Controlling outsourced management accounting to build legitimacy

Abstract

<jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>This paper aims to explore controls within an inter-organisational relationship involving outsourced management accounting services from the contractor’s perspective.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>Qualitative data from within the relationship are analysed in a legitimacy-theory framework, illustrating how controls within the relationship are intended to build the contractor’s legitimacy and what kinds of implications the controls have in relation to conflicts between interests inherent in the relationship.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The legitimacy perspective clarifies that while controls are aimed at ensuring efficiency for the client, they may also provide symbolic displays of the appropriateness of the contractor’s actions both at an inter-organisational level for the client and at an individual level for the contractor’s employees. While the contractor intends to build legitimacy with the client by demonstrating utility in the form of efficiency, the process also gives the client influence and allows the disposition in terms of shared values to be demonstrated. However, this process has some negative consequences for the contractor’s employees as it is insufficient for serving the boundary-spanning employees’ interests connected with the nature of their work. Hence, the same controls need to yield benefits and fair outcomes for employees. The controls simultaneously foster interconnections that contribute to permanence and formalise the outsourcing of complex services, thereby rendering such processes comprehensible and transferable to other settings, which can be seen to serve the contractor’s continuity interests.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>The paper contributes to academic research by illustrating how controls within inter-organisational relationships not only steer boundary-spanners’ work to conform to a client’s needs but may also help to build legitimacy via symbolic properties in the presence of conflicting interests at both an inter-organisational and individual level. It specifically highlights the important role of boundary-spanners lower in the organisational structure, who both affect and are influenced by the intentions to build legitimacy with the client.</jats:p> </jats:sec>

Management interventions in pacing a planned financial accounting outsourcing transition

“…1. Introduction Interorganizational control (Lepistö et al, 2020;Dekker et al, 2018) and planned organizational changes (Lukka and Partanen, 2014;Chenhall and Euske, 2007;Huy, 2001a) as purposeful actions that involve an alteration of multiple organizational elements (Agndal and Nilsson, 2019;Huy, 2001a), have interested researchers for a long time. This study combines these two research areas by focusing on the time and temporal management of a financial accounting outsourcing (FAO) transition.…”

“…The FAO literature has focused on staff attrition in offshoring (Nicholson and Aman, 2012), contract monitoring of the FAO relationship (Anguelov, 2016), accounting outsourcing turnback (Maelah et al, 2010), legitimacy building through outsourced management accounting (Lepistö et al, 2020) and the development of FAO through shared service centers (Hyvönen et al, 2012). To understand the FAO transition process, scholars have built models and identified stages (Nicholson et al, 2006).…”

“…Control and trust can either substitute or complement each other (Dekker, 2004). Also, every employee of the SP who communicates client-specific information to the alliance party representatives may strengthen the perceptions of the appropriateness of the SP at the interorganizational or individual level (Lepistö et al. , 2020).…”

Latent classes of accounting outsourcing firms

“…Smith et al, 2005), and models both the costs and the benefits of the decisions through transaction costs determined by the asset specificity, environmental and behavioral uncertainty, as well as the frequency of transactions (Widener and Selto, 1999). While TCE-literature has acknowledged that cooperation with a service provider enables development of the relationship and more transactions to be outsourced (Speklé, 2001), and recent research has shown how the service provider may contribute the development of the relationship by its legitimating efforts (Lepistö et al, 2020), earlier research has provided limited understanding of the influence of outsourcing accounting functions on firm performance. RBV is premised on strategic resources being heterogeneously distributed across firms (Barney, 1991).…”

Capital Intensity, Conflict of Interest, Litigation Risk, and Growth Opportunity as Determinants of Prudence

“…To minimize risk, creditors support the prudent presentation of financial statements. Therefore, the level of conflict of interest can affect the implementation of the principle of prudence contained in the presentation of financial statements (Lepistö et al, 2020;S. N. Sari & Agustina, 2021).…”