Initiating Social Accountability: Easier said than done

Management accounting systems and social housing. Prof. Aziza Laguecir: Even with institutions underlining the importance of social accountability in an organisation, the principal concern of employees is to hit financial targets.

Even with institutions underlining the importance of social accountability in an organisation, Profs. Aziza Laguecir, IESEG ICOR, Anja Kern, Baden-Württemberg Cooperative State University Mosbach and Cécile Kharoubi, ESCP Business School note that the principal concern of employees is to hit financial targets.

By CoBS Editor Meghana Kappernakere Mutt. Related research: Management accounting systems in institutional complexity: Hysteresis and boundaries of practices in social housing

Of late, private companies and public service organisations alike have taken up a spree of bringing about positive social – introducing inclusivity and diversity policies, advocating equal pay for women, introducing paternity leaves, actively participating in CSR activities, or having an eco-friendly workplace. How do these changes that originate in the higher management manifest when they trickle down to the other members in the corporate hierarchy? Is initiating social accountability policies enough, or must companies do more to ensure their implementation? And do employees face underlying problems integrating the newly introduced social responsibilities with legacy financial goals?

Management Accounting System (MAS) – A tough nut to crack

Public service organisations were run by reforms that imposed a stubborn set of principles, driven by management accounting principles. MAS forced organisations to chase financial goals, even at the cost of compromising on their goals and values. Even today, companies continue to pollute oceans and destroy ecosystems in order to drive their profit margins upward. This sole mission of placing financial profitability as the primary objective of an organisation influences its many different actors. They begin to align their responsibilities towards the institutional pressure of financial aspects.

French Social Housing – A deep dive

Prof. Aziza Laguecir: Even with institutions underlining the importance of social accountability in an organisation, the principal concern of employees is to hit financial targets.
Photo by Mike from Pexels

Laguecir, Kern and Kharoubi make use of French public sector social housing to study how actors make sense of changes in the institution’s vision and balance social and financial pressures.

Back in 1920, a French public sector social housing entity was formed to provide cost-effective housing solutions for the economically and socially weaker population. As time elapsed, the housing market became competitive. It forced public sector housing to make organisational changes to meet the standards in the market. Effectively, private-sector principles were adopted – the public housing sector was now governed by reforms that were mainly driven by financial goals. Everyone in the organisational hierarchy – from top management to middle managers to on-the-ground employees – were now focused on KPIs that made them financially accountable to the organisation. For example, collection of rent, the quick selling of vacant houses, and managing maintenance expenses. As a direct consequence of this change, the public housing sector witnessed a “mission-transformation” from one that sought to make housing affordable to the vulnerable sections of society to that which was powered by mostly financial motives.  

A bend in the road

In the early 2000s, the social housing sector garnered eyeballs owing to multiple scandals, mismanagement of funds and its deviation from its root purpose. To that end, a new rule was now established: social housing organisations now had to explicitly specify the social utility of their organisation and talk about the quality of services provided to their tenants to get funding for their projects.  On the grounds of this policy change, funding responsibilities were transferred to the regions’ local councils thereby making the monitoring of the implementation of this change easier.

To sum up, senior management and the local authorities now demanded public social housing organisations to be more socially accountable, as well as manage their financial goals. This expectation had to be integrated into the operational activities of the organisation – that is, the middle managers and the operational employees also had to balance social accountability with financial responsibility.

A tug of war between ideologies

Prof. Aziza Laguecir: Even with institutions underlining the importance of social accountability in an organisation, the principal concern of employees is to hit financial targets.

In order to eschew a strong shaping toward financial goals, a less financially loaded MAS was chosen. ABC/Ms – Activity Based Costing and Management systems – were employed to ensure that the newly introduced social aspect was not superficially integrated into the organisation. Various activities included in processes were mapped. For example, in selling a house these activities could be the identification of houses to be sold, a feasibility study, and identification of potential owners. However, different organisational actors had different opinions and suggestions about incorporating socially oriented changes in each activity. For example, the priority for a manager responsible for selling houses was to make a profit and sell as many houses as possible to reach her targets. On the other hand, an agency manager’s goal was to sell houses to low-income tenants. Likewise, the legal team and management accountants wanted to keep a steady flow of cash, whereas a janitor wanted social well-being. 

That being the case, compromises had to be made as to which suggestion to be considered. To facilitate the decision making process, a cost-value analysis was proposed in order to make trade-offs. Each suggestion was ranked according to the value it held for a stakeholder and the approximate cost for its implementation. Further, activities also had “practice boundaries” where actors decided whether or not an activity fell under their radar of responsibilities.  

Change Inertia

Prof. Aziza Laguecir: Even with institutions underlining the importance of social accountability in an organisation, the principal concern of employees is to hit financial targets.

Interestingly, the strategies aimed at incorporating social accountability that were selected had a high value associated with the local authorities (who were in charge of funding) and low cost to the housing organisation. On the flip side, a suggestion to introduce “buyer follow-up” was rejected even when it had low cost to the housing organisation and high value to the buyers. The buyer follow-up idea involved running a personalised financial simulation to warn the buyer of possible financial issues in the future. It was rejected on the basis that employees did not want to be perceived as “social workers”. Moreover, this recommendation had little impact on the funding decisions by the local authority.  

Eventually, suggestions were finalised based on what the actors perceived to be important in order to get their funding approved by local authorities. That is, even when higher management introduced a factor of social accountability, middle and lower management only wanted to address social concerns superficially with the aim to obtain funding. The general view was that the social aspect was present only to satisfy the local authorities and not to bring about any real change. Moreover, the team under observation experienced inertia to change in the move away from focusing exclusively on financial concerns to now striving to inculcate a new social dimension.  

Chained to the past

Actors in an organisation are greatly influenced by what they have been doing for decades together – chase financial profitability. By introducing the social accountability dimension, an organisation cannot expect all of its employees to truly integrate a newer responsibility into the existing: when it comes to making decision trade-offs, employees tend to choose practices that are financially oriented.

Laguecir, Kern and Kharoubi make a plea to “put the social back into the social housing sector” by placing socially vulnerable people at the centre of all the discussions. Nevertheless, leading a stiff-necked horse to water is not sufficient. Organisations must ensure that the horse is sufficiently healthy and flexible enough to be able bend down and drink it.  

Prof. Aziza Laguecir, management accounting systems and social housing
Prof. Aziza Laguecir

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