Cost Management in the Public Sector: Legitimation Behaviour and Relevant Decision Making

• Author: Kari Sippola,Toni Mättö
• Date: 01 May 2016
• Published date: 01 May 2016
• DOI: http://doi.org/10.1111/faam.12085

Financial Accountability & Management, 32(2), May 2016, 0267-4424

Cost Management in the Public

Sector: Legitimation Behaviour

and Relevant Decision Making

TONI M¨

ATT¨

OANDKARI SIPPOLA∗

Abstract: This paper presents a case study where a cost management project

was implemented using action research methodology at two Finnish organizations

working in a purchaser–provider relationship. While the study demonstrates the

efficiency-seeking motive behind the implementation of the management accounting

tool, subsequent investigation found that tool remained partly unused despite

showing its potential relevance for practice through user involvement. However,

this does not necessarily signal legitimation-seeking behaviour. Reasons for not

using some parts of the tool point to an overestimation of the functionality and

an underestimation of implementation problems during the design process. The

case also highlights the relationship between relevance and decision making.

Keywords: relevance, legitimation, public sector, cost management

INTRODUCTION

Discussion on the state of public sector management accounting research

(PSMAR) has been lively for some years. Several researchers have found that

public sector organizations tend to initiate cost management changes in order

to increase their legitimacy (Brignall and Modell, 2000; Verbeeten, 2011; and

Carvalho et al., 2012) or imitate other organizations that are deemed advanced

∗The authors are both Post-Doctoral Researchers at Jyv¨

askyl¨

a University School of Business

and Economics, Finland. They gratefully acknowledge the helpful and essential comments

received from two anonymous reviewers. They also thank Professor Marko J¨

arvenp¨

a¨

a for his

help. They wish to thank the Foundation for Economic Education for funding this research

project. They are appreciative of the helpful comments thay received from their colleagues

at the Jyv¨

askyl¨

a University School of Business and Economics. Many thanks as well for

the feedback received at the Annual Congress of the European Accounting Association 2013,

Paris, and at the 9th European Network for Research in Organisational & Accounting Change

(ENROAC) 2013, Jyv¨

askyl¨

a.

Address for correspondence: Toni M¨

att¨

o, Jyv¨

askyl¨

a University School of Business and

Economics, Jyv¨

askyl¨

a, PO Box 35, 40014’ Finland.

e-mail: toni.m.matto@jyu.fi

C

2016 John Wiley & Sons Ltd 179

180 M¨

ATT¨

O AND SIPPOLA

(Johansson and Siverbo, 2009a). Thus, the impact of recent cost management

changes on actual decision making remains small according to these studies.

Another frequently expressed concern in PSMAR is the relevance of the

current research for practitioners (van Helden and Northcott, 2010). Several

authors have expressed concerns that recent literature on PSMAR has only

limited practical orientation (Hitt, 2005; and Rynes and Shapiro, 2005).

Regarding Management accounting (MA) research in general, Malmi and

Granlund (2009) and van Helden (2005) have also expressed similar views.

Additionally, in his recent literature review on institutional research in the

public sector accounting literature, Modell (2009) notes that very few studies

address the intertwined nature of efficiency-seeking reasons and legitimation-

seeking behaviour that explains the form of management accounting (and

more precisely, the performance measurement and management) in public

sector organizations. The present discussion merely evaluates the strengths and

shortcomings of different approaches.

The study by ter Bogt (2008) found traces of discontent towards accounting

and control changes being expressed in public organizations. Although the

interviewees in his study indicated efficiency-seeking to be a very important

reason behind the accounting changes implemented in their environment, the

actual outcome was in many cases not as practical as had been hoped.

In addition, Adolfsson and Wikstr¨

om (2007) found mixed results; their case

study on the Swedish schooling system reported some of the participants were

unhappy about a quality system that did not include cost management as part

of the implementation and hence did not address their economic concerns. This

might be another example of a case that fuels the thought behind legitimation-

driven behaviour in the public sector. However, we might ask whether it is

the public sector that is at fault for this apparent lack of efficiency seeking

or whether the tools used have not been capable of addressing the relevant

economic concerns.

We suggest that there might be a connection between the perceived lack

of efficiency seeking, as evidenced by the lack of decision making, the notion

of legitimation-seeking behaviour, and the reported lack of relevance in recent

studies. This study employs a case study to illustrate that providing information

relevant to practitioners by addressing economic concerns with cost management

bridges the gap between theory and practice.

This paper responds to calls for more examples of cost management in

the public sector (Verbeeten, 2011) and provides an example case of a cost

management initiative with actual usage of the information for economic

decision making. In this study, a cost management tool with a quality emphasis previously

used in private organizations is introduced to a case setting with two public sector organizations

working within a purchaser–provider model. Therefore, this research addresses recent

concerns that research is becoming more detached from practical issues and

actual decision making.

C

2016 John Wiley & Sons Ltd