management accounting and control system...
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Management Accounting and Control System Changes:
A Case Study of the Housing Authority of Fiji
by
Umesh Prasad Sharma
A thesis submitted in partial fulfillment of therequirements for the degree of
Master of Arts in Accounting and Financial Management
Department of Accounting and Financial ManagementThe University of the South Pacific
April 2000
Umesh Prasad Sharma
Declaration of Originality
I, Umesh Prasad Sharma, declare that this is my own work and that, to the best of my
lcnowledge, it contains no material previously published. Wherever materials have been
borrowed, due acknowledgement has been made in the text.
Umesh Prasad Sharma.
7 April 2000.
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Acknowledgement
The author is indebted to several people and organisations for their comments, assistance
and support in completing this thesis. I wish to acknowledge the continuous support and
guidance provided by my supervisor, Dr Ruvendra K.Nandan, throughout the period of
this study. Discussions with him on issues relating to my research topic and his
comments on all written work were very beneficial. His guidance in writing up this
thesis is appreciated.
I also wish to thank Professor Emeritus of Accounting, Mohan Lai of Massey University,
for providing constructive suggestions on the draft chapters, whilst being attached to our
university as a visiting professor for a brief period last year. His assistance was indeed
extremely helpful.
I am grateful to Dr Zahinul Hoque, Senior Lecturer in Management Accounting and
Public Sector Financial Management at Griffith University, for his comments on the draft
chapters of the thesis. I am also thankful to him for providing me with additional sources
of reference.
I am indebted to Professor Mick White, Head of Accounting at the University of South
Pacific, for providing constructive suggestions on the research proposal, and a chapter on
methodology.
I also wish to thank Professor Croz Walsh, the previous Director of Development Studies
at the University of South Pacific, for reading my research proposal and providing useful
feedback. I am also thankful to Dr Govind Prasad, for reading the chapter on
methodology and providing useful suggestions, while he was on a short-term contract as
Associate Professor in the Department of Accounting and Financial Management at the
University of South Pacific,
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I am also indebted to Mr Surait Lodhia, a colleague of mine for reading the thesis and
providing constructive suggestions.
I owe huge debts to the previous Chief Executive of the Housing Authority, Mrs Sereana
Qoro, for granting me access to and making available information required for this study.
I also wish to thank the Head Office Staff and the Branch Managers of the Housing
Authority in Lautoka for participating in interviews, providing appropriate data essential
for this study and their continued support during the period of the fieldwork. My special
thanks to Mr Ajay Singh, Mr Muazzam AH, Mr Jone Mika and Mr Asaeli Tokaiau.
The Public Rental Board staff were also very helpful in providing information. My
special thanks go to Mr Jese Gade, Dineswar Singh, Leonard Singh and Mr Patrick
Kusitiono,
The financial support provided by the University of South Pacific to cany out this
research is acknowledged with gratitude.
i wish to register my gratitude to my caring and supportive family- my wife Renuka
Sharma, and my two daughters Artika Sharma and Divya Sharma, for providing support
during my work on the thesis.
Finally, my parents deserve special mention for all they have given, and in making my
career possible. It is, however, sad to note that my mum passed away so suddenly while I
was still carrying out this research. It was her wish for me to complete this work. Hence,
I dedicate this thesis to my late mother, Lila Wati.
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Abstract
The thesis looks at the management accounting and control system (MACS) changes at
the Housing Authority of Fiji (HA) from the wider social and political dimensions. The
study attempts to obtain an in-depth understanding of MACS in operation, with, particular
emphasis on the changes during the last decade. It is argued that MACS as a social
practice and the changes therein are understood better in the context of the influences of
the structures of the wider social order within historical, social, political and economic
dimensions of the economy. Apart from identifying the influences of the wider
structures, it is aimed to probe and explain the underlying forces and processes which
were/are at work. The discourse of this thesis, its arguments and conclusions have been
constructed through an interpretive study of the HA.
This case study on the HA demonstrates that the wider social and institutional structures
have been influential in bringing about changes in MACS at the HA. It demonstrates that
the organisational and control changes at the HA were the separation of the Public Rental
Board from the HA, innovations in the Finance Division, introduction of Total Quality
Management and performance measurement. External factors such as the State, political
climate, aid agencies, external consultants and the Pacific Asia Quality Foundation were
deemed to influence the organisational and control changes at the HA. The changes
prompted the organisation to become self-sustaining, and corporatised.
The findings provided support to the three theories of Contingency, General Systems and
Institutional as the data collected influenced the development of these theories. A more
holistic understanding of the MACS changes have been enriched by these theories. This
study also 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 organisation.
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Table of Contents
Title page i
Declaration of Originality ii
Acknowledgement iii
Abstract v
Table of Contents vi
List of Tables and Figures xiii
Explanation of abbreviations and terms used xiv
Chapter One
Introduction
1.1 Background 1
1.2 Accounting Changes 3
1.3 The Choice of Empirical Site: The Housing Authority 5
1.4 Aims and Objectives of the Research 7
1.5 Organisation of the Thesis 8
Chapter Two
Theoretical Discussion
2.1 Introduction 9
2.2 Management Accounting and Control System Changes 9
2.3 Total Quality Management 15
2.4 Performance Evaluation 19
2.5 Theoretical Constructs 23
2.5.1 General Systems Theory 24
2.5.2 Contingency Theory 25
2.5.3 Institutional theory 27
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2.6 Summary 28
Chapter Three
Methodology and Research Methods
3.1 Introduction 30
3.2 The Issue of Methodology 30
3.3 Interpretive Approach and Case Study Method 32
3.4 Case Study Research in Management Control 34
3.5 Limitations of Case Study as a Research Strategy 35
3.6 Data Collection from the Study 37
3.7 Summary 39
Chapter Four
The Wider Structures and the Activities of
the Housing Authority of Fiji
4.1 Introduction 40
4.2 The physical and social environment 40
4.3 The Deed of Cession 42
4.4 An overview of Fiji's independence and afterwards 43
4.4.1 Independence 43
4.4.2 The political Development since Independence 43
4.4.3 The Military Coup of 1987 44
4.5 Economic policies and Social Factors 45
4.5.1 Culture of the Indigenous Fijians 45
4.5.2 The World Bank/Asian Development Bank 46
4.5.3 Global Trends 48
4.6 The History of Housing Authority 49
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4.7 Housing and other Activities of the Housing Authority 54
4.8 Organisational and Control changes at the HA 55
4.8.1 Separation of the Public Rental Board from the Housing Authority 55
4.8.2 Separation of the Lending Division from the Finance Division 57
4.8.3 Introduction of the Total Quality Management 57
4.8.4 Introducing Management to Contract System/ Performance Measurement 58
4.9 Summary 58
Chapter Five
Organisational Stuctural Changes: The Separation
Of the Public Rental Board from the Housing
Authority of Fiji
5.1 Introduction 60
5.2 Reasons for the separation of the PRB from the HA 60
5.2.1 The World Bank and the Asian Development Bank 60
5.2.2 Financial Constraints 63
5.2.3 Government Policy/Global Trends 66
5.3 Accounting Change at the HA 67
5.4 Separation and Staffing 70
5.5 HA and Uncertainty 71
5.6 Discussion 71
5.7 Summary 72
Chapter Six
Organisational Structural Changes: The Separation
Of the Lending Division from the Finance Division
6.1 Introduction 74
6.2 Background of the Finance Division 75
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6.3 Reasons for the separation of the Lending Division from the
Finance Division 76
6.3.1 Government Policy/Global Trends 77
6.3.2 The World Bank and the Asian Development Bank 79
6.3.3 Consultants 80
6.4 Background of the Lending Division 82
6.5 Banking arm of the HA 84
6.6 Lending Operation 85
6.7 Shortcomings of Lending Division 88
6.8 Discussion 89
6.9 Summary 90
Chapter Seven
Total Quality Management
7.1 Introduction 92
7.2 Background of Total Quality Management 92
7.3 Reasons for the introduction of TQM at the HA 94
7.3.1 Pacific Asia Quality Foundation 95
7.3.2 PAQF and Consultants 95
7.3.3 The Chief Executive 98
7.3.4 Government Policy 99
7.4 Effect of TQM 100
7.4.1 Benefits of TQM 100
7.4.2 Reluctance to TQM 103
7.5 Discussion 104
7.6 Summary 105
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Chapter EightPerformance Measurement
8.1 Introduction 107
8.2 Background of Performance Measurement 107
8.3 Contract on Performance Basis 109
8.4 Reasons for the introduction of performance contract 111
8.4.1 Internal Reasons for the Introduction of Performance Contract 111
8.4.2 External Forces for the introduction of the Performance Contract 113
8.5 Performance Indicators 113
8.5.1 Financial Perspective 115
8.5.2 Customer Perspective/Internal Business Perspective 117
8.5.3 Innovation and Learning Perspective 118
8.6 Resistance to Performance Contract 118
8.7 Limitations of Performance Contract 121
8.8 Discussion 122
8.9 Summary 123
Chapter Nine
Discussion
9.1 Introduction 125
9.2 Summary of Findings 126
9.3 Evaluation of Results 129
9.3.1 The General Systems Theory 130
9.3.2 Contingency Theory 137
9.3.3 Institutional Theory 144
9.4 Summary 147
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Chapter TenConclusion and Directions for Future Research
10.1 Introduction 149
10.2 Limitations of the Study 149
103 Directions for future research 151
10.4 Summary and conclusions 152
Bibliography 155
Appendices
Appendix 1 : Questionnaire 174
Appendix 2 : List of Interviewees 184
Appendix 3 : Map of Fiji 186
Appendix 4 : Population by Ethnic Origin and Sex at Successive Censuses: 1881
To 1996 188
Appendix 5 : Housing Amendment Decree 190
Appendix 6 : Fiji Housing Authority Organisation Structure 194
Appendix 7 : Organisation Chart
(a) 1988 196
(b) 1998 198
Appendix 8 : Finance Division's Organisation Chart before the Separation 200
Appendix 9 : Organisation Chart of the Lending Division 202
Appendix 10 : Lending Department's performance indicators 204
Appendix 11 ; Total Quality Management Sites allocation team; Unavailability
Of transport 208
Appendix 12 : Collection Efficiency 228
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Appendix 13 : FNPF Receipts 230
Appendix 14 :Sale of land targets 232
Appendix 15 : Sales of land targets 234
Appendix 16 : Sales of Houses- Targets 236
Appendix 17 : Cash and Village loans Disbursed targets/ Cash,
Village,Soft, Home Comfort, Quick Loans Approved targets. 238
Appendix 18 : Loan processing time by Division targets 241
Appendix 19 : Payroll reconciliation targets 243
Appendix 20 : General ledger and Mortgage closure. 245
Appendix 21 : Reconciliation Completed targets. 247
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List of Figures and Tables
Figures Page
3.1 The Subjective-objective dimension 32
8.1 Kaplan and Norton's four perspectives of performance
Measurement 115
9.1 Predictors of MACS changes in the HA 128
9.2 The Systems Universe 132
9.3 Interaction between the System and its Substantial
Environment 133
9.4 A Simple Linear Framework for AIS design 138
9.5 Contingency variables and MACS 139
9.6 The Contingency framework at the HA 142
Tables
5.1 Revenue and Expenditure Statement for the HA with
and without the rental estates. 65
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Explanations of Terms and Abbreviations Used in this ThesisADB ; The Asian Development Bank
Beche-de-mer : Sea slug, which is a Japanese food delicacy
Blackbirding : Where the natives were kept as slaves to work for early planters and
settlers.
Cakobau : A high ranking Fij ian chief
FDB : the Fiji Development Bank
FEA : the Fiji Electricity Authority
Fiji Employers Federation : An organisation of all the employers in Fiji.
Fijians : The natives of Fiji
FNPF : the Fiji National Provident Fund
Girmit : Agreement under which Indians came to Fiji as indentured labourers
Gujerati : Indian business community from Gujerat State in India
HA : The Housing Authority of Fiji.
Hindus : Religion of Indo Fijian believing in Lord Rama
IKA Corporation : Fish canning Company
IndoFijians : Migrants from India under the indenture system
ISO 9000 : International Standards for Organisations. This is a quality accreditation
for organisations who exhibit certain quality products and services.
KPMG : A Chartered Accountancy firm in Fiji
MACS : Management Accounting and Control System
Mataqali : Sub-clan or extended family unit owning the land
Melanesian : First Fijians to settle in Fiji, they came from the West of the country
Muslims : Religion of Indo Fijians believing in Prophet Mohammed
NBF : The National Bank of Fiji
Native Land Trust Board : Trustees of the native lands in Fiji belonging to the indigenous
Fijian landowners.
PAQF : Pacific Asia Quality Foundation
Polynesian : Second wave of Fijian settlers from South and East of the country
PRB : Public Rental Board
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Punjabis : Indian community originating from Punjab State in India.
RBF : Reserve Bank of Fiji
Rotumans : People of the island of Rotuma
Tax free factory : A manufacturing company exempted from taxation if 95% of its
products are exported overseas.
Telecom : Telecommunications Ltd
TQM ; Total Quality Management
U.K : the United Kingdom
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Chapter One
Introduction
1.1 Background
There are a diversity of influences which change accounting and control systems in
organisations (Scapens and Roberts, 1993; Hoque and Hopper, 1994, 1997; Burchell et
al., 1980; Neimark & Tinker, 1986; Broadbent and Guthrie, 1992; Broadbent, 1999;
Otley, 1994). These influences include the historical, social and political dimensions of
the economy within which organisations are embedded. Thus, accounting practice as a
social construct can be understood by exploring the historical development of accounting
and identifying the various influences of accounting change (Scapens & Roberts, 1993;
Luft, 1997). The historical, organisational and economic perspectives offer explanations
of the emergence of organisational accounting and the reasons for their change
(Hopwood, 1983, 1999).
Changes in society create changes in organisations. We are currently in a technological
world. Consequently, most organisations are moving away from manual data processing
to computerised data processing. Further, competitive pressure from the rival would also
alter the operations of organisations. Organisations will carry out changes in
management accounting and control systems (MACS) so that they remain viable, and can
compete successfully with their rivals. The changes as Broadbent and Guthrie (1992)
argue, in the public sector context, are geared towards promoting efficiency,
effectiveness, cost saving and streamlining managerialism. With the changes, a firm's
internal accounting and control mechanisms may undergo changes (Hoque and Alam,
1999). An organisation's MACS is expected to provide timely, accurate, reliable and
relevant information on performance. With the appropriate innovations, a firm's
performance will improve. This would in turn facilitate the organisation to be viable and
compete successfully with its rivals.
External aid agencies also play a vital role in changing MACS operations. In certain
countries like Bangladesh (see Uddin and Hopper, 1998), the external agencies have
recommended economic liberalisation and privatisation for the country's ailing economy.
This impinges on the organisation as well, as the State tries to convert state-owned
corporations to private companies. Such were also the findings in Fiji's context of Fiji
Pine Ltd (see Achary, 1998a).
This thesis attempts to obtain an in-depth understanding of MACS in operation, with
particular emphasis on the changes during the last decade in a public sector organisation,
the Housing Authority of Fiji. It is argued that MACS as a social practice and the
changes therein are understood better in the context of the influences of a wider social
order within the historical, social, political and economic dimensions of the economy.
Apart from identifying the influences of the wider structures, it is essential to probe and
explain the underlying forces and processes which were/are at work. These underlying
forces are the historical, social and political dimensions of the economy, while the wider
structures are the land issues, racial discrimination, political issues, the indigenous
government, the culture of the indigenous Fijians, aid agencies like the World Bank and
the global trends within which organisations are embedded.
Accounting has to be seen as a social process in the wider social and economic context
(see Hopwood, 1987, 1989a, 1989b, 1999; Neimark& Tinker, 1986;Burchell et al; 1980;
Miller & O'Leary, 1990; Scapens & Roberts, 1993; Hoque & Hopper, 1994,1997; Hoque
and Alam, 1999; Luft, 1997; Smith, 1998; Llewellyn, 1994; Achary, 1998b; Nandan,
1997a, 1997b, 1998a, 1998b). Studies such as Hoque and Hopper (1994), Scapens &
Roberts (1993) and Uddin & Hopper (1998) found that the influences such as global
trends, wider donor agencies like the World Bank and the political influences facilitate
changes in MACS; and as such an organisation could not be separated from the wider
social context in which it is embedded. Therefore, accounting is seen as a phenomenon
subject to the influences of both the particular organisation and the wider social context
in which it functions (Hopwood, 1983, 1999; Broadbent and Guthrie, 1992; Broadbent,
1999). This goes on to show the interdependency of the organisation and the social
world. Although the social factors are external to an organisation, they tend to shape the
workings of the MACS in an organisation. One needs to understand the interplay
between these factors to comprehend the context in which MACS operates in an
organisation.
The privatisation of public sector organisations, for instance, is a global trend.
Consequently, influenced by this global trend the Government introduced the
corporatisation policy in Fiji. The exercise was geared towards making public sector
organisations more transparent and accountable to the public, consequently promoting
efficiency in the organisation. The privatisation program aims to see the withdrawal of
the government from public enterprises. Thus various Public Sector organisations in Fiji
have been subsequently commercialised, and are due to be corporatised. In order for the
organisation to be fully corporatised, some compelling changes in MACS were executed
to facilitate this process. This was facilitated through the changes that were taking place
in society contemporaneously.
The ensuing paragraphs consider some of these accounting changes in depth.
1.2 Accounting changes
The broader social pressures are likely to accelerate accounting changes. Recent research
has illustrated that management practices and structures in organizations are reflections of
wider social structures, institutions and ideologies (Broadbent and Guthrie, 1992;
Broadbent, 1999; Hopwood, 1999). It is argued that these factors fitter into daily
organizational setting affecting managerial decision making and control. Information
flows from the organisation to its environment, and society has impact on the functioning
of organisations. The changes in society affect the functioning of organisations. There
are a vast range of contingent factors which influence accounting change (see Otley,
1980; Burns & Stalker, 1961; Hoque & Hopper, 1997; Burrell & Morgan, 1979). These
factors are the social, political, economic and technological ones. Accounting is no
longer seen as a technical activity, but one where various social, economic contexts are
intertwined (Burchell et al; 1980; Broadbent & Guthrie, 1992; Broadbent, 1999;
Hopwood, 1983, 1999).
The analysis of internal accounting change needs to take seriously the complex network
of political and cultural debates within which accounting is embedded (Miller & O'Leary,
1990; Burchell et al., 1980; Broadbent and Guthrie, 1992). A complex web of social
process comprise accounting change. Such reproduction of social practice is historical
and contingent. For instance, Scapens and Roberts (1993) cite the case of Omega, a large
U.K based multinational company, facing international competition, and indicated that
the increasing import penetration of the U.K put the company's profit and cash flow
under pressure. A production cost control project (PCCP) was implemented in the
organisation in light of growing uneasiness about the quality of information being
received from unit companies. However, the PCCP was eventually abandoned because
of the growing resistance from the workers and the turnover of project leaders. The
accounting change, however, came about as a result of Omega's wider organisational and
historical contexts.
Thus, organisations are viewed as a open system, interacting with its wider environment
(Otley, 1989). Hopwood (1989a) further posits that accounting cannot be divorced from
the social relations which accompany its emergence and functioning. Accounting is seen
as an important means by which an organisation has been incorporated into the realm, of
social, and is seen as being merely reflections of wider and underlying social interests.
Further, accounting policy is political in that it derives from the political struggle in
society as a whole, but also the outcomes of accounting policy are essentially political in
that they operate for the benefit of some groups in society and to the detriment of others
(Cooper and Sherer, 1984). Racial discrimination, is common in certain societies (see
Nandan, 1997a, 1997b; Kumar, 1997; Naidu, 1992). The government policies in these
societies tend to also promote the interest of one race against the other. For example, in
Fiji's case the government has a positive discrimination policy in favour of the
indigenous Fijians. The Indo-Fijians, on the other hand, are discriminated against,
although in terms of population, numerically they are almost the same as the indigenous
Fijians,
The wider social, economic, political and institutional contexts govern the ways
management control operates in the organisation (Hoque and Hopper, 1994, 1997). Their
case studies demonstrated that the nationalised jute mills of Bangladesh have continually
faced an uncertain environment with respect to markets, resource constraints, operation,
politics, industrial relations, state interference and the demands of aid agencies.
Accounting is implicated in both organisational and social practice (Burchell et al., 1980;
Hopwood, 1983; Hopwood, 1989b, Dent, 1991). Political disturbances did have serious
implications on the running of jute mill in Hoque and Hopper's (1994) case. Their case
of Jute mill indicated that the government, forced by donor agencies, plan to declare
redundancies in the public sector. The financial reporting system in the mill legitimised
the organisation in the face of external demands. Hoque and Hopper further argue that to
achieve a fuller appreciation of innovation one needs to identify the diverse events- that
is, how institutional, technical, political factors are linked together to provide the
conditions which make certain types of innovations possible.
The present case study demonstrates that the wider social structures have been influential
in bringing about changes in MACS at the Housing Authority of Fiji (HA hereafter). The
discourse of this thesis, its arguments and conclusions have been constructed through an
interpretive study of the HA. The study examines the influences or pressures of the wider
structures in bringing about changes in MACS at the HA. A national policy on public
sector reform eventuated in Fiji. This was influenced by a global trend. Consequently,
the HA was restructured, so that it shortly becomes corporatised. Financial performance
indicators, Total Quality Management (TQM), innovations in Finance Division,
separation of the Rental Board from the HA came up as a result. These are discussed in
depth in later chapters.
Consequently, an overriding decision immediately after the financial restructuring was to
seek objectivity within the organisation. In Broadbent and Guthrie (1992), the thrust of
the change was geared, towards reducing costs in the name of economic rationalism. By
installing a new calculative vocabulary of efficiency, costs and value for money, the
public sector institutions' operations may change. The new accounting is one of
measuring and recording the elements of efficiency, cost savings, productivity and
performance (ibid, 1992).
The ensuing paragraphs consider the reasons for the choice of the empirical site- the HA
of Fiji.
1.3 The Choice of the Empirical Site: The Housing Authority of Fiji
The HA was selected for this study because of its significant role in providing housing for
low-income earners. There was growing urbanisation in the early 1950's together with a
growing concern for poor housing conditions for the lower income earners. This led to
the establishment of the HA through the promulgation of the HA Act in 1955. It caters
for the needs of the lower-income earners through its head office in Suva, and the two
branches in Lautoka and Labasa. The data for this study have been mainly derived from
the head office in Suva, and the branch in Lautoka. Data have not been gathered from the
branch in Labasa because of its geographical isolation, and the mode of transport would
be through aeroplane, which would be expensive. The HA is a source of relatively well-
paid employment for the people of Fiji, and employs 151 workers. The organisation is
expected to be both economically viable and welfare oriented.
The military coups of 1987, however, have had several unintended consequences on the
Fijian State, economically, socially and politically, including their adverse effects on
public and private sector enterprises. The economic viability of the HA was at stake after
these events. Consequently, it was agreed upon to study MACS changes in a housing
institution (HA) which has gone through very difficult times during the last ten years or
so, but still continues to survive. Also, as there has not been any study on management
control changes in the HA so far, it is important that this study be undertaken to
understand how this organisation remains viable despite very difficult times.
Further, most changes were expected to yield efficiency in the organisation's operation.
For instance, the TQM facilitated the organisation to be "customer focussed." The
separation of the Public Rental Board from the HA enabled the latter to enjoy profit, after
suffering losses when they were together. Inevitably, the Lending Division became more
efficient after being separated from the Finance Division.
The HA was also chosen for an in-depth investigation because it had MACS changes in
place and agreed to participate in the study. Information was easily accessible at the
organisation, Approaching the head office of the organisation at Valelevu was
convenient as it was in close proximity to the University, where I work.
The next few paragraphs consider the aims and objectives of the research.
1.4 Aims and Objectives of the Research
Aim
The aim of the thesis is to gain a fuller understanding of the various re-organizations and
changes in MACS. The overall impact of social, political and economic pressures on the
organisation will also be explored.
Objectives
The main objective of the research is to understand how the wider social and institutional
factors have impacted on the changes in MACS at the HA. The research further explores
the reasons for the separation of the Public Rental Board from the HA, and the separation
of the Lending Division from the Finance Division. It also identifies the reasons for the
implementation of the TQM and the management performance based contract. The
research further identifies whether the HA was able to achieve improved profitability
with the changes, the forces behind these changes, the reaction of employees to these
changes, and the impact of the Government on the organisation. The thesis also aims to
provide support to the theoretical constructs of General Systems, Contingency and
Institutional theory.
The study, through the above objectives would ensure that the reforms are adequately
evaluated, and have been implemented with economic rationality. This would prove to
be beneficial not only to accounting, but also to the wider society which accounting
serves. Also, by investigating MACS changes in a public sector-HA, this study adds to
the limited knowledge of MACS in developing economies, which has been a neglected
area of accounting research (see also Hoque and Hopper, 1994, 1997). The MACS
changes in the name of economic rationality will facilitate the survival and continuity of
the HA despite being faced with difficult times. The HA has been a major source of
relatively well-paid employment for those who have jobs with it.
1.5 Organisation of the Thesis
In concluding this chapter, a summary of the organisation of the thesis is provided. This
chapter discussed the diversity of influences which shape accounting and control systems
in organisations. It also stated that accounting needs to be seen in the wider social and
economic context, and is implicated in both organisational and social practice (see
Burchell et al; 1980; Hopwood, 1983, 1987, 1989a, 1989b, 1999; Hoque and Hopper,
1994; Dent, 1991; Neimark and Tinker, 1986). In the second chapter the relevant
literature on MACS changes is considered. Chapter three introduces interpretive
approach for carrying out the research. Chapter four introduces the structures of the
wider social order within which the HA is embedded, such as the social, economic,
political and cultural dimensions in their historical context. In chapter five, the changes
of the separation of the Public Rental Board from the HA are considered. Chapter six
sees the changes in the separation of the Lending Division from the Finance Division.
Chapter seven studies the introduction of the TQM. Chapter eight sees the introduction
of management contract and performance indicators at the HA. Chapter nine discusses
the findings of the case in relation to the theories of General Systems, Contingency and
Institutional. Chapter ten, as the final chapter, draws conclusion with respect to the wider
social factors influencing changes in MACS at the HA.
Chapter Two
Theoretical Discussion
2.1 Introduction
Having set out the aims and objectives of the research in the previous chapter, this
chapter intends to explore the relevant literature on MACS changes, both internationally
and within the local environment. The MACS changes in an organisation as seen earlier,
are basically brought about through environmental and institutional factors. Advances in
technology, a part of environment, for instance, impacts on organisations as the latter
have to adapt to the new technology, in order to survive. Historical factors are also
essential in determining the organisational changes, as organisations are embedded in
historical and sociological factors. History is quite essential in comprehending the
contemporary setting. The following paragraphs consider the MACS changes.
2.2 Management Accounting and Control System (MACS) changes
A large number of studies in management accounting have concluded that the success of
management control system impinges upon the wider social, historical, political and
cultural factors that are external to an organisation (Hopwood, 1987; Neimark & Tinker,
1986; Burchell et al; 1980; Miller & O'Leary, 1990; Scapens & Roberts, 1993; Hoque &
Hopper, 1994, 1997; Smith, 1998; Llewellyn, 1994; Achary, 1998b; Nandan, 1997a,
1997b, 1998a, 1998b; Miller, 1994; Laughlin & Lowe, 1990; Broadbent & Guthrie, 1992;
Broadbent, 1999; Chenhall and Langfield-Smith, 1998a; Dent, 199.1; LaAvrence, 1999;
Ogden & Anderson, 1999; Cobb et al; 1995), These wider factors bring about changes in
MACS in organisations. Further, 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). Similarly an understanding of history is of significant importance in
understanding the MACS changes. Historical research has the potential to make
contributions to the understanding of present day practices, especially that in
management accounting as they have been influenced by the historical work (Luft, 1997;
Gaffikin, 1998; Merino, 1998). Likewise an appreciation of political factors is essential
in comprehending the extent to which these will influence the operations of the MACS
(Cooper & Sherer, 1984). Political influences have shaped MACS in organisations (see
Hoque and Hopper, 1994, 1997; Nandan, 1997a, 1997b; Uddin & Hopper, 1998).
As individual firms strive to construct more profitable conditions for themselves, they
introduce technological,, social and organisational innovations which, if they are
successful, are adopted by other firms, and collectively transform the social context in
which they are situated and hence their existence as well (Neimark & Tinker, 1986;
Hopwood, 1978, 1989a, 1989b, 1987). The increasing pace of change and the growing
size and complexity of organisations have created a need for more rapid and sophisticated
accounting and information system developments. Increasingly, therefore, business and
public organisations have turned to outside consultants and researchers, for help
(Hopwood, 1978). The external consultants suggest changes for a more efficient running
of organisations. Thus, it can be said that they are catalysts to MACS changes as well.
A diversity of influences shape an organisations accounting system (Scapens and
Roberts, 1993). It has been argued elsewhere that all reproduction of social practice is
historical and contingent. The social, political and economic factors are seen as being
able to provide bases for accounting change (Hopwood, 1989a, 1989b, 1999; Llewellyn,
1994; Achary, 1998b; Dent, 1991; Broadbent et al; 1991; Burchell et al; 1980; Robson,
1991; Broadbent & Guthrie, 1992; Jones, 1992; Broadbent, 1999; Innes & Mitchell,
1990). They play a significant role in influencing the course of transformation.
Hopwood (1987, 1989a, 1989b, 1999) sees accounting in its organisational context, and
how it is implicated in organisational change.
Further, in their case study of Omega, Scapens & Roberts (1993) found that external
pressures contributed to a reproduction of economic concerns within Omega as
managerial policies and practices came to be expressed in the language of accounting
(Scapens & Robert, 1993). A production cost control project (PCCP) was implemented
in the organisation, which was claimed to improve the information concerning productive
activities in operating units and its communication to divisional managers. Scapens and
Roberts cite Hopwood (1987) in that external competitive pressure contributed to a
reproduction of economic concerns within Omega as managerial policies and practices
10
came to be expressed in the language of accounting. Hopwood (1987) carried out a case
study research for the three companies, M, Q and Wedgewood. He found that company
M's accounting system underwent a change because of severe competition from Japanese
firms. Similarly another manufacturing company Q, also faced extreme market
turbulence and change. The emergence of a new accounting system was observed. Thus,
an appreciation for accounting has been shown as being able to be grounded in the
circumstances in which it occurs (Hopwood, 1987). However, in Scapens and Roberts
case, the PCCP was abandoned later because of strong resistance received from its unit
managers, and also due to the project being done by a non-Omega person, The turnover
of project manager further exacerbated the PCCP to be abandoned.
The wider social, economic, political and institutional contexts govern the way
management control operates in organisations (Hoque & Hopper, 1994, 1997; Hoque and
Alam, 1999). In Hoque and Hopper's (1994) case study, the external aid agencies and
the state were major influences in management controls. Their paper drew from research
in a Bangladesh Jute mill, which has gone through intense changes through wider social
and unstable political condition. Further, Hoque and Hopper's (1997) study of budgeting
characteristics in the nationalised jute mills of Bangladesh found that five external factors
(political climate, industrial relations, competition, aid agencies and government
regulations) were deemed to affect budget-related factors such as participation,
accountability for budget, budget evaluation, budget analysis, interactions among
managers and budget flexibility. The analysis of data revealed a significant relationship
between environmental factors and budget- related behaviour. Political factors, industrial
relations and market competition were major influences on how budgeting systems were
perceived, Evidence also showed that the extensive budget within the Jute mill owed
much to the pressure of aid agencies-often they were a condition for further funding.
Likewise, Uddin and Hopper's (1998) case study on Bangladeshi Soap Opera revealed
that large public sector deficits were a source of state financial crises and became
identified as an impediment to economic development by the World Bank and the IMF.
The latter has come to see economic liberalisation and privatisation as a solution.
Consequently, the Bangladeshi government, influenced by the aid agencies, has adopted
programmes of privatisation. The assumption is that an infusion of private property
rights into failing public enterprises will increase their efficiency vis-a- vis better controls
11
leading to greater allocative efficiency in capital investment, increased government
revenues, employment creation and improved managerial technologies. The findings,
when the Soap Opera was a public enterprise, demonstrated that politicians frequently
intervened in the management of public enterprises: even labour appointments and
promotions are political. The poor public sector performance was a result of poor
government decisions, managerial failure and political interference, Consequently, the
Soap Opera had politicised management and bureaucratic control systems. Nevertheless,
after privatisation, cost reduction became the main language of the Managers of the
Opera. Redundancy programmes were the main source of cost reduction aided by cuts to
benefits and allowance. Top management used physical budget figures to evaluate the
performance of production managers. The top management, who were also the owners,
were the final authority on recruitment, punishments, promotions, dismissals and all other
company matters including budget targets and performance appraisal. Almost 75 percent
of the workforce were made redundant, which comprised 700 permanent employees,
including leaders of trade union factions. The top management also withdrew financial
benefits such as provident fund contributions, bonuses and the workmen participation
fund. In their weakness, the trade union leaders allowed to remain by management
pursued a more managerialist conception of an internal state, using the language of
accounting to justify their actions. Trade union leaders considered accounting language
important.
A case study by Laughlin et al. (1994) of General Medical practitioners indicate their
practices have been subject to a wide range of mandatory administrative and financial
changes in the last few years. Some of the changes included medical audit, and the new
general practitioners contract. The aim of the contract was to bring health promotion and
disease prevention within general medical services, and make remuneration dependent on
performance. These accounting changes have occurred globally (Laughlin et al; 1994).
Global trend is considered to be providing a critical influence in MACS changes.
Nandan (1997b) in the local context case on the Fiji Development Bank (FDB) argued
that race and ethnicity, as a feature of the wider structures, is inscribed in the daily life of
the activities of the FDB. He was arguing on how accounting is embedded in the socio-
political context. The higher echelon of the bank is dominated by the Fijians, whereas at
the middle and lower levels, racial balance has been more or less maintained. The FDB
12
is a development bank catering for the needs of the indigenous people, its policies are
racially sensitive and contribute to the racial tensions and conflicts that exist in the Fijian
society. The Fijian society is such that racial tensions and conflicts are inherent in its
daily life. Consequently, the society influences the policies of the organisation and
contributes to the establishment of such forms of domination structures of the indigenous
people. It is also one of the influences in bringing about changes in MACS.
Further, Achary (1998a) carried out a case study in the local context on the Fiji Pine Ltd
to show accounting's Fijian contextual embeddedness. There was dissatisfaction with the
financial performance of the Fiji Pine Ltd by both internal and external stakeholders.
Consequently, this led to the corporatisation of the Fiji Pine Commission to Fiji Pine Ltd.
More objective measurement techniques were implemented in the organisation including
performance measurement targets where the workers relate the financial spending to the
actual achievement. This was to reduce waste and improve efficiency within the
organisation. The major influence on privatisation was due to global trends. Public
sector organisations internationally were being privatised through the public sector
reforms.
To achieve a full picture of innovation, one needs to identify the ways in which diverse
types of events - institutional, technical, political, moral are linked together to provide
the conditions which make certain types of innovation possible (Miller & O'Leary,
1990). All innovations are embedded on institutional and political factors. The global
trends of public sector reform seem to be creating innovations in organisations. These
reform programmes are normally advised by donor institutions such as the World Bank
and the Asian Development Bank in developing countries (see Nandan, 1999).
Countries, which have committed to structural adjustment programmes with these
institutions, may face the pressure to introduce reforms. Consequently, the state tries to
convert its public sector organisation into private ownership through these reform
programs. The changes are carried out so that the organisations become more efficient
and cost effective.
Atkinson et al. (1997) argue that several countries in Eastern Europe, Taiwan and India
are restructuring their economy. Large-scale privatisation of state-owned enterprises
have made their economy more competitive. Further, privatisation represents a potential
13
revolution in the role of government in promoting economic growth and development
(Zemko and Cincotta, 1998). They argue that a recent study by the World Bank state that
more than 6800 state-owned enterprises have been privatised around the world since
1980, with more than 2000 of these in developing countries. Countries with broad
differences in wealth, degree of indusrialisation and even culture-from Great Britain to
Ghana, from Poland to Pakistan, from Argentina to Algeria- have embarked upon this
path, with some of the countries enjoying considerable success in their privatisation
efforts.
Public sectors are privatised in the quest for the government to reduce its consumption of
resources, and allow the private sector to operate efficiently and function as the engine of
growth for the economy. Experience has demonstrated countries relying on the private
sector to generate economic growth have fared better than countries that have relied on
the public sector to do so (Zemko and Cincotta, 1998). Ogden and Anderson (1999)
examine the strategic change involved in the transformation of a public sector Water
Authority into a private sector Water plc. Managers in the new Water plcs have had to
respond to new expectations of corporate performance from shareholders, investors and
financial analysts. In pursuit of improvements in efficiency and profitability, senior
managers undertook a variety of restructuring, and moved away from a public sector
bureaucratic management with tall-pyramid structure to flatter and less hierarchical
management structures. The authors argue that privatisation provides a rich state for
studying the constitutive role of accounting in organisational change. Substantial
organisation resources were devoted to introduce performance indicators and output
measures, which would show managers greater accountability. The vocabulary of profit
replaced the previous vocabulary of costs. Senior managers had a new language for
describing organisational objective- that of profit. There were a lot of emphasis on the
achievement of organisational targets. The profit contribution of the business was
dependent on managing costs. As a result, there have been a greater reliance on
performance targets and budgeting controls in Water plc.
Lawrence (1999), in the New Zealand context, reviews the way the public sector has been
seen through a market-based economic and accounting logic. The paper considers a case
of New Zealand Health service. The public hospitals were transformed into commercial
enterprises called Crown Health Enterprises (CHES), with requirements to operate as
successful and efficient businesses. Patients were reconceptualised in a business
language as clients or customers and were seen as a source of revenue. The aim of a
hospital was conceived as achieving increasingly productivity. This was essential to
eliminate inefficiencies and to ensure business survival and growth. The CUES were
expected to earn a return on assets involved. A wider range of performance indicators
were introduced as well, which were geared towards making them more customer
focussed, quality driven and efficient. This was expected to ensure the survival and
continuity of CHES.
Consequently, at an organisational level, it is now widely accepted that successful
organisations develop and maintain a customer focus and reduce response time to
customer requests. Total Quality Management (TQM) exercise facilitates this. This has
been influenced by a global trend.
Thus the ensuing paragraphs discuss the TQM conception.
2.3 Total Quality Management
The adoption of TQM includes participation of all members in the organisation in the
drive for continuous improvement, elimination of waste and a focus on customers. It has
been suggested that the TQM may be viewed as a programme to change an organisation's
corporate culture (Lord, 1998, Wilkinson & Witcher, 1993). All the members in the
organisation have to work as a team to strive for the common goal of the organisation.
They need to realise how important each one of them is for the organisation.
Historically the key objectives of managers in the UK and Western Companies have been
to enhance the profits of their organisation and to grow the value of the business for its
shareholders (Grant, 1995). The pertinent focus in the approach is customer satisfaction,
driving for continuous improvement and motivating all employees to contribute
proactively to this (see Johnson, 1994; Shank and Govindarajan, 1994; Powell, 1995;
Chenhall, 1997; Maloney and Stower 1999). This is expected to produce sustained
competitive advantage and improved profitability.
15
The past decade has seen many firms adapt TQM as a way of improving profits, market
share and competitiveness (Fowler, 1996; Johnson, 1994; Powell, 1995; Shank &
Govindarajan, 1994; Maloney & Stower, 1999). Quality is a potent weapon in
competition, sometimes more effective than price (Lai, 1990). A satisfied customer is the
best indicator for the quality image of any business. Customer satisfaction would boost
business sales and profitability situation. The customer is the major focus of all
businesses. All functions such as design, production and distribution aim to secure his
pleasure (of course at a cost), by the satisfaction of his needs. Therefore, his reaction to
any product plays a vital part in moulding the quality of a product (ibid, 1990). The
concept of TQM is basically very simple. Each part of an organisation has customers,
whether within or without, and the need to identify what the customers' requirements are,
and then set about meeting them, form the core of a total quality approach (Oakland,
1989). The critical element is customer satisfaction as this boosts business, and
consequently the value of the firm.
The most effective means of stimulating interest in quality and creating pride in
workmanship is by direct involvement of the workers in the quality improvement
programmes. Participation can be expected only if employees are given full opportunity
to express constructive criticisms and suggest methods of improvement (Lai, 1990). The
workers need to form quality teams, and need to express their views freely, particularly
with regards to the work problems and how they can be resolved. In no case should any
suggestion be just brushed aside, because it looks absurd. In fact workers should be
encouraged to offer any solution, which comes to their mind without fear of being
ridiculed.
The literature on the TQM highlights the importance of top management involvement as
a change agent in the introduction and establishment of the TQM in their organisation
(e.g. Oakland, 1989; Fowler, 1996; Lai, 1990; Wilkinson & Witcher, 1993; Powell, 1995;
Maloney & Stower, 1999). Oakland (1989) argues that a way to accomplish TQM is to
issue a total quality message that clearly states top management's commitment to TQM
and outlines the role everyone must play. This will enable workers to take the concept
seriously since it originates from the top; which shows the seriousness of the top
management in implementing the concept.
16
Many New Zealand firms have adopted new management philosophies (Fowler, 1996;
Thomson & Thomson, 1995; Hoque & Alam, 1999). To assess the attitude towards TQM
in New Zealand firms, Fowler (1996) conducted an exploratory mail survey. The survey
was sent to non-random sample of 48 New Zealand companies that were thought to have
implemented the TQM. The response rate was 94 percent. TQM is a relatively new
practice in New Zealand: 86 percent of the survey respondents started implementing
TQM only recently. TQM has been implemented because of the competitive nature of
businesses in recent years. Fowler's findings revealed that the management accountant
needs to develop and use tools that will measure customer satisfaction, employee
satisfaction, project performance, quality improvement and the firm's cost of quality. In
the UK situation, Royal Mail and Post Office counters were among the earliest users of
this approach and it has been instrumental in achieving major business improvements
(Grant, 1995).
Lord (1998) conducted TQM research in two unknown firms of A and B. Firm A had
been practising TQM since 1991. Before the introduction of TQM, the working
environment was described as "a dictatorship" and a "Dickensian workshop-no chrome,
dingy dark" (p.3). A change agent, Peter, was employed as plant manager to effect the
change to TQM. He used many symbols indicating that there was no hierarchy with the
TQM system. At both firms employees were rewarded for employee involvement. For
instance, at both venues, there was a free barbecue lunch for all staff after the business of
introducing a new model (ibid, 1998). TQM was successful in firm A, However, in firm
B, there was a strong resistance to TQM because of the dominant personality of the
owner. As a result, TQM was unsuccessful in this firm.
Hoque and Alam's (1999) findings revealed the institutionalised roles of TQM in a New
Zealand Construction company, DTL. The results suggested that organisations initiate
TQM practices to promote institutional and quality culture. The Institutional theory
identified significant external institutional factors such as market pressures, competition,
customer expectations, professional associations influencing the adoption of TQM.
Fierce competition and customer expectations with regards to quality compelled most
New Zealand firms to focus on ISO certification and TQM adoption. Indeed, DTL
wanted to be known for quality in its area in Hamilton. The city council, which has been
one of the clients of DTL, preferred DTL tenders because of their quality improvement
17
programmes in place, Most of the DTL competitors had TQM in place, so the company
had to adopt it too.
The increased demand for the implementation of TQM policy by DTL also came from
various national bodies such as city councils, quality award foundation, institute of
engineers, and so on. To be profitable and to remain competitive in the market, DTL had
to adopt TQM to satisfy their customers. With the TQM in place, DTL experienced an
increase in the construction work undertaken, in productivity and in profits.
The basic lessons that those companies with most success in TQM have learned can be
summarised as follows:
1. TQM is hard work.
2. To establish TQM takes longer than first thought.
3. TQM needs to be driven by the strategy through the whole business.
4. Top and middle management commitment is vital.
5. TQM champions must balance their enthusiasm with practicality
6. Institutionalism in TQM practices
(Oakland, 1989; Hoque and Alam, 1999).
In the new business environment of quality management, companies need to take a more
flexible approach to performance measurement within the firm. They should include
both financial and non-financial measures and incorporate, into their performance
measurement system, the key factors of quality, customer satisfaction and productivity
(Fowler, 1996; Ittner et al; 1997; Chenhall, 1997; Chenhall & Langfield-Smith, 1998b;
Ittner & Larcker, 1997; Shank & Govindarajan, 1994).
Ittner et al.'s (1997) finding reveal that non-financial measures increase with firms
following an innovative-oriented strategy and the adoption of quality initiatives. Such
non-financial measures entail efficiency/productivity, product quality, customer
satisfaction and employee satisfaction, They argue that the competitors' strategy can be
seen as a continuum between two different strategic orientations. At one end,
organisations are seen as prospectors, that is, those willing to undertake innovations. At
the other extreme, firms are characterised as defenders, or those that demonstrate a cost-
leader strategy. The findings reveal that prospector firms rely more on non-financial
;emeasurement (e.g. new product or personnel development). The authors also articulat
that the TQM philosophy has prompted calls for non-financial measures. TQM literature
suggests greater reliance on non-financial quality measures in order to facilitate
management commitment to the quality programme. The findings revealed that the
choice of performance measures is a function of the firm's competitive strategy. The
firms engaging in a prospector strategy rely more on non-financial measures in the chief
executive officer's annual bonus contract than those following a defender strategy.
Similarly, Chenhall (1997) argues that TQM enhances the profitability of companies
when managers are evaluated by using direct measures of manufacturing. Higher
performance, in his study, was associated with the combination of TQM and reliance on
manufacturing performance measures compared to TQM without such measures.
The ensuing paragraphs discuss the performance management in organisations. In order
for TQM to be effective, performance evaluation is essential. The literature suggests that
the adoption of TQM will affect performance measurement, requiring hardwork,
cooperation and discipline (Lord, 1998; Oakland, 1989; Fowler, 1996; Wilkinson &
Witcher, 1993; Chenhall, 1997; Ittner & Larcker, 1997). Performance evaluation has also
been influenced by global trends. Internationally, firms have adopted performance
evaluation to promote TQM exercise (e.g. Ittner et al; 1997). This ensures that workers
have commitment towards their work vis-a-vis meeting performance targets.
2.4 Performance Evaluation
Performance evaluation is an important aspect of management control as it enhances the
TQM approach in an organisation. The evaluation exercise requires certain targets to be
reached, which demands hardwork and commitment from workers and consequently
facilitates the TQM approach. An organisation functions through individuals using
resources to perform activities in order to accomplish organisational goals. Performance
evaluation is the process of reflecting upon the effectiveness of these activities in
accomplishing organisational goals and upon the efficiency with which resources are
used in performing activities (Stallman, 1982).
Many useful purposes for evaluating performance might be described. An organisation
may wish to provide a basis for individual position adjustments. Format performance
reporting allows recognition of the amount of talent and effort various individuals bring
upon their duties. This facilitates as a basis for effective reassignment of duties among
individuals, the object being to match task requirements with individuals' capabilities.
Reassignment of individuals via lateral moves, promotion or demotions to other positions
are done by the performance evaluation (Stallman, 1982). This provides motivation for
individuals to work diligently at their work. Bonuses and promotions are usually tied to
performance evaluation.
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). They should
include financial and non-financial measures, and incorporate into their performance
measurement system, the key factors of quality, customer satisfaction and productivity.
Fowler (1996) and Chenhall (1997) argue that the management accountants' role has
expanded with the implementation of TQM, into the measurement of non-financial as
well as financial performance. This includes recording and reporting the firm's cost of
quality; and measuring customer satisfaction; quality improvement and employee
performance.
The balanced scorecard as depicted by Kaplan and Norton (1992, 1993, 1996a, 1996b)
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 (see Lynch and Cross, 1992; Nanni Jr et al; 1992). The scorecard gives
managers four different perspectives from which to choose measures. The scorecard
helps managers to focus on strategic vision by selecting a number of essential indicators
within the four perspectives. The focus is on achieving the strategy and vision of the
organisation (e.g. Nanni Jr et al; 1992; Lynch and Cross, 1992). These four perspectives
of the balanced scorecard are the Financial, Customer, Internal Business, Innovating and
Learning perspective.
Kaplan and Norton (1993), for instance, in a case study of Rockwater-a global
engineering and construction company, found that the company had a balanced scorecard
in place. The vision of the organisation was seen as being the industry leader. The
20
strategies that the organisation adopted to achieve this vision were identified as services
surpassing needs, customer satisfaction, continuous improvement, quality of employees
and shareholder expectations. The indicators were developed for these strategies in
accordance with the four perspectives. The Financial perspective had indicators such as
return on capital, cash flow, project profitability, while the Customer perspective's
indicators were competitive price and value for money. The Internal Business
perspective's indicators were the tender effectiveness and quality service. The
Innovating and Learning perspective's indicators, on the other hand, were continuous
improvement and product and service innovation. The scorecard enabled the Rockwater
to achieve its vision of being number one in the industry (Kaplan and Norton, 1993).
The process of performance management begins with the establishment of strategy: what
is the business unit trying to achieve and why? How do they relate to the products and
services that customers will want and be willing to pay for? (Otley, 1.997; Broadbent et
al; 1991; Kaplan & Norton, 1992, 1993, 1996a, 1996b; Nanni Jr et al; 1992; Lynch and
Cross, 1992). It is vital to be externally focussed as well in order to develop key
performance measures. For example, to measure success in delivering products that
meets customer needs, discussions with customers are required as to what they expect
from businesses (Otley, 1997). Performance indicators enable the development of
accountability.
Information about the alignment of actual and budgeted performance can also be used as
the basis for performance evaluation. Since performance is evaluated in this way it
means that the achievement of budget targets should also provide a source of motivation
for organisational members (Berry et al; 1995). Managers must ensure that the targets are
within the reach of the employees, so that they will be motivated to work, or else they
will get demotivated. The managers must ensure that targets are neither too tight nor too
loose. Berry et al. (1995) argue that performance is better when clearly defined and
quantitative targets are established. A difficult target tends to motivate higher
performance. However, if a target is so high as to be perceived as unattainable, then
results are likely to be worse than if a lower, but accepted goal was set.
Managers are given specific targets and, while detailed control of day-to-day operations
is not required, the overall target result must be achieved. The bonus payments are often
21.
used to enhance the motivation of managers to achieve the required targets. Performance
indicators are expected to fulfil many roles in securing control of public sector
organisations (Smith, 1995). Performance has to be assessed in relation to these targets.
Any deviations from the budgeted targets can be examined, remedial action proposed and
revised targets set. Implicit in the comparison process of actual and budgeted
performance, are rewards and punishment for management and their staff which lead to
the organisation under scrutiny to pursue measures which improve their performance, as
reflected in the performance indicators. In summary, the performance indicator
philosophy entails identifying objectives, measuring progress towards these objectives,
assessing performance, setting targets and ensuring that incentives are compatible with
progress towards targets (Smith, 1995).
Performance targets can be individually tailored to the responsibilities of any managerial
position. The extent to which the prospect of financial rewards helps to motivate
performance is difficult to assess, but there seems to be reason to doubt that they provide
a major source of motivation, given the general lack of understanding of the way the
system works (Wilkinson, 1995). Those managers, who achieve targets are usually
rewarded in the form of bonuses or pay increments. Nankervis and Penrose (1990) found
in their survey that 85.85% of the companies possess appraisal schemes, and most of
these use them for performance appraisal (98.9%) and career development (85.7%)
purposes. A small number (60.4%) relate their results to salary reviews
Some recent research has indicated that organisations using non-financial performance
measures such as customer satisfaction appear to give better financial performance than
those which rely solely on financial indicators (Otley, 1997; Chenhall, 1997; Chenhall &
Langfield-Smith, 1998b; Shank & Govindarajan, 1994). Evans et al. (1996) cite a
substantive study of the relationship between culture and performance in more than 200
companies in 20 industry sectors. They considered a performance enhancing culture to
be one that was strong, strategically appropriate and adaptive when outside forces
changed. They found remarkable differences in actual performance between firms with
and without performance enhancing cultures. An eleven year period comparison was
done, where the former group increased their revenue by a factor of 4, their employment
by a factor of 8, the stock price by a factor of 12 and their net incomes by over 750
percent compared with the latter group (Evans et al; 1996). Evidence from UK
22
companies reinforces this research by showing significant benefit being achieved by
focussing their culture to achieve continuous improvement. They cite a Chief Marketing
Officer in the UK arguing that 'Everyone in the company needs to feel they are helping to
market the company. If all your employees are focussed on the customer and are
marketing your company everyday, then it is a formidable force" (ibid, p.24).
There are many more literature on performance evaluation. However, the present study
intended to limit this to the above only as they are directly relevant to the current study.
The others may not be that relevant to the study.
The present study examines the MACS changes at the HA from the wider social and
institutional context. Similar changes in MACS have been observed elsewhere (e.g.
Hoque & Hopper, 1994, 1997; Hoque and Alam, 1999; Uddin & Hopper, 1998; Achary,
1998a; Nandan, 1997b, etc). The military coups of 1987 have had a profound impact on
Fiji's economy. It had a devastating effect on the HA as well. To ensure that the HA
remains viable and competitive, the State through the assistance of the donor agencies
and external consultants carried out a number of changes in MACS at the HA. These
included the separation of the Public Rental Board from the HA, the separation of the
Lending Division from the Finance Division, the adoption of TQM and management on
performance contract basis. Organisations strive to construct profitable conditions for
themselves, and as they do so they introduce social and organisational innovations (e.g.
Neimark & Tinker, 1986; Hopwood, 1978, 1989a, 1989b, 1987; Uddin & Hopper, 1998).
The HA had similarly, carried out the changes so that it remains viable and the continuity
of its operations are assured. The thesis also aims to provide support to the theoretical
constructs of General Systems, Contingency and Institutional theory.
The next section discusses this.
2.5 Theoretical Constructs
The empirical data collected is related to the theoretical constructs of general Systems,
Contingency and Institutional theory. The study entails the use of factors from different
theoretical perspectives (see Hoque and Hopper, 1997; Ansari and Euske, 1987; Berry et
al., 1991). Berry et al.'s case study was based on a bank-owned finance house (RIF),
which was in the business of providing both industrial and retail loans. Their research
looked at the processes of control that operated within this organisation. A more formal
system of accountability and control was introduced with a number of new managers
being recruited from an external bank. These managers brought with them a more formal
system of managerial planning and control. This included a formal accounting-based
performance measurement, and a broader management by objectives system. The
findings, thus provided support to the theories of Management Control, Cybematics,
Organisation Behaviour and Contingency theory. By using multiple theories of MACS,
one can take advantage of their complementaries and build a more holistic analysis (see
Berry et al., 1991, p.137; Ansari & Euske, 1987, p.556). Similarly, for the present study,
and as stated earlier, three theories have been identified namely the Contingency, General
Systems and the Institutional theories. The theoretical constructs were allowed to
develop from the data.
The ensuing paragraphs discuss this:
2.5,1 General Systems Theory
The Systems thinking is normally attributed to the work of Von Bertalanffy (1956). The
essence of the theory was to study the whole from which a part comes from rather than
just study a part (reductionism), which would lead to misunderstanding. Gray et al.
(1996, p.13) argue that a system is a conception of a part of the world that identifies that
the part is "(a) one element of a larger whole with which it interacts (influences and is
itself influenced by); and (b) also contain other parts which are intrinsic to it."
The theory is framed in a philosophy, which argues that the only reasonable way to study
an organisation is to study it as a system (Von Bertalanffy, 1973). The organisation is to
be treated as a system of mutually dependent variables. It tends to take a holistic point of
view as its fundamental principle. The theory seeks to explain behaviour by means of
studying the interrelationships of parts.
Open Systems theory, which has been derived from the General Systems theory, build
closed models to account for the organisation-environment linkage (Berry, 1983). The
24
closedness means that control can be exercised either by the environment upon the
organisation or vice versa. The idea of control is depicted by the recognition of the
organisation's dependence upon the environment for its survival. It is concerned with
adaptation to the external environment, Open Systems theory recognises the importance
of interaction between the organisation and society (Llewellyn, 1994). It introduces the
idea that the survival of the system implies an appropriate relationship with its
environment.
Open Systems and General System theories articulate that an organistion is a complex
system of interrelated parts, which constantly needs to adapt to the changing environment
in order to remain viable in the long run (Nandan, 1997b).
Chenhall and Langfield-Smith (1998a) argue in the General Systems context, that the
effective management of organisation undergoing change involves using information
which helps to understand how operations support strategic priorities. Kaplan and
Norton's (1992, 1993, 1996a, 1996b) balanced scorecard on performance measures will
facilitate the achievement of strategic priorities. The case study on Cleanco, as identified
by Chenhall and Langfield-Smith (1998a) revealed the company's adoption of the TQM
approach. The company identified strategic priorities-enhancing customer satisfaction
and cost reduction, which would sustain its competitive advantage. A company-wide
programme to encourage all employees to adopt a customer orientation was emphasised.
The training programs emphasised the new values and goals which were the key to the
new strategy, A company-wide customer program was also instituted. The importance
of this training was the development of customer-focussed measures for each department
within Cleanco. Performance measures were also designed to meet the company's
strategic priorities. This illustration is in line with the General Systems Theory.
2.5,2 Contingency Theory
The contingency management approach has stemmed from Open Systems theory
(Kollins, 1982). Open Systems theory entails the interaction between the organisation
and external environment. The external environment is one of the contingent factors,
which impinges on the organisation.
25
The Contingency theoiy has dominated the study of organisational design during the past
forty years. Burns and Stalker (1961) were the pioneers of contingency study through
their book, The Management of Innovation. Their study of Scottish defence electronics
industry examined the effect of environmental uncertainty on organisational structure. A
hierarchical structure was appropriate in a stable environmental setting. If the activity
could be preplanned and need not be adjusted unduly as events unfolded, then the vertical
hierarchy represented a more efficient framework for the coordination of activity.
In an unstable setting, however, such a response was found to be inappropriate. The level
of changes made preplanning impossible. Burns and Stalker (1961) are seen as
demonstrating that environment has a major influence on organisational structure.
The Contingency theory looks at how organisations should be designed to be effective
(Sharma, 1997; Burns and Stalker, 1961; Otley, 1980; Schoonhoven, 1981; Langfield-
Smith, 1997). The theory articulates that the contingent variables affect organisational
design, which in turn leads to effective performance. This suggests that the organisation
design that the organisation needs to adopt to be effective is contingent or dependent
upon the contingency factor. Prominent contingency factors are uncertainty, size,
strategy and environment (see Donaldson, 1995; Hage and Aiken, 1995; Schoonhoven,
1981; Waterhouse and Tiessen, 1978; Otley, 1980).
By the early 1970's, the Contingency theory was established as a dominant approach in
organisational theory and around 1974, accounting was tentatively developing
contingency ideas (Otley, 1980). This was due to extensive research undertaken in the
area by Hayes (1977), Waterhouse and Tiessen (1978), Blau and Falbe (1976), Child
(1973), Donald (1979) and Lawrence and Lorsch (1967). Waterhouse and Tiessen's
(1978) findings revealed that efficient organisational design is contingent on technology
and environment. Blau and Falbe (1976) articulated that organisation size appeared to
exert more influence on the division of labour and organisation of work. Each of the
research findings implies that the variables will enhance organisational effectiveness.
The three general contingent variables of technology, organisational structure and
environment were prominent in the theoretical development of Contingency theories of
management accounting.
26
A recent contingent variable of strategy has been identified by Langfield- Smith (1997).
She argues that strategy has been described as a pattern of decisions about the
organisations' future, which take on meaning when it is implemented through the
organisation's structure and processes. MACS should be tailored to support the strategy
of the business to lead to superior performance.
2.5.3 Institutional Theory
Institutional theorists propose that an organisation's survival requires it to conform to
societal norms of acceptable practice to achieve high levels of productive efficiency and
effectiveness (Covaleski et al; 1993). Various aspects of an organisation's structure and
policies serve to demonstrate a conformity with the institutionalised rules expressed by
external constituents like the State, trade unions, and so on.
Beaiing Jr. et al. (1998) utilised institutional framework in a university study to show that
in time of budgetary stress, agencies like universities, will be called upon to legitimise
their institution's mission, strategy and operations in order to acquire resources. They
argue that the university will engage in restructuring as this behaviour creates a
perception of the university carrying out its mission to the public. The results articulate
that organisations must legitimise their existence to external constituencies like the
government, in order to survive.
Organisations are increasingly made similar as attempts are made to innovate them
(DiMaggio and Powell, 1983; Covaleski et al; 1993; Rowan, 1982; Meyer and Rowan,
1977; Scott, 1987; Gooderham et al., 1999). The concept which best matches the process
of homogenisation is isomorphism (DiMaggio and Powell, 1983; Gooderham et al;
1999). They argue that organisations tend to model themselves after other similar
organisation, which have been found to be successful.
Organisations are structured by phenomena in their environments and tend to become
isomorphic with them (Meyer and Rowan, 1977). This is so, as organisations are
embedded in the social world. Organisations deal with their environments at the
boundaries and imitate their structures. The authors argue that the dependence on
externally fixed institutions reduces turbulence and maintains stability. As a result, it is
27
argued that institutional isomorphism increases the success and survival of organisations.
The incorporation of institutionalised elements prevents the organisation from having its
conduct questioned. It is therefore argued in this study that a commitment to TQM,
performance contract and organisational restructuring by a regulatory authority like the
State, or by any leading organisation is followed by others and becomes institutionalised
shortly (e.g. Hoque and Alam, 1999; Whitley, 1999). Institutional theory in this study
helps see significant institutional factors such as state, customer expectation, professional
associations, external consultants influencing the changes in MACS.
2,6 Summary
This chapter initially examined the MACS changes in organisations in relation to the
wider social, economic and historical factors. Organisations are embedded in the social
world, that is, the changes that occur in society have a bearing on the organisation. The
social, economic and political influences bring about changes in MACS in organisations.
This has been demonstrated by various case studies (see Hoque and Hopper, 1994, 1997;
Uddin & Hopper, 1998; Hopwood, 1987, and so on).
The restructuring of the economy has also been a worldwide phenomenon. This has been
achieved by the privatisation of State-owned organisations (see Zemko and Cincotta,
1998; Broadbent and Guthrie, 1992; Broadbent, 1999). This facilitates the government to
reduce its consumption of resources, and allow the enterprises to operate more efficiently.
As a result of growing competitiveness in the environment, and global trend influences,
TQM was adopted by business firms as a means of improving profits and market share.
TQM strives for continuous improvement, elimination of waste and a focus towards
customers. This allows firms to boost their profits and increase the value of their
business. In order to have an effective quality management, performance measurement
was seen to be essential. The use of non-financial performance measures appears to
deliver better financial performance measures. Reassignment of individuals via lateral
moves, promotions or demotions to other positions are done by performance evaluation.
Bonus payments are usually tied to individuals achieving the set targets.
General Systems, Contingency and Institutional theories play an essential role in
understanding MACS changes. The Contingency theory basically looks at how
organisation should be designed to be effective. The theory argues that organisational
effectiveness is a product of matching between internal organisational elements and the
demands created by technology and external environments (see Burreil and Morgan,
1979). Open Systems and General Systems theory, on the other hand, argue that
organisations are a complex system of interrelated parts. These parts constantly need to
adapt to the changing environment in order to remain viable in the long nan. Institutional
theorists argue that for an organisation to survive, it must conform to societal norms of
acceptable practices in order to achieve high levels of productive efficiency and
effectiveness (Covaleski et al; 1993).
The ensuing chapter will address the research methodology and methods used in
investigating the above issues at the HA.
29
Chapter Three
Methodology and Research Methods
3.1 Introduction
Methodology is concerned with theoretical, conceptual and research aspects of
knowledge (Nandan, 1997b). It is fundamental in the sense of being dependent on the
values and beliefs of those engaged in the research process: both researchers and sponsors
of research (Llewellyn, 1992). Methods are secondary concerns. Their selection and
roles are guided by the ontological, epistemological and human nature assumption
adopted for the research (Burrell and Morgan, 1979). This chapter will discuss the
methodological issues and the specific methods employed in undertaking the research at
the HA.
The next section will discuss the issue of research methodology in some detail.
3.2 The Issue of Methodology
All Social Scientists approach their subject through explicit or implicit assumptions about
the nature of the social world and the way in which it may be investigated- These
assumptions are:
(i) Firstly, there are assumptions of an ontological nature. These are the assumptions that
concern the essence of the phenomena under investigation. The basic question under
ontology is whether the reality being investigated is external to the individual, or the
product of individuals consciousness (i.e. of one's mind) (Burrell and Morgan, 1979).
(ii) In relation to the ontological issue, is the second set of assumptions of an
epistemological nature. The epistemological assumptions are about the grounds of
knowledge, about how one might begin to understand the world, and communicate this as
knowledge to others. These assumptions entail ideas, for example, about the forms of
biowledge to be obtained, and how one can sort out what is to be regarded as 'true' from
what is to be regarded as 'false.' The epistemological assumptions determine extreme
positions on issue of whether knowledge is something, which can be acquired on the one
hand, or is something, which has to be personally experienced on the other (ibid, 1979).
(iii) Associated with the ontological and epistemological issues, but conceptually
separate from them, is a third set of assumptions concerning human nature, that is, the
relationship between human and their environment (Burrell and Morgan, 1979; Morgan
and Smircich, 1980; Hopper & Powell, 1985; LaughJin, 1995). At the objectivist end
human beings and their experiences are regarded as products of the environment
(determinism), while at the subjectivist end, human beings are attributed a more creative
role, possessing freewill and transformation capacity - Voluntarism (Burrell and Morgan,
1979).
The three sets of assumptions outlined above have direct applications of a methodological
nature, which leads social researchers towards different methodologies. Realist ontology,
positivist epistemology and deterministic human nature lay emphasis on structural
approaches which dominate the natural sciences (ibid, 1979), for example, the testing of
hypotheses based on data gathered through the use of quantitative techniques such as
surveys and questionnaires. This is known as quantitative research. The nominalist
ontology, anti-positivist epistemology and voluntarist human nature rely on ideographic
approaches in social sciences. These place emphasis on getting close to the subject of the
study by becoming an insider, and involve in-depth study of contextualities of interaction.
Ethnography and case study are major qualitative research methods employing
participant observation and semi-structured interviews to obtain data. See figure 3.1
below with respect to the assumptions about the nature of social science.
As shown in figure 3.1, the justification for qualitative research in social science becomes
stronger as one moves from objective to subjective continuum in Burrell and Morgan
framework. Nandan (1997b) argues that the most fundamental characteristic of
qualitative research is its express commitment to viewing events, actions, norms, and
values, from the perspective of the people who are being studied.
31
world (Boland Jr, 1993) as each of us is continually involved in giving meaning to the
stream of events, encounters and activities that fill the day. It is a valuable way to
understand how accounting works in actual setting (Jonsson and Macintosh, 1997).
Following the analysis of the case study, three main theoretical approaches were deemed
pertinent for this study. This may be described as General Systems, Contingency and the
Institutional theory. These theories were selected as the researcher had previously carried
out some work on them and was aware of their strengths and shortcomings. Also these
theoretical perspectives explained more adequately the data that were available. Thus, by
using multiple theories of control, one can take advantage of their complementanes and
build a more holistic analysis (see Hoque and Hopper, 1994; Ansari and Euske, 1987;
Berry etal., 1991).
The General Systems theory (GST) is framed in a philosophy, which argues that the only
reasonable way to study an organisation is to study it as a system (Von Bertalanffy, 1973;
Llewellyn, 1994; Chenhall and Langfield-Smith, 1998a). The Contingency theory, on the
other hand, looks at how organisations should be designed to be effective (Burns and
Stalker, 1961; Otley, 1980; Schoonhoven, 1981; Langfield-Smith, 1997). The theory
aticulates that the contingent variables affect organisational design, which in turn leads to
effective performance.
Institutional theory, on the other hand, propose that an organisation's survival requires it
to conform to societal norms of acceptable practice to achieve high levels of productive
efficiency and effectiveness (Covaleski et al; 1993; Beating Jr et al; 1998; DiMaggio and
Powell, 1983; Rowan, 1982; Gooderham et al; 1999).
However, it needs to be realised that there can be no such thing as an "objective" case
study (see Scapens, 1990). As discussed earlier, case study researchers rely considerably
on the description of events provided by organisational participants. These descriptions
are based on individuals own interpretation of their social reality. Thus case studies
comprise "interpretations of interpretation" (Scapens and Roberts, 1993). Case studies
have an explanatory role, and are critical to the process of theory construction, and
development. The researcher would be looking for patterns in the case, which explain the
particular situation. Theory developed in this way will be extended as additional cases
are studied by the researcher, or by other researchers (Scapens, 1990). The objective of
individual case studies will be to explain the particular circumstances of the case, and the
objective of a research programme to generate theories capable of explaining all the
observations, which have been made. Case studies, like experiments, rely on theoretical
generalisations.
3.4 Case Study Research in Management Control
A case study is an empirical enquiry that
• investigates a contemporary phenomenon with its real life context; when
• the boundaries between phenomenon and context are not clearly evident; and
in which
. multiple sources of evidence are used
(Yin, 1988).
Case studies give a researcher the possibility of understanding the nature of management
accounting in practice; both in terms of the techniques, procedures, systems, and so on,
which are used and the way in which they are used. In past years Kaplan (1986) and
Scapens (1990) advocated the use of case study research. In particular, Scapens (1990)
has encouraged researchers to leave their offices and study the practices of changing
organisations.
Case studies play an important role in researching into the functioning of MACS in
organisations. This study is motivated by concerns relating to obtaining a better
understanding of the nature and complexities of MACS in practice, as well as the
influence of the wider structures on such a system. Humphery and Scapens (1996) argue
that the case study approach has been consistently advocated as a useful way of
enhancing practical accounting knowledge. It is held that case studies of the social
practice of accounting can do more than illustrate particular social theories, having a
broader role to play in terms of the development of social theories of organisational
accounting practice (Humphery & Scapens, 1996).
34
MACS is evolutionary in nature, and therefore, a detailed process of change is essential.
To understand the accounting changes, one needs to see them in the context of historical,
political, economic and social factors. Case studies are more appropriate to study the
above nature of change as they facilitate researchers to make sense of accounting in
practice, and understanding it as a social practice. In recent years there have been
repeated calls for accounting researchers to use case studies of accounting in practice.
These calls have come from those who see case studies as a way of providing theoretical
explanations of accounting practices (Burchell et al., 1980; Humphery & Scapens, 1996;
Hopwood, 1987; Spicer, 1992).
What appears to have motivated the corresponding calls for case studies has been the
need to obtain a better understanding of accounting practice, and of the role and
functioning of accounting in organisations including the pressures accounting exerts and
has exerted on it, the interest it serves, and so on (Humphery & Scapens, 1996).
3.5 Limitations of Case Study as a Research Strategy
There is no best way to do a case study, and no way for a case study researcher to claim
to provide an objective assessment of events. Human beings are the subject as well as the
object of case studies. Thus, all case studies represent interpretations by the researcher as
to the nature of social reality (Humphery & Scapens., 1996; Kaplan, 1986). Scapens
(1990) argues that a case study cannot be any more than a subjective representation of the
particular social system being studied. One of the major problems with case-based
qualitative research is the inability of the researcher to see through other people's eyes
and to interpret events from their point of view. The subject's view of reality and the
interpretation of that social reality are always problematic, for how feasible is it to
perceive as others perceive.
Some case studies may also be judged better than others as they are seen to provide more
convincing explanations of accounting practice. They provide very little basis for
generalisation. "How can one generalise from a single case?" is a frequently heard
question. Case studies, like experiments are "generalisable" to theoretical propositions
and not to populations or universes (Yin, 1988; Hagg & Hedlund, 1979). The
interpretation of case studies as small samples arise from the positive researchers
(Scapens, 1990). The researcher selects a sample from a population and attempts to draw
inferences about that population through the study of the sample. From such a
perspective, a case study is only a small sample from which it is difficult to make a
statistical generalisation about the population from which it was drawn. Case studies,
however, are useful in generating hypotheses that can be tested later with larger samples.
Reliance on a case study is a problem because the results cannot be used to generalise
other situations. It is specific to a situation. It is possible to handle the problem of
generalisation. First, it is possible to study more than one case, paying attention to the
collection and evaluation of evidences. Through inter-case comparisons, it is possible to
develop and generalise case findings into theory (Nandan, 1997b). A second possible
approach to the case study generalisation problem is through the examination of a number
of cases by more than one researcher, whereby the overall investigation follows the
'team' approach. "Team field research can take one of the two forms, i.e. the team
jointly investigating one setting or the team investigating more than one case" (Nandan,
1997b, p.74). In both situations team-based field research can enhance the validity of
research data through enabling generalisation. However, there are limitations of this
approach, such as lack of consensus or shared understanding of the common theories
among the team member, and the danger of the research activity getting more structured,
instead of the needed flexibility (Nandan, 1997b).
It is not easy to draw boundaries around the subject matter of the case because a case
study also covers the contextual conditions (Scapens, 1990). The boundaries between the
phenomena and the context are vague. There is a danger that researchers, while studying
the interrelations may expand the case beyond what is required. Everything in a case
may seem related and important to an inexperienced researcher, In this instance, the case
study would become unmanageable, costly, time consuming and ineffective.
The methods of generating information in a case study, the treatment of data extracted
from it, the mode of presentation of the information, the procedures for reasoning about
the data, the rules for judging the validity and reliability of the observations, the ways of
relating information in the case to other information, etc, are alt 'looser' and less well
specified in the case approach than in other approaches (Hagg & Hedlund, 1979). To
conduct a case study, one needs to be a skillful question asker and interpreter of
information. There are also fewer rules and procedures to guide one to undertake a case
study. Obviously, this is difficult for the research. Replication of case is difficult, if not
impossible.
Another difficulty, which Scapens (1990) argues, is that of an ethical one. This relates to
the relationship between the researcher and his/her subjects. Researchers are expected to
give assurance to the subjects that their responses will not be disclosed to any other third
party. The latter may require the final report to be presented in aggregate manner,
without disclosing who said what. Also the subjects observed will not be their natural
selves. It is possible that the presence of a researcher has an effect on them. They will
behave differently when the researcher is present from when he is away from the scene.
The other difficulty for case study researchers arises from the nature of the social reality
being researched (Scapens, 1990). Social systems are not a natural phenomenon, so they
cannot be understood independently of human beings, and the researchers cannot be
regarded as neutral independent observers. The social reality must be interpreted by the
researcher, and so case studies represent interpretations of the social reality. There can be
no such thing as an "objective" case study. This raises the problem of researcher bias. It
may be possible to reduce such bias by giving the interview transcripts to the
interviewees for verification. This will reduce the problem of researcher bias and errors.
Further, there have been means to reduce the above problems in the case, but they cannot
be completely eliminated. The three most common approaches are the use of
triangulation of research methods, respondent validation and formation of a research
team. The first two have been used in this study, and have consequently reduced the
problems of case study research.
3.6 Data Collection from the Study
Researchers using the case study method to study MACS in practice run the risk of
having errors and vagueness in their description and analysis of such systems. This
cannot be completely resolved, but can be minimised through a variety of techniques of
37
data collection such as the involvement of a research team comprising several
researchers, rather than a single researcher, and importantly, feeding back transcribed
interview reports to the interviewees (respondent validation) for a much clearer form, and
to enhance the validity and reliability of interview data (see Nandan, 1997b).
A triangulation of methods (see Hoque and Hopper, 1997) has been used to gather field
data for this study. Firstly, document study was carried out which included a review of
annual reports for the last ten years, study of the new corporate plan, memos,
performance reports and sample board papers. Secondly, a series of semi-structured
interviews each lasting for one to two hours was conducted with staff at the head office in
Valelevu and also its branch managers in Lautoka.
The interview proceedings were tape-recorded and back-up notes were made. The tapes
were transcribed soon after the interview, and a selection of the interview transcripts was
fed back to the participants to obtain a clear understanding of the issues involved. The
transcripts are available upon request. Thirdly, questionnaires were administered with
various managers and junior staff to provide support for the interview data so as to
enhance their validity and reliability (see appendix 1). The questionnaire also explored
new ground that was not covered by the interviewer. These were handed out to the
managers at the end of the interview and collected personally a day or two later.
The aim was to generate a rich source of field data. A review of the literature was
pursued extensively to provide theoretical backing for the empirical data collected. The
data was gathered over a 1 1/2-year period. The research consisted of 22 interviews. The
interviewees were selected from different sections of the HA such as the Finance,
Lending, Human Resources, Legal and Public Relations sections. They were selected
from different hierarchical levels of the HA. The topics selected for interviews were
mainly on the MACS changes at the HA. These included the separation of the Public
Rental Board from the HA; the separation of the Lending Division from the Finance
Division, the introduction of TQM and the implementation of the performance
measurement at the organisation. The interviews took place in an informal surrounding.
Most questions were asked in an open-ended manner to help interviewees to respond in
their own ways.
The study took place at the HA in Valelevu, Nasinu. Visits were also made to the HA
office in Lautoka to provide an additional source of data. Documentary evidence was
also obtained from the HA. Some staff like the Chief Executive, Public Relations
Officer, Manager- Finance, Manager-Corporate Planning, Manager- Human Resources,
Manager- Lending, Manager- Collections, Accounts Clerk and so on were also
interviewed (see appendix 2). They were interviewed because they agreed to participate
in the stud}', and were with the organisation when the MACS changes eventuated.
The evidence gathered from the interviews and document studies was analysed for
patterns and themes (see Ansari and Euske, 1987). These patterns and themes were then
classified together to build the descriptions and interpretations presented in chapters 5, 6,
7 and 8.
3.7 Summary
This chapter initially examined the philosophical aspects of research, that is, the
implications of ontology, epistemology and human nature on methodology for research.
It has been argued that interpretive theory approach is an appropriate research
methodology for this qualitative interpretive field research as it offers the prospect of
contributing important dimensions of knowledge to accounting research. The paper
further argues in favour of triangulation of research techniques to enhance the validity
and reliability of the research findings.
Case studies are considered appropriate for the wider interpretive methodology, for they
enable deeper and richer understanding of MACS within the broader social, political and
organisational contexts. Researchers using this approach will need to leave their offices,
and get into the 'field' to properly understand the day- to - day practices in the context, in
which people work and interact. Scapens (1990) argues that there is a need to study
accounting and control practices at the various levels within organisations, and the
relationship between these levels and various groups of managers. This would facilitate
getting the maximum benefit out of the case study method of research in MACS. The
ensuing chapter will discuss the organisation of the HA in its wider social context.
Chapter Four
The Wider Structures and the Activities of the Housing
Authority of Fiji.
4.1 Introduction
The interpretive approach on MACS discussed in the preceding chapter will be used in
the empirical setting in the later chapters. This chapter intends to give an overview of the
wider structures and their historical significance within which the HA is embedded (such
as social, economic, cultural and political dimensions). Developments in Fiji after
independence are discussed in the context of the influences of these wider structures. The
historical background of the HA and the changes in MACS are then reviewed as a result
of changes and developments in the structures of the wider social order. The HA is
embedded within these wider structures, which have been influential in bringing about
the changes in MACS, as will be seen from discussions in the later chapters.
The ensuing paragraph discusses the physical and social environment within which the
HA is embedded.
4.2 The Physical and Social Environment
The Fiji Islands lie in the South-west Pacific between 15 and 22 degrees south, 177
degrees west, and 175 degrees East (see appendix 3). Its sovereignty extends over
250 000 square miles, of which only 7050 square miles constitute dry land. The
arcliipelago includes approximately 300 reef- fringed islands, the biggest two being: Viti
Levu (4011 sq. miles) and Vanua Levu (2173 sq.miles). The current population of Fiji is
approximately 775 011 (Fiji Census Report, 1996). Of this, Fijians comprise 50% of the
total population, whilst Indians make up 44%, and the other races (Europeans, Chinese,
Part- Europeans, Rotumans and others) comprise the remaining 6%, Indians, however,
were outnumbering all the other races prior to 1987 (see appendix 4).
40
Whilst there is no certainty about the origins of the indigenous Fijian, it appears that this
community is a product of two distinct migratory waves of people of different origins
(Lloyd, 1982). The first to arrive were people of Meianesian origin being part of a
migration originating on the Asian mainland, likely the Malaysian Peninsula. The second
wave were people of the Polynesian origin, who came through Hawaii, Tonga and
Samoa, and some settled in the Eastern part of Fiji Islands. These people appeared to
have a more advanced material culture and disciplined socio-political structure under
powerful hereditary chiefs than the people of Meianesian origin. During this long period
of being isolated from outside influences until the arrival of Europeans in the early
nineteenth century, the two sub-cultures met and mingled. Thus, the Fijians of the
present day are the output of this mixture and reflect their bi-cultural originality.
It was in 1643 that Abel Janszoon Tasman became the first known European to visit Fiji
waters (Donnelly et al; 1994). However, the reef- infringed water prevented him from
landing or making contact with the Fijians. On 2 July 1774, Captain James Cook sighted
a small Fiji Islands and renamed it Turtle Island. Thereafter, as late as in 1789, Captain
William Bligh landed in one of the southeastern islands (Tofua), but had to retreat
promptly because of the hostility of the natives. Europeans later came to Fiji in search of
sandalwood. This fragrant wood contains oil, which had been highly valued in Asia.
By 1813 there was very limited sandalwood left. The traders coming to Fiji during this
period switched their attention to beche-de-mer trading. When dried and smoked, this
fetched a high price in Asia as a food delicacy.
Indian labourers were introduced into Fiji to work in the colony's plantation in 1879 in an
indentured labour scheme known as the Girmit. The labourers were to work as directed
by the government for the period of five years, and were free to return to India at their
own expense at the end of the five years. Nearly sixty percent of the Indians who came
as indentured labourers decided to stay and chose Fiji as their new homeland. Between
1879 and 1916, 87 journeys took place between India and Fiji with Indian labourers
bound for Girmit in Fiji (Ali, 1980). They were issued with land lease, and continually
worked on sugar cane farms. In the early years of this century, Chinese and Gujeratis
arrived as entrepreneurs, and settled in and around towns and rural settlements, setting up
trade and large-scale market gardening, The Indian community in Fiji remained divided
41
with cultural differences persisting between North and South Indians, Hindus and
Muslims, Gujeratis and Punjabis (Naidu, 1992).
In Fiji, a small amount of inter-racial (ethnic) marriages has occurred mostly between
Europeans and Fijians (Nandan, 1997b). There have hardly been any inter-marriages
between Indians and Fijians or Indians and Europeans. A small proportion of part-
European population exists in Fiji, who together with the Chinese, make up the General
Electors. The Deed of Cession played an important role in Fiji's history, demonstrating
her reliance on foreign countries. The ensuing paragraph discusses this.
4.3 The Deed of Cession
The chiefs ceded Fiji to Great Britain in October, 1874. The Deed of Cession was
consequently signed at Levuka on 10 October 1874 between the Fijian chiefs and the
British Government. Thus, Fiji had become a British colony. Apart from heavy debts,
blackbirding problems, the Cakobau1 Government felt the threat of losing the land to the
White settlers from Australia and New Zealand, whose numbers were on the rise.
The aim of the British government, after Fiji was ceded to them, was to protect
indigenous social structures, ensure the security of native land, place limits on foreign
ownership of land, and encourage self-reliance through economic development, without
being a burden to the British Treasury (Lloyd, 1982).
After independence in 1970, the clauses of the Deed of Cession, and other Acts protect
the indigenous population, and have been reproduced in the 1970, 1990 and 1.997
constitutions of independent Fiji, and the Republic of Fiji (Nandan, 1997b). The Fijian
institutions and government continue to draw on colonial policies to protect the land and
Fijian social structures. Thus, their traditional structures have been well cemented, and
continue to be reproduced (ibid, 1997b). This is reflected at the organisational level as
well. For instance, in the case of the HA, 70 percent of its employees are Fijians whilst
the remaining 30 percent are those of other ethnic groups, although Indians compose
almost 44 percent of the population. Further, Fiji's cession to Britain is a reflection of
1 A high ranking Fijian chief
42
her being continually reliant on overseas countries. This has been filtered at the
organisational level as well. The HA has been reliant on external agencies as well. Most
of the changes in MACS in the organisation have been created by the global trends. It is
essential to examine Fiji's independence and afterwards as these have implications on the
HA as well. The following paragraph discusses this.
4.4 An Overview of Fiji's independence and afterwards
4.4.1 Independence
In October 1970 Fiji became an independent sovereign democratic state within the British
Commonwealth (Lloyd, 1982). This amounted to the restoration of independent political
status, which the native rulers of Fiji had surrendered to Britain in October 1874. Many
of the provisions of the present constitution and administrative processes operated under
it bear a strong resemblance to those, which prevailed, in pre-cession Fiji and during the
colonial era. Of particular significance are the provisions, which confer preferential
status to Fijians on matters, relating to land ownership and for the conduct of
administration affairs within the Fijian community. This facilitated the basis for
communal electoral system that encouraged racialism and segregation along ethnic lines.
Lloyd (1982) argues that the policy of colonial rulers is their unstated presumption that
the Fiji Islands belonged to the Fijian community and that by right of their prior
settlement of the islands, the Fijians have at all times a prior claim to the use of as much
land as is necessary for their maintenance and support and its answering dedication to
preserve Fijian social structure and way of life (see Lal, 1992; Kamkamica, 1997). The
HA faces problems in acquiring native land from the native landowners. There is almost
negligible market for the 83% native land because of the constant threat received from
these owners. The land tenure is quite insecure.
The following paragraph discusses the political development since independence.
4.4.2 The Political Developmen t Since Independence
A Westminster style of bicameral legislature was promoted by the 1970 constitution. The
House of Representatives consisted of fifty-two members. Of these, twenty-two are
43
Fijians, twenty-two are Indians, and the remaining eight are the General electors. A
Fijian dominated government ruled the country for 17 years after independence.
However, a new Indian dominated government came in power in 19S7. Doctor Timoci
Bavadra was elected the new Prime Minister of the country. This government was short-
lived as a military coup was staged on 14 May 1987, which overthrew the government.
This created Fijian supremacy in political affairs, which was filtered at the organisational
level as well. Out of the current 14 managers at the HA, only 4 are Indians, the
remaining are all Fijians. In, management meetings, they have tendency to speak in
Fijian as well.
The following paragraphs discuss the military coups of 1987 and its implication on the
economy.
4.4.3 The Military Coup of 1987
The military coup was led by the Major Sitiveni Rabuka, a high ranking military officer.
The 1970 constitution was abrogated and the country came up with a totally new 1990
constitution. The constitution introduced an electoral system, compartmentalising voters
on ethnic lines. This curbed racial integration through cross voting. The seventy
communal seat parliament had 37 seats for the Fijians., 27 for Indians, 5 for General
Electors and 1 for Rotuma. This made the indigenous Fijians enjoy political supremacy
over all other races in Fiji.
The economy, however, was on the verge of collapse immediately following the coup
(Lal, 1992). There was massive outflow of capital, suspension of tourist industry, a
decline in sugar production caused by droughts and hurricanes, and delayed harvesting.
There was also a sharp fall in the country's foreign reserve. Consequently, the Reserve
Bank devalued the currency by 35 percent in 1987, imposed exchange controls, cut
salaries in the public service and reduced grants to public sector (ibid, 1992). These
measures stabilised the situation, but more was needed to revitalise the depressed
economy. To stablise the situation, the Interim government came up with a number of
policies such as the Tax-Free Factoiy/ Tax Free Zone schemes, deregulation policies and
corporatisation of public sectors. The above measures led to a strong recovery with a
growth rate of 11.8% in 1989 as against 1% in 1988 (Nandan, 1997b). In the years 1990-
44
1994 the growth rate was around 2.5%. In 1996, the growth rate expanded by 3% from
2.1% in 1995 (Reserve Bank of Fiji, Annual Report, 1996). The HA was similarly oil the
verge of collapse as well. As a result, some reform policies were implemented to revive
the organisation so that it becomes self-sustaining. One of this changes included the
separation of the Public Rental Board from the HA.
The government realised that the 1990 constitution was unworkable. Thus, the
constitution was reviewed and replaced by the 1997 constitution. Most of the 1990
clauses on Fijians land ownership and political supremacy have been safeguarded, but the
constitution provided for cross voting along ethnic lines. With the new election in 1999,
the current government has an ethnic Indian Prime Minister. This has been the first time
that Fiji has an Indian Prime Minister after independence. However, the composition of
the cabinet, which is the major policy making unit is dominated by the indigenous
Fijians, thus showing Fijian supremacy in political matters. These are also reflected in
most public institutions in Fiji, with Fijians dominating the top positions in the public
sector enterprises over other races. The HA is no exception in this regard.
Some of the economic policies of the government as well as the social factors have had
implications on MACS in Fiji's public institutions, including the HA. The following
paragraphs discuss this.
4.5 Economic Policies and Social Factors
4.5.1 Culture of the Indigenous Fijian
The Fijians are devoted to their communal social structure with obedience to their chiefs
(Achary, 1998a). Their loyalty to the authority is generally unquestioning. The Fijian
communal tradition is contradictory to sound business practice, and therefore impedes
economic development (Nandan, 1998a, 1998b). The traditional Fijian socio-economic
system has been, and to a great extent, as mentioned before, still remains cooperative,
communal and village oriented (Lloyd, 1982). The Fijians convey the impression that:
"Life is for living today, tomorrow will look after itself" (ibid, p.44),
45
Because of their communal obligations, it is difficult for Fijians to save money.
Consequently, they remain poor, and the HA was formed to assist the poor with the
housing. There has also been some implications of the HA's loan repayments as more
Fijians than Indians have their loans outstanding with the HA. Indians are individualistic
in nature and believe in future savings. Ali (1980) posits that Indians have great loyalty
to the self in pursuit of material gain. The next section considers the role of the World
Bank and the Asian Development Bank in enhancing the HA's functions.
4.5.2 The World Bank /Asian Development Bank
The World Bank is a donor agency, which aims to help finance the reconstruction and
development of its member countries. It is an international development agency founded
in 1945 (Payer, 1982). The bank has been increasingly called upon to provide technical
assistance of various kinds to its less developed member countries.
The Asian Development Bank, (ADB hereafter), on the other hand, is a financial
institution comprising 52 member countries. The Bank is responsible for the promotion
of the economic and social progress of developing member countries in the Asia and
Pacific. It began functioning in December 1966, and is owned by the government of 36
countries from the region and 16 countries from outside the region (ADB Annual Report,
1991).
The ADB's functions encompass making loans and equity investment for the economic
and social advancement of developing member countries, providing technical assistance
for the execution of development projects and programs and advisory services, promoting
investment of public and private capital for development purposes and responding to
requests for assistance in coordinating development policies and plans of member
countries (ADB Annual Report, 1991).
The governments usually seek assistance from this bank when organisations are plagued
by institutional, operational and financial problems (ADB Report, 1989). With technical
assistance inputs from the banks, the various problems of public organisations on
government request are made and recommendations are also suggested. The ADB and
the World Bank finance development projects once these suggestions have been
46
implemented. Consequently, it can be said that the international agencies such as the
World Bank and the ADB are influential in Fiji, and are a source of political pressure.
The HA was plagued by a variety of institutional, operational and financial problems
after the military coups of 1987. Even before 1980, the HA's operations were generating
losses mainly on the account of subsidised rental programme. There was poor loan
management, and lending terms did not take into account the cost of funds. It was in this
context that the government asked the World Bank and the ADB for assistance. With.
technical assistance input from the banks, the various problems of the HA were studied
and recommendations made. The government had agreed to put into place a
Revitalisation Plan for the HA, developed with the assistance from the banks. This will
be discussed later in chapter six.
The World Bank and the ADB had advanced loans to the HA for a period of 20 years,
including a 5 year grace period. The borrower was the government, which lent the Bank
funds to the HA under a subsidiary loan agreement. This loan was used for housing
projects, generating considerable economic activity, benefiting the poor. Following the
events of 1987 the economy has been depressed with high unemployment. The project
provided jobs for the unemployed poor.
After the events of 1987, Fiji has suffered a heavy loss, through the emigration of
professional and skilled personnel. The HA was one of the many organisations, which
had lost skilled personnel. The World Bank and the ADB mission in March, 19S8 noted
that at that time virtually all senior staff positions within the HA were vacant. The jobs
were filled by others who were qualified but needed training. With the assistance from
the ADB grant and the World Bank, the HA was provided with five advisors at senior
levels. These advisors carried out on- the-job training, The technical assistance program
made the senior staff more aware of the latest techniques of corporate and financial
management associated with a self-sustaining housing. Also the banks recommended
that the rental element be separated from the functions of the HA, if it has to remain
financially viable.
It would be implicit in the conception of the bank as a going concern, to operate on a
sound business practice with funds borrowed from the private market. It is expected to
47
make loans only where there are reasonable prospects of repayment. The loans that are
given out by the bank have to be expended for productive purposes only. In effect, the
only requirement that the bank imposes is that, before granting loans, there shall be a
clear agreement both on how the proceeds of the loan are to be expended and on what the
loan is expected to achieve,
The World Bank and the ADB recommended for the restructuring of the HA in line with
the public sector reform policy of the state. This reform has been a global trend. The
ensuing paragraph discusses this.
4.5.3 Global Trends
Simultaneously influenced by global trends, and dissatisfaction with the financial
performance of the public enterprises led to the commercialisation of these organisations
in Fiji through the national policy of public sector reform. There is undoubtedly growing
pressure from within Pacific Island government and donor agencies to privatise the state-
run enterprises. Pacific Island countries do not have the political or economic power to
influence change on a global scale. However, if these governments do not respond to
these trends, they will have serious consequences for the future of the Pacific region in
terms of foreign aid, and investment. Privatisation will cause the benefits of development
to become concentrated in the hands of a few individuals who choose to own what are
now government departments or government-controlled service organisations (Report of
International Seminar, 1994). Consequently, a program of corporatisation has been
instituted by the government, which has resulted in the establishment of IKA Corporation
Ltd, Fiji Pine Ltd, Fiji Posts and Telecommunication Ltd, and the National Trading
Corporation. The government aims to sell its interests in commercial enterprises to
potential investors. The reform is expected to enhance competition in the markets and to
increase economic efficiency and accountability of government commercial enterprises.
The current Labour- led government policy on public sector reform, however, is unclear
(Nandan, 1999). They wish to pursue reform cautiously, so that redundancies are not
involved. They may slow the process of reforms, but a complete halt is impossible owing
to internal and external pressures (ibid, 1999). The HA has been commercialised, and is
on the verge of being corporatised in some distant future.
48
The following paragraphs discuss the history of the HA, as it is essential to comprehend
how it was established.
4.6 The History of Housing Authority
The HA was established under the Housing Act of 1955 as a statutory body to provide
"housing accommodation for workers in the city of Suva, Lautoka and in any prescribed
area" (Housing Authority, Corporate Plan, 1996-2005). The HA is authorised and has
powers as stipulated in section 15 of the Housing Act:
"(a) to acquire land or building or any estate or interest therein and to develop the
same as a building estate by the erection, construction, alteration, maintenance
and improvement of dwelling houses and gardens, recreation parks and other
works and buildings, for or for the convenience of persons occupying such dwelling-
houses
(b) to accept donations of land, money or other property
(c) to subdivide and develop any land acquired by or vested in it;
(d) to acquire dwelling-houses suitable for the purposes of this Act
(e)(I) to let or lease any land or building vested in it, to be used for the purpose of
any factory, warehouse, shop, workshop, school, place of worship or place of
recreation which would, in the opinion of the Authority, be to the convenience or
benefit of persons occupying houses provided by the Authority;
(ii) to construct oil any land vested in it, any building for letting or leasing for any of the
purposes specified in sub-paragraph (I) and to retain for its own use any part of such
building;,
(f) to sell or exchange any land or buildings vested, in it;
(g) to invest at its discretion in any securities authorised by law for the time being for
the trust funds any moneys (whether capital or income) at any time at the disposal
of the Authority and not immediately required by the Authority for the purchase of
property or for the construction of buildings or for other purposes authorised by
this Act;
h) by way of loan, guarantee or otherwise, to assist a worker to purchase a dwelling
house or discharge a debt secured on a dwelling house or erect or effect substantial
alteration, improvement or extension to a dwelling house, upon such terms and
49
conditions as the Authority may deem fit;
i) with the approval of the minister, to make advances upon such securities as may
likewise be approved to suitable social organisations for the purpose of assisting
the erection of hostels;
j) to purchase plant, vehicles, machinery, equipment, stores and building materials
and accessories of any kind;
k) to approve, if it thinks fit, schemes prepared by any other persons, firms, company
or local authority to provide housing accommodation for workers in Suva or Lautoka
or any other prescribed area. "
(Housing Authority, Caps.267, p.7-8).
The growing urbanisation in the early 195Q's together with increasingly concern for poor
housing conditions, especially for low income earners, led to the establishment of the
HA. The Housing Act of 1955 had two important provisions to enable workers to:
(a) lease dwelling houses and/or
(b) purchase dwelling houses
at a cost commensurate with their incomes. These two considerations meant that the HA
is expected to be economically viable, and welfare oriented.
The economic viability is specified in section 16 of the HA Act as:
"In selling or leasing houses or providing loans or other facilities to assist
workers to purchase, lease, build or otherwise obtain houses, the object of the
Authority shall not be to make a profit but to enable workers and their
families to obtain accommodation suitable to their needs at the minimum cost
without the Authority actually incurring a loss "(p.8).
On the other hand, the welfare orientation is outlined in section 16 (1) of the Housing Act
as:
"the Authority shall in relation to the letting of sales of houses ensure that
preference is given to workers who are occupying overcrowded or insanitary
houses or have children dependents...or are living under unsatisfactory
housing condition or who because of housing shortages we obliged to pay a
rent disproportionate to their means."
50
For some low-income earners, the HA houses were still unaffordable. Recognising the
problem of affordability in acquiring houses, the rented housing program began in 1964
offering temporary accommodation for workers unable to purchase houses. The
production of serviced sites began in 1971. By the end of 1987, the HA had produced
about 8,300 serviced sites and 1800 rental flats and homes, and provided finance for
some 7,000 mortgages (ADB Report, 1989). This, however, required considerable
government subsidy, which was not forthcoming and created financial problems for the
HA. Consequently, the HA had to borrow significantly to meet the costs. This meant
that the welfare oriented housing measure has not been an advantage to both the
government and the HA. Consequently, the year 1988 saw the government adopting the
policy of provision of affordable shelter on a financially viable basis by the HA. This
necessitated that the HA be run as a business and recoup full costs of its products.
The Housing (Amendment) decree of 19892, however, amended the Housing Act by
creating the Public Rental Board (PRB hereafter) as a Statutory body to manage and
extend and sell the public rental housing stock of the HA. The decree (see appendix 5)
took away the responsibility for managing the rental stock from the HA, enabling it to
focus on production and financing of building plots and houses for sale.
The HA, on the other hand, is responsible to the Ministry of Housing and Urban
Development. The organisation is managed by a Chief Executive who reports to a Board
comprising a chairman and five other members appointed by the Minister of Housing and
Urban Development (HA Corporate Plan, 1996-2005). The Chief Executive is a non-
voting member of the Board. The HA was restructured in May, 1994 to reorganise into
business units in line with a commercialisation approach as required by the government.
An organisation chart of the HA appears in appendix 6.
"The purpose of the Housing Authority is to produce and finance, through long term
mortgages, shelter for families who would not otherwise have available to them the kinds
of living accommodation they would both desire and afford" (HA Annual Report, 1996,
p. 1). The HA has been able to meet the demands of its customers. Presently, it has been
able to maintain a stock of its products (houses and sites) and has diversified further to
2 Decree to amend the Housing Act and to provide for the establishment of the Public Rental Board andmailers Ancillary thereto,8 May, 1989.
provide loans of different types to its customers. Common among these loans are white
goods, self-help and purchase loans.
The HA policy statement and the Housing Act do not require the HA to be a profit
making institution. The emphasis is on providing affordable shelter for low -income
groups. It employs 151 staff, which includes permanent staff, expatriates, wage earners,
temporary as well as those on contract,
Housing is a necessity but because of financial constraints, the ability to purchase one's
own home is often limited to the financially privileged. The lower income earners are
normally neglected and the struggle for accommodation has led to squatting. This illegal
tenancy has been an issue of recent discussions. Land related problems are one of the
major contributions to illegal tenancy. The HA has stepped in, to attempt solving the
problem as reported in its Annual Report as:
"That our purpose is to provide she Her for middle to low income workers and to keep
searching for better and more affordable ways to serve their housing needs."
(HA Annual Report, 1996, p.2).
The HA is an arm of the government. The minister responsible for the housing portfolio
is responsible for the appointment of the HA's board members. There have been as many
changes to the composition of the board as there have been replacements to the Minister
of Housing. This makes the HA a very unstable organisation. Each new Chief Executive
coming in wants work to be done in his or her way. The organisation has been
restructured thrice in the recent six years. Thus, the workers' frustrations are high. An
organisation chart of 1988 and 1998 is provided in appendix 7 to show the differences in
organisational structure over these years. Some of the notable differences included the
separation of the PRB from the HA in 1989. In 1990, for instance, Corporate Planning
and Internal Audit departments were created. The year 1994 saw the separation of the
Lending Division from the Finance Division. In 1993, the Total Quality Management
and staff on contract basis were introduced. There were 5 General Managers in 1994.
These managers were for Financial services, Western division, Customer Services,
Property services and Strategic Support. However, in 1996, the position of the General
52
Managers' were reduced to three namely, the General Manager-Financial Administration,
Lending and Property Services.
Even in the early 1980's (pre-coup years), the HA was facing problems. The then
minister for Urban Development, Housing and Social Welfare invited "University
consultants to report on the administration and unsatisfactory state of the Authority"
(Walsh, 1994, p. 194). Although the consultants saw the problem in the administration, it
has changed very little since then. The administrators have changed, but the
administration procedures and practices remain,
In the early 80's there was a shift in emphasis away from providing completed homes
towards the provision of sites. The reason for this shift could have been the
government's policy to provide land at no cost to the HA. In the later years the
government was no longer able to afford such measures and the HA had to seek finance
from other institutions to carry out such development,
The Public Enterprise Bill was submitted to parliament in 1995, and was subsequently
approved into an Act. It provides for the reorganisation and corporatisation of nominated
government entities so that they operate on a commercial basis and in a competitive
environment. The HA, however, has been commercialised prior to this Act. However,
for the HA, the major provisions in the Act imply:
. The payment of dividend to the government
• The removal of any tax exemption in force
• The removal or minimisation of special advantage such as government
guarantees or borrowings to ensure competition on equal terms with the
private sector,
• A mandatory statement of corporate intent.
. The submission of half-yearly reports to the government
• The submission of an annual report and audited financial statement within five
months after the year end; and
• The preparation of an employment and industrial relations plan.
(HA Corporate Plan, 1996-2005).
53
The ensuing paragraphs discuss the housing and other activities of the HA.
4.7 Housing and Other Activities of the Housing Authority
The HA has two major functions to perform: housing production (house construction and
building plot development) and lending or mortgage finance. It undertakes municipal
service functions covering ground rent collection for the Native Land Trust Board. This
is one of the organisations which leases land to the HA. The HA also undertakes
maintenance activities of communal areas in project sites and in the rented units left with
them.
The HA's lending programme is geared towards low and middle-income earners. There
are, however, competition from the banks and other Financial institutions. However,
their focus is on the upper income groups. Recently, the commercial banks have
promoted their home loan schemes. Interest rates of the banks are generally lower than
those of the HA. The banks' interest rates range from 7 to 9 percent. The HA's interest
rate is at 11.5 percent. However, with the current government's intervention, the rate has
been brought down to 9 percent. This has been their election promise. The repayment
periods in general are shorter for the commercial banks, ranging from 15 to 20 years.
The HA's repayment period, on the other hand, is up to 25 years.
Most institutions are not interested in lending to low - income earners. The HA is alone
in this market. The HA raises finance from the Fiji National Provident Fund and lends
them to the borrowers.
The lending programme is market related and is responsive to the needs of the target
population. The programme includes mortgage loans for the purchase of building plots
and houses developed by the HA and other developers; cash loans for the buying,
renovation, expansion and improvement of houses; housing loans to village communities;
and development loans for other agencies providing the low and middle income housing
and building plots.
This thesis identifies the changes in MACS that have come about at the HA through the
wider structures identified above. It has identified four major changes, which will be
discussed in the ensuing paragraphs.
4.8 Organisational and Control changes at the HA
As a result of global trends, political influences and public sector reform policy, some
organisational and control changes have come about in the operations of the HA. This
will now be discussed briefly below. However, they are discussed in detail in appropriate
places in the later chapters.
4.8.1 Separation of the Public Rental Board from the Housing Authority
The PRB was separated from the HA because it was uneconomical for the latter to retain
the rental element which was sustaining losses for the HA, and the aid agencies of the
World Bank and the ADB were approached for assistance. The agencies stipulated that
loan would only be given if the rental element was separated from the HA. The deficit
laden rental estates were posing financial problems for the HA. Consequently, with the
assistance from the aid agencies, it was decided to separate the rental estates under a new
organisation of the PRB.
Thus, it was in 1989 that the PRB was separated from the HA due to the World Bank and
the ADB recommendations. "All evidence before the Housing Authority Board and the
World Bank/ADB consultants suggests that so long as the deficit laden rental housing
program is on the Authority's books, the Housing Authority cannot become a financially
viable institution" (ADB Report, 1989, p.53). The Bank's analysis revealed that there
was a need for a statutory body to monitor the rental flats for the underprivileged tenants.
It was then decided that establishing the PRB was the best alternative. The separation
exercise was said to mainly revitalise the country's housing program. After the necessary
work was carried out, the PRB was established but with an accumulated debt totaling
$19,269,043 (HA Board Paper, 1989).
55
Despite the accumulated debt, the PRB was able to continue operations with its four main
objectives:
. To manage all rental estates transferred from the HA;
• To assess and collect rent from tenants;
• Extend rental estates; and
. To sell fiats to sitting tenants.
(PRB Annual Report, 1993).
With the objectives in place, the PRB operated under an amended Act, due to the
accumulated debt (see appendix 5). The purpose of creating the PRB was to take over
and manage the rental section of the HA and all its rental estates with the view to selling
whole or a portion of those estates (HA Board Paper, 1989). Section 32 of the HA
amended Act stipulates that:
"The functions of the Board shall be to manage the Public Rental Estate, to
understand, the assessment and collection of rents from tenants and occupants
there of and, where the Board considers it appropriate, to extend the Public
Rental Estate, to sell to tenants or others the whole or any portion of the Public
Rental Estate... "(p.2).
Section 34 of the amended Act further argues that:
"The Board shall be required so to assess and collect rents from lessees, tenants
or occupiers as to ensure that the net earnings from the Public Rental Estate do
not incur a loss,"
The PRB's main income was derived from economical rents charged and collected,
government grants and subsidies, and sale of flats to existing tenants. Since its inception
the PRB has managed to maintain good relations with its tenants. This has assisted the
Board in its collection of arrears and rental payments. However, not all the PRB tenants
are entitled to government subsidies. Only those tenants facing genuine financial
problems like the destitutes, old aged, sickly, the casually employed and other related
welfare recipients qualify for subsidies from the government.
The provision of affordable rental iiousing to the low-income earners will continue to be
a major focus for the PRB. "Through the support of government, the PRB will continue
to endeavour to fulfill its mission and objectives, that is to accommodate the housing
needs of those in waiting" (PRB Annual Report, 1993, p.7). There may be many that
need these services, but are not provided. One of the officers at the PRB stated:
"We get thousands of applicants, but we cannot provide houses to everyone as we
built only 30 new fiats this year. So only 30 houses were allocated this year to
new tenants based on first come first serve basis" (Interview Report H, p. 17).
4, S.2 Separation of the Lending Division from the Finance Division
The Lending Division was separated from the Finance Division because of the
restructuring program for the HA. It was to become corporatised in line with the
government's public sector reform policy. This was one of the changes carried out to
prepare the organisation towards privatisation later. The Lending Division, ultimately,
became the profit centre of the HA, The public sector reform policy was prompted by the
global trends.
The HA had to be operated on a self-sustaining basis without depending on government
subsidies. The separation exercise would facilitate the Lending Division to earn profit, as
it becomes a profit centre for the HA. Further, in order to obtain loan finance from the
donor agencies, it was essential to carry out institutional strengthening of the HA. The
separation of the Lending Division from the Finance Division would reinforce this.
4.8.3 Introduction of the Total Quality Management (TQM)
TQM was introduced to make the organisation more customer focussed, at the instigation
of the previous Chief Executive. This was also due to the global trends as companies
internationally were adopting the TQM strategy. This was subsequently, also attributed
to the government's public sector reform policy, which was geared towards privatising
the HA. TQM made the employees realise the profit motive for the organisation, and
facilitated the concept of teamwork in the organisation vis-a -vis quality circles to be
discussed later.
More and more organisations are moving towards the TQM philosophy. The TQM is
expected to bring in improved profitability and efficiency in organisations. Organisations
57
such as the Pacific Asia Quality Foundation was instrumental in introducing TQM at the
HA. Other successful organisations with the TQM policy were members of the Pacific
Quality Foundation (PAQF). Consequently, the HA became a member too in order to
enhance the TQM exercise at the HA. The role of PAQF will be discussed later.
4.8.4 Introducing Management to Contract System/Performance Measurement
Management was exposed to contractual system. Performance appraisal techniques and
indicators were introduced to facilitate this exercise. This was once again in line with the
global trends, and the public sector reform policy of the government. Consequently, this
would facilitate the organisation's privatisation path as this embraced the idea of
accountability and transparency by the management.
Performance measurement needs to include both financial and non-financial indicators.
The HA has elements of both indicators for measurement of performance. The
performance measurement process has brought in improvements in work processes as
will be discussed later in chapter eight.
4.9 Summary
Fiji has been facing a crisis situation since the military coups of 1987. This has left
public confidence, and especially investor confidence in tatters (Naidu, 1997). This event
led to economic decline, which meant increased levels of poverty and suffering for many
in the society.
To stabilise the economy, the government came up with a number of policies, one of
which was the corporatisation of public sector institutions. This was a global trend, and
the HA was gearing towards it. In order for the organisation to be corporatised, a number
of sweeping changes were made such as the separation of the PRB from the HA,
separation of the Lending Division from the Finance Division, implementation of TQM
and development of performance indicators. These changes can be said to have been
made as a result of social and political influences.
58
The wider social, political and economic dimensions within which the HA is embedded
have been facilitating the changes in MACS in the HA. The separation of the Lending
Division from the Finance Division was for economic reasons. The lending function
became the core function of the HA, and consequently its profit centre. It became clear
that profit was essential for the long-term viability of the HA.
This profit motive led the HA to adopt TQM, where the emphasis is on customer
satisfaction. One must produce quality products and services for customer satisfaction.
This will mean more business for the organisation. In order for TQM to be successful,
performance indicators are essential. There are set targets for the various divisions of the
organisation, which employees are striving to achieve. The achievement of these targets
entitles employees to year- end bonuses.
The ensuing chapter discusses the first aspect of organisational and control changes at the
HA- the separation of the PRB from the HA.
59
Chapter Five
Organisational Structural Changes: The Separation of the
Public Rental Board from the Housing Authority of Fiji.
5.1 Introduction
This chapter is an attempt to understand the circumstances that have led to the separation
of the Public Rental Board (PRB) from the HA. The chapter begins by exploring the
reasons that led to the separation of the two organisations, and subsequently discusses the
changes in accounting and staffing at the HA.
One of the objectives of the research was to gain a fuller insight into the reasons behind
the separation of the PRB from the HA, and how the managers have coped with the
changes. The separation of the PRB from the HA had improved the latter's financial
position through improved profit. The HA, through its improved financial position after
the separation, received financial assistance from the World Bank and the ADB, which
were the main advocates of the separation of the two organisations.
The following paragraphs discuss the reasons for the separation of the PRB from the HA.
5.2 Reasons for the separation of the PRB from the HA
There were a number of reasons attributed to the separation of the PRB from the HA in
1989. The World Bank and the ADB were the major forces behind the separation,
although the government's corporatisation policy, and the financial constraints of the HA
were also some of the contributing factors for the separation. The ensuing paragraphs
consider this in detail.
5.2.1 The World Bank and the ADB
In the 1980's the HA's operations were generating losses mainly due to its subsidised
rental programme. Thus, the HA was facing operational and financial difficulties. It had
increasing net losses, and was on the verge of collapse (ADB Annual Report, 1989). The
net deficit for the year 1987 was $7,702,000, whilst for 1988 it was $5,497,000 (HA
Annual Report, 1988). The income for rental operation in 1988 was $575,000, whilst the
expenditure in the same period Avas $2,021,000. The current liabilities exceeded current
assets in 1988 by $6,419,000. The long-term debt/equity ratio in 1988 stood at 20:1.
The rental estates had been imposing financial constraints on the organisation. One of the
managers of the HA remarked:
"The rental income was peanuts for us. This was nowhere close to the investment
we made for the flats. The rental income was as low as $5-6 a week Even with
the low rental people still were in arrears-far months, sometimes even in
years "(Inteniew Report K, p, 24).
The HA was in a difficult situation and the government realised that the collapse of the
HA would not only affect the housing programme, but also have implications on the
Finance sector such as the Fiji National Provident Fund (FNPF). The FNPF provides its
members two-thirds of their savings towards home deposits at the HA. Further, the HA
borrows significantly from the FNPF at rates such as 10.48% to finance its activities (HA
Board paper, 1989). Thus, the collapse of the HA would have implications on the FNPF
as the HA will not be able to honour its debts. The government made a capital
contribution of $1 million to revive the HA, but this was inadequate. Thus, further
assistance was sought from the World Bank and the ADB. On the recommendation of
these banks, the ADB consultants were hired by the government to carry out institutional
strengthening of the HA, The Bank emphasised that the rental estates need to be
separated from the HA to save it from bankruptcy.
The ADB consultants argued that the main impediments to continuing the operation of
rental housing were:
"(1) Rent controls by government directives focusing uneconomic rents to be
retained;
(ii) Misguided social welfare constraints on the Authority which since 1974, has
had to suffer the losses of income incurred by the Government's instruction that
the maximum rent it can charge must not be greater than 15 percent of the
. nominated tenant's income;
(in) Inequities in rent setting policies unrelated to household incomes;
(iv) Inadequate support with land, grants and sufficiently favourable loans by
government; and
(v) this inadequacy in financialsupport for rental has forced the Authority into
non-sustainable debt servicing in its attempts to meet government's housing
targets. "
(ADB Report, 1989, p.73).
The government had wanted to retain the uneconomic rents on the rental estate, which
was 15 percent of the tenant's income. This was so, because the tenants could not afford
the rent of $2.36 per week for the flats, which were based on economic rental calculation
(HA Board Paper, 1989). This led the government to direct the HA to impose 15% of
tenants grossly weekly pay towards their rental payment. The balance was to be met by
the State. This trend continued for a while despite the deficit situation of the rental
estates. Consequently, this made the rental estates unviable, and had exacerbated the
HA's financial situation. The HA was unable to recover the rental costs. Government
assistance was also not forthcoming, as the State wanted the HA to be self-sufficient.
Thus, the HA was very much acquainted with servicing the debt of the rental estates. It
had to acquire more loan finance to meet the housing targets, thus deteriorating its
financial position.
The loan assistance from the World Bank and the ADB came after the rental estates were
separated from the HA. The ADB consultants argued that:
"There is a need for the rental housing operation to be separated financially and
clearly from the rest of the operations of the Authority so as not to mask the true
cost of the rental program, nor to prevent the Authority from continuing its other
functions of providing housing loam andhomes for sale to low-income workers;
and so as to be separately accountable to the government to enable management
to be dedicated to, and responsible for, this financially vulnerable operation"
(ADB Report, 1989, p.73).
Since its inception, the PRB manages all rental estates, transferred from the HA, assesses
and collects rent from tenants, extends rental estates and sells flats to existing tenants.
Both organisations provide shelter for low-income earning families. However, the PRB
manages only the rental estates whereas the HA develops land and builds houses to sell.
Even before the military coups, the HA was having problems with its administration. It
had saturated the market for its houses and saw little scope in expanding that market. It
diversified into selling sites for homes and providing loans to its customers. To achieve
all this, the HA needed finance and local finance was used to the point where it was
affordable. As the cost of local finance at that time was high,a cheaper World Bank and
the ADB finance was sought. One of the managers elaborated:
"If the Housing Authority was to obtain World Bank loans, Public Rental Board
had to be separated or else the World Bank's policies and procedures would
disallow loans to the Housing Authority" (Interview Report D, p.8).
The rental program has been part of the HA's operations since 1964. The main purpose
of the rental estates were to house workers who were low-income earners and were
unable to afford houses under HA's cash loan scheme and home purchase plan (HA
Board paper, 1989). However, due to the HA's policy constraints and funding, it
gradually became apparent that the operation in this sector of its responsibilities was
neither viable nor sustainable. Although the HA faced financial constraints when rental
estates were part of the organisation, it never pushed for the separation. The HA was
pushed into a position where there were very few alternatives and separation was the
most viable alternative. Thus, the separation was implemented. One of the managers of
the PRB remarked:
'The Bousing Authority was facing financial problems. The World Bank did a
case study. Part of their recommendations on the case study was to separate the
Housing Authority from the PRB, as the HA was sustaining losses. The rental
portion was recommended to be separate from the mortgage funds. This
recommendation was considered by the HA and went to the cabinet for approval
It was eventually approved" (Interview Report H, p. 16).
5.2.2 Financial Constraints
The rental estate imposed significant costs on the HA, and the viability of the HA was at
risk with the rental estates. As discussed earlier, the current liabilities exceeded current
assets in 1988 by $6,419,000. Further, the long-term debt/equity ratio in 1988 was 20:1.
One of the managers maintained that:
"We were running wider financial losses, World Bank said they couldn't finance
us because of the losses" (Interview Report D, p,8).
As discussed earlier, the HA began facing financial problems after the military coups of
1987. There was massive migration and people were reluctant to buy houses from the
HA because of political instability. Immediately after the military coups of 1987,
borrowing rates "sky rocketed"3 in Fiji. Beginning in mid -1987, short-term interest
reflected the shortage of liquidity and rose to unprecedented levels in excess of 20
percent (Sturton and McGregor, 1991). Further, the weighted average interest rate on
loans and advances by banks increased marginally from 12.2 percent in December, 1990
to 12.4 percent in December, 1991 (Reserve Bank of Fiji, Annual Report, 1991). This
resulted in HA's seeking cheaper sources of finance, offshore, from the World Bank and
the ADB,
The rental income in 1987 was $578,000, while the expenditure was $2,126,000
sustaining a total net loss of $1,548,000 on rental operation. Similarly, in 1988, the rental
income was $575,000, while the expenditure was $2,021,000. This yielded a net loss of
$1,446,000 on rental operations (HA Annual Report, 19S8). Thus, the rental estates had
been posing problems for the HA.
Prior to 1980, the HA's operations were making losses. Operating losses amounted to
nearly 12 per cent of gross income in 1983 (ADB Report, 1989). These losses were
exacerbated by the government's move to stop subsidies for the rental housing in 1985
and rose as high as 31 percent in 1987. The cessation of government subsidies was in
line with the government's corporatisation policy to be discussed later. Arrears in the
rental and mortgage loan payments also escalated. The HA's balance sheet deteriorated
with deficits reaching F$9.7rn in 1988 (HA Annual Report, 1988).
By the conclusion of 1988, the HA's operations were suffering from a deeply subsidised
rental program for which it no longer received government grants. It had a negative cash
1 The interest rales increased significantly after the military coups to as high as 20 percent
flow of $10,8 million (ADB Report, 1989). The HA recovered only 23.2 percent of its
expenditure on rental housing in 1987 (ibid, 1989). The rental program loss of estimated
$1,907m was the largest single component of the 1987 deficits.
The total breakdown is as follows:
Net rental deficit
Net Interest Deficit
Net Administration Expenditure
Total deficit for the HA
1.907million
0.040million
1.074 million
$3.021 million
(ADB Report, 1989).
A summary of the financial result of the HA with and without the rental estates is shown
in table 5.1.
Table 5.1 Revenue and Expenditure for the HA with and without the rental
estates
(In thousands of Dollars)
Income
Expenditure
Deficit for the
year
With rental estates
1987
9,961
12,706
-2,745
1988
10,064
13,365
-3,301
Without rental estates
1987
9,383
10,580
-1,197
1988
9,489
11,344
-1,855
The separation of the PRB from the HA was carried out in 1989. The above table
analyses the results to show the implications of having or not having the rental estates on
the HA's deficits prior to the separation in 1989. It can be observed from the above table
that without the rental estates, the HA's expenditure would be reduced by over $2
million, which would be a significant cost cutting measure for the organisation. There
would be close to 5500,000 difference in income, which the HA would lose as a result of
65
the separation. However, by the separation, the HA would still be better off by over $1.5
million. Through the separation the deficit would be reduced by 129% in 1987, and by
77.9% in 1988. From the above computations, it is evident that through the separation of
the PRB from the HA, the latter's financial and operational efficiency would be improved
significantly. This has been reflected by the improved percentage changes in deficits
from the above discussions.
The ADB consultants suggested that "the Authority's rental operations in 1988 had a
deficit of around F$2.1 million. Any continuation of such losses is likely to cripple the
whole Authority preventing it from continuing most of its operations, at a great loss to the
community" (ADB Report, 1989, p.73). Consequently, the rental programme was
restructured by creating a new public body, the PRB.
5.2.3 Government Policy/ Global Trends
The other cause of the separation, although not the major one is the government's policy
of corporatisation of public sector organisations in line with the global trends. Through
the separation, the two organisations were expected to become independent, self-
sustaining, and work on the profit motive. The ADB Report of 1989 after the separation
articulates that:
"the objectives for the housing sector were more clearly articulated. These
objectives now mainly include: providing affordable housing to the low-income
group through a revitalised HA which should be instituionally sound,
operationally strong and financially viable without depending on government
subsidies,.. " (p.i).
The government removed subsidies and grants immediately after the separation, although
there were subsidies for the PRB. The government gave the PRB subsidies as some
tenants had genuine difficulties and required assistance (PRB Annual Report, 1993).
This was a form of government assistance towards PRB's less fortunate tenants.
However, not all PRB tenants are entitled to government subsidies. Only those tenants
like the destitutes, the old aged and sickly, the casually employed and other welfare
related cases qualified to have their rentals subsidised by government (ibid, 1993). The
66
removal of subsidies was due to the government policy on the public sector reform. The
main thrust of the policy included:
1. commercial efficiency;
2. Accountability;
3. Competition; and
4. The transfer of new ownership from public to private hands where appropriate,
(Towards a Better Fiji, 1999, p.13).
The first two elements of commercial efficiency and accountability were applicable to the
separation of the PRB from the HA. The HA was supposedly to operate on a profitable
basis after the separation, and was accountable to the wider public for its provision of
housing and loan products to the low and middle income earners. The government,
through the public sector reform policy, is moving towards corporatising statutory bodies
in Fiji. This means that they will remove grants and subsidies from these organisations,
so that they become financially independent.
The government is currently removing subsidies from the PRB. The government's
removal of subsidies from the PRB leaves the latter in a difficult situation with their
acquired debts from the HA. The PRB, according to their financial position, will not be
able to pay off the debt. For instance, one of the Officers at the PRB maintained:
" We started off with liabilities exceeding assets. However, we managed to
reduce the debt from $19m to $15m last year" (Interview Report I, p.20).
This lingering problem will continue to act as a demotivator for the PRB and prove to be
a hindrance in their performance. This is due to the large amount of finance required to
service the debt.
The next section discusses the changes in accounting as a result of this separation.
5.3 Accounting Change at the HA
The HA's accounting system changed as a result of external pressure. The accounting
system changed with the separation. The HA admitted that there were a number of
consultations with the government's finance division to separate the assets and liabilities
between the two bodies. A $19,269 million long-term debt of Fiji National Provident
67
Fund was transferred to the PRB along with assets valued at $11,135,303. The assets that
were transferred to the PRB were part of the rental estates and the equipment needed to
maintain this. The debt was initially acquired for building the rental estates.
On this one of the managers of the PRB stated:
"When the organisation was separated, it was in a very unusual situation:
liabilities were greater than assets... " (Interview Report G. p.14).
The total net current liabilities of the PRB in 1989 were $3,834,000. The total liabilities
exceeded assets by $11,322,000 (PRB Annual Report, 1990). The government had
provided the PRB with a $3 million to finance its operation in 1990 but the PRB
continued to have a situation where the total liabilities exceeded the total assets. In 1993,
for instance, the total liabilities exceeded total assets by $11,614,591 (PRB Annual
Report, 1993). This situation has persisted. Prior to the separation in 1988, the HA's
liability exceeded assets by $3,711,000 (HA Annual Report, 1988). However, after the
separation the HA had an improved financial position. In 1990, its assets exceeded
liabilities by $2,692,000. In 1992, this improved further to $4,311,000. It can be argued
that with the separation, the HA's financial position improved, whilst the PRB's
deteriorated.
The HA had to service the cost of the debt it obtained to construct the rental flats. The
rental income obtained was not enough to pay the interest on the loans. After the
separation, the HA had problems with its cash flow as the government removed its grants
and subsidies. The government carried out this exercise because it wanted to corporatise
the HA and for it to be corporatised, the HA had to be financially viable.
The accounting systems of the two organisations changed. The rental income went to the
PRB. The PRB also owned all existing rental estates. One of the managers of the PRB
remarked:
'Our accounting system has shown considerable improvement We are using cm
IDL accounting system. Our rental data is on an online basis. The idea was
floated when we were with the Housing Authority but it had never materialised
with them' (Interview Report G, p. 14).
The HA's financial statements no longer displayed rental estates, and rental related
income and expenditure after the separation. This became the responsibility of the PRB.
The PRB was better able to manage rental estates than when it was under the HA. Such a
behaviour is consistent with arguments put forward by Cooper et al. (1981) who suggest
that accounting systems might be designed to facilitate creativity and innovations in
organisations. One of the managers of the PRB revealed:
"Housing Authority would not have achieved what we have achieved, had we
stayed together. We collect on an average $1.2m rental per year. Bid when the
rental element was with the Authority, the collection was up to $300,000. This
year we are also building some 41 new flats. This is our 4th project" (Interview
Report G, p. 14).
The PRB's adoption of online rental system was basically for technological reasons.
They wanted to keep up with the technology and speed up their overall processing time,
hence being on a par with the technological advancement in the World.
The financial reports of the HA were considered by the World Bank and the ADB. They
found that the HA's accumulated losses were basically increased because of its rental
estates. The World Bank and the ADB made the recommendation of the separation of the
rental estates from the HA in order to improve the performance and efficiency of the HA.
This observation is consistent with Hopwood's (1987) view that accounting had provided
an operational and influential language of economic motive, its calculations had infused
and influenced important policy decision. Consequently, rental estates were separated
from the HA, based on the accounting reports. The significant costs associated with
rental estates were reduced after the separation. This enabled the HA to enjoy a better
financial position. After the change, the financial reports of the HA met the guidelines of
the loan requirements of the World Bank and the ADB.
McSweeny (1997) argues that accounting has the power to create ambiguity. The study
of the use of accounting shows that multiple meanings and readings are possible. The
meanings do not exist as such, that are communicated, but are produced through readings,
interpretation which also provide a challenge to the possibility of unambiguous
accounting (ibid, 1997). He argues that the reading of accounting representation is not
the means of communication, but is a complex process of interpretation, and the
producers of accounts are involved in an interpretive act- the act of representing is co-
extensive with the act of reading (ibid, 1997). Thus, the financial viability of the HA
through its financial reports was interpreted as being weakened by its ownership of the
rental estates. Consequently, it was suggested that the rental estates be removed from the
other functions of the HA. This has an element of ambiguity because of the donor
agencies interpretive act.
The next section discusses the separation and staffing of the HA and the PRB.
5.4 Separation and Staffing
With the establishment of the PRB in late 1989, the rental flat operations of the HA were
gradually transferred, and a smooth transition was achieved with the transfer of
employees. The staff numbers for the HA were reduced to 216 from 320 over the course
of the year. This was largely due to the movement of staff to the PRB (HA Annual
Report, 1990). All the staff were given a choice whether to join the PRB or to stay with
the HA. Some rental staff chose to join the PRB along with others from other divisions.
One of the managers of the HA stated:
"We were all given the opportunity to move to the new organisation. Mostly, the
rental staff and some others moved to the PUB, with the same working conditions.
No one was forced to join the PRB " (Interview Report H, p, 16).
Those that did not get along well with the management of the HA decided to join the
PRB. Further, one of the officers at the PRB maintained:
"We were quite scared to join the new job environment, Jobs may not be secured.
There was also speculation that the PRB will not survive. We still have a long
way to go. There is a lot of struggle, with financial problems creeping in the
organisation'' (Interview Report I, p. 19),
Owing to job security, some of the staff remained with the HA. Some officers regretted
joining the PRB because of its heavier debt ratio. This result is consistent with Ferris
(1977) work, where using a sample of staff accountants from two public accounting
firms, he found that as the level of perceived uncertainty increased, the level of job
satisfaction decreased. The uncertainty with the PRB was revealed by one of the
managers of the PRB;
70
" ... When I initially joined the organisation in 1991,I asked myself, where am 1?
after inspecting bank statements, How did I get here? Then I realised that it is a
challenging job and I must face the challenge " (Interview Report G, p. 14).
As discussed earlier, the uncertainty on the job was exacerbated by the PRB's liability
exceeding its assets. This is still persistent at the PRB, and is a very unusual situation.
The PRB's survival and continuity is at stake, and the workers are faced with an
uncertain environment. However, the management feels that if the government takes
over the debts of the organisation, then it would be able to operate on a commercial basis.
5.5 HA and Uncertainty
The HA is an unstable body and has a very large staff turnover rate because of the
instability in the government. The Minister for Housing changes too frequently. Most
often the board of directors changes with the minister. The new Minister and the new
Board get rid of the old agenda and they want to start afresh as there have been no results
achieved by the past Board members. This cycle is a continuous one and the HA has
hardly produced commendable results. One senior manager in the HA claimed that he
has "never seen any improvement in the organisation," The instability with the Board
and the Chief Executive frustrates the employees, as there are no notable results there.
They leave the organisation and join others where they have the resources to achieve the
results. Since 1991, the organisation has been restructured thrice which means that there
were not any improvements observed after the first two restructuring. If no results had
been obtained after the first two restructuring, there was little expectation that any would
be observed after the third. Using the laws of probability it gets lower all the time. An
officer from the PRB remarked:
' We are happy to be separate from the Housing Authority because it is a very
unstable body, It lays off workers every now and then. Had we remained with
them, many of us would have lost our jobs as well" (Interview Report E, p.II).
5.6 Discussion
The HA needed its reforms in order to improve its financial viability. The costs of
maintaining rental estates had exceeded the revenue, passing a substantial loss to the HA.
71
With the separation of the rental estates, the HA's financial position as observed in the
annual reports improved substantially. One of the managers of the PRB maintained:
' The HA was able to achieve what they set out to with the separation. They were
making losses but these losses were minimised' (Intennew Report H, p. 16).
After the separation in 1989, the HA's deficit was minimised to $1,144,000 from
$3,301,000 in 1988. That is, there has been a sixty-five percent reduction in deficits,
which is a significant improvement for the HA. In 1991, the HA's deficit was further
reduced to $479,000. However, from 1992 onwards, the HA has consistently began
making profit on its operations.
The PRB and the HA were separated forming their own internal structures. The
individuals in these organisations were receptive to this change as their working
conditions and pay remained static. This is consistent with the work of Burns and Stalker
(1961), Lawrence and Lorsch (1967), Hoque and Hopper (1994), and Hopwood (1978)
who have indicated that as 'the task environment' becomes more dynamic, the
organisation must become not only more receptive to change but alter its internal
structure and operations to maintain and/or establish a high survival potential.
It is observed that in the case of the HA, factors beyond the organisation's control brought
about the change in the organisation. Firstly, there was political instability in the country
in 1987 that devastated the economy. Secondly, lending rates 'sky rocketed'. There was
a need for the HA to look for cheaper finance and the World Bank and the ADB were
seen as viable sources. In order to obtain loan the recommendations by the Bank had to
be adhered to. As a consequence of that recommendation, the rental estates were
separated. Such results are consistent with arguments put forward by Hopwood (1978)
who suggests that research has illustrated that management practices and structures in
organisations, including prevalent accounting and information systems are reflective of
wider social structures, institutes and ideologies.
5.7 Summary
The PRB was separated from the HA as a result of the recommendations made by the
World Bank and the ADB. The structural factors beyond the national boundaries brought
about this change. The recommendations of the Bank were based on the perception that
72
the rental estates would be managed better by a separate entity that was totally
independent of the HA.
This study highlights the fact that external agencies and the state are major influences on
management control. This has been the finding in other case studies (see Hoque &
Hopper, 1994, 1997; Nandan, 1997a, 1997b, 1998a, 1998b; Hopwood, 1987; and Scapens
& Roberts, 1993). The PRB has certainly made good progress since its inception. Its
rent collection has dramatically improved and the PRB has achieved positive results from
its new projects. However, the reduction of the government grants and subsidies to the
organisation has become a major concern to the PRB. Similarly, the HA has also
progressed through the separation by initially minimising its deficit and recently begun to
realise profit as well.
The next chapter discusses the second aspect of change, that of the separation of the
Lending Division from the Finance Division.
73
Chapter Six
Organisational Structural Changes: The Separation of the
Lending Division from the Finance Division
6.1 Introduction
This chapter attempts to understand the circumstances that led to the separation of the
Lending Division from the Finance Division. It begins by examining the background of
the Finance Division followed by the circumstances that have led to the separation of the
two divisions. The chapter subsequently looks at the background of the Lending
Division. It then discusses the lending operations and the shortcomings of the Lending
Division. Discussions of the empirical findings are carried out next, and the chapter
concludes with a summary.
The Lending Division became one of the profit centres for the HA after it was separated
in 1994. The other profit centre at the HA is the Property Service Division. The basis of
responsibility accounting system is to identify those financial elements in a certain area of
activity which form a controllable set, and to appoint a person responsible for managing
this set of financial elements (Wilson & Chua, 1988). Thus a responsibility centre may
be explained as an area of responsibility which is controlled by an individual. A profit
centre is one where its manager is accountable for revenues and expenses. The Lending
Division as a profit centre is responsible both for generating revenues and managing
costs, It earns revenue based on interest from mortgages made, along with the fees
generated as part of the mortgaging process. It also has to control and manage its cost of
borrowings from institutions such as the FNPF.
The government policy on public sector reform, which is in line with global trends, was
one of the major forces behind bringing about the separation of the two divisions. As
discussed earlier, the main thrust of the governments pubic enterprise reform policy
included commercial efficiency, accountability, competition and the transfer of
ownership from public to private hands where appropriate. The first two elements of
commercial efficiency and accountability were applicable to the exercise of the
74
separation of the Lending Division from the Finance Division. The HA, undoubtedly has
reached a stage in its development where it takes a more commercial approach to its
activities, particularly the tending activities. This is supplemented by the HA Board
paper (1996) which argues that the HA
"... operate as far as practicable on a commercial basis and in a competitive
environment" (p. 1),
The next paragraph discusses the background of the Finance Division.
62 Background of the Finance Division
The Finance Division was part of the HA since its inception. It was basically concerned
with routine bookkeeping matters and the lending function was part of it as well.
Lending was initially part of the Finance Division as it (Lending) dealt with looking after
the organisation's debtors, which related to the bookkeeping function of the Finance
Division. The accounting functions of the Finance Division included the land sales
accounts, cash sales accounts, statement of production, lending functions, cash flow
management, project financing, general ledger, balance sheet, profit and loss functions, as
well as performing functions for the debtors. An organisation chart of the Finance
Division prior to its separation from the lending functions appear in appendix 8.
Due to the large size of the Finance Division, its activities seemed to be unmanageable.
Subsequently, the debtors' functions were transferred to the Lending Division. It was
considered that work related functions needed to be together. The movement of debtors'
files usually took time when the divisions were one. The files used to move from the
Lending personnel to the Finance personnel and vice versa. With the separation, this has
ceased. The Lending Division now looks after all of them.
The ADB consultant stated that the HA would continue to find itself in financial problem,
unless it tries to revitalise itself. Its deficit in 1989 stood at $3.3m. It was recognised that
the core business of the HA was lending. For the commercial orientation of the HA, it
became vital that the Lending Division be separated from the Finance Division. Initially
the Lending Sector of the Finance Division had no target to achieve, and as such the
services of the Finance Division were slow and ineffective. However, now with the
75
revitalisation programme, the Lending Division is reorganised as a profit centre of the
HA with set targets to be achieved, which will be discussed in the latter stages of the
paper. The targets and objectives of the Lending Division are shown in appendix 10.
There is a monthly measurement program to gauge the progress of the department against
its quantitative targets. If the targets are not met, then the reasons are investigated, and
the targets are reviewed. These targets included cash and village loans disbursed, home
comfort/quick loans disbursed and loan processing time by the division. With the
separation, the Finance Division is now left with only the accounting functions to
perform. The Lending Division, on the other hand, enables the HA to give better services
to its customers, in order to meet its vision of providing timely and cost effective loan
finances principally for the low and middle income families.
The next section explores the reasons for the separation of the two divisions.
6.3 Reasons for the separation of the Lending Division from the
Finance Division
A number of reasons are attributed to the separation of the Lending Division from the
Finance Division. The government had adopted the policy of corporatisation of public
sector organisation in line with global trends so that the public sector organisations are
run on a commercial basis, and in a competitive environment. This policy had been
developed due to the poor performance of public enterprises. The poor performance of
public enterprises was reflected in the low return on assets employed compared to the
private sector (Towards a Better Fiji, 1999). A more efficient management of these
assets was likely to yield better cost control and more explicit commercial objectives. It
was in this regard that the public sector reform policy was pursued by the State. The
World Bank and the ADB also recommended that the HA operate on a financially viable
basis without depending on government subsidies. Consequently, Lending as a profit
centre would facilitate the HA to be self-sustaining. Therefore, it was essential for it to
be separated from the Finance Division.
The ADB consultant was invited by the government to carry out this separation, so that
the HA becomes a financially viable organisation and operates on a profit basis. The HA
has reached a stage where it has to take a more commercial approach to its activities and
in particular the way it handles its funding and lending activities (HA Board Paper,
1995). The consultant was to review the HA's borrowings and mortgage lending
functions. The specific output of the exercise was to improve the loan processing/
approval procedures and reduce mortgage arrears through improved control.
The next section examines in some depth the above reasons for the separation exercise.
6,3.1 Government Policy/ Global Trends
The past government had come up with the corporatisation policy of public sector
organisation in line with the global trends. The current government has maintained this.
However, they have slowed the process so that redundancies of workers are not involved.
The corporatisation policy would mean the removal of subsidies and grants from these
organisations, and consequently a reduction in government expenditure. Parliamentary
paper number 2 (1993) argues that
"Measures taken to reduce size of government have included restraint in
government spending and reform of public enterprises " (p.5).
The aim of the reform was to improve the performance of loss-making government
organisations by operating them on commercial basis rather than as bureaucratic entities.
Once it was commercially oriented, it would give the people of Fiji a better reward for the
invested public funds (Towards a Better Fiji, 1999).
The HA Board paper (1996) further argues that
"The Housing Authority is one of the organisation's that the government has
identified to be reorganised and which is to operate on a commercial basis "(pl).
The organisation is to operate on a profit basis, and is expected to be self-sustaining
without relying on government subsidies. The Lending Division was separated from the
Finance Division in May 1994 as a result of the coorporatisation plan of the government.
One of the managers argued that
"...Public Sector reform could also be attributed to be the reason for the
separation of the two divisions. Housing Authority stopped getting subsidies from
the government since 1993, With the reform, the HA is to operate on a more
viable basis... "(Interview Report N,p30).
77
This corporatisation plan initiated the restructuring of the organisation into business units
in line with the commercialisation approach required by the government, in accordance
with its public sector reform policy (e.g. Innes & Mitchell, 1990). The aim of the
separation exercise was to facilitate the HA to operate on a commercial basis, and in a
competitive environment. The major emphasis was to separate operations between
production and lending in order to fully introduce cost or responsibility centre accounting
and evolve the organisational divisions of the HA into its two main business activities
(HA Board Paper, 1994). One of the managers maintained:
" Lending is somewhat different function altogether from the finance. This
function of lending is related to banks lending function. The Finance Division, on
the other hand, looks at bookkeeping matters. ...Lending is actually the core
business of the Housing Authority. It is a profit centre " (Interview Report P,
p.35).
The HA raises funds through promissory notes, loan notes, bonds and long term loans.
Promissory notes are secured under a government guarantee to a limit of $5 million. This
provides a short term financing of the loan portfolio (HA Board Paper, 1995). The
average cost of this fund is 5.5%. The finance is also raised from the FNPF at a rate of
6%. The HA also obtains finance through bonds at a cost of 6.26% (HA Board Paper,
1995). The HA lends at 9%, thus making profit from this activity. The HA used to lend
at 11.5%, but the current government has brought this rate down to 9% in order to fulfil
its election promises.
With the establishment of the Lending Division in early 1994, the loan operations as well
as the lending staff of the Finance Division were gradually transferred to the Lending
Division. This approach was considered necessary in order to promote efficiency in
operations and to ensure business survival and growth. One of the managers remarked
"...Finance Division's role was broad. With the separation, its role was
narrowed and manageable... "(Interview Report N, p.30).
The Finance Division was left with the bookkeeping functions only. The aim behind the
separation was to separate the core business of lending. One of the managers argued:
"...Our core business was mortgage financing and property development. Our
core businesses are our profit centres. ...the mortgage financing is part of the
lending division "(Interview Report O, p.32).
78
Besides the Lending Division, the Property Services Division is also the HA's profit
centre, As discussed earlier, the HA borrows at a lower rate and lends at a high rate,
consequently making profit from its lending operations. The primary objective of
restructuring has been to identify the entity's activities and separate the commercial
activities from those which are non-commercial and non-viable (Towards a Better Fiji,
1999). The commercial activity of the HA was the lending function. Thus, the
separation would enable Lending Division to operate on its own. In addition, this would
reduce the size of the Finance Division and make it more manageable. Consequently, the
Lending Division dealt with debtors, and became a "one-stop shop"4 for customers.
6,3.2 The World Bank and the Asian Development Bank
The World Bank and the ADB were the major sources of finance for low-income
housing development projects. The HA had borrowed $6.3 million from the ADB and
another $6.7 million from the World Bank (HA Board paper, 1995). The repayment
began from 1995 onwards. The main purpose for this fund was to finance project-based
activities such as the development of land and the building of houses. However, the
ADB consultant required institutional strengthening of the HA so that their loans could
be repaid (HA Annual Report, 1992). The government requested technical assistance
from these banks because of the ailing condition of the HA in the late 80's. The Banks
identified problems and made recommendations for action.
The government realised that the ailing financial condition of the HA would make HA's
operation difficult. With the assistance of the ADB consultants, it came up with a
Revitalisation Plan with the following components:
'(I) emergency actions to assist HA to resolve its cashflow crisis comprising
approval of an increase in HA's mortgage lending rates to 10 percent (for loans
previously 5-9.5 percent) and 12 percent (for new loans and loans previously at
10-11.5 percent);
(ii) a capital contribution to HA of F$1million; and
(in) approval of a new HA policy statement which makes a number of
organisational, operational and financial changes designed to make HA
financially viable " (ADB Report, 1989, p. 7).
A Those customers needing loan finance are served by the Lending Division staff only.
79
As reported earlier, the HA was lending at 11.5% until the new government came into
power last year. The new lending rate is set at 9%. The previous government with the
assistance of the ADB consultants came up with organisational and operational changes
to make HA financially viable. The separation of the Lending Division from the Finance
Division was one of those changes. The HA separated the Lending Division so that it
could become financially viable based on the recommendations of the ADB consultant.
The Lending Division became the profit centre and this led to the overall improvement in
the profitability situation of the organisation as discussed earlier.
6.3.3 Consultant's
An ADB lending advisor, Terry O'Donnell, was hired by the government to carry out the
separation between the Lending Division and the Finance Division in order to make the
HA a financially viable organisation. The ADB financed this technical assistance project.
The ADB paper (1995) states that the project
"is part of a team ... engaged to improve and enhance the operational
performance of the Authority, The Authority has reached a stage in its
development where it now has to take a more commercial approach to its
activities and in particular the way it handles its funding and lending
activities "(p. I).
The HA, like other public sector organisations in Fiji were functioning on commercial
objectives. This was aimed at making the organisation self-sustaining.
The prime objective of the technical assistance for the Lending advisor was to improve
mortgage- lending management inclusive of enhancing the matching of borrowing and
lending activities. The ADB paper (1995) maintains that
"The development of options and recommendations will include a structural
overview regarding the separation of core activities... " (p.2).
The HA Corporate Strategy (1995-1999) further states that
"The Housing Authority will strive for consistency profitable operation in line
with Government's directive to operate in a financially independent and
responsible manner. We will eliminate our operations deficit and will provide a
positive return on equity invested in the organisation " (p.5).
80
This had implications on the HA as it started making operating profits. Prior to 1992, its
operations were in losses. After 1992, it consistently made profit.
The consultants reviewed the HA borrowing and mortgage lending function, and
recommended improvements. The HA Board paper (1995) stated that
Output shall be reduced mortgage arrears through improved controls, improved
loan processing and approval procedures and an integrated borrowing and
lending information system " (p.5).
The lending advisor was to design improved mortgage loan approval and processing
procedures aimed at reducing arrears and bad debts. Some targets were set so that there
are improved loan processing and collection. This will be discussed later in chapter 8.
The recommendations of the Lending advisor were:
1. That the Lending Department be represented by a dedicated General
Manager due to the strategic importance of the lending function to the overall
organisation; and
2. A comprehensive training program should be introduced as soon as possible
to upgrade the current level of skills and knowledge within the Lending
department."
(HA Board Paper, 1994, p.5).
Since lending is the core function of the HA, it was essential to have it looked after by a
specialist management. The management is expected to generate revenue and manage
cost (see Langfield-Smith et al; 1999). This core function of lending is also captured
through the HA's mission statement that it:
"...makes available timely and cost effective loan finance principally for low and
middle income families... "
(HA Board Paper, 1995).
Further, the staff training would promote consistency or standardisation of procedures.
The consultant recommended for internal and external courses for the Lending
Department staff as follows:
* Internal Courses
a) Induction courses which needs to be attended by all employees to ensure what the
HA is all about.
81
indicators came in as from 1993, and the lending management in their quest to meet their
targets wanted to handle only the lending from May, 1994 onwards. This was, recorded
in a "new book." The lending before this was attended by an "old book" team. It was
difficult to collect the "old book" arrears and the current lending management
performance might be deemed to be unsatisfactory and this would have implications on
the renewal of their contract. The HA Board Paper (1996) states that the Lending section
prior to the separation was plagued with operational problems and was not performing. It
was, therefore, considered to keep the "old book" and the "new book" separate. The
"new book" has a sound method of dealing with the situation. Some teams have been set
up to recover bad debts and their performance is measured on a daily, weekly and
monthly basis (HA Board Paper, 1995). The Lending Division, as discussed earlier,
became the profit centre of the HA and earns revenue based on interest made along with
the resultant fees generated as part of the lending process.
In 1994, a major restructuring process was carried out by an ADB Lending Advisor
(Teny O'Donnell) in conjunction with the executive management team comprising the
Chief Executive and the General Managers of the HA. The consultant was hired by the
government to carry out the restrocturing of the HA in order to improve mortgage lending
management, including an enhancement in the matching of borrowing and lending
activities (ADB Paper, 1995). They saw a need to form a separate Lending Division
which would enhance the commercial viability of the HA and consequently increase the
profitability position of the HA. As a result of this, the Lending Division was separated
and formally recognised as a division in its own right in 1994.
The Lending Division's objectives are:
"1. To ensure that loans are available to existing and prospective clients through
strengthening market strategy and product planning;
2. ensure effective loans management and control;
3. To maximise and maintain profitable loan operations;
4. To ensure human resources development through on the job and external training
with emphasis on multi-skilled employees;
5. Provide prompt and courteous customer service; and
6. Review procedure to stream line operations"
(HA Board Paper 1995, p.5).
83
The HA advances loans for any of the following purposes:
1. To build a house on land where one already owns or leases;
2. To buy a completed house;
3. To obtain additional funds to complete the house;
4. To add extra rooms to ones home for the growing family;
5. To renovate or alter a house;
6. To repair a house;
7. To pay off a loan on a house so that the debt can be transferred to the HA from
another lender;
8. To help customers transfer money from the Fiji National Provident Fund to pay
off a debt on a house; and
9. To carry out improvements to ones property like fencing.
(HA Board Paper, 1994).
In addition to the above, there are additional types of loans advanced by the Lending
Division. These include:
• Soft loans for family needs; and
• Home comfort loans- this assists family in furnishing houses; and
• Village housing schemes. These are loans catering for the building of houses in the
village. It is lent to the head of a village clan on behalf of his extended family who is
the custodian of the concerned native land.
(HA Corporate Plan, 1996-2005).
The lending operations will be discussed in more detail in the later part of the chapter.
The following section considers lending as the banking arm of the HA. The banking
aspect of the Lending Division enables it to operate on a commercial basis so that the HA
becomes a financially viable organisation.
6.5 Banking arm of the HA
Lending is the banking arm of the HA, and is basically concerned with the processing of
loans. It is one of the largest divisions within the HA. There are four managers, under
the General Manager- Lending, since the separation in 1994 (see appendix 9). The work
of these managers is evaluated by the performance indicators. They have set targets, as
discussed earlier, within which they should operate to achieve the end results. The
84
Lending Division is unique in its function as a lender. Unlike commercial banks, it does
not have any deposits from which to advance loans. The HA relies on government
guarantees for its borrowing operations and raising funds on the capital market in Fiji
(HA Board Paper, 1995). These are raised through the domestic markets of the FNPF
and also through the issue of bonds to the public. Thus, the HA borrows money from the
domestic market and lends at a higher rate.
The sale of the developed property is the other source of income for the Division. The
HA Board paper (1995) states that one of the core activities of the HA is to develop land.
Once the land is serviced, the HA sells the plots. The sales and profits on land exceed the
budget (ibid, 1995). A lot of profit contribution also comes from the house sales. The
demand for the HA houses are high and the profit contribution from houses is
approximately $350,000 (HA Board Paper, 1995). One of the managers supplemented
this by stating:
"...The sale of the developed property is the main source of our income. This is
where we generate our income from. It is through the sale of land and houses
that we grant loans to our customers. Recently, we have started to market our
product... "(Interview Report M, p.28).
The Property Service Division, as discussed earlier is the other profit centre of the HA.
It's manager has costs and revenues to manage. The generation of profit is a source of
funds for the HA, which is utilised in lending to the clients. Further, the marketing of
lending is done through the local newspapers and the television. The intention of the
division is to assist people with limited income in acquiring houses.
The next section considers the lending operations of the HA.
6.6 Lending Operation
The lending programmes were to be market related, profitable and responsive to the
needs of the target population of middle and low-income earners. The programme, as
discussed earlier, includes: mortgage loans for the purchase of building plots and houses
developed by the HA and other developers, cash loans for the purchase, expansion,
renovation and improvement of houses; housing loans to village communities; and
development loans for other agencies providing the low and middle income housing and
building plots (HA Corporate Plan, 1996-2005). Further, the role of the Lending
85
Division encompasses assisting homebuyers by the provision of affordable mortgage
finance loans. The Division appraises, approves and processes loans as well as takes
action on non- performing or delinquent accounts. It ensures that the services provided
are prompt, timely, cost effective and are comparable to similar services offered by other
institutions operating in the market such as commercial banks and finance institutions
like the Home Finance Company and the Fiji Development Bank.
The Lending Division has certain criteria for its lending. It lends to the Fiji citizens who
earn less than $15,600 a year or where the total family income does not exceed $15,600 a
year. The maximum loan amount the Division can advance is $50,000. To qualify for
the loan, an individual is expected to have a regular income at the time of application and
be over 21 years age. He or she is also expected to be not owning a house or a share in a
house, or residential land other than the one for which the application is made. In
addition, an individual borrower needs to budget a third (1/3) of his or her income on
average for repayment purposes (HA Board Paper, 1994).
All mortgages are insured under a mortgage protection insurance facility provided by the
Lending Division. This insurance facility ensures the full repayment of loans even if the
mortgagor dies or becomes disabled. The loans are granted for a period depending on the
land tenure, applicant's income and the type of building (HA Board Paper, 1994). The
maximum loan terms for timber houses are normally for 20 years, whilst for the concrete
houses, it is for 25 years. The loans advanced are usually for 80% of the valuation of the
concerned property.
The separation has facilitated improvement in the profitability of the HA. The HA annual
report (1994) maintains that
"The Housing Authority realised a profit of $687,000 in 1994 compared to
$518,000 in 1993. This is the third consecutive year in which the Housing
Authority has made a profit... "(p.4).
The separation of the Lending Division from the Finance Division has been able to boost
profits.
With the separation, the aim behind the present structure, as reported earlier, was to
present to the customers a "one-stop-shop" where they could have all matters attended by
86
the one team. The division is managed by the "Manager-Lending" who reports to the
General Manager Financial Services.
Further, through the creation of the Lending Division, some of the benefits are reduced
mortgage arrears through improved controls, improved loan processing and approval
procedures and an integrated borrowing and lending information system. Total
collections had increased from $14.7 million in 1990 to F$16.8m in 1994. Arrears,
however, had been reduced from $7.2 million in 1990 to $5.8m in 1994. In 1998, this
had been further reduced to $4.4m. This reflects improvements in collection efficiency.
When the Lending Division was part of the Finance Division, there were no targets to
meet. One of the managers remarked
"...When they (Lending Division) were part of the finance division, there was no
pushing for the achievement of the targets. Now with the separation the Lending
division had to meet its targets. There has been some efficient checking on the
clients' record by the Lending Division " (Interview Report O, p. 33).
With the separation, the Lending Division have their own targets to achieve, which is
making the division efficient. The targets are shown in appendix 10. The division has
been continuously meeting its targets in terms of the number of loans to meet in the
month, disbursement of loans and so on.
The village scheme offers the HA its largest loan values and therefore has a major effect
on the size of the loan portfolio. A good relation exists between the village and the HA
as it is a specialist product with a specific target market.
Another of the managers of the Lending Division stated:
"We have made improvement in services. We 're constantly looking at the targets
in terms of customer complaints. We try and address this in the shortest possible
time,.. "(Interview Report L, p,26).
The HA realised the importance of customer services. This is reflected in the HA's
Board paper (1996, p.2) which states that:
"The provision of staff to effectively deal with customer complaints and queries is
a very important, component of any servicing organisation like the Housing
Authority."
The HA has customer satisfaction as one of its performance indicators. This will be
discussed later in chapter 8. This indicator of customer satisfaction ensures that the
customers get prompt and quality product and services from the HA,
The next section examines the shortcomings of the Lending Division.
6.7 Shortcomings of the Lending Division
The Lending Division is expected to be the sole judge of whether to approve advances or
not. However, there are instances of loans, which have not met the lending criteria, and
have subsequently been rejected by the Manager, Lending. However, in some such cases,
the rejected applicants have been referred by the Sales Division to the General Manager-
Financial Services. The General Manager- Financial Services have on such occasions
overruled the Manager, Lending and have granted the loans.
This procedure is acceptable as the General Manager, Financial Services, has the
responsibility for the Lending Division, However both Managers in question, Sales and
Finance, have other motives. The Sales department wishes to make its sales targets and
once the loan has been approved then it is no longer the concern of that department, and
if it goes into arrears then it is someone else's problem. The Financial Manager wishes to
have the loan approved as he wishes to meet the profitability targets for the HA by selling
houses. In the short-term the profit on sales outweighs the profit on the loan.
The other problems faced by the Lending Division are described by one of the managers:
"There is competition from outside; interest rates are lower outside. Banks have
brought the rates down, but we cannot, Our cost of loan is high because we have
to borrow in order to provide the loam. Banks rely on depositors' money for
lending out, while we don't have any depositors"(lnterview Report O, p.34).
The banks are providing a very low rate of return on depositors' money ranging from 1 to
3 percent on an average. As such, they are able to lend at a lower rate. On the other
hand, the HA has to borrow at a higher rate and is compelled to lend at a higher rate too.
The banks, however, normally provide loan finance to the higher income earners, whilst
the HA is the only institution in Fiji which provides finance to the middle and low-
income earners. The HA, as reported earlier, was previously lending at II.5%.
However, since the new government came in 1.999, it has brought the interest rate down
to 9%. The banks current lending rate, on the average is 7% to 8%. This interest cost is
comparable to the HA's cost.
The next paragraph provides a brief discussion of the empirical data gathered.
6.8 Discussion
The Lending Division was separated from the Finance Division, so that the former could
be operated on the profit bases, and increase the value of the HA. These results are
consistent with suggestions made by Hopwood (1989b) who argues that enterprises are
broken down into more units than are necessary for the purpose of internal reporting.
They are being broken down into units where the language of the market, of competitive
pressure, and forces of profit can be introduced by calculative informational accounting
means. Organisations are changed in the name of economic vocabulary, that is, to attain
efficiency. Hopwood (1978) further argues that organisational designs have never been
and are unlikely to be static,
The separation of the Lending Division from the Finance Division facilitated the
organisation to achieve profit. In 1994, with the separation it recorded an improved profit
of $687,000 compared to $518,000 in 1993 when they were together. The interest on
loan account revenue increased from $8,688,000 in 1993 to $10,593,000 in 1994, when
the separation was completed (HA Annual Report, 1994), In 1998, the amount increased
to $14.2m (HA Annual Report, 1998). These observations are consistent with Hopwood
(1989b) who argues that more managers are being exposed to the market forces. The
General Manager, Lending had to be responsible for costs and revenues of the Lending
Division as it was a profit centre. The HA's performance improved significantly in 1996
compared to 1995 (HA Annual Report, 1996), For instance, the cash and village loans
granted in 1995 was over $8 million. However, in 1996 this increased to over $10
million.
In 1998, the HA. achieved a net profit of $159,899. This was attributed to improvement
in the HA's lending performance, The HA Annual Report (1998) states that:
"Cash loans approved, which included new products- soft, home comfort and
quick loans-were worth $15,671,819. This was 63 percent above budget and
$8,948,143 better than the 1997 figure " (p. 7),
The value of village loans approved also increased by 26 percent compared to the
previous year. These increases in lending contributed to profitability situation of the HA.
Prior to the separation, and as far back as 1992 the HA consistently recorded losses, The
results suggest that the loan market is the HA's most effective area of business (see HA
Annual Report, 1996). Thus, profit is "used in the Lending Division as a means for
management to realise their responsibilities. They need to market their core business of
Lending well to attract profit.
The next section provides a summary of the chapter.
6.9 Summary
This chapter examined the reasons underlying the separation of the Lending Division
from the Finance Division. It argues that the corporatisatiou plan was a catalyst to the
change. Lending Division offers customers a "one-stop shop" whereby they could get
everything, attended by one team-the lending team. The separation exercise has
prompted efficiency in the Lending Division. Of critical importance is the division's
contribution to the HA's directional policy which is outlined in the mission statement as
making available timely and cost effective loan finance for low and middle-income
families to advance the vision of Government towards the provision of shelter for a
higher standard of living for its people (HA Board Paper, 1996).
However, there are shortcomings as well. Sometimes loans are approved by the higher
management of other divisions because of their quest to meet the performance targets.
There has been considerable improvement in the HA's performance since the separation
eventuated. The HA consistently made profits after the separation. The Lending
Division became the profit centre of the HA, and the consultants identified this to be the
most effective area of the HA's business.
In order to enhance the commercialisation of the HA, TQM and perfomance indicators
were adopted by the organisation. The ensuing chapter will discuss how TQM improved
efficiency and profitability in the organisation.
91
Chapter Seven
Total Quality Management
7,1 Introduction
This chapter explores the implementation of Total Quality Management (TQM) at the
HA. Following the global trend, the TQM was implemented to make the organisation
more effective and efficient, and to prepare the organisation towards corporatisation. The
chapter begins with the background of the TQM, and subsequently looks at the reasons
for the introduction of the TQM. It then examines the benefits of the TQM, and the
resistance that was expressed by the employees of the HA. This is then followed by a
discussion of the empirical evidence collected. The chapter finally concludes with a
summary.
7.2 Background of Total Quality Management (TQM)
The Total Quality Management as discussed by Wilkinson and Witcher (1993) can be
summarised as having three essential requirements, which are:
Total which means participation of everyone.
The TQM requires continuous improvement and getting things accurate the first
time. Consequently, teamwork and the maintenance of good relationship are essential in
achieving the above.
Quality means meeting customer requirements exactly.
The TQM requires customer agreed specifications, which allow suppliers to
measure performance and customer satisfaction.
Finally, management means enabling conditions for Total Quality.
TQM. demands leadership and commitment from senior management to ensure that an
appropriate infrastructure exists to support a holistic and not a compartmentalised
approach to organisational management.
There are a divergence of views on what constitutes TQM (Martinez-Lorente et al; 1998),
They argue that there are a number of common elements through the varied definitions
(for example, top management support, customer and supplier relationships and
employee involvement).
TQM is defined as a change in the management of a firm involving the entire business
and includes all its activities and employees (Fowler, 1996). Its core principles as
articulated by Fowler (p.53) are:
• A focus on meeting the requirements of both external and internal customers;
. The solving of identified problems using statistical data and scientific procedures;
• The incorporation of quality principles into the firm's long-term strategy;
• The empowerment of employees through the use of teamwork, education and by
giving people responsibility for and control over the quality of their work;
• A management that is actively committed to implementing quality concepts;
• An emphasis on supplier partnerships; and
• The continuous improvement of business process by removing the causes of poor
quality.
Many organisations have moved towards a total quality management (TQM) path in their
quest for quality (Hoque and Alam, 1999). There is also a growing literature on TQM
suggesting that organisations that pursue TQM have better productivity, greater market
share and improved profitability and efficiency (see Redman, 1995; Pearson et al; 1995;
Lal, 1990; Oakland, 1989; Fowler, 1996; Grant, 1995; Lord, 1998; Hoque and Alam,
1999; Wilkinson & Witcher, 1993; Martinez-Lorente et al; 1998; Laszlo, 1998;
Macdonald, 1998; Thomson & Thomson, 1995; Wilkinson et al; 1992; Johnson, 1994;
Powell, 1995; Maloney & Stower, 1999). It is conclusive that TQM enhances continuous
improvement. Improvement, as articulated by Hoque and Alam (1999, p.200) "is
measured in terms of providing products or services of high quality and low-cost,"
While it is true that TQM has general appeal, its meaning can only be understood in terms
of its organisational context. For instance, from New Zealand experiences, it is evident
that fierce competition and customer expectations with regards to quality compelled most
New Zealand firms to focus on ISO certification or TQM adoption (ibid, 1999).
TQM has clear implications for participation and involvement in terms of the
teamworking principles in organisations. The teamwork provides more collegial
relationship within the organisation (Wilkinson et al; 1992; Shank and Govindarajan,
1994). Teams are designed to improve communication, understanding and problem
solving, and have commitment towards the proposed solutions. The solution once
implemented will bring about improvement in the organisation.
Having discussed the background of TQM, the chapter will now consider the reasons for
the introduction of TQM at the HA.
7.3 Reasons for the Introduction of TQM at the HA.
A number of reasons are attributed to the introduction of the TQM in September 1993 at
the HA. The HA had to be run on a commercial basis in line with the corporatisation
plan of the government. The corporatisation plan entails reform with the ultimate aim
being privatisation. This has been largely due to the financial crisis facing the
government (Nandan, 1999). Raising enterprise efficiency, opening the economy to
domestic and international competition, breaking up monopolies are core measures taken
by government as part of corporatisation (ibid, 1999). TQM facilitates raising of
enterprise efficiency at the HA. It also enhances the HA to be run on a commercial basis.
The TQM would facilitate this. The Chief Executive at that time was the driving force
behind the TQM.
The World Bank and the ADB also recognised the seriousness of the HA's financial
situation. The organisation had to be run on a financially viable basis, and the TQM was
expected to promote this. The HA invited two consultants to implement the TQM. These
consultants were hired by the Pacific Asia Quality Foundation (PAQF hereafter). One of
these consultants was from the University of Hawaai and the other one was from the
94
University of South Carolina. The PAQF is a professional organisation, which promotes
TQM in organisations. The HA is a member of this organisation.
The next section considers some of the above reasons that brought about the TQM in the
organisation.
7.3.1 Pacific Asia Quality Foundation
The PAQF is a commercial organisation which puts resources together to hire consultants
to train its members. From time to time, it hosts quality forum. The PAQF also conducts
Quality Management courses in Fiji. The courses on Quality Management are usually
two to three days in length and are applicable to various senior and middle management
levels. The PAQF is not a consulting organisation (HA Board paper, 1994). Consultants,
however, belonging to PAQF offer their fees at a 50% discount to Fiji members.
The PAQF has also developed Quality Management videos and books. The member
organisations can borrow these at no cost. The organisation is committed to continuous
improvement in its own goals and strategies. It enhances the development and
implementation of continuous improvement in cultures within organisations. With the
assistance from Hawaai Pacific University, it also offered credentials in Quality
Management to the HA's executives, which some managers have completed without
travelling abroad.
7.5,2 PAOF and Consultants
One of the managers maintained:
"... We 're members of the Pacific Asia Quality Foundation (PAQF) together with
Colonial, FEA, Telecom, RBF and others. We were one of the many
organisations to join PAQF... " (Interview Report Q, p.37).
At least the Telecom and the Reserve Bank of Fiji were members of PAQF, prior to the
HA. These organisations were successful in terms of customer satisfaction and
profitability. Consequently, the HA became a member in order to adopt the TQM as
well. The PAQF indirectly influenced the HA to introduce the formal quality system. It
can be argued that the HA adopted the TQM by imitation and copying from one another
95
to increase its external legitimacy. Other Public sector organisations like the FEA and
Telecom adopted it, and so did the HA. This is in line with the Institutional theory to be
discussed later,
The HA annual report (1993) argues that
"With assistance from the Pacific Asia Quality Foundation, quality teams were
formed and members were given thorough training in the eleven steps to problem
solving" (p. 10).
The eleven steps advocated by the PAQF are:
Step 1- Identify the problem;
Step 2- Identify and analyse the consequences;
Step 3- Identify the underlying causes;
Step 4- Data/ Assignment;
Step 5- Data Collection;
Step 6- Data Evaluation and Analysis;
Step 7- Possible Solutions;
Step 8- Solution Analysis;
Step 9- Cost/Benefit Analysis;
Step 10- Action Plan; and
Step 11- Measurement/Follow up.
(Total Quality Management, Site Allocation Team, 1994, p. 1-12),
A summary of the eleven steps to problem solving is contained in appendix 11 for one of
the problems of the HA - the unavailability of transport in loans and sales department. In
solving the problem, the First step entails the identification of the problem. This is the
unavailability of transport, which lead to late approvals of loans. The second step
identifies and analyses the consequences of the problem. This is seen as affecting
employee and customer satisfaction. The customers and employees are both frustrated
and the HA. would lose business as a result of this. The problem also affects operational
effectiveness in that targets are not being met. The third step identifies the causes of the
problem. This has been identified as accidents, puncture of tyres, vehicle sent for
maintenance, and also the distance taken to drop and pick clients, The fourth step
analyses the data in terms of the frequency of the problem. This problem has been
occurring on an average eight times per day. The fifth step entails data collection. The
96
data is collected via vehicle numbers, that is, the number of times the vehicle has been
taken during the day with usage duration. The sixth step carries out the data evaluation
by utilising bar graphs and pie charts (see appendix 11). The seventh step identifies the
possible solutions. This has been identified as the need to purchase extra vehicles. The
eighth step involves solution analysis, which involves prioritising possible solutions.
Cost benefit analysis is carried out next. The subsequent step is that of action plan, that
is, the action to be taken in order to solve the problem. The last step is that of
measurement/follow up, that is, the ideal situation the HA would have once this problem
is solved. The solving of the problem is expected to boost the sales target. Similar steps
are followed for other work-related problem at the HA.
Two consultants were hired by the PAQF, who were to coordinate TQM in the
organisation. One of these consultants was from, the Hawaai Pacific University and the
other was from the University of South Carolina. Initially, they coordinated six hours of
training per week on TQM in the organisation. However, with their departure it is now
left to the HA's management to coordinate this programme. The consultants' major task
was to train management in the TQM practices.
One of the managers argued about the TQM as:
"In its initial stages, it required six hours of framing. But now, it's no more.
Workers are now excused for an hour from office to participate in the TQM
process. The idea is to map process-try to reduce customer turn around time "
(Interview Report Q, p.38).
The workers are more accustomed to the TQM concept. The problems are identified and
the eleven steps are followed. For instance, the HA faced another problem, regarding the
delay in the supply of houses. The primary cause of the problem has been identified as
manpower shortage and approval of plans. The solution the team came up with are to
improve:
1. Performance standard;
2. Quality control;
3. Training of Inspectors;
4. Commitment by the inspector; and
5. Provide additional staff, etc.
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A cost benefit analysis is done with individual solutions. For instance, with the
recruitment of two additional staff, the HA will have a net gain of $55,000. This
document then goes to the Chief Executive for approval. Once approved this becomes
the policy document.
The staff of the HA were initially exposed to the TQM seminars through the consultants.
Training sessions usually took place for a few hours at the HA centres in Suva, Lautoka
and Labasa. The team leader in each division was a manager from a different division.
For instance, in the Human Resource Division, the Manager- Finance will act as the team
leader. The team leaders became the facilitators of the TQM. There were twenty
facilitators, altogether, with the steering committee at the top, comprising the chief
executive and the directors.
7.3.3 The Chief Executive
The management was also behind the implementation of the TQM in order to enhance the
improvement of the organisation. Actually, the previous Chief Executive, Isikeli Kini,
came up with the idea. One of the managers argued:
"The idea ccme from the top, from the previous chief executive. He must have
read a lot books on TQM. It was a top- down thing, not from the middle
management. It concerned five directors at thai time to implement the system... "
(Interview Report Q, p.37).
The Chief Executive also traveled to New Zealand and Australia, and had visited some
successful companies there carrying out the TQM concept. Also some leading
organisations in Fiji like the Telecom and the Reserve Bank were adopting it, and were
successful. These organisations were operating on a commercial basis. Consequently, he
borrowed the idea and applied it in the HA's context, as this had to be operated on
commercial basis as well. This is in line with the State's public sector reform policy.
The top management of the HA argued that, the long-term survival of an organisation is
dependent on factors like quality, customer satisfaction and operational efficiency. The
HA was able to deliver its products on a timely basis to the customers. This facilitated
customer satisfaction. Hoque and Alam (1999) on a NZ case study of TQM had similar
sentiments. Gaining the approval from management and obtaining their commitment are
the first steps towards the successful implementation of TQM in any organisation
(Laszlo, 1999). The top-down approach in implementing TQM at the HA enhanced
commitment amongst employees. There was a growing commitment from the top on
TQM. Consequently, the employees had to go by it.
The Public sector reform policy of the government had also contributed to the
implementation of the TQM as will be discussed below:
7.3.4 Government Policy
The government's public sector reform was also one of the forces behind the introduction
of the TQM. The HA annual report (1993) argues that
"With major change requirements due to its commercial orientation and in order
to maximse its service to customers and target groups, it became necessary for all
employees to be part of the change process" (p. 10).
TQM at the HA was accelerated because of the Public Sector reform policy of the
government. The corporatisation of the HA would mean removal of government
subsidies and consequently a reduction in government expenditure. One of the managers
argued:
"... The TQM is actually followed from a global trend. It is an American concept,
which has been copied by the organisation... " (Interview Report R, p.41).
The TQM has been borrowed to empower employees to discuss problem areas in their
work area. It facilitates the employees to analyse the causes of the problem and suggest
solutions for overcoming them. The TQM would improve the performance of the HA in
terms of efficient services and customer satisfaction as advocated by many writers on
TQM.
The corporatisation of the public sector organisation is in line with the global trends,
which were responsible for the introduction of the TQM. The HA annual report (1993)
argues that:
"...the Rousing Authority now has to operate in a commercial environment, and
must be able to offer cost effective, timely, and competitive products and services
and respond timely and effectively to market, demands "(p. 4).
99
The TQM process facilitates the achievement of the above goals. The loan products were
delivered to customers on a timely basis. There were prompt services provided to
customers with the TQM in terras of delivery of loan products and houses.
The ensuing paragraphs discuss the benefits arising from the TQM,
7.4 Effect of TQM
The TQM had brought benefits to the HA, Loans are processed within a day or two after
the implementation of the TQM. Previously it used to take a few months to process
them. There was some reluctance to the acceptance of TQM as well. The senior
managers were fearful of the concept, as the subordinates were given a chance to express
themselves. They feared that they might question the performance of the superiors. The
ensuing section considers this.
7.4.1 Benefits of TOM
There has been remarkable changes and improvement in the organisation since the
implementation of the TQM. For instance, as reported earlier, if the customer applies for
loan now, it is processed within a day or two, provided all the papers are in order. Before
TQM was introduced, it used to take a few months to process loans. It used to take
longer previously as the staff were lazy. With the TQM, they began to realise how
important each one of them was to the organisation. The vision and mission of the
organisation is quite clear to the employees, and they are working towards it. The vision
of the HA is:
"To be the leading Housing Finance Company providing competitive and quality
services to advance the vision of government towards better housing and living
standards for its people " (HA Annual Report, 1998).
Further, the mission statement of the HA is:
".., to provide on a financially viable basis, timely and cost effective loan finance
principally for low and middle income families in Fiji"
(HA Annual Report, 1998).
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TQM is in-built within the mission of the HA. Without the TQM, the vision and the
mission of the organisation would not be realised by the workers.
Pearson et al. (1995) in the information system context argued that the benefits frequently
achieved from TQM included improved customer satisfaction, enhanced quality of
products and services, greater productivity, increased flexibility in meeting customer
demands, better utilisation of human resources and better management control. The
benefits accruing to the HA with post implementation of TQM were more timely
approval of loan products, quicker supply of houses in accordance to the customers
expectations and improved profitability. The loans as discussed earlier were approved
within a day or two, as compared to the previous untimely approval of loans. With the
TQM, each employee realised how important he or she was to the organisation. One of
the managers remarked:
"...Every player realised their importance in the organisation, that is, how
important their job was... "(Interview Report 0, p39).
This created an environment where the workers were motivated to work harder as they
realised the importance of their role in the organisation through the TQM. This,
consequently, helped in improving profitability of the organisation. In 1993, after the
implementation of the TQM, the HA realised a profit of $518,000. This increased to
$687,000 in 1994. In 1995, the organisaion was still profitable with profit standing at
$309,000, whilst in 1998 the profit was $160,000. The HA initially began realising profit
in 1992. This is supplemented by the HA Annual Report (1992, p.4) as:
"...for the first time, the Housing Authority has realised in 1992 a net operating
profit of $248,000. This achievement is quite significant when compared to the
previous operating loss of $1,898 million in 1991."
With the restructuring, the HA has began to realise profit. The above discussion reveal
that with the TQM, the HA has become financially viable.
The delivery of houses after the TQM implementation was prompt (TQM, Site Allocation
Team, 1994). The delays in delivery were sorted out through the quality circle teams.
The HA's profitability, as reported earlier, improved with the adoption of TQM policy.
The TQM has been critical in bringing about performance indicators in the organisation,
which will be discussed later.
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The HA annual report (1993) argues that
"...total quality management has already transformed the attitude of workers at
the Housing Authority. They now feel more responsible for their work and realise
the impact of poor quality on the financial performance of the Homing Authority
and its capacity to look after them. ... In order to ensure corporate belief and
commitment, a TQM Policy for all employees were formalised and adopted: We
should do it right the first time on time, and all the time " (p10). .
The TQM practices are embedded in all aspects of the HA. The process improvement
teams function across all areas of product delivery at the HA. The management is
committed to improving its customer services and are continuing quality programmes to
achieve a high standard quality service to customers (HA Annual Report, 1993).
The TQM has made the organisation viable. The introduction of the TQM boosted staff
morale at the HA. The staff knew the importance of the work they do, and every
employee realised that they were very important players within the organisation.
Consequently, this improved the effectiveness of the organisation. One of the managers
maintained:
".../ believe in the concept of TQM, It is tailor made to suit the needs of the
organisation. It has not borrowed the ideas, wholesale "(Interview Report Q,
p. 39),
One of the other managers stated;
"With the TQM, we have to do brainstorming and son out issues. We need to do
cost-benefit analysis, This helps build confidence in the staff, as meetings are
done professionally. It is satisfying to see that your views will be heard at the
board level through the minutes of the meetings. To solve a problem, TQM takes
three months. Data collection takes time. At the end, the team presents the case
at the boardroom. The chief executive endorses this, and is implemented straight
away" (Interview Report R, p.41),
The implementation of these solutions are expected to yield benefits to the HA. For
instance, in the case of the problem of unavailability of transport, the recommended
solution was expected to bring higher sales, and consequently improve the profitability of
the organisation. Such are the cases with the other problems as well. The aim behind the
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TQM is to see that customers are satisfied, and that the services are provided to
customers in the shortest possible time.
There has been some resistance to the TQM idea as well. The ensuing paragraph
discusses this.
7.4.2 Reluctance to TOM
Initially when the TQM was introduced in the HA, the workers were a bit reluctant to
accept it. However, through training, this reluctance was reduced. One of the managers
argued:
"... Changing the culture of the organisation was difficult Management level also
agreed to the TQM reluctantly. But if was the directive from the top, so people
had to abide by it "(Interview Report Q, p38).
Some of the employees still maintained the lazy attitude towards work. For the
implementation of TQM, they had to change their attitude and work more sincerely for
the improvement of the organisation, This was somewhat difficult to achieve.
Performance indicators, however, attempted to achieve this. This will be discussed later.
Redman (1995) argues in the UK context that resource limitations, cost constraints,
difficulty in measuring quality improvement, lack of commitment from senior managers
were often cited as difficulties in the implementation of quality management. In the case
of the HA, however, there was a commitment from top management and so the
employees had to abide by it.
A few managers, however, were filled with anxiety after the introduction of the TQM.
Their anxiety, as discussed earlier, was attributed to the subordinates being given
freedom to express views on them. The team leaders were to ensure discussions are
centred on the processes, and means to improve them. There were also degrees of fear at
the supervisory level as people who were quiet so far, could speak up during these
meetings. Through TQM, management functions or tasks are taken to a lower level.
This undermines some of the management, but for the commercial viability of the
organisation, TQM has been adopted. Everything in the meeting is documented and this
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goes to the steering committee, which comprise the Chief Executive and other
management of the HA.
The next section carries out a brief discussion of the empirical evidence collected.
7.5 Discussion
The TQM would mean changing the culture of the business organisation in order to
manage change in a more customer-responsive manner. The adoption of performance
targets would enable this. This would be discussed later. The TQM has been
implemented in response to the changing competitive environment of business over the
last few years. In the case of the HA, there has been improvement in performance.
Loans are now approved within a short span of time. Before the TQM, it used to take
months to process the loan. The profit of the HA has improved as well. The findings are
consistent with the claim that TQM is one of the keys to a firm's competitive success (see
Johnson, 1994; Powell, 1995; Chenhall, 1997; Shank and Govindarajan, 1994; Hoque and
Alam, 1999).
The companies using the TQM principles seem to be the most committed to making their
manufacturing operations more competitive (Shea and Kleinsorge, 1994; Johnson, 1994;
Powell, 1995). The resulting changes that are brought about by the TQM process are the
commitment to satisfy the customers, a more formal planning and goal setting process,
increased employee skills and responsibility, and an ongoing objective to improve
continually the performance of the organisation (see Chenhall, 1997; Hoque and Alam,
1999; Shank and Govindarajan, 1994). Such changes have been evident at the HA as
discussed above. The adoption of TQM means driving for continuous improvement,
elimination of waste, and a focus on customers.
The TQM is dependent on teamwork. Wilkinson and Witcher (1993) argue that
teamwork lies at the centre of most progressive thinking in human resource management.
Teams are crucial to the management of continuous improvement. There are quality
teams within the organisation. One of these teams is mentioned in appendix 11. This
team attempts to deal with the problems of unavailability of transport. This team does
brainstorming and sort out the problem of unavailability of transport.
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goes to the steering committee, which comprise the Chief Executive and other
management of the HA.
The next section carries out a brief discussion of the empirical evidence collected.
7.5 Discussion
The TQM would mean changing the culture of the business organisation in order to
manage change in a more customer-responsive manner. The adoption of performance
targets would enable this. This would be discussed later. The TQM has been
implemented in response to the changing competitive environment of business over the
last few years. In the case of the HA, there has been improvement in performance.
Loans are now approved within a short span of time. Before the TQM, it used to take
months to process the loan. The profit of the HA has improved as well. The findings are
consistent with the claim that TQM is one of the keys to a firm's competitive success (see
Johnson, 1994; Powell, 1995; Chenhall, 1997; Shank and Govindarajan, 1994; Hoque and
Alam, 1999).
The companies using the TQM principles seem to be the most committed to making their
manufacturing operations more competitive (Shea and Kleinsorge, 1994; Johnson, 1994;
Powell, 1995). The resulting changes that are brought about by the TQM process are the
commitment to satisfy the customers, a more formal planning and goal setting process,
increased employee skills and responsibility, and an ongoing objective to improve
continually the performance of the organisation (see Chenhall, 1997; Hoque and Alam,
1999; Shank and Govindarajan, 1994). Such changes have been evident at the HA as
discussed above. The adoption of TQM means driving for continuous improvement,
elimination of waste, and a focus on customers.
The TQM is dependent on teamwork. Wilkinson and Witcher (1993) argue that
teamwork lies at the centre of most progressive thinking in human resource management.
Teams are crucial to the management of continuous improvement. There are quality
teams within the organisation. One of these teams is mentioned in appendix 11. This
team attempts to deal with the problems of unavailability of transport. This team does
brainstorming and sort out the problem of unavailability of transport.
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Similarly, quality management practices are largely customer/client driven. The HA
developed the idea in 1993, and is largely meeting customer requirements with this
approach as discussed earlier. The next section summarises the chapter.
7.6 Summary
This chapter commenced with the background of the TQM. The TQM comprises three
essential requirements, which are:
Total-which means participation of everyone;
Quality-which means meeting customer requirements exactly; and
Management-which means enabling conditions for total quality.
There has been a growing literature on TQM suggesting that firms pursuing TQM have
better productivity, greater market share and improved profitability (e.g. Chenhall, 1997;
Hoque and Alam, 1999; Shank and Govindarajan, 1994; Johnson, 1994; Powell, 1995).
The HA, had consequently adopted the TQM because of the State's public sector reform
policy. The then Chief Executive in 1993 was also instrumental in introducing this at the
HA. The HA became a member of the PAQF, a regional organisation for quality, to gain
external legitimacy.
The TQM policy brought benefits to the HA in terms of quicker approval of loans, supply
of houses and improved profitability. There has been some reluctance expressed as well.
The top managers were anxious about the TQM, as the subordinates through the quality
teams will be able to express feelings about their superiors. Despite the reluctance, it was
implemented because of the commitment from the Chief Executive, and it was a top-
down policy,
In order to successfully implement TQM, performance measurement is essential in the
organisation. TQM is based on the assumption of continuous improvement as fostering a
more intense focus on attacking and improving performance (Shea and Kleinsorge, 1994;
Powell, 1995; Shank and Govindarajan, 1994; Chenhall, 1997; Maloney & Stower,
1999). With the performance targets, the organisation will enhance a culture, which is
105
oriented towards achieving the targets. This change in the culture would further enhance
the TQM at the HA. The performance measurement is eKpected to include both financial
and non-financial indicators, and incorporate into their performance measurement
systems, the key factors of quality, customer satisfaction and the productivity (Fowler,
1996; Powell, 1995; Ittner et al., 1997; Ittner & Larcker, 1997).
The next chapter will discuss the performance measurement at the HA.
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Chapter Eight
Performance Measurement
8.1 Introduction
Having discussed the TQM in the preceding chapter, this chapter explores the
implementation of the performance measurement, in particular the management on
contract system at the HA. For successful implementation of TQM, performance
measurement is essential, and should include both financial and non-Financial indicators,
The financial indicators include projected net profit, cash flows, production, sale of
houses and plots, loans approved, collection efficiency and the loan processing time. The
non-financial indicators, on the other hand, include customer satisfaction, which is
measured in terms of on- time delivery of quality services and products (e.g. Chenhall,
1997). Customer satisfaction is also measured in terms of the minimum number of days
taken to address the customer complaints or queries. This chapter begins with the
background of performance measurement, and subsequently looks at the reasons for the
implementation of management on contract system, This is then followed by a
discussion on the performance indicators. The resistance to performance contract is
carried out next. The chapter then explores the limitations of the performance contract,
followed by a discussion of the empirical findings. Lastly, the chapter concludes with a
summary.
The next section discusses the background of performance measurement.
8.2 Background of Performance Measurement
The basis for performance measurement is in terms of aligning actual performance with
budgeted performance. The achievement of budget targets would, as discussed earlier,
provide a source of motivation for organisational members (Berry et al; 1995). The
budgeted targets are usually developed with the help of performance indicators. The
rationale behind these indicators as argued by Smith (1995) is to secure accountability of
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the public sector organisation (the agent) to its principal. Performance is assessed in
relation to the targets developed with the aid of performance indicators.
Kaplan and Norton (1992, 1993, 1996a, 1996b) suggest that the strategy of a firm can be
achieved with a balanced scorecard approach. This has criterion that measures
performance from four perspectives- Financial, Customers, Internal Business processes,
Innovation and Learning perspective. The balanced scorecard stresses the importance of
a balanced set of performance indicators (Haas & Kleingetd, 1999). The balanced
scorecard intention of performance measurement is to build organisations operations and
MACS around financial measures and targets, which have significant implications on the
company's progress in achieving long-term strategic objectives. It complements financial
measures with operational measures on customer satisfaction, internal processes activities
and the organisation's innovation and improvement (Nanni Jr et al., 1992). These are the
operational measures, which are drivers of future financial performance.
The scorecard enables managers to introduce four new management processes, which
contribute to linking long-term strategic objectives with short-term actions. The first
such new process of "translating vision" helps managers to develop a consensus around
the organisation's vision and strategy (Kaplan and Norton, 1996a, p,75). This should be
developed in such a manner that it can be operationalised and measured. The statement
has to be expressed as an integrated set of objectives and measures, agreed by all senior
executives, which describe the long term drivers of success for the organisation (ibid,
1996a).
The second process of "communicating and linking" allows managers to communicate
their strategy to the various levels within the organisation and link it to departmental and
individual objectives (ibid, 1996a, p.76). The scorecard facilitates all the levels of the
organisation to understand the long-term strategy, and the departmental and individual
objectives aligned with it.
The third process of "business planning" allows companies to integrate their business and
financial plans (ibid, 1996a, p.76). The fourth process, on the other hand, is that of
"feedback and learning", which gives the company strategic learning to do in terms of
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seeing whether the expected targets have been reached or not. Reviews of targets,
investigation of deviant results are done accordingly.
Kaplan and Norton (1996a) 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 for each business unit. As for the third
level, the organisation asks both individuals and teams to articulate which of their own
objectives would be consistent with the business unit and corporate objectives.
Individuals may also be asked as to what initiative they should undertake to achieve their
objectives.
Kaplan and Norton's balanced scorecard has limitations too. Scorecard projects can also
fail in organisations (Kaplan & Norton, 1996b). Many organisations consider they have a
balanced scorecard because they supplement non-financial measures like customer
satisfaction with traditional financial measures. Kaplan and Norton argue that non-
financial measures like customer satisfaction are not a sound basis for resource allocation
linkage to annual budgets and discretionary spending, and do not complement financial
measures. The balanced scorecard would not be effective if it is delegated to a middle
management. For the balanced scorecard to be effective, it is expected to reflect the
strategic vision of the senior executive group. The balance scorecard facilitates the
companies' vision and strategy to be translated into a coherent set of performance
measures.
After having discussed the background of performance measurement, the next section
discusses the contract on performance basis. This is where the managers are placed on a
contract for three years, and their renewal is based on the achievement of the targets.
8.3 Contract on Performance Basis
As of first June 1993 all staff in executive positions were engaged on a performance basis
contract m line with commercial practices. They were put on three year contractual
system and the renewal of the contract was based on the achievement of set targets and
objectives for each position. The increase in pay of the senior executive was also
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commensurate with the achievement of those targets. The annual report (1993) argues
that
"The movement of salaries for these positions therefore will be relative to the
productivity of the incumbents and in turn will be reflective of the overall
financial performance of the Authority" (p.10).
If the management meets the target, then only he or she was entitled for pay increases. It
also had implications on the HA's profitability. The HA consistently made profits from
1993 onwards since this system had been implemented.
One of the managers remarked that management contract system was introduced as:
"this will ensure accountability and make people more responsible. All
management are placed on a contractual system for a period of three years. The
renewal is based on performance. Employer had the right to hire and fire. This
system was introduced to innovate people to work harder"(Interview Report T,
p.45).
Each manager tried to achieve the set targets. If they were not meeting the targets, then
no bonuses were awarded to them at the end of the year. The bonus was a component of
the salary. Once the managers' contract comes to an end, the achievement of targets are
looked at over the previous two to three years before the contract was renewed. If the
managers have not attained the targets, then the contract is not renewed.
With the imposition of the performance contract, there have been improvements in work
performance. There have been on time delivery of loans and houses to the customers. |
This has been evident through interviews on TQM. as discussed earlier. The HA enjoyed
profitability situation after the system was in place. In 1993 its profit was $518,000.
This grew to $687,000 in 1994. The HA has been publicised positively over the news
media for its efficient services to low income earners. The managers through the
performance targets are trying to motivate workers to work hard and improve the HA's
image. One of the managers commented:
"There have been differences in what the HA wanted to achieve with the
management contract system. It has achieved efficiency and effectiveness. Things
are done in a more orderly manner now. There has been improvement in work
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performance. Workers are now more accountable to their superiors "(Interview
Report U, p.47).
The management has targets to reach. They continuously work hard to reach these as the
renewal of the contract is dependent on the successful fulfillment of the targets. The HA
had realised profits since the system has been put in place.
The contract on performance system was part of the corporatisation plan of the HA. It
was a matter of survival, as the HA was making losses. Workers readily accepted the
system, as they had no alternative. Jobs were quite scarce with unemployment at its
unprecedented high level in Fiji. In addition to the corporatisation plan, other forces
played a critical role in the introduction of performance measurement. Common amongst
them were the donor agencies and the Chief Executive. The next section caries out an in-
depth discussion of this.
8.4 Reasons for the Introduction of Performance Contract
A variety of factors is responsible for the introduction of management on contract basis.
Common amongst them and as discussed earlier were the corporatisation policy of the
State, the donor agencies of the World Bank and the ADB and also the Chief Executive
of the organisation, These forces can be classified into the internal and external forces.
The internal forces are the government policy of public sector reform and the Chief
Executive. The external forces, on the other hand, are the donor agencies of the World
Bank and the ADB.
The next section discusses the internal forces,
8, 4.1 Internal Reasons for the Introduction of Performance Contract
Through the government's corporatisation plan in line with the global trend, the HA had
to operate in a commercial environment and had to offer cost effective, timely and
competitive products and services. To achieve this, performance contract system was
essential for the management. Each manager had specific targets to reach.
The HA annual report (1993) argues that
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"Unlike its welfare orientation in the past, the Housing Authority now must not-
only be a cost effective producer of housing products and services, it must also be
able to recover on its loans timely, so as to be able to honour its financial
commitments" (p.4).
Hence there has been a movement away from welfare orientation to one where the HA
could be profitable and self-sustaining. This would mean that government support for the
organisation in the form of subsidies and grants would be indefinitely withdrawn, and the
organisation should be operating on profit motive. The organisation should be self-
sustaining. This would reduce the government expenditure on public sector organisation.
The Chief Executive also came up with the idea of management performance contract in
order to prepare the organisation towards corporatisation later. One of the managers
maintained that the management contract system was introduced
"Because of the global trends. Our Chief Executive also visited abroad in 1992
and 1993, and got the idea from there." (Interview Report U, p.49).
The Chief Executive's visit abroad, in particular New Zealand, facilitated the system to
be introduced here. Other performance based firms abroad were successful and this was
thought to be a useful idea for the HA.
One of the other managers of the HA argued that management contract was introduced:
" in recognition of accountability. To reward people who were performing
consistently by achieving set targets and goals. We're also earmarked for
commercialisation" (Interview Report U,p.47).
For the profit-orientation of the HA, the performance contract was essential. In addition,
the management contract system was vital for the survival and continuity of the HA as it
had to operate on a commercial basis. The Chief Executive implemented the
performance-based contract in the organisation, showing his commitment to the policy.
Consequently, this has enhanced improvement in the organisation as already discussed.
The next section discusses the external forces for the introduction of the performance
contract.
112
8,4.2 External Forces for the introduction of the performance contract
The World Bank and the ADB were the major driving force for the introduction of the
performance contract. The HA was facing financial problems prior to 1989. It was
generating losses. The World Bank and the ADB were asked by the government to carry
out a feasibility study, and to come up with recommendations (ADB Report, 1989).
The HA annual report (1993) argues that
"Under the Fiji low income housing project, as agreed between Government, the
World Bank and the Asian Development Bank, experts in financial management,
project management, information systems and corporate planning were engaged
to assist in improving Housing Authority's procedures and systems" (p.7).
Their recommendation included the HA to operate on an institutionally sound and
financially viable manner without depending on government subsidies. The management
performance contract facilitated this. The management had targets to achieve, to which
end-of-the- year bonuses were tied. The achievement of the targets enhanced the
organisation's operation. The profit grew for the organisation after the system was
implemented. However, the managers had the capacity to manipulate data, particularly
the provisions, as they are estimates only. This can be manipulated so that the profit
looks ideal. They could underwrite provisions to inflate profit, as this depends on the
managers' discretion.
The management contract system, as argued earlier, was based on the achievement of
targets, which has been facilitated by the performance indicators. The next section
discusses these indicators.
8.5 Performance Indicators
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 organisations.
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Kaplan and Norton's (1992, 1993, 1996a, 1996b) balanced scorecard enables managers to
look at organisation from four essential perspective, which is applicable to the HA as
well. These perspectives are Financial, Customer, Internal business and Innovating and
Learning perspective. The authors articulate that balanced scorecard answers four
pertinent questions as follows:
"How do Customers see us?(Customer perspective);
What we must excel at? (Internal perspective);
Can we continue to improve and create value? (Innovation and Learning
Perspective); and
How do we look to shareholders? (Financial perspective). "
(Kaplan & Norton, 1992, p.72).
The HA has both financial and non-financial performance indicators. Although the
organisation is unaware of Kaplan and Norton's balanced scorecard approach, the idea is
with them. The object of a reasonable measurement system in any organisation would be
to translate its strategy into measurement system (Kaplan & Norton, 1996b). Hence, a
balanced scorecard is expected to communicate a strategy through an integrated set of
financial and non-financial measures, This is essential as this creates a holistic model of
the strategy, which allows all employees to see how they contribute to organisational
success (ibid, 1996b). It is, thus, vital to analyse the HA's performance measures within
the Kaplan and Norton's balanced scorecard approach.
The HA's Corporate plan (1996-2005) articulates that;
'The mission of the Housing Authority is to implement, on a financially viable
basis, through intermediation and private sector facilitation, a nation-wide
programme which under innovative approaches provides affordable and
acceptable houses and building plots and makes available timely and cost
effective loan finance principally for low and middle-income families to advance
the vision of Government towards the provision of shelter for a higher standard of
living for its people" (p.II-I2).
The goals have been translated into specific-measures. The managers translated the
general goals into four specific goals and identified appropriate measures for each as
shown in figure 8.1 below:
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The production targets would be based on alternative assumptions regarding the market
share expected for new building plots and housing units in relation to projected demand.
The lending targets would be based upon assumed percentages of the plot and house sales
to be financed by mortgages from the HA, plus estimates of assumed market share for
other loans. These are all compared with actual results, and the deviation is investigated.
The various divisions of the HA have their own targets to reach, against which the
managers are evaluated. The Collection department, for instance, has a target collection
performance, which its managers must strive to achieve. A graphical representation of
the collection efficiency is shown in appendix 12. The actual collection efficiency has
been below the targeted collection efficiency. This is attributed to customers not being
thoroughly investigated for credit worthiness before credit being extended to them. On
the other hand, the FNPF receipts of $1,055,298 up to April 1999 were below the targeted
level of $1,317,000. The Central and Northern division achieved above collection target
levels. The Western division had a poor collection record with receipt amounting to
$54,144 compared to the target collection of $370,000 (see appendix 13). The laxity on
the part of the Lautoka collection section needs to be investigated. The Sales department
wants to reach its targets, and the superiors there at times by-pass the Lending Manager
in approving loans, and consequently creating bad debts, but boosting the sales.
The Sales department performance indicator encompasses cumulative actual and
cumulative targets, which determine the efficiency of sales department executives (see
appendix 14). These sales relate to land and houses. For instance, the sales of land up to
April 1999 have been below the target level in all the three centres of Central, Western
and Northern (see appendix 15). In the Central division, only 16 lots were sold compared
to the target of 41. In the Western division, out of the ten planned, only five were sold.
This may be attributed to the political uncertainty in the country. Land issue is a very
critical issue in Fiji with the native landowners demanding very high rental from the
tenants. Consequently, insecure land tenure is a problem, which further exacerbates the
above deviations. The sale of houses depicts some concern as well. In the Central
division out of the thirteen planned for sale, only nine were sold. In the Western division,
twenty- two houses were targeted for sale, out of which none were sold (see appendix
16). It appears that the HA has saturated the market.
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The performance of the Lending Department's manager is judged through targeted and
actual loans approved. If more loans are approved than targeted, then this shows that the
management has been doing well. The cash, village, soft and home comfort loans
approval exceeds the targeted approval in 1999, Appendix 17 contains this. The soft
loans exceeded the targeted levels more in the Western division than in any other
divisions. This is attributed to more individuals in the Western division switching to soft
loans than anticipated. This was basically to cater for children' school fees, buy food
items for consumption, and also to make down payments on hire-purchase items. The
cash and village loans also exceeded the targets more in the Western division than in any
other division. However, in the Central/ Northern division the actual ($600,920.40) was
below the targeted level of ($675,000). This underachievement could be possibly due to
the rural- urban drift of youngsters or lack of interest in the Central division to upgrade
villages.
The next section discusses the Customer and Internal Business perspective of Kaplan and
Norton's framework
8.5,2 Customer Perspective/Internal Business Perspective
In line with the Kaplan and Norton's Customers' perspective, the Lending manager's
efficiency at the HA is judged through the average loan processing time with monthly
average against monthly targets. The loan processing time in all divisions except the
Western was below the targeted level (see appendix 18). In April 1999 the Northern
division's processing time was above the targeted level, whilst the Western division
showed some slackness. The Central division improved its processing time from 11.88
days in January 1999 to 7.66 days in April. The target level was 7 days.
Consistent with Kaplan and Norton's Internal business perspective, the payroll
reconciliation is done though computer technology, which is monitored through the
actual date completed against the targeted date. The difference must be explained with
the corrective actions to be undertaken. For example, in 1997, the payroll reconciliation
in all months were done prior to the targeted dates, which goes on to reflect the efficiency
of the bookkeeper (see appendix 19).
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The Finance and Planning Divisions targets are also monitored. There are target dates set
for the general ledger closure, which is also computerised, and this is compared with the
actual results (see appendix 20). The reasons for this deviation with the appropriate
corrective action taken have to be explained by the departmental head. The Bank
reconciliation procedures receive similar treatment. The profit and loss, balance sheet
reports are also evaluated to ascertain whether they are available on the due dates or not.
The monthly reporting of performance reports detailed in the monthly profit and loss
account, together with the variance analysis proved to be useful tools for management to
keep close control of performance, and to take corrective actions when required. The
monthly management-monitoring meeting proved an important forum to discuss monthly
performance. The general ledger closures were done on targeted dates in most months in
1997. Mortgage closure accounts also followed these deadlines. The Bank reconciliation
was also completed on time except for September 1997 (Westpac and NBF), which was
delayed by two days (see appendix 21).
8.5.3 Innovation and Learning Perspective
The on-the-job-training at the HA is classified in Kaplan and Norton's Innovation and
Learning perspective, The managers are evaluated in terms of the training they have
taken up, If they undertake some form of training, then this is a favourable stance for
them to qualify towards annual bonuses. The HA is also actively involved in sending
their employees to the University of the South Pacific and the Fiji Institute of Technology
for pursuing further studies on a part-time basis. This would facilitate the employees to
bring better working practices to the work site. The multiplicity of measures on balanced
scorecard enables the HA towards achieving its mission.
Whilst the performance contract was imposed on the organisation, there were some
resistance expressed. The next section considers this.
8.6 Resistance to Performance Contract
Whilst the performance contract was being imposed, not everyone was happy. Some
managers resigned because of the manner in which it was implemented. It was
inadequately discussed with the managers, and was basically a top-down approach. One
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of the managers, who left due to his unhappiness in the system, later on became the
chairman of the executive board. One of the managers argued about the situation as:
"...the boy left to become the boss. " (Interview Report V, p.49),
This was a political appointment as the "boy" was a close friend of the previous Minister
of Housing. The Minister of Housing appointed him as the chairman of the Board of
Directors. This had implications on the Chief Executive as he was a Board member too.
One of the other manager's comments are worthy of note:
"some of our staff did not like the idea of the contract system, and left the
organisation. At least one manager quit the organisation since the system was in
place. Before, the expectation was thai everyone would work for 55 years. But
now with the system in place, the renewal is based on performance. The initial
contract is for three years... "(Interview Report T, p.45).
This manager left the organisation as the management contract created uncertainty in the
job environment. The continuity of job after three years was uncertain. This result is
consistent with arguments put forward by Ferris (1977) who suggested that as the level of
environmental uncertainty increased, the level of motivation decreased. This leads to
turnover on jobs. The renewal of the contract at the HA is based on the achievement of
set targets.
The performance contract system has, consequently, brought in fear in the organisation.
Most managers are performing in the fear that if they do not perform, then their contract
may be terminated. Some of these workers have major mortgage commitments with the
financial institutions. Consequently, their job is a source of bread and butter for them,
and they cannot afford to lose it, especially at a time of rising prices,
There was, in addition, some resistance from the union, One of the managers remarked:
"...The union disliked this idea because of its fear of losing members. But they
must realise that there must be an organisation before there is a union. For the
survival of the Housing Authority this system was extremely essential This was a
key element in the introduction of the Total Quality Management later "(Interview
Report T, p.45).
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The HA, consequently, has not been able to introduce this system at the junior staff level
as there is an acute level of resistance from the trade unions. The unions of the HA are
known for the disputes with the management as far as redundancy and putting people on
contractual system are concerned. The unions have fear of losing members through the
non-renewal of contracts. However, if the system is introduced, at the junior level, one of
the managers anticipate the following benefits:
"Key performance indicators will be introduced The workers will have targets
and deadlines to achieve. The organisation will, overall, achieve efficiency."
(Interview Report T, p.46).
It is obvious that the targets for junior staff will enable them to work harder in order to
meet their stipulated targets. This would in turn facilitate the respective managers to
realise their targets, and would consequently enable the organisation to meet its goals.
The corporate objective will be translated into division objective, which in turn will be
broken into personal objectives for individuals in an organisation to reach. This is in line
with Kaplan and Norton's (1996a) insight that it is essential to communicate corporate
and unit objectives to the people and teams performing the work. They argue that the
organisation's high level strategic objectives and measures need to be translated into
objectives and measures for divisions and individuals.
The staff appraisal programme for subordinates, however, has been implemented as from
the beginning of 1999. The staff appraisal is for the personal career development of the
staff. The management spends roughly forty-five minutes to one hour with the staff in
discussing the appraisal of the work. The manager interviews staff together with their
immediate supervisors. The action plan, objectives and targets of the staff are agreed
upon at this meeting. Thus, after every six months the worker undergoes this appraisal to
see whether the targets and objectives have been met or not. The staff appraisal forms are
given to the subordinates after every six months. They are expected to fill in. a section
and return it to their respective supervisors, who will pass this to divisional managers.
The workers, on achieving objectives are, rewarded in a form of bonus payment at the
end of the year. Those workers, who are identified with certain deficiencies, are sent for
further training.
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Performance appraisal is a worldwide phenomenon with the Fiji Employers Federation
enforcing this in Fiji's context. This has been adopted by the HA for external legitimacy.
Authorities like the Fiji Employers Federation have enforced this on Fiji's organisations,
and this had to be adopted. This is in line with the Institutional theory to be discussed
later.
There are some limitations of the performance contract as well. The next section
discusses this.
8.7 Limitations of Performance Contract
On the non-achievement of targets, a review is carried out as to why the targets have not
been achieved. For instance, for the 100 vandalised houses in the HA's stock, only 35
have been sold. There are hardly any buyers for the vandalised houses. In such
instances, the whole performance monitoring system is reviewed whereby the review
committee carries out a post-mortem. After a thorough investigation, the targets are
reduced or reviewed so that they are within reasonable reach of the employees. KPMG, a
chartered accountancy firm, also checks the targets from time to time to establish its
feasibility, that is, whether it is within the reach of the employees.
The system has other shortcomings as well. According to one of the managers, quality
loans have not been given out. People just work in the organisation for the meeting of the
targets, and hardly pursue work beyond this. Customers are not thoroughly investigated
for credit worthiness before credit is granted to them. These bogus loans create problems
for the Collection Division, as it is unable to meet its targets.
The system is also biased in the sense that good boys and girls of the managers always
receive good comments irrespective of bad performance. Hence it is seen that some
favouritism persists in the organisation. The employees are more focussed on achieving
the targets and not on the best interest of the organisation. One of the managers stated:
"At times there are false achievements of targets. More loam are given
without checking the credit worthiness of the customers. As a result,
collection becomes difficult (Interview Report V, p.51).
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This comment reveals a way of smoothing performance indicators, The Lending
Division, in its quest to meet targets, gives out loans anyhow. This poses problems for
the Collection section, as the indicators are inter-related. However, appropriate measures
need to be put in place to control these misdemeanours.
The next section carries out a brief discussion of the empirical data gathered.
8.8 Discussion
In the case of the HA if a manager does not meet targets, then no bonuses are awarded to
him/her at the end of the year. The bonus is a component of the salary. On the
achievement of targets, the management is awarded the bonus at the end of the year, and
the contract is renewed at the end of the three years. This result is consistent with the
arguments put forward by Wilsted and Taylor (1978) who suggest that the performance
appraisal is a management function for purposes of salary administration and recognising
future promotional prospects. It is also one of several tools available for employee
motivation.
Rewards and incentives are usually tied to the achievement of the targets. The employees
at the HA know 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. The use of these indicators
encourages accountability and provides customers with efficient services (Lynch and
Cross, 1992).
The National Federation of the Housing Association of United Kingdom define
performance indicators as "facts which assists in realising whether we are achieving our
targets and thereby our objectives" (HA Corporate Plan, 1996-2005, p.III-2). The
relation between the performance and objectives is pre-eminent. One of the steps in
designing performance indicators is to establish corporate objectives. They ensure a
focus on facts as opposed to personal perceptions (Evans et al; 1996). Management
intervenes if performance deviates significantly from targets without adequate
explanation. At the HA, this has been done, particularly in the cases of vandalised
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houses, which enjoy very little resale. The targets for such house sales have been
reviewed so that they, are within the reach of the workers.
Sometimes performance is reviewed at the HA when it is unattainable. Performance is
assessed in relation to the indicators. Any deviations from the targets need to be
examined, remedial action suggested, and revised targets set. The HA acted in this
direction by revising the vandalised house sale targets, as discussed earlier. This is
consistent with Evans et al (1996) argument that the annual review of each performance
indicator determines the extent to which the objectives have been achieved. The extent to
which these objectives are reasonable and attainable for the forthcoming year can be
established. If need be, the objectives and their implicit targets can be reset (Evans et al;
1996). Those who grasp the opportunity will increase their own capability to survive,
and help their entity to achieve changes rapidly.
A brief summary of the chapter is provided next.
8.9 Summary
This chapter discussed performance contract system at the HA. The system was
implemented in 1993. This was in line with the commercial practice, where targets and
objectives were set for each position and pay was commensurate with the achievement of
those targets. The system was brought about as a result of the government's
corporatisation plan. The donor agencies of the World Bank and the ADB were also
behind it. The then Chief Executive also went abroad and got the idea from there, as
firms which were adopting this overseas were quite successful. The performance
indicators of the HA fits into the four perspectives as argued by Kaplan and Norton
(1992, 1993, 1996a, 1996b). They are the Financial perspective, Customer perspective,
Internal business perspective and Innovation and Learning perspective. These goals and
their respective measures through the indicators enable the HA to realise the vision of the
organisation, as argued earlier.
However, there were some resistance expressed regarding the system. The scarcity of
jobs compelled people to accept the system. The system has brought about improvement
in work performance, and the HA has been commended positively in the media over its
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efficient services for the poor. Its profitability situation improved in 1994 compared to
the 1993 situation,
The next chapter carries out a discussion of the empirical evidence collected. The
discussion of the empirical findings is done in the context of the three theories of
Contingency framework, the General Systems theory and the Institutional theory.
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Chapter Nine
Discussion
9.1 Introduction
Having discussed the performance measurement of the HA in the previous chapter, this
chapter begins by summarising the research findings. This is followed by an evaluation
of the findings. As outlined earlier, this research was open ended in the interpretive
tradition (see Hoque and Hopper, 1994). The study uses the three theories of
Contingency, General Systems and Institutional to explain the empirical data gathered.
A more interpretive methodological approach has been adopted for this study as this
yielded a richer descriptive data, demonstrating the existence of the wider social
structures in influencing changes in MACS at the HA. It also generated multiple theories
of management control, with which one can build a more holistic analysis of the HA's
organisational and control changes.
Contingency theory, for instance, has been widely publicised and in this study helped to
capture that the organisation design depended on the specific circumstances in which it
operated. It demonstrated a complex pattern of interaction between organisation and the
wider structures within which the former was embedded (see Otley, 1980; Chapman,
1997; Langfield-Smith, 1997; Burns and Stalker, 1961; Berry et al, 1991; Child, 1973;
Donald, 1979; Watehouse & Tiessen, 1978,Schoonhoven, 1981, etc).
Secondly, General Systems theory articulates that the best way to study organisation is to
study it as a system. This theory helped in comprehending that the survival of an
organisation is dependent on its environment (see Otley, 1983; Katz & Kahn, 1966; Lowe
& Mclnnes, 1971; Von Bertalanffy, 1956, 1973; Gray et al., 1996; Burrell and Morgan,
1979 and so on).
Thirdly, the Institutional theory helped capture external institutional factors such as the
State, customer expectations, professional associations influencing MACS at the HA.
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The theory argues that by incorporating externally legitimised management systems, the
organisation may be protected from having its conduct questioned (e.g. Hoque and Alam,
1999; Meyer and Rowan, 1977; Scott, 1987; Scapens, 1994).
9.2 Summary of Findings
This case study revealed that influences beyond the HA have been critical in bringing
about changes in MACS at the HA. What happens in the wider society is intertwined
with the organisational activities and to better understand the local organisational
environment, it is necessary to consider the broader social perspective. A national policy
on public sector reform eventuated in Fiji. This was to improve the performance of many
government organisations by operating them on commercial lines. Nandan (1999)
articulates that the State Owned Enterprises (SOE's) impose burden on state finances, and
has become untenable. Most governments face budget deficits and can no longer provide
resources to offset the losses of SOE's. Public sector reform may be an answer to this as
this allows the public sector enterprises to operate on commercial objectives without
relying on government subsidies and grants.
Public sector reform5 also resulted from satisfying international obligations to retain
membership of international funding organisations such as the World Bank, IMF, ADB
and so on (ibid, 1999). These organisations provide continued support in terms of fluids
as well as expertise for economic development. Consequently, the HA was restructured
so that it operates on a commercial basis and gets assistance from international
organisations such as the World Bank and the ADB. The commercial orientation of the
HA was a movement away from the initial welfare emphasis of the HA. The financial
performance indicators, TQM, innovations in Finance division and separation of the PRB
from the HA came up as a result of the commercial orientation of the HA.
This study reinforced the findings of other research claiming that the wider social,
economic and institutional contexts govern the ways management control operates in the
organisation (Hoque and Hopper, 1994, 1997; Uddin and Hopper, 1998; Nandan, 1997a,
1997b, 1998a). These studies revealed that the donor agencies of the World Bank were
5 The current Labour led government seems to pursue public sector reform with caution so thatredundanncies of employees are avoided.
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influential on management control. This agency was embedded within organisations.
The donor agencies like the World Bank are a source of finance for organisations.
Consequently, they dominated forms of control within the Jute mills in Bangladesh
(Hoque & Hopper, 1994, 1997), Soap Opera in Bangladesh (Uddin & Hopper, 1998) and
the Fiji Development Bank (Nandan 1997a, 1997b, 1998a).
The PRB was separated from the HA because of the ailing condition of the HA. There
have been innovations in the Finance Division as well. The Lending Division was
separated from the Finance Division. The former became the profit centre for the HA.
The government policy of the public sector reform has been articulated as one of the
major forces bringing about the separation of the two divisions.
TQM and performance measurement were also introduced into the organisation. This
was to enhance the commercialisation of the HA. The introduction of TQM and
performance measurement were attributed to the World Bank and ADB's recognition of
the seriousness of the financial situation of the HA which had to be run on a financially
viable basis (ADB Report, 1989). The TQM and performance measurement would
facilitate the HA to be run on a commercial basis. The HA is in a commercialised stage
and will be corporatised later. The corporatisation of the public sector is the last stage of
the State's public sector reform. Commercialisation aims to make enterprises more
profit-oriented, whilst the corporatisation is the process of transferring the commercial
activities of government or statutory authority into a limited liability company registered
under the Companies Act (see Nandan, 1999).
The present study demonstrates that in order to understand the MACS changes, one needs
to look at the external influences. The external environment is critical in bringing about
the changes in MACS. In order to understand organisational changes, an understanding
of how social, political and economic factors exogenous to the organisation operate is
essential. Many writers argue that organisations are embedded in the social world (see
Burchell et al., 1980; Neimark & Tinker, 1986; Nandan, 1997a, 1997b, 1998a; Achary,
1998a; Hoque and Hopper, 1994, 1997). It is argued that MACS study should not be
limited to a technical or quantitative phenomenon, which has been articulated by
conventional advocates. Rather the consideration of the wider social, political and
127
economic factors would be a pertinent move towards the study of MACS (e.g. Burchell et
al., 1980;Hopwood, 1987; Hoque and Hopper, 1994, 1997; Broadbent, 1999).
In the case of the HA, as argued earlier, the donor agencies, State, external consultants
were the major influences in carrying out the changes in MACS. From the present study,
it became evident that the environmental factors were major influences on MACS
changes at the HA, These environmental factors included the State, political factors, aid
agencies, external consultants and the PAQF. Figure 9.1 summarises this.
Perceived environmental influences
StatePolitical FactorsAid AgenciesExternal ConsultantsPAQF
MACS changesSeparation of the PRB from the HA
Separation of the Lending Divisionfrom the Finance DivisionIntroduction of TQMIntroduction of ManagementContract System
Figure 9.1 Predictors of MACS Changes in the HA
The HA has benefited from the organisational and MACS changes. Prior to the
separation of the PRB from the HA, the HA's liabilities exceeded its assets. In 1988, for
instance, the liabilities exceeded assets by $3,711,000. However, with the separation, this
situation was reversed with the assets beginning to exceed liabilities. There was a
gradual improvement in net assets from $2,692,000 in 1990 to $4,311,000 in 1992. The
HA was consistently in deficit prior to 1989. However, its deficits were significantly
reduced as discussed earlier, after the separation. It was from 1992 onwards that the HA
began making profits.
Further, the separation of the Lending Division from the Finance Division enabled the
former to become the profit centre of the HA. There were improvements in lending
operations such as the disbursement of loans and the loan processing time, as discussed in
chapter eight. The HA continually made profit after the separation in 1994.
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With the introduction of TQM, the HA was able to deliver its products such as loan to
customers within a day or two. This improved customer satisfaction and the sales
position of the HA. The HA has persistently made profits since the introduction of TQM
from 1993 onwards.
The introduction and implementation of performance contract yielded benefits for the HA
as well. Since it was in place in 1993, the HA consistently made profits, and were able to
deliver their products and services on a timely basis. It can be said that the above
changes facilitated the HA to achieve its mission of providing affordable houses and
building plots as well as making available timely and cost effective loan finance
principally for low and middle-income families.
After having discussed the research findings, the next section evaluates/discusses the
research findings in terms of the three core theories of Contingency Theory, General
Systems Theory and the Institutional Theory.
9.3 Evaluation of Results
The preceding discussions demonstrate that the organisational and control changes at the
HA were the separation of the PRB from the HA, innovations in Finance division,
introduction of TQM and performance measurement. These changes came about as a
result of external influences. Whilst no claim is made that this work is free of theory, it is
claimed that an effort was made to be theory conscious, and that the data collected has
influenced the theoretical explanation developed. For instance, in the case of
Contingency theory, this study drew independent variables from fieldwork rather than the
previous Contingency research. This had an advantage in disclosing new contingency
variables such as the aid agencies, State, consultants than the common ones found in
traditional contingency research such as technology, environment and organisation
structure.
The present study, began with MACS changes at the HA as an area of study. The
relevant theories that emerged from this investigation were the General Systems Theory,
Contingency Theory and Institutional Theory. The justification for the selection of these
theories is that they consider the critical role of external variables, which are embedded
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within the organisation. Consequently, it can be interpreted that whatever happens in the
social world has implications on the organisation. Institutional theorists helped to capture
significant institutional factors influencing controls (e.g. Burchell et al; 1980; Hoque and
Alam, 1999; Covaleski et al., 1993; DiMaggio and Powell, 1983; Rowan, 1982; Whitley,
1999). Contingency theory, on the other hand, enabled the generation of independent
variables from the field. These variables were the previously neglected institutional
factors such as the State and the aid agencies. Contingent variables affect firms, which in
turn enhance effective performance (see Otley, 1980; Burns and Stalker, 1961; Chapman,
i997; Langfield-Smith, 1997). The General Systems Theory recognises the interaction
between organisation and society (see Burchell et al., 1985; Llewellyn, 1994; Broadbent
and Guthrie, 1992). As discussed earlier, this study assumed organisations and society to
be socially and institutionally constructed systems of reality (Morgan and Smircich,
1980; Chua, 1986; Hoque and Alam, 1999; Bun-ell and Morgan, 1979).
The empirical data in this study provided support for the General Systems Theory, the
Contingency Theory and Institutional theory. The next section discusses the General
Systems theory.
9,3.1 The General Systems Theory
The General Systems Theory (GST) has been accepted as a leading paradigm within,
administrative theory (Perry, 1975). Many books on organisation theory, personnel
management and administration use GST as a basic framework. The theory, as discussed
earlier, argues that a system is a conception of a part of the world that recognises
explicitly that the part is:
"(a) one element of a larger whole with which it interacts (influences and is influenced
by); and (b) also contains other parts which are intrinsic to it" (Gray et al., 1996, p.13).
The General Systems Theory is based on the premise that the only meaningful way to
study organisation is to study it as a system, A system can be understood as a set of
elements standing in inter- relations (Otley, 1983; Katz and Kahn, 1966). The open
system theory emphasises the necessary dependence of any organisation upon its
environment. The theory recognises the interactions between the organisation and
society. It sees organisational boundaries as permeable. The survival of the system is
130
dependent on the relationship with its environment (Burchell et al., 1985; Broadbent &
Guthrie, 1992; Llewellyn, 1994). The external environment of the State and the aid
agency influenced the changes in MACS at the HA. The HA is interdependent on the
actions of the State and the aid agencies. The State pursued the object of public sector
reform. In order to be reformed, the HA had to restructure itself in terms of separating
the rental element, innovating the Finance Division and instituting the TQM and the
performance contract.
The HA is the system to be examined, it has to be distinguished from the rest of the
universe of objects and phenomena, which is referred to as the environment to the
system. For further analytical purposes, the environment needs to be divided into the
substantial environment and the general environment (Lowe and Mclnnes, 1971). The
former is defined as part of the environment to the system, which can affect and be
affected by the behaviour of the system under investigation. The general environment,
according to Lowe and Mclnnes (1971) constitute the rest of the universe of objects. The
system and its substantial environment are defined as the universe for our particular
systems analysis. These notions are depicted in figure 9.2.
Lowe and Mclnnes (1971) argue that the system analysis deals with the relationships of
the elements within the enterprise, and also with the behaviour of that enterprise in
relation to its environment. They stress that all elements which cannot be significantly
influenced or controlled must lie outside the boundary of the enterprise system.
All elements in the substantial environment are essential to understand as they have a
relationship to the system. In HA's case, inputs include the donor agencies funding,
employees from the environment, external consultants which are used by the HA to carry
on the transformation process through its improved performance measures, TQM and
finance structure and the HA gives to the environment affordable shelter and loan finance
on a financially viable basis to low and middle income earners. By employing the
concept of systems, the complexities of interactions between organisations and its
substantial environment are captured as depicted in figure 9.3.
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circles at the HA. The management achieved the objective of TQM through enabling
employees to take eleven steps as discussed earlier towards the problem solving at the
work site. These sequential steps, based on an overall TQM strategy, showed
organisational participants how TQM can make a difference in their activities (see Hoque
and Alam, 1999). This approach enabled the HA to achieve its wider goals: the mission
of the HA is to provide under innovative approaches affordable and acceptable housing
and building plots and make available timely and cost effective loan finances principally
for low and middle-income families (HA Corporate Plan, 1996-2005, p.II-12). Similarly,
for performance measurement, these general goals were translated into four specific goals
in accordance to Kaplan and Norton's (1992, 1993, 1996a, 1996b) insight, classified
under Financial perspective, Customer perspective, Internal Business perspective and
Innovation and Learning Perspective. The four specific goals and the performance
measures enabled the HA to realise its broader goal as discussed earlier.
The changes in MACS at the HA can be understood better in a holistic mode. To
understand the change, one needs to look beyond the HA into its external constituents.
Neimark and Tinker (1986) in a systems context maintain that:
"Organisation is part of and constitutes its environment as well as the extent to
which the environment permeates the organisations internal structure and social
relations" (p.373).
The PRB's separation from the HA, in this context, was carried out by the aid agencies of
the World Bank and the ADB. The separation of the Lending Division from the Finance
Division and the introduction of the TQM, on the other hand, were brought by external
consultants. The changes, as observed, were brought by factors beyond the national
boundary. The changes carried out were a transformation process to the HA's system.
The changes were adapted by the HA as they were centered on the HA's need for
survival after the events of 1987. With the separation of the PRB from the HA, the latter
reduced its deficits. With other changes in MACS, the HA began to realise profits.
Consequently, with these changes the HA was able to carry out its activities on a
Financially viable basis to provide the output of basic shelter and cost effective loan
finances to middle and low-income earners.
: n
134
The separation of the PRB from the HA was carried out so that the former could more
effectively look after the rental estates and is in line with Hopwood's (1978) argument
that broader social pressure add to organisational changes. The World Bank and the
ADB were catalyst to this change. Besides, the above influences, the financial constraint
of the HA and the public sector reform policy of the government also contributed to the
separation of these organisations. Thus, the above study demonstrate that the wider
social structures are reflected in the accounting system; and are subsequently responsible
for bringing about the changes in MACS in organisations. It can be argued that the wider
social structures of the State and external Consultants were a source of pressure to the
changes in MACS at the HA. The changes in MACS were part of the transformation
process of the HA's system.
In the systems context, and for the financing of housing programs to proceed, the HA had
to meet accounting stipulation prescribed by the World Bank and the ADB, such as
providing statistical data on the execution of projects; the disbursement of funds; and the
recovery of loans, The rental income went to the PRB. For the HA, this did not matter as
the rental income was insignificant. The separation allowed the HA to operate on a
financially viable basis in carrying out its function of delivering shelter and loan products
to the environment.
The World Bank and the ADB best saw the rental estates to be under a new statutory
body, so that its operations could be more effectively controlled. This is in line with the
suggestion that accounting and other organisational practices, according to the systems
view, are seen as being merely reflections of wider and underlying social interests.
The separation of the Lending Division from the Finance Division was carried out as a
result of the restructuring programme of the HA aimed at making the organisation
commercially viable. This is again a transformation process to the HA's system. The
Lending Division of the HA has become a "one-stop" shop for the customers whereby all
essential services pertaining to lending are available from one team-the lending team. It
has become a profit centre for the HA. This has facilitated the organisation to become
commercially viable..
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Von Bertalanffy (1973) argues that the essential factors in public issues, policies must
always be considered and evaluated as interdependent components of a total system.
Scapens and Robert (1993, p.l) argue that "... diversity of influences... shape an
organisations accounting system." The World Bank, ADB, Consultants, government
policy of corporatisation and PAQF were the major influences of the accounting change
at the HA. The World Bank and ADB played a vital role in the separation of the PRB
from the HA. Similarly, the HA joined the PAQF to introduce TQM in the organisation
so that it gains external legitimacy. These improved organisation structure and practices,
as discussed earlier, were a transformation process to the system. With the separation of
the PRB from the HA, innovations in the Finance Division, TQM and performance
measures, the HA was able to carry out its functions adequately to give to its environment
basic shelter and cost effective loan products on a timely basis.
System theory advocates argue that accounting could not and should not be studied as an
organisational practice in isolation from the wider social and institutional context in
which it operated (Laughlin and Lowe, 1990; Llewellyn, 1994). Further, Burchell et al.,
(1985) claim that little is known of how wider social forces can impinge upon and change
accounting, The open systems theory emphasises the dependence of organisation on its
environment. Some studies which have been undertaken demonstrated a complex and
highly significant web of social factors which have effect on the functioning of an
organisation (see Hoque & Hopper, 1994, 1997; Scapens and Roberts, 1993; Neimark &
Tinker, 1986; Uddin & Hopper, 1998; Jones, 1992; Cooper & Sherer, 1984; Burchell et
a l , 1980; and so on). These factors brought about the changes in MACS, which were
subsequently an input to the HA to enable it to move towards commercial orientation,
The HA started to make profit after the changes.
Systems theory, however, has limitations in that it is deterministic in nature within the
functionalist paradigm of the Burrell and Morgan framework. The notion of "systems" is
also an elusive one (Burrell and Morgan, 1979). The emphasis of Systems theory is on
the achievement of organisational goals. However, organistional goals are problematic,
and Systems theory does not capture this. Silverman (1970) argues that seldom is any
attempt made to see individuals in an organisation with own values, perceptions and
interests that they pursue through struggle (see also Cyert and March, 1963). Cyert and
March view an organisation as a coalition. That is, the organisation is a coalition of
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individuals comprising of managers, stockholders and workers. Also Lowe and Chua
(1983) define management control to include the whole of human society itself as an
organisation. The value of management control has to be measured in terms of its
contribution to the satisfaction of the needs of the coalition. Individuals can be seen as
having personality needs and or generalised motives, and this has to be readily accepted
(Lowe and Chua, 1983). Their needs may be arranged in a hierarchy starting with
physiological and safety needs and moving towards the need for self-actualisation
(Silverman, 1970). These needs and motives exert a direct influence upon behaviour of
the employees. Consequently, there is a basic conflict between the needs of individuals
and the goals of organisations as a whole. The Systems theory as applied to the HA,
similarly, does not capture the conflicts and tensions which exists between the employees
and the management. Nevertheless, despite its limitations, the Systems theory has been
found to be very useful in explaining MACS in organisations. The Systems approach has
assumed increasing importance since the early 1950s (Burrell and Morgan, 1979).
The Contingency theory's application to the present research is discussed in the following
section,
9.3.2 Contingency Theory
The Contingency management approach, as discussed earlier, has stemmed from open
systems theory (see chapter 2). The organisation and its environment are seen as being in
mutual influence and interdependence.
Contingency theory is widely accepted (Otley, 1980; Otley and Berry, 1980; Chapman,
1997; Langfield-Smith, 1997). As discussed earlier, it has dominated the study of
organisational design and performance during the past forty years. Burns and Stalker
(1961) were the pioneers of the contingency study. Their study of Scottish defence
electronics industry, as discussed earlier examined the effect of environmental
uncertainty on organisational structure. A hierarchical structure was appropriate in a
stable environment setting.
In an unstable setting, however, such a response was found to be inappropriate. The
authors are seen as demonstrating that environment has a major influence on
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timely and cost effective loan finance for principally low and middle income families. A
range of performance measures are essential. This has been achieved through the
Financial perspective measures of number of loans approved, collection efficiency, profit
targets, cash flow projections; Customer perspective of average loan processing time,
complaints to be attended and resolved within 5 working days; Internal Business
perspective of payroll reconciliation, bank reconciliation; and Innovation and Learning
perspective of training taken up, and production equals sales.
Contingency theory has long held the principle that the organisation is shaped by its
environment (Donaldson, 1995; Pfeffer, 1995; Innes & Mitchell, 1990). The organisation
is seen as being dependent upon the environment for resources needed to survive or grow.
To ensure its continual survival, the organisation is likely to attempt to manage its
interdependence with external organisations. In the case of the HA, the external
environment of the World Bank/ADB, State, and the consultants were influential in
facilitating the changes in MACS. The continuance of financial support from external
agencies such as the World Bank would be under threat if structural reforms were not
carried out. Consequently, the State restructured the HA through its national policy of
public sector reform. This meant that the PRB had to be separated from the HA, and
other innovations had to be carried out. The HA received World Bank loan via
government guarantees. Figure 9.6 demonstrates the contingency framework at the HA.
Contingency theory articulates that organisational effectiveness is a product of matching
between internal organisational elements and the demands created by technology and
external environments (Burrell and Morgan, 1979). The organisational design that the
organisation needs to adopt to be effective is contingent or dependent upon the
contingency factors (Shanna, 1997). Prominent among these are task uncertainty, size,
strategy and environment. The forces as discussed above were influential in innovating
the organisational structure of the HA. The separation of the PRB from the HA, and the
consequent separation of the Lending Division from the Finance Division are ideal
illustrations. The contingent variables are considered to be outside of the control of the
organisation (Otley, 1980).
The TQM concept demonstrates that the type of environment faced by the HA
substantially influenced its MACS (Sharma and Nandan, 2000). The theory emphasises
140
that the most effective organisational structure would vary according to the situation the
organisation finds itself in. TQM helped to create quality circles at the HA, consequently
decentralising its organisation structure. The HA's focus on TQM was to keep customers
satisfied vis- a- vis efficient loan approval and supply of houses.
The management contract system has been influenced by the environmental variable of
the State's public sector reform policy. Through the system of management contract
system, the HA has been able to establish a greater accountability and a sense of
responsibility as argued by Miller & O'Leary (1990) and Hopwood (1987) that
accounting change is seen in terms of organisational reform and improvement. The
management contract later prevented resistance to the introduction of the TQM. This
relates to Miller & O'Leary (1990) and Hopwood's (1987) insight that accounting not
only reflected the organisation as it had been but it also played a significant role in
making the organisation.
Further technology means the way in which firms organise their production processes.
Otley (1980) identifies production technology as the longest established contingent
variable used in management accounting. The choice between different types of
production techniques such as small batch, unit production, large batch and mass
production are factors that have been influencing the design of internal accounting
system. In the case of the HA, job costing is warranted as only limited allocation and
averaging are done. A larger proportion of the total costs are directly associated with the
particular jobs,
Organisation structure, which is the other contingent variable, refers to the manner in
which tasks and responsibilities are allocated in organisations. For instance, in a
centralised organisation senior managers make all major decisions, and the managers
down the hierarchy have little scope to participate in decision making. In a decentralised
organisation, like the HA, decision making is delegated down the line via TQM approach
through the formation of quality teams. Research findings demonstrate that the
participation in the budgetary process by a subordinate manager had positive motivational
implications, compared to a greater degree of stress and job-related tensions as a result of
non-participation (Hopwood, 1976). He argues that in industrial societies, individuals
have a hunger for self-expression and personal creativity. These are what today's
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source of motivation for organisational members. The HA provides annual bonuses to its
employees on the achievement of targets. The Collection, Sales, Finance and Planning
Department have budgeted plans to be achieved. At the HA, well- defined quantitative
targets are set for the employees, which keep them motivated in their work.
The managers are given specific targets, and the overall target result must be achieved.
The annual bonus payments are often used to enhance the motivation of managers to
achieve the required targets. One of the managers maintain that the management contract
system
"... will ensure accountability and make people more responsible, All
management are placed on a contractual system for a period of three years... "
(Interview Report T, p.45).
The State, as an environmental variable of Contingency theory, was the major force
behind the commercialisation of the HA. Its operation on a commercial basis was
essential, as this would allow it to eliminate inefficiency and to ensure business survival
and growth. The HA was to run as a business. There was a wider range of performance
indicators for the management to achieve as shown in figure 8.1. Lawrence (1999)
argued in the New Zealand context that the Crown Health Enterprises after being
privatised had a wide range of performance indicators covering quality, human resources,
operational and financial matters. This has also been reflected in the case of the HA. It
can be said that accounting has contributed to the organisational change. Through these
performance indicators, accounting is implicated in organisational practices (Burcheli et
al., 1980, 1985; Hopwood, 1983, 1987, 1999; Neimark & Tinker, 1986; Choudhury,
1986).
Contingency theory has a few shortcomings as well, It has been criticised for being
deterministic. This is so as bulk of contingency studies have drawn upon natural science
models based on sophisticated statistical analysis to unravel a complex pattern of
interaction between organisations and the wider structures within which the former are
embedded (see Sharma & Nandan, 2000). The concept of 'organisational effectiveness'
which measures the extent of goal achievement is also problematic. The organisation is
made up of diverse individuals, each having his/her own needs, and participating in
organisational coalition for a variety of personal reasons. It is argued that individuals,
143
and groups of individuals (not an organisation) have goals, which is necessary to ensure
their continued membership and support in organisations (Sharma and Nandan, 2000).
Contingency theory, in the HA study, has failed to capture the conflict and resistance that
exists in the HA due to the conflicting goal of the HA and that of its employees. There
are also methodological weaknesses of Contingency theory, which, as reported earlier, is
based on natural science models. These models are inadequate to study and understand
the diversity of influences, which shape an organisation's accounting system. There is a
need for the research to have a closer involvement to understand better the complex
structural influences on MACS, However, in spite of the above limitations, the
Contingency theory has been found to be useful. Otley (1980) articulates that the
Contingency theory has been widely accepted.
The next section discusses the Institutional theory.
9.3.3 Institutional Theorv
Institutional theorists (DiMaggio and Powell, 1983; Meyer and Rowan, 1977;
Gooderham et al,, 1999) like contingency theorists argue that organisational practices are
shaped by environment (see also Hoque and Hopper, 1997). However, Institutional
theory differs from the Contingency theory as the former demonstrates how and why
bureaucratically rational systems of control become transformed when political factors
predominate. As such the activities of the HA is geared towards a means of securing
external legitimation.
As discussed earlier, the theory proposes that an organisation's survival requires it to
conform to societal norms of acceptable practice to achieve high levels of productive
efficiency and effectiveness (Covaleski et al,, 1993). Many aspects of an organisation's
structure and policies tend to demonstrate conformity with institutionalised rules
expressed by external constituents such as the society. The societal norm was the public
sector reform, which the HA had to conform to in order for it to be externally legitimate,
and to operate on a commercial basis with a profit motive. Consequently, many aspects
of the formal structure policies of the HA serve to demonstrate a conformity with the
institutional rules and expectations expressed by external constituents. The policies of
TQM, management on contract basis, separation of the PRB from the HA and
144
innovations in Finance Division all serve to enhance the commercial status of the HA;
and a movement away from the welfare emphasis.
Compelled by the donor agencies of the World Bank and the ADB, the government
sought reform in the operations of the HA so that it is self-sustaining. The restructuring
in the HA, subsequently enabled it to gain financial support from these donor agencies.
The reforms as discussed earlier were effective in the context of improving the
profitability situation of the HA, The HA moved from a loss situation to a profit
situation, The PRB was separated from the HA because of the institutional context, in
which the ADB and the World Bank required it to be separate so that it becomes
financially viable. The cheaper source of finance from these banks necessitated this
action.
Hoque and Alam (1999) in a similar case study of DTL, a New Zealand based
construction firm, argue that organisation adopt TQM practices to promote "institutional"
and "quality" culture rather than for technical reasons (p.208-209). Many writers further
argue that business environments along with various regulations in society can influence
the behaviour of constituent organisations (Meyer and Rowan, 1977; Covaleski et al.,
1993; Bealing Jr. et al., 1998; DiMaggio and Powell, 1983; Scott, 1987; Scapens, 1994;
Gooderham et al; 1999; Whitley, 1999). They argue that organisations may adopt certain
policies and procedures by imitation and copy one another to demonstrate conformity
with institutionalised practices (DiMaggio and Powell, 1983; Scott, 1987; Hoque and
Alam, 1999; Meyer and Rowan, 1977; Gooderham et al; 1999).
The observations reported in the present study suggest that TQM adoption at the HA
helped in gaining acceptance from professional association such as the PAQF and the
State. That is, quality culture is promoted at national level in Fiji through organisations
such as the PAQF and also the Fiji National Training Council, through their regular
quality conferences, The Fiji National Training Council has also initiated the Fiji Quality
Awards. The goal of the Fiji Quality Award is to promote Fiji organisations to adopt
TQM and improve quality. This award will be implemented from the year 2000, and a
number of organisations have applied for these awards. A few of the organisations in Fiji
are already ISO 9000 accredited. Certifying organisations like KPMG Peat Marwick,
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Lloyds, Bureau of Veritus Quality Association play a vital role in disseminating the ISO
9000 standards and advising organisations on TQM.
Further, the staff appraisal programme for the junior staff at the HA were enforced by the
professional organisation of the Fiji Employers Federation. In order for external
legitimacy, the HA adopted this so that they are in consistency with other organisations in
the country. That is, the HA adopted this to show consistent values in their institutional
environment, The other public sector organisations adopted the staff appraisal
programmes as well. In order to remain in acceptance by organisations like the Fiji
Employers Federation, it was essential for the HA to adopt this program. In addition
some bigger organisations like the Reserve Bank of Fiji and Telecom's adoption of TQM
compelled the HA to adopt it too. Other organisations in Fiji are also following the TQM
practice so much so that it may become institutionalised shortly.
The state's public sector reform policy compelled the HA to give more attention to TQM,
performance measurement and to carry out innovations in the Financial services. The
State's corporatisation policy implied a removal of subsidies from the organisation. This
meant the restructuring of the organisation into business units. Similarly, the Lending
Division had to be separated from the Finance Division. The institutional forces of the
World Bank and the ADB required institutional strengthening of the HA so that their
loans can be repaid.
It can be argued that organisations adopt a new management system like TQM by
imitation and copy one another to increase their external legitimacy. This is consistent
with the Institutional theory (see Hoque and Alam, 1999; Meyer and Rowan, 1977;
DiMaggio and Powell, 1983; Scapens, 1994; Scott, 1987; Gooderham et al; 1999;
Whitley, 1999). This facilitates institutional isomorphism, which facilitates the success
and survival of organisations (Meyer and Rowan, 1977). Consequently, organisations
tend to become isomorphic with institutionalised norms and standards (Rowan, 1982;
DiMaggio and Powell, 1983). For instance, the Chief Executive of the HA pushed for the
idea of management on contract system. His visit overseas in 1992 and 1993 saw
overseas firms implementing this idea and their consequent successes. This was thus
imitated and placed in the HA's context as well.
146
The introduction to commitment to quality, performance measurement, and to be profit
centred were seen to be influenced by both institutional forces and the internal need to be
competitive and successful within market. The quality principles were enhanced through
quality circle teams at the HA. The adoption of TQM at the HA meant driving for
continuous improvement, elimination of waste and a focus on customers. The separation
of the Lending Division from the Finance Division is another ideal example. The
Lending Division became a profit centre for the organisation, facilitating the HA to be
self-sustaining.
Institutional theory is deterministic and based on the functionalist paradigm of Burrell
and Morgan framework. It argues for organisations to become isomorphic due to
external pressures such as that of the State's public sector reform policy. This is an
attempt by the State to make public sector organisations in Fiji isomorphic. However, the
theory does not address the consequences of such exercises, particularly in terms of
redundancies of workers involved at the HA, and generally how it exacerbates the
unemployment problem at the national level. Despite the above limitations, Institutional
theory and research have developed rapidly and occupy a prominent place in the field of
organisational analysis.
The interpretive approach, however, overcomes the problems of a more deterministic
approach. It emphasises the subjective nature of social world and understands it from the
frame of reference of those being studied. As such, the interpretive research provided
support to the generation of variables influencing the MACS changes at the HA,
9.4 Summary
The purpose of this research was to gain a fuller understanding of the various re-
organisation and changes in MACS, and how these were internalised by organisational
participants to provide for the survival and continuity of the HA. Broader social
pressures add to organisational changes. For instance, the separation of the PRB from the
HA was carried out by the wider social order of the aid agencies of the World Bank and
the ADB. Accounting and other organisational practices are seen as being merely
reflections of wider and underlying social interests. From the study, it is evident that the
major environmental factors responsible for the MACS changes at the HA were the State,
political factors, aid agencies, external consultants and the Chief Executive.
The study used interpretive approach methodology as a framework. Three theoretical
perspectives of Contingency theory, General System's theory and the Institutional theory
evolved out of the empirical data gathered. Importantly, the three theories chosen as a
means of exploring the MACS changes at the HA provided a better understanding of the
changes at the HA. The three approaches provided a wider and richer understanding of
MACS changes at the HA than any would have given singly (see Berry et al; 1991;
Hoque and Hopper, 1994). The study uses a greater theoretical plurality (e.g. Hoque and
Hopper, 1994, 1997; Ansari & Euske, 1987; Berry et al; 1991). The major contingent
factors that made the organisation effective were the State, the global trends, the donor
agencies, external consultants, customer expectations, Chief Executive, technology and
the PAQF. The General Systems theory articulated that the changes in MACS could be
better understood in a holistic mode. To understand the changes, one needs to look
beyond the HA, into external constituents. The environmental pressure caused the
changes in MACS at the HA.
Further, many aspects of the formal structure policies of the HA serve to demonstrate a
conformity with the institutionalised rules and expectations expressed by external
constituents. This is in line with the theory that by incorporating an externally
legitimated formal management system, the organisation will be protected from having
its conduct questioned. The next chapter concludes the thesis.
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Chapter Ten
Conclusion and Directions for Future Research
1.0.1 Introduction
Having analysed the findings of this research with respect to the theoretical constructs, in
the last chapter, this chapter intends to identify the limitations of the present research.
Following this, the implications for future research is identified. For future research,
management accounting should not be limited to the technical aspects only, but it should
be studied as a social construct (Neimark and Tinker, 1986; Broadbent and Guthrie, 1992;
Burchell et al., 1980; Broadbent, 1999). Lastly, a summary of the entire thesis is
provided and appropriate conclusions are formulated.
The present study is based on a case study research at the HA. Case studies are prone to
interpretations, and as such is claimed to be not providing an objective assessment of
events (see Humphery and Scapens, 1996). Thus, the next section discusses the
limitations of the study and the means used to overcome these limitations in the present
study.
10.2 Limitations of the Study
All case studies represent interpretation by the researcher as to the nature of social reality
(ibid, 1996). This may create allegation of "bias." However, the current research
minimised this by ensuring that as many views as possible of key participants, are sought,
and feeding interview transcripts back to them for validation of their comments. As
reported earlier, case study research has limitations with respect to generalisation of its
results.
The data in this study, for instance, came from a single public sector organisation, and as
such generalisations cannot be drawn from a single case study (Hagg & Hedlund, 1979;
Hoque and Hopper, 1994,1997). That is, any generalisation of its results to public sector
149
in Fiji or beyond is not possible without some caution (see also Hoque and Hopper,
1997). It would be incorrect to assume that research on public sector organisation in
developing countries is not pertinent to advanced countries and vice versa. As Hoque and
Hopper (1997) argue that the public sector organisation existing in the western countries
have been models for developing countries. Western public sector organisations have
undergone similar changes in MACS (Hoque and Alam, 1999; Chenhall and Langfield-
Smith, 1998a; Cobb et al., 1995; Thomson & Thomson, 1995). As such, some
generalisations can be made.
It is also essential that similar study be undertaken in other public sector organisations in
order to draw generalisations on MACS changes. Some similar studies, however, have
been done in Fiji's context such as those of Nandan (1997a, 1997b) on the Fiji
Development Bank and Achary (1998a) on the Fiji Pine Ltd. This would warrant some
generalisations to be made. The present research orientation is rooted in the interpretive
tradition of understanding events (see also Hoque and Hopper, 1997). The present
research, which is rooted in interpretive framework, is believed to reveal more significant
and surprising results than the survey methods.
The research relied on interviews of organisational personnel on MACS changes. As
with any qualitative exercise, there could be problems with the interpretations of issues.
It is difficult to see through other people's eyes and interpret events from their point of
view. The subject's view of reality and the interpretation of that social reality is always
problematic; for how feasible is it to perceive as others perceive (Nandan, 1997b).
As discussed earlier, there have been means used to minimise the above problems in the
case, but they cannot be eradicated completely. The three most common approaches,
according to Nandan's (1997b) insight are the use of triangulation of research methods,
respondent validation and formation of a research team. The first two have been used in
this study, and have consequently reduced the problems of case study research.
In this study, the State, aid agencies, external consultants, PAQF and customer
expectations were major influences on MACS changes. This has been a recurring
findings in other case based research in this area. It was felt and wished that a more
detailed investigation of these phenomena could be carried out. The failure to do was the
150
normal arguments of researchers in getting the relevant data. As reported earlier, the HA
is an unstable organisation and has a large staff turnover. For instance, the separation of
the P.RB from the HA occurred in 1989 and majority of the 1989 workers have left the
organisation except for one or two. Thus, it was difficult to interview workers on this
topic, as only a few were aware of this change. A lot was, therefore dependent on
documents and memos supplied by the HA. An alternative organisation of the PRB was
resorted to in order to investigate the reasons for the separation.
Our university library lacked copies of core journals in the management control area such
as Accounting, Auditing and Accountability journals as well as the Management
Accounting Research Journal. The library has recently starting subscribing for these
journals. The journal issues prior to 1998 were lacking in the library. Therefore, a lot
was relied on the inter library loan services of the library, whereby the journal articles
were made available from overseas universities. This exercise was time consuming as it
took almost a month for the articles to arrive from overseas to our university. This
required a lot of preplanning on part of the researcher as the journal articles had to be
ordered via the inter library loan service, at least a month in advance.
The next section looks at the directions for future research.
10,3 Directions for future research
By investigating MACS changes at the HA, this study adds to the limited knowledge of
management control changes in developing countries which is a somewhat neglected area
of accounting research (see Hoque and Hopper, 1994, 1997). 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.
Future research should be aimed at making a comparative study of MACS changes in
public sector organisation in developing countries. As the public sector restructuring is a
global trend, similar comparative study could also be made internationally. The object of
such multiple case studies would be to support theories capable of interpreting the various
observations which have been made (see Humphery & Scapens, 1996).
151
This study related to a single-site study. Future research adopting a multiple site study
may provide one with more findings in MACS changes in organisations. This would add
to the current literature on MACS. The findings from this study can be generalised to
other situations as well. Future research can be undertaken to compare the findings in
this study with findings that relate to (1) international housing institutions abroad (2)
privately or publicly traded manufacturing firms and (3) firms in other countries (e.g.
Hoque and Alam, 1999). Such an endeavour may improve our understanding of the
influences of the wider structures that create MACS changes in organisations.
For future research, management accounting research should not be limited to technical
lore as depicted by the conventional argument (Burchell et al, 1980; Broadbent and
Guthrie, 1992). Rather it should be studied in a social construct as suggested by Neimark
and Tinker (1986). The socio-economic and political factors external to the organisation,
as argued earlier, cannot be isolated from the organisation. The socio-economic and
political factors in the organisation and the society are intertwined and there is a need to
consider the interdependency between them to better comprehend the context in which
MACS operate.
The next section summarises the thesis.
10.4 Summary and Conclusions
This thesis initially highlighted that a diversity of influences change accounting and
control systems in organisation, It then established the intention of the research as
carrying out an in-depth understanding of MACS operation, with particular emphasis on
the changes during the last decade at the HA. This was followed by an overview of
theoretical discussion on MACS changes in organisations. Chapter three provided details
on Burrell and Morgan and Interpretive framework, which were used as the
methodological base for the research. The use of naturalistic research method, and the
means of collecting data were highlighted.
The fourth chapter looked at the HA and its wider social structures. The military coups
of 1987 were seen as a major disturbance to the economy, and the stability of most
organisations. These accelerated changes in MACS at the HA Chapter five presented
1.52
the first organisational and control change at the HA, that of the separation of the PEJB
from the HA. The PRB had to be separated because the HA was deficit laden with the
rental estates. The World Bank, the ADB and the State facilitated the change.
Chapter six explored the change whereby the Lending Division was separated from the
Finance Division. The Lending Division became the profit centre of the HA, and began
generating profit. This was carried out because of the recommendations of the donor
agencies of the World Bank, ADB and also the national policy of public sector reform.
External consultants carried out the changes. This made the organisation effective in
terms of improved financial standing, particularly in terms of improved profit.
Chapter seven examined the introduction of the TQM in the organisation. This was
instigated by the Chief Executive of the HA, and was in line with the State's public sector
reform policy. Certain institutions like the PAQF accelerated this as well. Performance
measurement was discussed next. This would pave the way to the adoption of TQM.
The institution of performance measurement was attributed to the State's public sector
reform, the Chief Executive and the donor agencies. These changes ensued the survival
and continuity of the HA despite very difficult times. The penultimate chapter has
summarised and evaluated the findings of the research in terms of the theories of
Contingency, General Systems and Institutional.
The thesis concludes that the influences beyond the HA have been critical in bringing
about the changes in MACS at the HA. The financial performance indicators, TQM,
innovations in Finance Division, separation of the PRB from the HA were some of the
consequent MACS changes that eventuated at the HA. This study reinforced the findings
of other researchers that the wider social, political, economic and institutional context
governs the way management control operates in organisations (Hoque & Hopper, 1994;
Uddin & Hopper, 1998; Hoque & Alam, 1999; Nandan, 1997a, 1997b; Scapens &
Roberts, 1993; Neimark& Tinker, 1986; Hopwood, 1987; Dent, 1991, Otley, 1994, and
so on).
It is apparent from the results that the HA aspired to be known for quality, transparency
and accountability. As such the HA faced no difficulty in accommodating the separation
of the PRB from the HA, the separation of the Lending Division from the Finance
153
Division, TQM and performance measurement principles. The institutional requirements
and wider social and political influences were easily accommodated. The commitment to
quality and performance measures, and organisational restructuring were seen to be
influenced by the social, institutional forces as well as the internal need to be successful
within the market. The changes in MACS improved the HA's organisational
effectiveness. This ensured its survival and continuity in operation.
154
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Appendix 1
Questionnaire
Questionnaire- Separation of the Public Rental Board from the Housing Authority
1. Why was the PRB separated from the HA?
2.Was the HA able to achieve what it wanted to after the separation?
3. If so, how? If no, then what went wrong?
4. How were the workers transferred to the new organisation?
5. Were the workers happy with these changes?
6. Did the HA's accounting system change after this separation?
7. What sort of relationship does the HA have with the PRB?
8. Are you happy to give the rental flats away?
9. Was there any reduction in grants and subsidies from the government after the
separation?
10. What sort of problem was the HA facing when the rental element was part of it?
1 1 Did the HA's mission change after the separation?
12. How was the HA's profitability position after the separation?
13. Why were the World Bank and the ADB approached for the loan?
14. How were the assets and liabilities transferred to this new organisation of the PRB?
175
Questionnaire- Management Control System
1. Why was the management contract system introduced?
2. Was the HA able to achieve what it wanted to with this being implemented?
3. If so, how far?
4. Have you noticed any noticeable differences in the performance of organisation, since
the contractual system has been introduced?
5. Have the workers' readily accepted this?
6. What could be the reason for above?
7. Has this system brought any conflict with the management? If so, how?
8. When was this system introduced?
9. How does this system work?
10. If a management is not able to fulfil targets/ objectives, then what happens to him
under this system?
11. Does non-fulfillment of targets create conflict/resistance in the organisation?
12. What is your view on the system?
13. Do you see any problem with this contractual system? If yes, elaborate.
14. Were the external forces responsible forthe introduction of this system or is it the top
management?
15. Would you like this system to be introduced at the juniour staff level as well?
16. What will be the likely benefit if this system is introduced at the juniour staff level?
m
Questionnaire- Total Quality Management
1. When was this introduced?
2. Why was this introduced?
3. What are its likely benefits?
4. Did this impose any extra cost on the organisation?
5. How was this exercised on the organisation?
6. Has there been any remarkable changes / improvement in the organisation, since this
has been introduced?
7. Has the organisation's mission changed since the implementation of this?
8. How have the workers reacted to this change?
9. Has there been any resistance to the TQM?
10. Has the HA achieved what it wanted to with this changes. If so, how far?
11. What are your views on the system?
12. Has the stafFbeen exposed to the TQM seminars? If so, when and by whom?
13. Can you see any problems with the TQM? If yes elaborate.
14. How is this exercise practiced in the organisation?
15. Have you seen any changes in the employees' morale after the introduction of the
TQM?
16. Have there been any changes in the management/ employee relationship since the
introduction of the 'TQM'?
17. Mas there been any problem in the implementation of the TQM?
Questionnaire- Separation of the Leading Division from the Finance Division
1.Why was the Lending division separated from the Finance Division?
2, What is the function of the lending division?
3. What organisational changes took place as a result of these changes?
4. Are you happy to see this change?
5. Were there any changes in your accounting system as a result of this changes?
6.Did any external party play a role in the separation exercise?
7. Did the HA achieve what it wanted to with this change? Explain.
8. What sort of relationship does the Finance Division have with the Lending
Department?
9. What sort of problem was the HA facing when the Lending division was part of the
finance division?
1 O. What are some of the achievements of the newly formed Lending division to date?
11. Did the HA's mission change after the separation?
12. How was the HA's profitability position after the separation?
13. Has there been any improvement on the Finance division's performance, after the
separation of the lending element?
i so
14.How many people are employed an finance and lending division respectively?
15. What are some of the problems that lending division faces?
Questionnaire- Housing Authority- Background
1. When was the H'A formed?
2.Why was it formed?
3. who controls the running of the HA?
4.What are its mission?
5.What are some of the changes that have come about in the organisation since its
inception?
6.Does the political influence affect the organisation? Explain.
7.What other external forces influence the organisation? Explain.
8. Give a brief background of the organisation.
9. Has the HA's function changed overtime? Explain.
10. What are some of the achievements of the HA over the last 10 years?
11. What are some of the problems the HA is facing?
12. How has the HA been able to resolve the above problem?
13. How does the HA's organisation chart look like?
14. The HA, according to newspapers is severely in debt? How have you been able to
cope with this debt?
15. Do you face problems in acquiring land from the landowners? If yes, what sorts of
problems arise?
16. "What are the views of the landowners on the HA's acquisition of the land?
17. Who are the board of governors? % Fijians, Indians and others.
18. On what basis do you allocate houses? Why do you use this basis?
19. Why has the organisation been restructured so many times in the past?
20. Does the organisation face any political interference? Elaborate.
Appendix 2
List of Interviewees
Appendix 3
Map of Fiji
Appendix 4
Population by Ethnic Origin and Sex at Successive Censuses:
1881-1996
Appendix 5
Housing (Amendment) Decree, 1989
Appendix 6
Fiji Housing Authority
Organisation Structure
Appendix 7(a)
Housing Authority Organisation chart of 1988.
Appendix 7 (b)
Housing Authority Organisation chart of 1998
Appendix 8
Finance Division's Organisation chart before the Separation
from the Lending Division
Appendix 9
Housing Authority Organisation chart of the Lending Division
•1.0 "2-
Appendix 10
Lending Department's performance indicators
Appendix 11
Total Quality Management Sites allocation team:
Unavailability of transport.
Appendix 12
Collection Efficiency
Appendix 13
FNPF Receipts
Appendix 14
Sale of land Targets
Appendix 15
Sales of Land-Targets
Appendix 16
Sales of Houses- Targets
m
Appendix 17
Cash and Village loans Disbursed targets/ Cash, Village, Soft,
Home Comfort, Quick Loans Approved targets.
Appendix 18
Loan Processing time by Division targets
Appendix 19
Payroll Reconciliation Targets
Appendix 20
General Ledger and Mortgage Closure
Appendix 21
Reconciliation Completed Targets
