts were presented to the interviewees for confirmation and verification. The responses from the unstructured interviews were then analyzed. The empirical evidence on the RBF’s reasons behind the restructuring process is presented below.
3.0 Results and Analysis
3.10 Historical overview of RBF
Accounting practice as a social construct can be
understood by exploring the historical development of accounting and
identifying the various influences of accounting change (Burchell et al., 1985;
Scapens & Roberts, 1993; Luft, 1997; Hoque and Hopper, 1994 and 1997). RBF
formerly known as the Central Monetary Authority (CMA) came into existence in
early 1973. It replaced the Currency Board that existed since Fiji’s
independence in 1970. Upon its inception, CMA was responsible for printing,
minting and issuing currency. It was also in-charge of promoting the growth of
a healthy financial system and strong economy. In particular, CMA, acted as a
banker to commercial banks, government and its agencies.
On 1st January 1984, an Act of Parliament
formed RBF. The RBF Act, 1985, governs the RBF. According to the Act, RBF is a corporate body with perpetual
succession and a common seal (1985: Sec. 3). The bank has the power vested by
the RBF Act in respect of “entering into contracts, suing or being sued in its
own name, has power to acquire, hold and dispose of real and personal property
(1985: Sec.3).” It also has the power to “make such expenditures as it deems
necessary for the proper discharge of its functions (1985: Sec.3).”
The assets and liabilities and contractual rights
and obligations of the RBF have been transferred from the Central Monetary
Authority of Fiji since 1985. The
organizational structure of the RBF prior to the restructuring process is shown
below.
_______________________
Insert figure 1_______
3.20 Process Restructuring
Process restructuring at RBF was critical to
eliminate inefficient, non value-adding processes, to remove impediments to
high quality production, and to provide an environment where problems could be
solved quickly and effectively.
3.21 Action Plan
The Action Plan was for a three-year period from 1998 to 2000. The
Action Plan was not just about the restructuring process. Restructuring was the
first step in improving the change management. The 1998 plan provided for the
development of planning and budgeting process, the introduction of new
management techniques such as projects, integration of better TQM program with
other management process and the development of an organization culture based
on excellence.
The plan also focused on how change was to be achieved. It provided
appropriate management and staff involvement at all stages, and for
consultation with the union on employment related matters. The approach to
change emphasized communication at all stages which is a vital part of future
organizational culture.
3.22 RBF organizational restructures
From the earliest thinking about organizations as
somewhat distinctive aspects of social structure, analysts have attempted to
account for the existence and elaboration of organizational structure. For
most, the emergence of formal structure-codified rules; designated positions or
offices has been either the defining feature of or a prominent characteristic of
these systems.
Organizations also exhibit considerable diversity in
their structural features. Some are tall and highly centralized, others flat
and decentralized. Some develop disproportionately large and top-heavy
administrative components; others appear relatively lean with modest resources
devoted to management. RBF organization
restructure occurred over a period of three years starting from 1998. The following is a diagrammatic
representation of the new structure of the Bank.
_______________________
Insert Figure 2_______
The changes mainly occurred in staff resourcing, management and
communication, teamwork (within and between departments) and service delivery.
Design and implementation of a new organization structure was the first step in
the change program. During the restructuring process, majority of the positions
disappeared and new jobs were created. The objectives of restructuring process
included: a flatter and flexible rank-based to role-based structure, focus on
results and key outputs, teamwork and staff empowerment and developing job
descriptions that clarify roles and accountabilities which are based on
outcomes achieved, not tasks. As a
result of the change, the organization structure of the Bank became more
flatten and flexible. The reporting lines were clarified with more staff
empowerment.3
Restructuring means new structures, responsibilities and work
processes. The Public Relations Officer explained in detail the actual process
of the organizational restructure. According to him, “the new structure
involved several stages. These were creation of new departments and appointment
of their managers, design of positions and assignment of remuneration and
applications were invited for new positions. The best people for new jobs were
chosen.”
Having discussed the organizational restructure, the next section looks
at the actual process in the new structure and how it operated.
3.23 The new structure in operation
RBF is committed to improving the new jobs and in continuing ones. Good
job performance was expected from all the staff. Job performance was
realistically measured and managed more thoroughly and more consistently.
Remuneration and rewards were more closely related to job performance. Good
performers would be rewarded and poor performers would be required to
improve. Specialized skills and
knowledge are required for many jobs in Central banking. Even where jobs are
less specialized, previous experience in Central Bank work added an advantage.
Therefore in most cases the then current staff filled new jobs.
Nevertheless at the end of the restructuring process, some existing
staff became surplus. This occurred when individual’s current position
disappeared and he/she failed to obtain a position in the new structure. This
is in line with the Bank’s commitment to improved management and obligation to
its stakeholders.
The Public Relations Officer asserted that:
“There were some redundancies as a result of the restructure. The staffs were not happy with the change. There was a general feeling of job insecurity especially during the restructure process.” (RBF Human Resources Briefings, 2001).
Organizational change always creates some uncertainty and confusion,
for the organization as a whole and for the people within it. It is natural for
every individual affected by change to be concerned about its personal impacts
on them. For the great majority of the
staff, restructuring was suppose to bring in new opportunities and more satisfying
jobs. Secondly, the new structure would provide a more stable platform for the
collective work and for the careers of individual staff. The new structure was
designed to meet current and foreseeable future needs. Of course all
organization structures must evolve over time as the world changes, but the new
structure was not expected to change greatly for at least five years or more.
Lastly, restructuring was only one step in the Change Programme.
Organizations that restructure without changing their management systems
usually achieve little. Having analyzed the actual process of change, the next
section focuses on changes in MACS.
3.30 Management accounting and control system
changes
Organizational development are becoming increasingly
important for firms, as they are now more and more confronted with problems
that are caused by their complex and rapidly changing environments. Therefore, management control activities are
carried out regularly both to detect and to guide the processes by means of
which an organization adapts itself to changing environmental conditions (Lowe,
1970; Loo and Verstegen, 2000).
There have been calls to study MACS in the context
in which they operate (Hopwood, 1983) and to make accounting practical (Miller
and O’Leary, 1990). A diversity of
influences shape an organizations accounting system (Scapens and Roberts.,
1993). Hopwood (1987, 1989a & 1999) sees accounting in its organizational
context and how it is implicated in organizational change. The global trends of
public sector reforms seem to be creating innovations in organizations. All
innovations are embedded on institutional factors. These reform programmes are
normally advised by donor institutions such as the World Bank and the Asian
Development Bank (ADB) in developing countries (see Nandan, 1999). Changes are
carried out so that the organizations become more efficient and effective. External agencies also play a vital role in
changing MACS operations. At the Bank, external agencies like the International
Monetary Fund, the ADB and the World Bank have recommended the need for change
for Fiji’s ailing economy.
As Fiji’s Central Bank, it
must demonstrate leadership and perform its functions with:
·
Maximum
effectiveness: doing the right things, to achieve key objectives.
·
Reasonable
efficiency: doing things right, to avoid wasting scarce resources.
For quite some time senior management have been considering change
needs for the RBF. As the governor stated “this process of change has not been
hasty, we wanted to be thorough in our thinking, careful in our planning and
effective in achieving the changes the Bank requires" (Governor's
Statement, 1998).
The first step in the change process was an internal review. In early
1995 a study was commissioned to review the Bank’s objectives and how it
applies its resources to them, improve the management and operation of the Bank
and different ways were recommend to use the Bank’s resources more
cost-effectively. That study developed
directions and strategies for change. In late 1997 a Board paper was prepared
which summarized the findings of the internal study and a proposal was made for
a specific change programme. The Board approved this programme ‘mandate for
change’. The action plan developed
specifically responded to the Bank’s change agenda developed internally over
the past two years, the ideas and concerns staff expressed during focus groups
and the priorities managers identified at the workshop.
The change priorities include strengthening customer
focus, being forward looking and responsive, developing a shared vision-‘we’
not ‘they’, improving timeliness, providing more external communication and
disclosure and to put Bank needs ahead of personal wants. There were certain
motives behind the organizational change at the RBF. These reasons have been
analyzed in the following section.
4.0 Impediments
to change and driving strategic changes with specific controls
4.10 Impediments to change
The management control system in the context of this
study is defined as the formal, information-based routines and procedures used
by managers to maintain or alter patterns in organizational activities (Simons,
1987). This includes information relating to organizational structure,
budgeting systems, performance measurement, rewards and capital approval.
Organizational culture
Culture plays an important role in shaping the
knowledge sharing efforts of an organization (Chung, 2001). Top-level management has to set the right
tone and visibly display their commitment to transfer knowledge via
communication channels. Those
organizations that encourage internal communication by way of sharing both,
success and failure stories, the implementation of knowledge transfer
initiatives will be much easier as compared to those organizations where
personal information is always fiercely guarded (Greco, 1999; Chung, 2001)
MACS of the Bank have been designed within the parameters of its organizational culture. An important aspect of organizational culture is power relationships, that is, the relative power of individuals in managerial positions. The power and responsibilities of the Board of Directors of the Bank has been vested in section 9 the RBF Act, 1985.
The Reserve Bank of Fiji’s Board of Directors
comprise of the Governor, the Permanent Secretary for Finance and five other
members. The current performance culture at the Bank is more empowerment and is
strongly quality focused.
Performance appraisal system
Under
the Bank’s former structure and culture, performance standards were too
inconsistent and too low. Continuing inadequate performance was tolerated and a
welfare mentality was prevalent among many staff; “if I don’t perform, it’s up
to the Bank to remedy this for me.” To establish a platform for a performance
culture operating within a new structure, the immediate priority should be to
establish and enforce a consistent standard of adequate performance in relation
to each job. Emphasizing the ‘bottom line’ for each job and applying a ‘zero
tolerance’ policy to inadequate performance can achieve this (Governor's
Statement, 1998).
A
performance appraisal often bundles up a number of different processes,
including performance measurement – assessment of actual versus planned
outcomes; performance management – discussion of outcomes and what should
happen next; performance rating – a summary assessment of outcomes and key
issues; career and professional development – individual or unit directions for
action and reward allocation – tangible recognition of good performance (RBF
Performance Appraisal, Review and Recommendation, 1998). Typically staff
focuses on reward allocation. The other processes then tend to be ignored,
under-emphasized or distorted. Separating the processes is desirable and
partially feasible by developing measurement processes that are objective and
accepted, requiring ongoing and frequent performance management, using the
results of this ongoing management to develop and support a rating, taking
development issues forward to unit and department planning processes and making
reward allocation a separate process.
Performance measurement and
management
Performance
measurement should be as objective as possible. Even where some subjectivity is
inevitable, objective criteria can be applied (for example, the quality of the
research paper can be discussed using criteria such as completeness, logical
analysis and comprehensibility). If perceived objectivity is maximized, people
are more likely to accept the subjectivity that inevitably remains. Performance
management works best when it is focused on specific outcomes close to the time
when they are produced. Managers are expected to provide ongoing, informal
feedback as work outputs are produced, hold regular and structured
‘exception-based’ discussions with individual staff to identify, discuss and
record non-routine performance aspects like outstanding outcomes; inadequate
outcomes; progress with any improvement initiatives, monitoring or oversight;
changed work priorities and special circumstances affecting performances.
For MACS, performance measurement is a key source of information for
control. One means of motivating people towards the organization goals is to
measure their performance in achieving those goals. Performance measurement can
also be used as the basis for rewarding performance. The performance appraisal
system of the Bank also changed in the process of the organization restructure.
Responsibility, accountability and authority were matched at all levels of
management. The resources were aligned with priorities.
Total Quality Management
Quality
culture is promoted at national level in Fiji through organizations such as the
Pacific Asia Quality Foundation (PAQF) and the Fiji National Training Council
(FNTC) through their regular quality conferences. The FNTC has also initiated
the Fiji Quality Awards. The goal of the FQA is to promote Fiji organizations
to adopt TQM and improve quality. This award has been implemented since year
2000. A few of the organizations in Fiji are already ISO 9000 accredited.
Certifying organizations like KPMG Peat Marwick, Lloyd, and Bureau of Veritus
Quality Association play a vital role in disseminating the ISO 9000 standards
and advising organizations on TQM.
Other organizations in Fiji are also following the TQM practice so much
so that it may become institutionalized shortly.
TQM
was first introduced to Bank in August 1994. TQM has helped improve review of
work processes in the Bank and has assisted in defining linkages to their
corporate statements focusing on efficiency and effectiveness. Further, staff appraisal programme for
junior staff at the Bank was enforced to show consistent values in their
institutional environment. The design
and implementation of TQM was tailored to suit the Bank’s needs of reviewing
work processes and raising efficiency. The main ingredient of TQM has been
process mapping.4 It provides the opportunity for all team
members to critically assess work processes and suggest changes for
improvement. Feedback and review are also a significant part of this cycle of
continuous improvement.
In
the Bank’s context, TQM means the following:
¨
Teamwork - There has been a
substantial improvement in teamwork in the Bank. Staff members have set in a
team environment to resolve work related issues. This has led to substantial
reductions in re-work.
¨
Timeliness - Timeliness of work has
improved and processes are more customer focused. Staff pays particular
attention in ensuring timeliness of their outputs.
¨
Communication - Communication is the key!
The managers talk formally and informally with the staff and actively provide
opportunities for feedback and dialogue throughout the year. Communication
within the Department and Bank-wide has improved significantly. Communication
in the team and across departments has also improved leading to better work
processes.
¨
Documentation/Procedure
Statements
- Most processes are documented in the form of procedure statements, which has
been reviewed, and this has been a major achievement in the Bank. This has
provided the basis for training new staff as well as continuous improvement as
teams re-visit the work processes.
¨
Alignment with Core
Functions of the Bank - Each process is linked to the objectives of the Bank, which in turn
has linkages to the Bank’s Vision and Mission statements (RBF Board Paper, No.
24/1998).
The
TQM activity has slowed in 1998 when the Bank went into the restructuring
exercise. In time of the restructuring of the Bank, several staff mostly at the
managerial level took up employment on contract. Under this arrangement
performance assessment is based on the key result areas and key performance
indicators. This created a dilemma between individual recognition to collective
recognition.
With
this new focus on outcomes, there was a general re-organization of Unit
resources to achieve Key Result Areas (KRA’s). The Performance Appraisal
Management System was revised to capture this change. It was clear that the
Bank benefited greatly by introducing TQM but there was a need to revive the
principles of TQM.
4.20 Driving strategic changes with specific controls
Key performance indicators
The
performance culture in the bank focuses on achieving the identified Key
Performance Indicators (KPI’s) in the respective KRA’s of the Bank. These KPI’s
are the quantifiable targets set in the respective departmental work plans.
Quality teams play an important role, as there are individual/Unit/Departmental
KPI’s to be achieved. This has linkages to achievement of outputs bank-wide and
linkage to customer/stakeholder satisfaction that is in line with the Bank’s
mission strategy.
The
performance indicators are used as a measure of the achievement of
objectives/targets. They enable managers to evaluate in numerical terms the
extent to which the action they have undertaken result in the improvement in
services offered. It is an early warning system fundamental to effective
control of all organizations.
In
terms of the operations of the Bank, work processes are to be managed within
departments, be staff closely concerned with the work. All Bank and Management
staff has a responsibility to regularly review and improve work processes and
practices. These achievements translate to Bank outputs and performance
rewards.
The budgetary process
The
Heads of the Department are required to formulate their department training and
development plans and budgets to meet identified work needs. They have to
organize staff to meet these plans and submit as part of their annual budget
planning their budget for any training, attachments and study plans for each
financial year, along with training needs analysis for the department.
This
needs to be done in line with the Bank’s budgeting process. Some of the types
of development programmes provided and offered by the human resources unit are
induction training, In-house training programs and On-The-Job training. The Bank aims to present a professional
image in its dealings with the public, its customers and its staff generally.
To assist in achieving these standards, induction training is provided for all
new recruits within a month of joining the Bank. Departments also arrange
seminars or talks to be given by visitors or staff on matters of general or
specific interest.
Job
rotation is also an important method of developing staff. This can be done
within the department or within the Bank. The other career development benefit
is given to the staff relieving in higher positions, which provides them with
valuable training and experience and the opportunity to develop and demonstrate
skills. The Bank also approves study
leave (local or overseas) and gives scholarships for full-time studies.
Reward system
Rewards
and incentives are usually tied to the achievement of the targets. The staff at
the Bank knows through the targets as to what is expected of them. This is
consistent with Otley (1997) suggestions that the setting of targets act as a
motivational device for the managers. It challenges them to achieve targets.
Contract on performance
basis
After
the restructure process, all staff in the executive positions was engaged on a
performance basis contract. They were put on a three-year contractual system
and the renewal of the contract was based on the achievement of the set targets
and objectives for each position. Managers increase in pay and bonuses were
tightly linked to the achievements of their targets. This result is consistent
with the arguments put forward by Wilsted and Taylor (1978) who suggested that
the performance appraisal is a management function for purposes of salary
administration and recognizing future promotional prospects.
However,
whilst the performance contract was being imposed, not everyone was happy. Some
managers resigned, some took up the redundancy package because of the manner in
which it was implemented. It was inadequately discussed with the managers and
was basically a top-down approach. Some left because of job uncertainty after
three years. This is consistent with the arguments put forward by Ferris (1977)
who suggested that as the level of environmental uncertainty increased, the
level of motivation decreased. This created fear in the Bank. With the
imposition of the performance contract, there have been improvements in work
performance. The contract on performance system was part of the change process
of the Bank.
Process mapping
Process
mapping is not the end product but should be used as a means to achieve the
desired results efficiently. A paper by TQM Core Group5
provides a comprehensive coverage on the role of process mapping in TQM.
Departmental KPI’s stated in work plans need to be closely monitored and
corrective action (process review) taken where needed. The performance
management system allows for a review of performance on a six-monthly basis.
This review should come out with weaknesses in the delivery of outputs and
therefore raise concerns for improvement in work processes on a formal basis
(RBF Memorandum, 1998).
The
process maps identified as high risk maps will need to be completed and
reviewed as per the targets outlined. The departments have to ensure that
attention is paid in completing these maps and the processes are documented as
procedures statements. Tied with the
achievement of departmental/unit or individual KPI’s (RBF Staff Development
Policy Guidelines, 1999).
By
applying TQM principles to work practices, it can ensure a quality output,
better turnaround time and measure for value added and relevance of processes
in the KRA’s of the Bank. Essentially there is a strong linkage between the TQM
principles and the values covered under initiatives in the Bank. The two are to
be seen as complimentary to each other in the new phase of TQM.
Performance rating
The
rating system can be used to summarize and record performance, provide input to
remuneration processes and trigger monitoring and oversight of any inadequate
performance. Ratings relate actual performance to the demand of the job. In
order for TQM to be effective, performance evaluation is essential.
Internationally, firms have adopted performance evaluation to promote TQM
exercise (see Ittner et al., 1997). This ensures that workers have commitment
towards their work vis-à-vis meeting performance targets.
For
successful implementation of TQM, performance measurement is essential and
should include both financial and non-financial indicators. The basis for
performance measurement is in terms of aligning actual performance with
budgeted performance. The achievement of budget targets would provide a source
of motivation for organizational members (Berry et al., 1995).
Performance evaluation
Performance
evaluation is an important aspect of management control as it enhances the TQM
approach in an organization. Performance evaluation is the process of
reflecting upon the effectiveness of activities in accomplishing organizational
goals and upon the efficiency with which resources are used in performing
activities (Stallman, 1982). In the new business environment, companies need to
take a more flexible approach to performance measurement within the firm
(Fowler, 1996; Ittner et al., 1997)
The
balanced scorecard as depicted by Kaplan and Norton (1992 and 1993) makes
effective measurement an integral part of the management process. The balanced
scorecard enables translating of a company’s strategic objectives into sets of
performance measures (Lynch and Cross, 1992; Nanni Jr et al., 1992).
The
scorecard gives four different perspectives from which to choose measures.
These four perspectives of the balanced scorecard are the financial, customer,
internal business, innovating & learning perspective. From the financial
perspective, RBF had indicators such as return on capital, cash flow, and
project profitability and from customers perspective, indicators were
competitive price and value for money. The internal Business perspective’s
indicators were the tender effectiveness and quality service. The innovative
and learning perspective’s indicators were continuous improvement.
The
balanced scorecard intention of performance is to build organizations
operations and MACS around financial measures and targets, which have
significant implications on the company’s progress in achieving long-term
strategic objectives. The scorecard enables managers to introduce four new
management processes, which contribute to linking long-term strategic
objectives with short-term actions. The first one is ‘translating vision’ which
helps managers to develop a consensus around the organization’s vision and
strategy. The second process of ‘communicating and linking’ allows managers to
communicate their strategy to the various levels within the organization and
link it to departmental objectives. Thirdly, is the process of ‘business
planning’, which allows companies to integrate their business and financial
plans. The fourth process is that of ‘feedback and learning’ which gives the
company strategic learning to do in terms of seeing whether the expected
targets have been reached or not (Kaplan and Norton, 1996).
Kaplan
and Norton (1996) further argue that the scorecard contains three levels of
information. The first describes the corporate objectives, measures and
targets. The second translates corporate targets into targets of each business
unit. In the third level, the organization asks both individuals and teams to
articulate which of their own objectives would be consistent with the business
unit and the corporate objectives.
RBF Performance Evaluation
Framework
_______________________
Insert Figure 3_______
An
inadequate rating could reflect disastrous performance, poor performance or
substantial shortcoming such as inexperience. By definition, the organization
cannot tolerate continuing ‘inadequate’ performance in any of the KRA’s or
competencies required for the job. To help managers set and maintain fair
performance standards and ensure staff live up to them, an ‘inadequate’ rating
should also consistently trigger a process that leads to dismissal if
performance does not improve.
Rating
of ‘adequate’ mean the basic pay for the job has been earned. They do not
justify a bonus and it is questionable whether they should justify any salary
increment once the scale midpoint has been reached. Ratings of ‘superior’ or
‘outstanding’ recognize performance beyond minimum requirements. For example a
‘superior’ rating might only be given when a staff member is adequate in every
aspect of the job and exceeds normal expectations in many aspects; an
‘outstanding’ rating might only be given where the job is being done so well in
all respects that keeping the staff member in that role probably underutilizes
human resources. In some cases the staff member will have a contractual
entitlement to a bonus for achieving ‘superior’ or ‘outstanding’ ratings.
5.0 Post-implementation review and the corrective measures
undertaken
The main reasons for the restructure of the Bank were, firstly, to
limit the operating budget by developing new planning and budgeting processes.
Management decided to opt for zero-based budgeting6
with function and cost center reporting. This would prompt management to
monitor budget very closely. The second reason for change was to align
organization structure prior on core business activities in order to maximize
effectiveness. The non-core activities
were out sourced. More emphasis was placed on customers. In addition, the
restructure was also aimed at increasing accountability by devolving authority.
More authority was given to line management. The senior managers were supposed
to focus on strategy and policy.
The governor that time, expressed the reasons for change as follows:
“Why should we change, some
may ask? The answer is simple. We do not exist for ourselves. We make an
accounting profit, but our profit comes from a statutory monopoly. In reality
our stakeholders fund us. Increasingly, taxpayers want value from their tax
dollars. They expect that the entire public sector carries out its functions in
a cost effective way.”
He also emphasized that:
“Change is a stressful time
for everyone involved. I am conscious that in small organisations like ours the
impact of change will affect every one of us as individuals. Change will bring
many opportunities as well as some immediate problems. I ask each of you to
make a personal effort to take a positive approach to change and to help the
RBF become a center of excellence: a place where every individual, whatever
their job feels proud to belong and proud of their personal contribution (Board
Paper: 1998, p.1).”
There is also increasing demand for greater productivity and
achievement- especially in the pubic sector. This is actually true for most
organizations as they find themselves more and more in the mainstream of a
global economy. Over the last ten years at the bank there was a significant
increase in staff and resources. Two important questions that can be asked are
that:
·
Does
the rapid growth in resources properly reflect the objectives of the bank?
·
Does
the increase in size match the increase in responsibilities and outputs?
The bank also became increasingly conscious of the uneven distribution
of resources and of anomalies with the core functions. It was believed that it
is critical to match efficiency of resource allocation to the effectiveness of
the bank’s output. Moves within Public Sector Reform encourage the bank to look
itself carefully, measure and reward performance more effectively and outsource
non-core activities. At that time, some people felt that these obligations to
the stakeholders are a problem something that forced the RBF to change when it
would be more comfortable not to change.
In response to this, the then Governor suggested that
“Change is an opportunity.
By serving our stakeholders, we can also serve ourselves. We can build an
organization of true quality, operate effectively and efficiently, show
leadership to others and provide challenging and fulfilling jobs. Change is not
optional. The Board, who represents our stakeholders, has endorsed the action
plan that was developed in consultation with the staff.” (Governor's Statement,
1998).
Few committees were formed to investigate change at the RBF and to focus on key outputs from 1998 – 2000. However, still some changes were made after the implementation and a post-implementation review was made to comply with the desired outcomes. Insufficient time was given to the staff to study the package before they can make a decision – lack of prior consultations with staff that are likely to be affected; recommend that the formulae components be made readily available to staff on request, either on PC or circulated. The review revealed that staff can still perform without a fixed contract and be made accountable for their actions through restructure and performance agreements.
Constitutional right of freedom of choice by an individual is eroded if staff is not given an opportunity to choose between fixed individual contract and fixed collective contract. It was noted from the efficiency study that the ratio of staff at the bank is 3:1 (RBF Annual Report, 1997) in favour of corporate services. Since the emphasis is now on core functions, management has considered that voluntary redundancy should be directed first to the corporate services staff and management’s directive to transfer ineffective staff from core functions. Corporate services structure indicates the required numbers and positions. For management to state that redundancy is not an issue is beyond comprehension.
There was no consultation with staff at the time of advertising the manager positions. There was a need for staff to know what they are getting into beforehand. There is also lack of prior consultation with staff regarding job descriptions. From staff point of view, it was too general and it needs clarification so that staff and management are on the same wavelength.
It is not clear whether the change manager was part of the executive management as shown on the organization structure or part of the middle management like other managers. The common issues legally binded should be ironed out amicably between the two bodies to avoid any union protest, which can be detrimental to the objectives and existence of the bank. Staff should be given the freedom to hold pocket meetings in the bank to discuss issues of mutual concern and not to be spied upon. Thus, management should look at both sides of the coin.
The bank should have also looked at the staff with overseas permanent residence (PR) and make a decision whether to invest in them given that they leave the bank sooner or later. Sources said that some have been promised/approached to fill certain posts – even outsiders. Concerns have been raised of the actions taken on the non-performers over the years. These are the IV and V ratings. Also outsourcing costs needs to be evaluated in terms of its costs and benefits (RBF Performance Appraisal-Review and Recommendation, 2001).
To be an effective central banker there has to be cross-cultural learning and job rotation. The management had problems to accommodate this issue. According to deputy governor, theoretically, this sounds as if it will not work, but practically, it can be done. Middle managers that do not get the jobs they apply for were required to apply for a lower job. If a person honestly thinks that one or two jobs justifiably fits his/her skills but is still not appointed to those jobs, he/she may not apply for another position because according to him/her, he/she may be over qualified for the lower job and his/her full potential will not be exploited. If he/she was to be given a lower job, it may mean ‘not fitting the round peg in the round hole’ which is against the principle of this restructure (RBF Staff Development Policy Guidelines, 1999).
Furthermore, organization structure was flattened and reporting lines were clarified. It became more flexible reflecting departmental needs with role-based structure more effective than rank based. Teamwork was extended across the bank providing more flexible career paths and clarifying roles and accountabilities. Job descriptions were based on outcomes achieved not tasks. The focus of resources and operations on core functions shifted the balance from tail to teeth. Staffing was improved with better match of staff skills and role requirements. Use of technology was advanced and equipment was allocated according to needs. More informality in management and communication methods (fewer memos) and style (more open) was very effective resulting in communicating both ways-up and down (RBF Action Plan for Change, 1999).
Decisions were made more faster (stop procrastinating, just do it) and simple planning processes resulted more effective implementation. Greater ownership of work and accountability was developed for its quality and increase in delegation and empowerment-reduced bureaucracy. Right appointments were made and poor performers were removed which improved human resource management. Work results were best measured with effective performance management system and rewards were made for results achieved and not inputs (RBF Performance Appraisal-Review and Recommendations, 1999).
The above issues are in line with the objectives of re-structuring which includes a flatter structure, a stronger focus on results achieved, clearer accountabilities and more staff empowerment.
RBF can be rated with each practice now (low, medium or high) and where you want to be (low, medium or high) (RBF Human Resource Briefings, 2001). Managing people during change is stressful. Sometimes change is imposed upon us, sometimes we make changes ourselves, regardless, change can make us feel uneasy, distressed, threatened and challenged. Restructuring is a beginning, not an end. Improvements to the management systems will continue for several years. People don’t change overnight – a few unrealistic expectations/timeframes in regard to best quality outputs in a timely manner. Changing culture/attitudes/behaviour takes time. Allow time for new concepts to be understood. The nature of rewards can affect performance – the proposed ranking system (bell-shaped curve) was perceived as likely to create unhealthy competitiveness (RBF Structure, 1998). Distribution of work appeared arbitrary at times and not a reflection of the pay some people are receiving. Some people in top management need to change their behaviour or they will undermine the entire change programme.
It appears in some areas that there’s only one way to do a job – the managers way. It can be sensed that sometimes a lack of trust, or possibly lack of resources causes this for example the staff idea of getting closer to the customer and inviting customers in for an informal social and feedback session. This did not happen.
Organizational change always creates some uncertainty and confusion, for the organization as a whole and for the people within it. It is natural for every individual affected by change to be concerned about its personal impacts on him or her.
Hence, the new structure has provided a more stable platform for the collective work and for the careers of individual staff. The new structure has been designed to meet the current needs and foreseeable future needs. Of course, all organizational structures must evolve overtime as the world changes but the new structure is not expected to change greatly for at least next three years or more (RBF Human Resource Briefings, 2001).
Change has brought many opportunities as well as some immediate problems. Taking a positive approach to change helped the RBF become a center of excellence: a place where every individual, whatever their job, feels proud to belong and proud of their personal contribution (Governor's Statement, 1999). The performance appraisal programme for subordinates is being implemented for the personal career development of the staff. The manager interviews staff with their immediate supervisors and their action plan, objectives and targets. The workers, upon achieving their objectives are, rewarded in a form of bonus payment at the end of the year. Those workers who are identified with certain deficiencies are given a probation period to improve. If still performance is not up to expectation then they are sent for further training.
Performance
appraisal is a worldwide phenomenon with the Fiji Employers Federation
enforcing this in Fiji’s context. This has been adopted by RBF for external
legitimacy. This is in line with the institutional theory. A performance
appraisal provides a consistent framework for assessing performance and
provides alignment between what people are doing and organization’s
goals/objectives. It assesses job performance and achievement against targets
over a fair period of time. Its also improves communication between the
managers and staff and helps identify and plan training needs for individuals
and the organization. Performance appraisals identify potential for the future,
assist with career planning and provide input into remuneration. As analyzed
during the organizational performance workshop the current organizational
culture at the Bank is more focused, more efficient, accountable and
competitive. Thus the Bank is seen as the institution with cultural rules
giving collective meaning and value to particular entities and activities,
integrating them into the larger schemes.
Two types of institutional arguments regarding the rise of training programs at the Bank are: the first focuses on institutional agencies such as the government that create legal requirements and professional ideologies that make training seem necessary and rational. The second form of institutional argument stresses a process explanation. Institutional processes operate to diffuse beliefs in the desirability of training so that, increasingly overtime, the value of training in modern organizations is taken for granted.
6.0 Conclusions and the direction for future
research
By investigating MACS changes at the Bank, this
research adds to the limited knowledge of management control changes in Fiji,
which is somewhat a neglected area of accounting research. In particular, it
illustrates that the changes in MACS are understood better in the context of
the influences of the structures of the wider social order within the
historical, social, political and economic dimensions of the economy.
Accounting for the increased amount and for the
existing diversity of organizational structures is an ongoing activity to which
institutional theorists are making contributions. At an organizational level,
it is now widely accepted that successful organizations develop and maintain a
customer focus and reduce response time to customer requests. TQM exercise
facilitates this. This research reinforces the findings of other researchers
(e.g. Hoque and Hopper, 1994; Broadbent and Guthrie, 1992) claiming that the
wider social, political, institutional and economic contexts govern the ways
MACS operates in the organization.
For future research, management accounting should
not be limited to the technical aspects only, but it should be studied as a
social construct (Burchell et al., 1980; Neimark and Tinker, 1986; Broadbent
and Guthrie, 1992;; Broadbent, 1999). It is also essential that similar study
be undertaken in other public sector organisations in order to draw
generalizations on MACS changes. Some similar studies, however, have been done
in Fiji’s context such as those of Nandan (1997) on the Fiji Development Bank,
Achary (1998) on Fiji Pine Limited and Sharma (2000) on Housing Authority of
Fiji.
Figure 1:
Interpretive
Scheme
·
Ir-rationalised
environment (less focus on human resource functions).
·
Structures
and routines were not reflecting the rules.
·
View
accounting practices as routine and institutionalized.
Design
Archetypes
Organizational structure
·
Coupled
structures such as Bank departments, offices and procedures. For e.g. Domestic
Markets Unit in the Financial Markets Department implements monetary policy
through daily RBF tenders.
·
From
more centralized top-down approach.
Human Resources
·
Less
focus on organizational culture (specific values, beliefs and norms that
influence human interactions.
·
Low
Power relationships.
·
No
Staff values such as honesty, integrity, trust, openness, flexibility,
prudence, quality and transparency.
·
Centralize
training approval.
·
Poor
performers given chances in many cases.
·
Updated
existing human resource policies and practices.
Accounting Practices
·
Quantity
based.
·
No
teamwork approach.
·
Few
reward policies mainly based on output.
·
Focus
of performance evaluation on experience.
·
Low
levels of budgetary process such as less staff training and staff attending
seminars and conferences.
Communication system
·
More
formal in management and communication methods such as use of large number of
memos.
·
Closed
style.
·
Communication
in one way (only up).
·
Less
use of emails and network.
Decision processes
·
Staff
to discuss with the seniors and then seniors discuss with the unit managers who
liaises with department chief manager and with deputy governor and the
governor.
·
Decisions
take more time to process.
·
Tough
decisions are put on hold to be discussed in the Board of Governors meeting.
Sub-Systems
·
Fewer
committees.
·
Less
team work approach.
·
No
Employee empowerment.
·
Low
levels of skilled and specialized staff since the focus was more on experienced
staff.
·
Large
amounts of assets.
·
Regulated
market.
Figure 2:
Interpretive Scheme
·
Rationalized
environment (Human Resource Functions).
·
Creating
culture change based on excellence (management for a changing world).
·
Organizational
restructure and changes in MACS to achieve high levels of efficiency and
effectiveness.
·
Structures
and routines are reflections and effects of rules.
·
Effects
of legitimating actions on process of restructuring in a public sector
organization.
Design Archetypes
Organizational structure
·
Decoupled
structures such as Bank departments, offices and procedures. For e.g. Domestic
Markets Unit in the Financial Markets Department implements monetary policy
through daily RBF tenders.
·
From
more centralized top-down approach to a flatter structure.
Human Resources
·
Organizational
culture (specific values, beliefs and norms that influence human interactions.
·
Power
relationships.
·
Staff
values such as honesty, integrity, trust, openness, flexibility, prudence,
quality and transparency.
·
Decentralize
training approval.
·
Remove
poor performers.
·
Improve
human resource policies and practices.
Accounting Reforms
·
Changes
in performance management system.
·
Introduction
of TQM.
·
Changes
in reward policies.
·
Development
of performance evaluation practices.
·
Performance
appraisal system updated.
·
Use
of KPI’s in performance measurement.
·
Process
mapping for performance rating.
·
Use
of balanced scorecard principles.
·
Budgetary
process such as training, study plans and seminars & conferences.
·
Identification
of key result areas.
Communication system
·
More
informal in management and communication methods such as fewer memos.
·
Open
style.
·
Communicate
both ways (up and down).
·
Use
of emails and network.
Decision processes
·
Staff
to discuss with unit managers and with department chief manager and in certain circumstances
with deputy governor and the governor.
·
Decisions
are made more faster.
·
Prepared
to take tough decisions.
Sub-Systems
·
Fewer
committees.
·
Team
work approach.
·
Employee
empowerment.
·
Shift
from experienced to high levels of skilled and specialized staff.
·
Large
amounts of assets.
·
Support
department such as currency and corporate services to provide additional
support to other departments.
·
High
levels of reserves.
·
High
levels of dealing in financial terms.
·
De-regulated
market.
Figure 3
Name of staff
member:
Tick staff
rating box
|
Rating |
Description |
Definition |
Performance
Criteria |
|
1 |
Outstanding |
Substantially exceeds requirements |
80 – 100 % |
|
2 |
Superior |
Exceeds requirements |
60 – 79 % |
|
3 |
Adequate |
Meets requirements |
50 – 59 % |
|
4 |
Inadequate |
Does not meet requirements-action required |
Less than 50 % |
Give three reasons for your rating:
(Source: RBF Culture Change Programme, 1999)
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