“Discuss the contribution of Actor-Network Theory to our understanding of management accounting and control in organisations that have adopted ERPS technologies.”

Over the past decade, management accounting has seen an extraordinary rise in technology driven innovations, whereby Hyvonen (2008) explains how this has contributed to the emergence of virtual organisations. The power of ICT plays a pivotal role in many organisations, through providing a basis for managing efficient operations and formulating corporate strategy. Moreover, Bhimani et al (2008) explains how ICT provides the opportunity to alleviate the problems associated with information flows in organisations with fragmented information systems. In practice, Hyvonen (2008) notes that the centralised control of large organisations requires ICT systems that make the periphery visible to the centre. The enterprise wide resource planning system (ERP System) is an example of an ICT system which coordinates all the resources, activities and corporate information of an organisation into one central database that collects data and feeds it into multiple applications that support all business activities of an organisation. Furthermore, it has been suggested that such systems facilitate unprecedented levels of organisational integration (Dechow and Mouritsen, 2005) and thus ERP systems have provided a new platform for organisations to thrive and develop a competitive advantage.

Actor-Network Theory is a constructivist and distinctive approach to social theory which was developed in the early 1980’s by scholars Michel Callon and Bruno Latour, together with sociologist John Law. Whilst Actor-Network Theory is often interpreted in many ways, it is commonly agreed that it adopts a ‘material-semiotic’ approach, which assumes that many relations are mapped together in order to form a single network. Thus, Actor-Network Theory describes the progressive constitution of a network in which both human and non-human actors assume identities in order to form a heterogeneous network of aligned interests (Nagm, F & Cecez-Kecmanovic, D 2008, Cited in Callon 1996; Latour 1986). Moreover, Actor-Network Theory explains how these actor networks function as a whole, whilst providing users with an understanding of the unambiguous strategies that are used to map these technological and social elements together.

Whilst the origins of Actor-Network Theory are in sociology of science and technology, its characteristics provide the opportunity to take a new and innovative approach to analysing a range of fields. Hyvonen (2008) explains how Actor-Network Theory attempts to rediscover the connections that have been lost as a result of modernistic thinking, whereby the epistemology of modernism segregated society and technology. Moreover, Latour (1999) further explains that as Actor-Network Theory posits, the world is neither purely social nor purely technical but always a mix of both. It is this reasoning which makes Actor-Network Theory particularly useful for understanding the relationships and complexities between management accounting and control and ERP systems in organisations. This essay will therefore explore the contribution of Actor-Network Theory to our understanding of management accounting in organisations that have adopted ERPS technologies.
In order to gain an understanding of how Actor-Network Theory contributes to our understanding of management accounting and control in organisations, it is important to consider the two extreme end points of a continuum of alternatives which were explained by Hanseth (1998). Technological determinism holds that the development of technology is solely responsible for its actions, whereas social determinism holds that society and its actors develop and use the technology, thus implying that technology itself is not a driving factor. Actor-Network Theory addresses this issue by allowing the symmetrical treatment of both human and non-human actors, who are heterogeneous actants mutually interconnected to form actor networks (Nagm, F & Cecez-Kecmanovic, D 2008, Cited in Callon 1996; Latour 1986). Actor-Network Theory therefore considers all actants in a network, whether they are people, technologies, or documents, and can thus provide an effective platform to deal with this complexity (Quattrone & Hopper 2005, Cited in Latour 1999). In addition, Actor-Network Theory incorporates the principle of generalised symmetry which explains how human and non-hum actors that are integrated into a network should be assigned equal amounts of agency (Doolin & Lowe, 2002).

Chapman (2005) provides support for this notion of Actor-Network Theory, by adopting a Latourian approach to explore the implications of ERP systems for accounting and organisational control. Chapman concludes that ERP systems take their form through the decisions and resources of previous actors, subject to future decisions and resources that may transfigure them beyond recognition. Moreover, Chapman explains that by describing an ERP system as an actor that might seek allies to further its own ends, it considers the ways in which it might shape the actions and intentions of organisational managers through the systematic implications it brings to the management of organisational data. Alcouffe et al (2008) reiterates this, by stating that accounting technologies are not inert and explains that they have to be pushed and pulled by actors in order to diffuse the innovation.

Drawing on this notion of heterogeneous actants, we can further our understanding of management accounting and control in organisations that have adopted ERP technologies. Dechow & Mouritsen (2005) investigates TimeCorp and SpaceCorp, both of whom are widely recognised for their success with ERP systems. They found that both firms had experienced favourable effects from their SAP systems, such as improved precision and timeliness of information due to automatic and ongoing data reconciliation. Moreover, the systems also helped control inventories and provided upstream visibility in the supply chain which allowed them to make informed decisions about operations planning. Despite these favourable benefits, both cases illustrate that many of these material consequences of ERP systems arise only once the technology is made part of a larger network, thus implying that integration can never be based on technology alone. Instead, TimeCorp and SpaceCorp illustrate how integration is the responsibility of all the actors, as ERP systems condition various actors in different ways and can thus control the actions of individuals in an organisation. This was evident at TimeCorp, whereby the ‘product configurator’ was created in order to act as a supplement to support improved integration, thereby emphasising the importance of actants in a network.

Therefore, by drawing on Actor-Network Theory, one can gain an increased level of description which consequently provides enhanced precision and hence a new opportunity to aid our understanding of management accounting and control. However, although the suggestion that all actors are equal within a network may increase the level of precision and thus be deemed as strength of Actor-Network Theory, it should also be noted that this same suggestions has been subject to vast criticism. It has been argued that by suggesting the equality of all actors within a network, Actor-Network Theory does not account for pre-existing structures and therefore sees these structures as emerging from the actions of actors within the network. In addition, many researchers have criticised Actor-Network Theory for supporting symmetry between human and non-humans, by arguing that humans have superior moral status from machines and computers (Abdul, 2008).

In addition, the concept of translation is also fundamental to Actor-Network Theory and plays a crucial role in enhancing our understanding of management accounting and control in organisations. Translation is concerned with creating a central network in which stability and social order is achieved through continually negotiating and aligning an actor’s diverse set of interests with other actors in a network (Hanseth, 1998). Alcouffe et al. (2008) explains that the notion of translation can also been used to contribute to our understanding of how a division-wide management control system can be successfully diffused in a multinational enterprise. Hyvonen et al. (2008) investigates Alpha, one of the four divisions of the Papergroup enterprise; who are the largest paper producers in the world. Hyvonen concludes that the divisional controller at Papergroup was successful in diffusing both Phoenix and SAP R/3 management systems, as he was able to translate and align his diverse set of interests into other actors, thereby creating an actor network of heterogeneous allies.

In 1986, Michel Callon defined four moments of translation (Law and Hassard, 1999), which can be used to further our understanding of how Alpha’s divisional controller was able to successfully diffuse the division-wide management control system at Papergroup. Callon defines the first moment of translation as probelmatisation, which explains how there is a need for a focal actor to be identified, which in the case of Papergroup was the divisional controller. Moreover, it explains how the focal actor defines and identities the interests of other actors that are consistent with their own, which leads to the primary actor establishing itself as an obligatory passage point. This describes a situation where all the actors satisfy the interests that have been attributed to them by the primary actor (Callon, 1986). Secondly, interessement is concerned with motivating the interests of other actors and negotiating the terms of their involvement (Cited in Ezzamel, 1994). This was seen at the Papergroup, whereby the divisional controller presented his ideas to the two business controllers which lead to the continuation of the project, hence demonstrating the importance of interessement. Thirdly, enrolment explains how actors accept the role that has been defined for them by the primary actor (Stalder, 1997). This was once again evident in the case of Papergroup, whereby the mill controller volunteered the use of her mill as a pilot site. Finally, Callon’s fourth moment of translation is concerned with the mobilization of allies, which refers to the monitoring of the various interests so that they remain stable (Cited in Mouritsen et al, 2001).

Furthermore, the concept of translation is illustrated by the budget overrun at Papergroup. As a result of the increased need for consultancy, the project required more active participation from the divisions CFO. During the meetings with management, the divisional controller prepared a speculative presentation to convince senior management of the benefits of the project, which lead to the approval of extra funding and thus the actor-network expanded to include the senior managers. Therefore, Actor-Network Theory contributes to our understanding of how Papergroup’s divisional controller was able to create a forum in which all the actors agreed that the network was worth building and defending, through negotiating terms and aligning their interests with other actors.

Whilst it has been made apparent that translation can lead to the successful diffusion of a management accounting innovation, conversely, a management accounting innovation may fail if it is not supported by a network in which all its actor’s interests are aligned. This was illustrated by Alcouffe et al (2008), who used Actor-Network Theory to explore the failure of a management accounting innovation in France. Whilst Georges Perrin and his wife were aware of the benefits of acquiring allies for the diffusion of the Georges Perrin Method (GPM), due to their technical innovation being so unique in design, they were unable to interest other actors who could have been powerful allies in supporting their method. Moreover, Alcouffe et al (2008) states that for a managerial innovation to successfully diffuse, it is necessary to have a diversity of interessement modalities such as political, editorial or intellectual modalities. However, as GPM’s interessement modalities were only commercial, they did not permit other allies to be enrolled into the network, and thus translation could not take place and GPM failed to succeed. Therefore, this further demonstrates the importance of acquiring allies for initiating new management accounting innovations and control in organisations, indicating that technology alone is insufficient.

Both Papergroup and the case of Georges Perrin illustrate the importance of translation for the diffusion of an accounting innovation. Moreover, they illustrate how translation can strengthen an actor network through the incorporation of human and non-human allies. Alcouffe et al (2008) states that the construction of an actor network becomes successful once the accounting innovation becomes black boxed. This describes the moment at which all actors within a network become stabilized and the innovation acquires a solid and sound appearance. Moreover, the black box is sealed and the complex networks inside the box which is made up of human and non-human actors will not subsequently be questioned (Cited in Latour and Woolgar, 1979). This is illustrated by Alcouffe et al (2008), where they state that once the Sections Homogenes was inscribed in the Plan Comptable in 1947, any reference to the system of values that had supported its development was erased through collective amnesia. As a result, managers strive for their accounting innovations to become accepted by the organisation, so that it becomes black boxed and only the inputs and outputs of the system are deemed important, ultimately achieving improved efficiency. Whilst a black boxed accounting innovation, such as an ERP system, may host an array of benefits to control in an organisation, managers should act with care as reporting dimensions become carved in computer code (Deschow and Mouritsen, 2005), and thus they should be confident in its design. However, the merits of black boxing have also received criticism, as many argue that the pursuit of creating a black box can never be successful, as it is always possible to reopen and re-debate the black box (Deschow and Mouritsen, 2005). Nonetheless, the performance of a black box is thus influenced by the costs of re-opening it, or in the case of an ERP system, the costs of changing the system after implementation which is determined by both the human actors and technology.

Additionally, Actor-Network Theory provides an affective platform in which to explore the merits of control in organisations. Quattrone & Hopper (2005) illustrate this by investigating the implications of ERP technologies for management control at two multinational organisations. Sister Act, a Japanese MNO possessed an organisation structure which was characterised by complexity and distance. Sister Act realised that distance was not physical, but rather a social artefact and thus used SAP to reproduce existing boundaries and existing control methods, keeping the organisation structure intact. Although the SAP was not a vehicle for revolutionary change, it defined the centre and peripheries whereby the only space capable of overseeing the MNO was the centre, and thus its configuration created a unitary notion of space and time enabling action at a distance to continue. Consequently, this improved prevailing practices and enhanced the level of control at Sister Act.

In contrast, Think Pink, an American MNO used SAP to collapse functional barriers and distances between segments in order to enact integration based on real-time control. However, paradoxically, control suffered as the reorganisation of processes and structures failed to match responsibilities to accountability and thus eliminating distance did not centralise control (Quattrone & Hopper, 2005). Quattrone & Hopper (2005) explain that as a result of this impaired control, information could be accessed and inputted from different locations, for different purposes and so ‘everyone at Think Pink could slice the information as they wished’. As a result, this had significant implications for Think Pink; For example, the plant financial analysts tried to improve their unit’s performance by benchmarking their costs against those factories across the world without the centre or the other factory knowing. Hence, anyone with access to the ERP database could create information to suit his or her purpose and thus they stated that ‘everyone is an accountant now’. This illustrates the importance of forming a heterogeneous network of aligned interests in order to achieve control in an organisation. Therefore, by drawing on Actor-Network Theory, which places a fundamental emphasis on both human and non-human actors, it enhances our understanding of integration and control in organisations.

By examining the implementation of ERP technologies in several organisations, Actor-Network Theory has proved successful at rediscovering the connections that have been lost as a result of modernistic thinking. However, Actor-Network Theory has been subject to criticism, and thus this creates the opportunity for further research into social theory, such as an investigation into the extent to which Functionalism better contributes to our understanding of management accounting and control. Nonetheless, as Actor-Network Theory successfully breaks down the barriers of dualism between society and technology, it has provided a practical platform to understand the complex issues associated with information infrastructures. Hence, as Actor-Network Theory increases the level of description and precision, it provides a new opportunity to aid our understanding of management accounting and control in organisations that have adopted ERP technologies. Without this precision, Dechow and Mouritsen (2005) state that one will never get to understand the underlying infrastructure of the meeting point between technology and control. As Quattrone & Hopper (2005) suggest, shared databases which are simultaneously accessible from many locations fulfil the dream of many managers and accountants. However, this dream has not been shared by everyone, as Dechow & Mouritsen (2005) suggest that ERP systems only create ‘moderate impact’ as they are not typically designed with change in mind. Nonetheless, through exploring the merits of Actor-Network Theory, we have come to understand that for an ERP system to be given a fair chance at succeeding and initiating control within an organisation, all relevant actors must construct its meaning through translation and action, and this meaning must be continuously renewed in order to continue its existence socially (Hyvonen et al, 2008).