The role of budgets in organizations facing strategic change: An exploratory study

Recent attention in the general management literature has focused on mechan isms and processes used by organizations to respond and adapt to changes in their operating environment. There is, however, very little broad-based em pirical research examining the role that management accounting control syst ems can play in shaping organizational change. Much of the empirical resear ch to date has focused on the role of accounting as a diagnostic tool for a ssessing and rewarding managerial performance despite the recognition that accounting can serve as a dialogue, learning and idea creation machine (Bur chell et al., 1980. Accounting Organisations and Society 5,5-27). The purpo se of this study is to explore how accounting can serve this alternative ro le. We use (Simons, R. 1990.) Accounting Organisations and Society 15, 127- 143). interactive/diagnostic classification of management control systems t o capture how accounting can be used as a learning machine in the formulati on and implementation of strategic change. A theoretical model is developed to examine the relationship between strategic change, style of budget use and performance. It is argued that an interactive style of budget use can m itigate the disruptive performance effects of the strategic change process. The data, collected from Chief Executive Officers in 63 public hospitals, provide results that are consistent with our expectations. (C) 1999 Elsevie r Science Ltd.. All rights reserved.