Symbolism, rationality and myth in organizational control systems: an ethnographic case study of PBS Jakarta Indonesia

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1 University of Wollongong Research Online University of Wollongong Thesis Collection University of Wollongong Thesis Collections 2004 Symbolism, rationality and myth in organizational control systems: an ethnographic case study of PBS Jakarta Indonesia Imam Wahyudi University of Wollongong Recommended Citation Wahyudi, Imam, Symbolism, rationality and myth in organizational control systems: an ethnographic case study of PBS Jakarta Indonesia, PhD thesis, School of Accounting and Finance, University of Wollongong, Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library:

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3 SYMBOLISM, RATIONALITY AND MYTH IN ORGANIZATIONAL CONTROL SYSTEMS An Ethnographic Case Study of PBS Jakarta Indonesia A thesis submitted in fulfillment of the requirements for the award of the degree Doctor of Philosophy From UNIVERSITY OF WOLLONGONG By Imam Wahyudi, Drs (UGM); MCom (Hons) (UOW) School of Accounting and Finance 2004

4 Certification I, Imam Wahyudi, declare that this thesis, submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy, in the School of Accounting and Finance, University of Wollongong, is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution. Imam Wahyudi 8 November 2004 i

5 Abstract The study of accounting in its environmental contexts requires an understanding of accounting beyond its technical and numerical aspects. To obtain social, cultural and political legitimacy, organizations tend to adopt formal structures and practices including accounting - that have been widely accepted by society as social norms and values without necessarily using them in actual practices. Seen from this perspective, accounting information, and particularly budgeting that plays an important role in organizational control systems, is not value free. It intermingles and is implicated in constructing social reality by shaping and being shaped by the political interplay among contested interested parties that takes place in organizations. This study examines the impact of the institutionalization of the authoritarianbureaucratic regime of the New Order government of Indonesia in the PBS Jakarta a private higher education institution on the role of accounting and budgeting used within the organization. Incorporating the theory of closure of Weber and power mobilization developed by Hardy (1996) into institutional theory, a theoretical research framework is developed to reflect the researcher s understanding regarding the research process as a result of his experience in interacting with the subject being studied for more than a decade as an academic as well as an administrative staff member. Following an ethnographic case study method that allows the involvement of the researcher as a part of the case being studied, the subjective experience of the researcher enriches the analysis of this study reflexive-ethnography. An historical ii

6 analysis is performed by involving a confirmation by the researcher of other organizational participants understanding about the school s control system through interviews inter-subjective analysis. Documents and archival records are also used in order to provide official organizational and descriptive historical contexts of the case and to make available the powerful link between what people say interviews and what they actually do. Instead of formal organizational structures being adopted, this study found that informal relationships, paternalistic management and physical control dominated everyday managerial practices in which the school head held the absolute power in the school. Budgeting as part of formal control systems, in this environment, facilitated a political deal among the school s stakeholders and functioned as a rationalized myth to the process not an efficiency measurement. In addition, financial statements played a symbolic reason to display how the managerial conduct was rational and financially responsible. An effort to implement a technical-rational efficiency discourse of budgeting into the school by the new school head, after the demise of the New Order government, turned out to be a devastating blow to the school development as it contradicted the organizational culture that existed in the school. Therefore, these findings contribute to the understanding of accounting as providing socially constructed meanings and reality accounting is value-laden. iii

7 Acknowledgements I would like to thank Professor Michael Gaffikin, my principal supervisor for his guidance, assistance and support in completing my thesis and also in opening up my mind to understand accounting as a social science beyond its technical-rational context. I am also thankful to Associate Professor Christopher Poullaos, my associate supervisor, for his guidance and help especially in discussing the theoretical framework of this thesis. My gratitude is also expressed to the management of the Perbanas Business School Jakarta Indonesia for its financial support and allowing me to use the institution as the case study of my research. I also would like to thank to my father and mother in law who supported my study with their praying. Of course, I am grateful to my parents my father, Drs. K.H. Sjuaib Mustafa, who had been teaching me to love knowledge and study since my early childhood, and my mother, Hj. Siti Amanah, who with her endless love and patience drives my effort to finish this thesis. To both of you, I owe an incalculable debt of love, kindness and wisdom. Finally, to my wife, Jurica Lucyanda, whose unquestionable support and considerable patient enabled me to complete this thesis to her this thesis is dedicated, my thanks. iv

8 Table of Contents Certification Abstract Acknowledgements Table of Contents i ii iv v Chapter One - Introduction 1. Indonesia as a Postcolonial State 1 2. Accounting s Presence in the Five Eras A Brief Overview 4 3. Indonesia under the New Order Government Military Pancasila Ideology Javanese Culture Economic Development The Role of Accounting during the New Order Perbanas Business School (PBS) Jakarta The New Order s Influence over PBS Jakarta Objective of the Study Research Questions Addressed by the Study Organization of the Study Contribution of the Study 26 Chapter Two - Interpretive Organizational Culture and Control System 1. Introduction Perspectives of Organizational Culture Concept of Culture Levels of Culture Organizational Culture Managing Organizational Culture Organizational Control Systems Accounting and Institutional Change 49 v

9 5. Symbols, Ritual and Myth of Accounting Concluding Remarks 54 Chapter Three - Theoretical Propositions 1. Introduction The Genesis of Institutional Theory on Organization Institutional Theory and Institutionalization Institutional Isomorphism Coercive Isomorphism Mimetic Isomorphism Normative Isomorphism Interests and Institution Organizational Imprinting Effects of Institutionalism on Organization Managerial Responses to Institutional Processes Acquiescence Compromise Avoidance Defiance Manipulation Problems of Institutional Theory Power, Interests and Process of Institutionalization The Problematic Concept of Decoupling Incorporating Power and Theory of Closure Research Framework Concluding Remarks 99 Chapter Four - Methodological Issues 1. Introduction Philosophical Foundation Triangulation vs. Crystallization in Qualitative Research Ethnographic Case Study Method 108 vi

10 5. Fieldwork Stages Participant Observation Interviews Documents and Archival Records Qualitative Data Analysis Concluding Remarks 126 Chapter Five - Perbanas Business School Jakarta: A Tale of Its Progress and Individual s Domination 1. Introduction Initial Involvement Accumulating Power Dominating the School The Governing Bodies Adopting Javanese Culture Concept of Rukun and Musyawarah Mufakat Superior and Leader: Priyayi Other Contributing Factors Concluding Remarks 149 Chapter Six Perbanas Business School Jakarta: Building up Power 1. Introduction Concept of Power Organizational Structure and Managerial Hierarchy Formal vs. Informal Organizational Structure Staff Appointment and Evaluation Mobilization of Power Exercising Status Groups Paternalistic Management Concluding Remarks 179 vii

11 Chapter Seven Perbanas Business School Jakarta: Institutionalization of the New Order Cultural and Political Values and Practices 1. Introduction Domination of the New Order Government over Indonesian Society President Suharto as a Central Figure Appropriation of the State by Its Officials State Corporatism The New Order and the Culture of Corruption The PBS Jakarta: Cultural and Political Pressures Paternalism and Concentration of Power Rent-Seeking and Corrupt Practices The PBS Jakarta: Government and Regulative Pressures Academic Issues Organization Structure Student Activities Isomorphic Analysis Concluding Remarks 225 Chapter Eight Perbanas Business School Jakarta: Organizational Control System 1. Introduction Informal Authorities and Cultural Dimension of Control System Management Budgeting Budget Approval as a Political Deal and Rationalized Myth Physical Control and Performance Evaluation Financial Statement a Symbolic Display Concluding Remarks 259 Chapter Nine Perbanas Business School Jakarta: The Role of Accounting after the Demise of the New Order 1. Introduction Management Practices 262 viii

12 2.1. The Awkward Relationship between the PBS Jakarta the YPP Leadership Style and Managerial Tensions Accounting Discourse Does Its Role Change? Budgeting Discourse Ambiguity of Performance Measurement Practices Accounting and Budgeting: Power and Cultural Interplay Concluding Remarks 288 Chapter Ten Final Notes 1. Introduction Mimicking the New Order Managerial Strategies Centralization of Authority Harmonious Social Order of Javanese Culture Symbolic Formal Structures Status Groups preference Power Mobilization Normative and Coercive Government Regulative Pressures Organizational Control System Consequences Informal Authority: Personal Control Physical Discourse Control and Performance Budgeting Interplay Symbolic Reason and Myth of Financial Statements Imposing Technical-Rational Control of Accounting Conclusion 309 References 312 Appendices Appendix 1: Managerial Positions Based on Religious Status Groups Appendix 2: Variance Analysis Report January ix

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