37? A & / J

H&oH

CULTURAL INFLUENCES ON THE ABC IMPLEMENTATION

UNDER THAILAND'S ENVIRONMENT

DISSERTATION

Presented to the Graduate Council of the

University of North Texas in Partial

Fulfillment of the Requirements

For the Degree of

DOCTOR OF PHILOSOPHY

By

Supitcha Morakul, B.A., M.S.

Denton, Texas

May, 1999

Morakul, Supitcha, Cultural influences on the ABC implementation under

Thailand's environment. Doctor of Philosophy (Accounting), May, 1999, 155 pp., 15

tables, references, 59 titles.

This study examines the influences of culture on the implementation of a U.S.-

based Activity-Based Costing (ABC) in three Thai organizations. Prior cross-cultural

studies have suggested that, for the implementation of imported accounting concepts to

be successful, they must be modified to meet the needs of the local culture. The

participant's attitude toward the new accounting system is one of the important factors

that indicate the success of the system implementation. Specifically, the research

question addressed in this study is, How would cultural differences affect the level of

resistance to the implementation of the ABC concept for Thai organizations? This study

extends Brewer's (1994) study by including behavioral attributes as intervening variables

in the model. The extended model with detailed analysis of the relationship between

cultural factors and resistance levels through behavioral attribute variables explains why

the differences of resistance levels exist.

This study utilizes the case study method to compare three Thai organizations that

have attempted to implement U.S. cost-accounting concepts, holding culture constant.

These organizations are in the utility industry; all three are government-owned companies

being prepared for privatization. This study obtained information about the management

and employees' assessment and reactions to the ABC system implementation using

interviews and questionnaires.

The results of this study support Proposition 1 that an ABC system that causes

empowerment and redistribution of power will encounter a higher resistance level,

particularly in Thailand where there is a large power distance and people accept external

locus of control by more powerful others as a norm. On the other hand, the results do not

support and/or provide evidence to address the other propositions. Although the

propositions posited in this study are logical, there is no strong evidence to support them

due to several confounding factors not included in their development. These factors are

the extent and scope of implementation, the stage in the implementation process, the

unique context of the enterprise, and the use of outside consultants. Identifying these

confounding factors is beneficial to future research; researchers should recognize the

importance of these factors when investigating ABC implementation in future studies.

37? A & / J

H&oH

CULTURAL INFLUENCES ON THE ABC IMPLEMENTATION

UNDER THAILAND'S ENVIRONMENT

DISSERTATION

Presented to the Graduate Council of the

University of North Texas in Partial

Fulfillment of the Requirements

For the Degree of

DOCTOR OF PHILOSOPHY

By

Supitcha Morakul, B.A., M.S.

Denton, Texas

May, 1999

Copyright by

Supitcha Morakul

1999

in

ACKNOWLEDGMENTS

I would like to thank my parents, Sima and Puanglek Morakul, for their

continuous support and encouragement throughout my studies and my entire life. I

would also like to thank my dissertation chairman, Professor Frederick Wu, and the other

committee members, Professors Barbara Merino, Thomas Klammer, and Steven Cobb for

their guidance and support during the dissertation process and my entire doctoral

program.

IV

TABLE OF CONTENTS

Page

LISTOFTABLES vii

Chapter

1. INTRODUCTION 1

Purpose of the Study and Research Question Research Strategy and Summary of Findings Organization of the Study

2. RELATED LITERATURE REVIEW 6

Activity-Based Costing Management Accounting Research and Contingency Theory

3. RESEARCH MODEL AND PROPOSITIONS 16

Research Model Cultural and Personality Variables Behavioral Attributes Attitudes toward ABC Implementation

Comparisons between "Culturally-Adjusted ABC" and "Non-Culturally-Adjusted ABC" Implementation

Propositions

4. RESEARCH METHODOLOGY 33

Research Type Justification for Organization Selection Subjects Data Collection Questionnaire Development

Chapter Page

5. RESULTS AND DATA ANALYSIS 45

Data Analysis Descriptive Statistics Correlation Coefficient Regression Analysis

Narrative Analysis Organization 1 Organization 2 Organization 3

Summary

6. LIMITATIONS AND CONCLUSION 93

Limitations Conclusions

APPENDIXES 99

A. Research Model B. Interview Guide C. Questionnaire (English Version) D. Questionnaire (Thai Version) E. ABC Benefits F. Results of Raw Data G. Tables

REFERENCES 151

VI

LIST OF TABLES

Table Page

1. Comparison of Culture Dimension Scores Between

U.S. and Thailand (0 = low, 100 = high) 18

2. Comparison of the ABC Implementation 27

3. Size of Organizations (Fiscal Year 1996) 36

4. Summary of Questionnaire 44

5. Reliability Statistics 47

6. Means (Standard Deviations) 50

7. Cross-Organization Comparison 52

8. Correlation Matrix 55

9. Regression Model 58

10. Interview Subjects 60

11. Subjects by Gender 148

12. Subjects by Age 148

13. Subj ects Education - Obtained Last Degree 149

14. Subject Average Years of Experience 149

15. The Utilization of ABC Information by Organization 150

vu

CHAPTER 1

INTRODUCTION

Thailand is a developing country experiencing rapid economic growth. There is

an increasing "demand f o r . . . the acquisition of new skills among accountancy

practitioners" (Hossain and Adams 1997, 270). Most of the current accounting practices

and techniques are based on the U.S. model; however, many cross-cultural studies

provide evidence that, because of cultural differences, successful accounting techniques

and practices in one country need modification for effective use in another country

(Hofstede 1984; Daley et al. 1985; Birnberg and Snodgrass 1988; Frucot and Shearon

1991; Harrison 1993). Hofstede's work (1980) suggests that Thailand and the United

States are different in all cultural dimensions. The greatest difference is in the

individualism/collectivism dimension. The other significant difference is in the

dimension identified as power distance. These indicate that there are differences in

behavior and perceptions between the Thai people and the American people. The use of

some U.S. accounting techniques in the Thai environment may not provide successful

results without appropriate modifications.

The current study examined cultural considerations in the implementation of

Activity-Based Costing (ABC) for Thai organizations. It is intended to provide a basis

for understanding the effects of cultural differences on the adoption of U.S. accounting

practices and techniques. The findings provided some insights into the question, Should

Thai organizations implement U.S. accounting concepts and practices with modifications

due to cultural differences?

Purpose of the Study and Research Question

In general, the purpose of this study was to examine the influences of culture on

the success of an accounting system implementation using U.S. accounting concepts in

the Thai environment. One of the important factors indicating the success of system

implementation is participants' attitudes toward the new system. Shields and Young

(1989, 22) stated that "the biggest challenge in successfully implementing a CMS [Cost

Management System] is individual. . . resistance to change." In other words, resistance

level indicates the employee's willingness to use the new system. A system may be

developed and ready to use, but if no one uses or follows the required procedures, it is

considered a failure.1 Specifically, the research question to be addressed in this study is,

How would the cultural differences affect the level of resistance to the implementation of

the ABC concept for Thai organizations? Moreover, Yates (1997, 164) stated that "a

manager cannot change existing structures single-handedly; workers must enact the new

structure, as well." Therefore, it is important to know the employees' attitudes toward

the new system.

Brewer (1994) conducted a field-based study using surveys and in-depth

interviews with employees of one company that has implemented an Activity-Based Cost

1 Malnii (1997,475) also considered "resistance to a new costing system as a source of ABC failure.'

Management System (ABCMS) in plants located in Malaysia, Singapore, and the United

States. He found differences in the ABCMS resistance levels across cultures. However,

his further investigation using only personality variables failed to identify any specific

reasons for the existence of cross-cultural differences in ABCMS resistance levels. The

current study extended Brewer's study by including behavioral attributes as intervening

variables in the model. McGowan (1994) investigated the behavioral implications of

adopting ABCMS by using questionnaires and a series of structured interviews. She

found that there were significant relationships between behavioral implications and

employees' attitudes. For instance, the amount of effort expended on the job is positively

related to resistance. This extended model, with detailed analysis of the relation of

cultural factors and resistance levels through behavioral attribute variables, explains why

the differences of resistance levels exist.

Research Strategy and Summary of Findings

According to Yin (1989,18), "'how' and 'why' questions are more explanatory

and likely to lead to the use of case studies . . . as the preferred research strategies." To

answer the above research question and to explain why resistance levels differ culturally,

I conducted a comparative case study of three Thai organizations that have attempted to

implement U.S. cost-accounting concepts, holding culture constant. These organizations

are in the utility industry, are government-owned companies, and are being prepared for

privatization. One organization attempted to implement the ABC concept without

concern for cultural differences (hereafter, "non-culturally-adjusted ABC"). A U.S.

consulting firm directed implementation, based on its experience in the United States.

On the other hand, the other two organizations also implemented ABC, but made

modifications to reflect cultural differences between Thailand and the U.S. (hereafter,

"culturally-adjusted ABC").

This study obtained information about the management's and employees'

assessments of and reactions to the ABC system implementation through use of

interviews and a questionnaire. I compared the differences between management's and

employees' perceptions in these organizations to see whether or not cultural adaptation

resulted in greater acceptance of the new system. I analyzed the modifications of the

system implementation for the "culturally-adjusted ABC" organizations and determined

cultural influences based on Hofstede's (1980) theories and the extended Brewer (1994)

model. The expectation was to find that the modifications required for making the

system implementation more successful are based on the consideration of cultural

differences between Thailand and the U.S.

Some of the results were contradictory. Although the narrative analysis indicates

that the "culturally-adjusted ABC" implementation in Organization 2 has the

modifications to reflect cultural differences as discussed in the Proposition section, the

descriptive statistics show that the resistance level of this organization was higher than

that of the other two organizations. Moreover, the employees' perceptions on some

behavioral attributes differed from the interview results. These contradictory results may

have been driven by an uncontrollable variable, the implementation phase. Organization

2 has just implemented the "culturally-adjusted ABC" system within the last two years,

while the other organizations have had the implementation in place for more than three to

four years. The higher resistance in Organization 2 may come mainly from the recent

changes in the organization, regardless of the cultural modifications. The other possible

explanations for these contradictory results include the extent and scope of

implementation, the unique context of the enterprise, and the use of outside consultants.

Identifying these confounding factors is beneficial to future research; researchers should

recognize the importance of these factors when investigating ABC implementation in

future studies.

Organization of the Study

Chapter 1 provides a brief introduction to this study and discusses the purpose of

the study and research question. A literature review of related research on activity-based

costing (ABC) and management accounting research based on contingency theory is

presented in chapter 2. Chapter 3 presents the research model and theoretical

propositions guiding the investigation. Chapter 4 discusses research methodology,

including research type, justification of organization selection, data collection, and

questionnaire development. Chapter 5 presents the results and data analysis, including

both statistical and narrative analysis. Finally, the limitations and conclusions are

discussed in chapter 6.

CHAPTER 2

RELATED LITERATURE REVIEW

Activity-Based Costing

The Consortium for Advanced Manufacturing-International (CAM-I) defines

Activity-Based Costing (ABC) as "a method of costing in which activities are the

primary cost objects. ABC measures cost and performance of activities, and assigns the

costs of those activities to other cost objects . . . based on their use of activities" (Ansari

et al. 1997a, 31). Bhimani and Pigott (1992,119) have suggested, based on extensive

research, that ABC offers the following important advantages over traditional costing

techniques:

- Enhanced product cost accuracy - More comprehensive cost data for performance evaluation - More relevant information for managerial decision making - Greater potential for sensitivity analysis - Providing a novel outlook on value-adding organizational transactions

and activities.

However, Kaplan (1992, 63) warned, "ABC is not magic. It is just one of many

information systems to help managers make better decisions." Moreover, product costs

can be distorted if there is a violation of ABC assumptions: homogeneity and

• 7

proportionality (Roth and Borthick 1991).1 On the other hand, the benefit of ABC is not

limited to improved costing of products and cost management. ABC also provides

information that can be used to improve a business. This process is called Activity-Based

Management (ABM). "ABM uses this information in various analyses designed to yield

continuous improvement" (Turney 1992,20).

In ABM analysis, activities are broken into sub-activities and tasks. The company

examines the interactions among and between sub-activities and tasks to determine the

task nature and related costs. Activities are then classified into value added and non-

value added. The result of ABM is a basis for process improvement and performance

measurement (Baxendale and Spurlock 1997). In conclusion, "ABM reorients

organizational participants toward understanding and managing work processes" (Ansari

et al. 1997b, 23). Unfortunately, ABM is also threatening. It is used as a means of

cutting jobs and making the remaining work force work harder.

Numerous studies have examined the issues in ABC implementation. For

example, Ainsworth (1994), Argyris and Kaplan (1994), and Norkiewicz (1994)

discussed steps or processes in implementing ABC. Turney (1990) examined 10 myths

about ABC implementation.3 Chaffman and Talbott (1991), Kock (1995), and Roth and

1 "Homogeneity means that the costs in each pool are driven by a single activity or by highly correlated activities.... Proportionality means that all costs in the cost pool should vary proportionally with changes in the activity level" (Roth and Borthick 1991,39-40). 2 Although ABC implementation may result in loss of jobs, this consequence does not apply to employees of government-owned organizations because the employees have tenured positions. Therefore, I do not discuss this issue further. 3 The 10 myths about ABC systems are (1) ABC systems are too costly; (2) ABC systems are too complex to understand; (3) all that we need are more cost centers; (4) machine-hour systems save the day; (5) a cost system should be kept simple; (6) we know what our products cost; (7) the market set prices, so we do not need product costs; (8) we cannot do anything about fixed costs; (9) only manufacturing costs are product costs; and (10) product costs are not useful for managing overhead activities. Turney (1990,31) concluded

Sims (1991) studied the ABC implementation in service organizations, whereas

Baxendale and Spurlock (1997), Briody (1994), and Fayne and Clark (1997) examined

the implementation of ABC in the electric utility industry. The research about the

effectiveness of ABC as a management tool has been inconclusive (Ferrara 1990;

Pattison and Arendt 1994). However, there are a limited number of studies concerning

the behavioral impact of implementing ABC and ABM (Bhimani and Pigott 1992;

McGowan 1994).

The ABC and ABM implementation processes vary among companies, depending

on several factors, including organizational culture, management policy, needs or reasons

for implementation, objectives, and expectations. McGowan (1994) conducted field-

based studies using questionnaires and a series of structured interviews. The units of

analysis were four divisions of U.S. companies that adopted or were in the process of

implementing activity-based cost management (ABCM). Each site was in a different

industry and had different operations and needs for ABCM. The system planning and

implementation also differed. Although there is no standard way to implement ABC and

ABM, McGowan found consistent results with respect to the impact of ABCM adoption

on employees' behaviors in the areas of empowerment, job effort, planning, performance

measurement, and teamwork. A discussion of the behavioral attributes can be found in

chapter 3.

that "the myths may be valid under limited circumstances, but they break down when they are extended to ABC systems at large."

This study assumes that McGowan's (1994) findings apply to the implementation

of ABC in the U.S. culture. As discussed earlier, one Thai organization chosen for this

study is implementing ABC without considering cultural differences ("non-culturally-

adjusted ABC"). I expect to find similar behavioral attributes as those found in the

McGowan study. Preliminary discussion with key personnel in this Thai organization

showed that the ABC concept is being implemented with assistance from an outside

consultant, Price Waterhouse. The new system empowers production employees while

increasing their job efforts. The company uses ABC information for planning purposes

and for changing the performance measurement system of the organization. Finally, the

implementation of ABC requires employees to participate in cross-functional teamwork.

The other two organizations that are implementing the ABC concept with some

modifications due to cultural influences ("culturally-adjusted ABC") are the focus of this

study. I posit that modifications in the implementation due to cultural influences will

result in different behavioral effects. McGowan (1994) also found that the ABCM

implementation had a significant impact on employees' attitudes. Culturally consistent

implementation should engender less resistance from employees; therefore, I expect to

find lower levels of resistance when ABC is implemented in a manner consistent with the

Thai culture.

Management Accounting Research and Contingency Theory

An increase in the globalization of business raises an important issue of the

transferability of management practices across national boundaries (Chow et al. 1996).

10

Relying on Hofstede's findings of significant cultural differences between Anglo-

American countries and developing countries, Perera (1989) suggested that transferring

accounting skills from Anglo-American countries may not work due to cultural

irrelevance and may be dysfunctional in a developing country. Moreover, accumulating

evidence exists that peoples from different nations have differing attitudes toward, and

reactions to, management controls and practices (Hofstede 1980 and 1991; Adler et al.

1986; Vance et al. 1992). Several studies have been conducted to determine whether

effective management controls in one country can create as successful effects when

applied in another country. Most studies are based on contingency theory and identify

national culture as a contingency variable. Otley (1980,413) defined contingency theory

in an accounting context as follows:

The contingency approach to management accounting is based on the premise that there is no universally appropriate accounting system which applies equally to all organizations in all circumstances. Rather, it is suggested that particular features of an appropriate accounting system will depend upon the specific circumstances in which an organization finds itself.

Birnberg and Snodgrass (1988) conducted an exploratory study comparing U.S.

and Japanese workers' perceptions of management control systems (MCS). They found

that a homogeneous and cooperative culture such as Japan's enables MCS to be directed

toward improving communication and decision making, rather than toward "enforcing"

goal congruent behavior. Chow et al. (1991) conducted an experimental study testing the

effects of national culture and management control systems on manufacturing

performance. The subjects were undergraduate accounting majors from an American

1 1

university and a university in Singapore. They found that cultural individualism and

management controls had independent, but not interactive, effects on performance. The

authors suggested that future research should investigate whether other cultural

dimensions, such as power distance and uncertainty avoidance, affect the effectiveness of

management control systems and how they, either independently or interactively, impact

performance.

Frucot and Shearon (1991) conducted a survey of Mexican managers to determine

whether or not cultural differences affect the interrelationship of locus of control4 and

budgetary participation as they impact job satisfaction and performance. The result was

consistent with the findings of previous studies conducted in the United States, indicating

that the participatory budgeting process increased managerial performance. However,

budgetary participation did not increase job satisfaction for all Mexican managers. This

finding suggests that there is a cultural difference between the U.S. and Mexico.

Harrison (1992) examined the cross-cultural generalizability of the effect of

participation on the relation between the degree of budget emphasis in a superior's

evaluative style and the subordinates' attitudes. He used two of Hofstede's cultural

dimensions: individualism and power distance. The results of questionnaires from

Singaporean and Australian employees indicated that there was no difference in the

participation's effect between the high power distance/low individualism culture

(Singapore) and the low power distance/high individualism culture (Australia). Harrison

4 "The locus of control construct categorizes individuals as (1) externals, those who believe that events are controlled by fate, luck, chance or powerful others, or (2) internals, those who believe that they have some control over events" (Rotter 1966 as cited in Frucot and Shearon 1991, 80).

12

(1993) used the same data set to examine the influences of culture and personality on the

relation between reliance on accounting performance measures in the superiors'

evaluative styles and subordinates' attitudes. He found support for the influence of

culture, but not for personality. The implication of these findings suggest that "the same

performance evaluation style or system is unlikely to be equally effective across the

range of nations in which those companies operate" (Harrison 1993, 336).

Ueno and Wu (1993) examined the impact of national culture on budget control

practices in the United States (low uncertainty avoidance/high individualism) and Japan

(high uncertainty avoidance/low individualism). Using a questionnaire, they found that

only the individualism/collectivism dimension was an important factor in explaining the

differences in four budget control practices between these two countries: (1)

communication and coordination, (2) budget slack, (3) controllability of budgets, and (4)

short-term versus long-term performance evaluation. Chang et al. (1995) duplicated

Ueno and Wu's (1993) experiment and found that cultural differences did provide a

significant impact on three budget control practices between the U.S. and Taiwan: (1)

short-term versus long-term planning, (2) budget slack, and (3) short-term versus long-

term performance evaluation.

O'Connor (1995) used Hofstede's cultural dimension of power distance to

determine the influence of organizational culture on participatory budgeting in local and

foreign Singaporean manufacturing firms. Using interviews and surveys, the researcher

found that "power distance moderates the usefulness of participation in budget setting

and performance evaluation at the organizational culture level in terms of decreased role

13

ambiguity and enhanced superior/subordinate relationship" (O'Connor 1995, 383).

Chow et al. (1996) used a survey to explore similarities and differences in the tightness

and effects of management controls at the profit center level between one U.S. firm and

one Japanese firm. The results supported the premise that national cultural differences

influence individuals' preferences for and reactions to organizational controls at the profit

center level. The findings suggested that the composition and tightness5 of transferring

control systems from one country to another need some modifications to fit each

country's culture. Although numerous studies, as discussed above, found results

supporting the premise that cultural differences have significant impact on the

effectiveness of management control systems, some studies present opposite results.

Chow et al. (1994) investigated the effect of national culture and organizational

context on an individual's preference for specific management controls. They conducted

four experiments using last-semester American and Japanese MBA students as subjects.

The results indicated some differences in preferences for management controls between

Japanese and American students. However, the differences were inconsistent with

Hofstede's model. The findings of Chow et al. (1994, 397) indicate that "the relationship

between management control preferences and national culture is complex and probably

influenced by many variables."

Merchant et al. (1995) conducted a field study exploring the differences in

measuring, evaluating, and rewarding profit center managers between the U.S. and

5 Composition refers to "the types of control tools used" in the system, whereas tightness refers to "the importance placed on each type" of those control tools (Chow et al. 1996, 176).

14

Taiwanese firms. Using a series of intensive, open-ended interviews, they found some

significant similarities among the incentive plans of all four firms and concluded that

cultural factors do not seem to be important in explaining firms' evaluation and reward

practices. They also suggested that other variables, such as senior managers' education

and experience, their belief about the stock market, companies' stages of economic

development, market foci, growth patterns, and use of consultants, need to be

incorporated in future models.

There are some inconsistent results in explaining how cultural differences affect

the transferability of management practices across national boundaries. However, the

studies that found no impact of national cultural differences failed to conclude that

cultural differences are insignificant in all situations. For example, Merchant et al. (1995,

634) stated that "we do not mean to suggest that cultural factors, of the types identified

by Hofstede and others, have no influence." On the other hand, they posit that future

research is needed for both differences in Hofstede's cultural dimensions and in other

kinds of management practices.

Brewer (1994) examined the impact of cultural differences on the participants'

attitudes toward the implementation of an Activity-Based Cost Management System

(ABCMS). He conducted a field-based study using surveys and in-depth interviews with

employees of one company that has implemented ABCMS in plants located in Malaysia,

Singapore, and the United States. The results indicated differences in the ABCMS

resistance levels across cultures. However, Brewer's further investigation, using only

personality variables, failed to identify any specific reasons for the existence of cross-

15

cultural differences in ABCMS resistance levels. The current study attempts to extend

Brewer's study by including behavioral attributes as mediating variables. The details are

discussed in the next chapter.

CHAPTER 3

RESEARCH MODEL AND PROPOSITIONS

Research Model

The research model for this study can be found in appendix A. As discussed

earlier, it extends Brewer's (1994) model by including behavioral attributes as

intervening variables to explain the existence of differences in resistance levels. Each

variable in the proposed model is discussed in detail below.

Cultural and Personality Variables

The definition of "culture" is inconclusive because of the complexity of this term.

Hofstede (1991, 5) defined culture as "the collective programming of the mind which

distinguishes the members of one group or category of people from another." From 1968

to 1973, Hofstede conducted paper-and-pencil surveys collecting data from employees of

the IBM Company in 40 countries. His results identified four dimensions on which

country cultures differ:

Individualism/Collectivism is the degree of interdependence a society maintains among individuals. It relates to people's self-concept: "I" or "we" (Hofstede 1984, 83).

16

17

Power Distance is the extent to which the members of a society accept that power in institutions and organizations is distributed unequally (Hofstede 1985, 347).

Uncertainty Avoidance is the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity, which leads them to support beliefs promising certainty and to maintain institutions protecting conformity (Hofstede 1983, 336).

Masculinity/Femininity is the degree to which values like assertiveness, performance, success and competition, . . . prevail over values like the quality of life, maintaining warm personal relationships, service, care for the weak, and solidarity (Hofstede 1994b, 6).

Hofstede and Bond (1988) added a fifth dimension based on the study using

Bond's questionnaire, the Chinese Value Survey (CVS). Fifty male and 50 female

students in 23 countries answered the questionnaire. The fifth dimension was called

"Confucian Dynamism" or "Long-term versus Short-term Orientation" (Hofstede, 1991).

On the long term side one finds values oriented towards the future, like thrift (saving) and persistence. On the short-term side one finds values rather oriented towards the past and present, like respect for tradition and fulfilling social obligations (Hofstede 1994a, 42).

Table 1 compares the cultural values between the United States and Thailand.

The individualism/collectivism dimension indicates the largest difference. Triandis

(1989,42) stated that "the most important dimension of cultural difference in social

behavior, across the diverse cultures of the world, is the relative emphasis on

individualism versus collectivism." According to Hofstede (1980), the United States is

the most individualistic country in the world. In an individualist society, "the ties

between individuals are loose: everyone is expected to look after himself or herself and

18

TABLE 1

Comparison of Culture Dimension Scores

Between U.S. and Thailand (0 - low, 100 = high)

Individualism Power Uncertainty Masculinity Long-term Distance Avoidance Orientation

U.S. 91 40 46 " 62 29

Thailand 20 64 64 34 56

Source: Hofstede (1984 and 1994) and Willett et al. (1997)

his or her immediate family" (Hofstede 1991, 51). Employees in the United States

consider personal time, freedom, and personal challenge as important work goals. They

emphasize their independence from the organization. On the other hand, the Thai culture

is located near the other end of the scale. Thailand is a collectivist country, where

"people from birth onwards are integrated into strong, cohesive ingroups, which

throughout people's lifetime continue to protect them in exchange for unquestioning

loyalty" (Hofstede 1991, 51). One of the important concepts developed in collectivist

societies is "face. " According to Hofstede (1991, 61), "The importance of face is the

consequence of living in a society that is very conscious of social contexts." This

concept is discussed in detail later.

19

Another dimension that presents a significant difference and may relate to the

implementation of the new system is power distance. The U.S. is categorized as a small

power distance culture in which people "strive for power equalization and demand

justification for power inequalities" (Fechner and Kilgore 1994, 267). Subordinates in

the United States expect their superiors to consult them before making a decision that

affects their work. Moreover, they are more likely to speak their opinion even if it

opposes their superiors' ideas. Hofstede classified Thailand into a large power distance

culture in which "superiors and subordinates consider each other as existentially unequal

. . . [and] subordinates are expected to be told what to do" (1991, 35). Supporting this

classification, Vance et al. (1992) found that Thai subordinates accept a hierarchical order

and appreciate strong leadership. One of the behavioral attributes of implementing ABC

is empowerment, which will affect individual positions in an organization, particularly

the importance and status of some superiors in the large power distance societies.

Empowerment is discussed in detail under the Behavioral Attribute section.

According to Brewer's (1994) study, two main personality variables influenced

by the two cultural variables, a concern for saving face and external locus of control due

to more powerful others, affect the acceptance of multinational corporations. Face is one

of the important concepts, especially in Asian countries, related to the

individualism/collectivism cultural dimension. Brewer (1994,14) found that the results

support his hypothesis that "levels of concern for saving face would be higher in

collectivist cultures relative to individualist cultures." In the collectivist society, people

are concerned about what others think of their actions and try to gain respect by acting in

20

a way that meets the expectations of the individuals around them. According to Ho

(1976), as cited in Hofstede (1991, 61), "Face is lost when the individual, either through

his action or that of people closely related to him, fails to meet essential requirements

placed upon him by virtue of the social position he occupies." Thompson (1988) found

that the Thai people are as face conscious as any other Asians.

Another personality variable, external locus of control due to more powerful

others, is related to the power distance dimension. Brewer's (1994,13) findings support

the hypothesis that "levels of external locus of control due to more powerful others would

be higher in the high power distance cultures." The Thai people, in a high (large) power

distance society in which inequality is accepted as a norm, are more likely to ascribe

control of events to outside forces, such as more powerful others.

Although there are two other dimensions that indicate relatively large differences

between the U.S. and Thailand, I did not include them in the research model. Those

dimensions are masculinity/femininity and long-term versus short-term orientation. The

masculinity/femininity dimension was not included because I cannot identify any specific

relationship it has to the ABC implementation. Lee (1997,18) stated that "the

relationships between masculinity and accounting values . . . are vague." She found that

the masculinity/femininity dimension had less influence on the accounting subculture

than the other dimensions and concluded that this dimension lacks explanatory value. Its

dichotomy seems to be too general to be a surrogate for the posited relationships and

variables.

21

I did not include the long-term versus short-term orientation dimension because

this dimension is embedded in the uncertainty avoidance dimension. Chang et al. (1995,

41) stated that "Confucian Dynamism to the Eastern minds may, in essence, be

equivalent to high Uncertainty Avoidance in the Western minds." Additionally, this

dimension refers to the teachings of Confucius that are lessons of Chinese history in

practical ethics, but Confucian teachings seem to have less impact on Thai culture. China

and four of the five Asian countries, known as the "Five Dragons" (Hong Kong, Taiwan,

Japan, and South Korea), hold the top five positions in the long-term orientation index.

The cultural traits derived from a Confucian tradition can be traced to the economic

success of the Five Dragons (Chang et al., 1995). However, Thailand is not one of the

Five Dragons.

Behavioral Attributes

In an attempt to explain why cultural differences in resistance levels exist, this

study includes behavioral attributes as intervening variables. These intervening variables

include empowerment, job effort/individual responsibility, planning or performance

measurement, and teamwork. McGowan (1994) found that ABC implementation would

result in changes in empowerment and job effort.1 The use of ABC also has the potential

to redistribute power relationships within an organization because the new system allows

production employees to have access to and control over the information. As a result, it

1 "Empowered workers have responsibility, a sense of ownership, satisfaction in accomplishments, power over what and how things are done, recognition for their ideas, and the knowledge that they're important to the organization" (Turney 1993, 31).

22

empowers those employees by allowing them to make decisions and to initiate continual

improvement. McGowan found that employees in the manufacturing job category

perceived an increase in empowerment when ABC was implemented. Their perceptions

are significantly different from the responses of employees in other job categories, such

as purchasing, marketing, accounting, and human resources. At the same time, the

implementation of ABC increases individual responsibility or job effort, especially for

production employees. An example of extra duties is the request for employees to list

and describe activities required to complete their tasks (McGowan 1994). After the ABC

implementation, the employees also need to monitor these activities for continuous

improvement.

One benefit of ABC implementation is providing "more accurate information to

managers about the cost and profitability of their business processes, products, services,

and customers" (Argyris and Kaplan 1994, 83-84). The use of more accurate information

allows managers to have better planning and decision making, particularly, in resource

and overhead allocation. When McGowan (1994) reviewed previous literature

concerning the use of ABC information, she found that the ABC concept was not only

used to obtain a better understanding of costs and profitability, but that it was also used in

budgeting and in cost control. Moreover, the new information provided results in a

change in performance measurement used to evaluate organizational performance. ABC

systems allow managers to use both financial and non-financial performance measures.

"Performance measures such as quality, time and cost are readily available for each

activity" (McGowan 1994, 14).

23

The last behavioral attribute is teamwork. Steimer (1990), as cited in McGowan

(1994,14), posited that "the use of ABC information encourages efficient use of cross-

functional teams and working groups." Foster and Gupta (1990,252) found that ABC

implementation "increased communication across functional areas." This results in the

breakdown of departmental barriers. McGowan also found that ABC adoption promotes

teamwork. In one of the sites she studied, the development of work teams from different

departments allowed brainstorming and led to significant process improvement.

Attitudes toward ABC Implementation

The attitude of employees toward the implementation of ABC is an important

factor of the success of that implementation. According to Yates (1997), a manager alone

cannot change an existing system; he/she needs workers' cooperation in order to make

any changes. "Steimer (1990) suggests that ABC systems help to align the goals of

organizational participants at all levels. As such, a change in the attitudes of employees

and managers might also occur" (McGowan 1994, 31). As stated above, resistance level

indicates the employee's willingness to use the new system. This study focuses on

attitudes to explain resistance levels. Individual resistance regularly occurs when there is

a change that will affect individual status. The implementation of ABC will lead to

behavioral changes through empowerment, job effort, planning or performance

measurement, and teamwork. The degree to which employees perceive the new system

to impact their status and security will influence their level of resistance.

24

Comparisons between "Culturally-Adjusted ABC" and "Non-Culturally-Adjusted ABC" Implementation

The modifications of the ABC implementation to reflect cultural differences

between Thailand and the United States are the adjustments of the four behavioral

attributes discussed earlier. The first behavioral attribute is empowerment. Following

the "non-culturally-adjusted ABC" implementation will be changes in empowerment and

redistribution of power. The "non-culturally-adjusted ABC" system empowers the

production department by allowing production employees to have access to and control

over information, together with giving them the chance to make their own decisions. At

the same time, this ABC system diminishes the power of an accounting department in

terms of ownership of information. The "non-culturally-adjusted ABC" implementation

may not be appropriate for Thai culture, with large power distance and the acceptance of

inequality and being controlled by more powerful others.

In a large power distance culture, people who have power try to protect

themselves from losing power. People who are under the control of more powerful

others accept their situation as a norm and try not to overstep their boundaries. To adjust

to Thai culture, the "culturally-adjusted ABC" implementation will not empower the

production department. It will keep access to and control over information within the

accounting department. The possession of information makes the accounting department

remain in power. If the production department wants to make financially related

decisions, it has to rely on the information from the accounting department. The

"culturally-adjusted ABC" implementation does not result in redistribution of power.

•25

The second behavioral attribute is job effort. The "non-culturally-adjusted ABC"

requires production employees to keep track of all the activities they conduct and allows

them to make decisions based on the ABC information in their hands. The increase in

job efforts for production employees may threaten their face if they cannot understand

accounting and the new system because it sends a "failure" signal to coworkers. The

concern for saving face is an important concept in a collectivist culture such as that in

Thailand. To adjust to Thai culture, the "culturally-adjusted ABC" tries to maintain the

face of the production employees by keeping the responsibility for collecting and

processing information with the accounting department; that is, the job effort of the

production employees remains the same with the implementation of ABC.

The third behavioral attribute relates to the use of ABC information, which can be

used for planning purposes, as well as for setting performance measurements. The "non-

culturally-adjusted ABC" allows subordinates to participate in setting performance

measurements. In a small power distance culture such as that in the U.S., this allowance

creates a commitment and cooperation between superiors and subordinates. However, it

may be viewed as poor leadership in a large power distance culture such as that in

Thailand. In Thai culture, people accept the norm of being controlled by more powerful

others. Subordinates try not to overstep their superiors' duties and are not involved in

setting performance measures. As a result, the "culturally-adjusted ABC" does not use

the ABC information or allow subordinates to be involved in setting performance

measurements. The primary use of information in the "culturally-adjusted ABC"

organizations is for planning purposes.

26

The last behavioral attribute is teamwork. The "non-culturally-adjusted ABC"

promotes cross-functional teamwork that results in more communication and

understanding among functional areas. However, participation in the cross-functional

team may make people in the collectivist culture feel uncomfortable. They may feel that

they betray their loyalty to their original groups (their departments). An important

element of a collectivist culture such as that in Thailand is loyalty to the group. To adjust

to Thai culture and avoid loyalty betrayal, the "culturally-adjusted ABC" encourages

group working for the benefits of brainstorming and cooperation, but the members of the

team come from the same department. Table 2 summarizes the differences between

"non-culturally-adjusted ABC" and "culturally-adjusted ABC" implementation.

Propositions

According to Brewer (1994), there are cultural differences in the resistance levels

across countries. However, using only personality variables, Brewer failed to explain

why those differences exist. The current study has tried to identify possible explanations

by including behavioral attributes as mediating variables. Instead of conducting a cross-

cultural investigation,2 this study compared the implementation of ABC by three utility

organizations in the same country-Thailand. As discussed earlier,, one organization has

implemented ABC without concern for cultural differences ("non-culturally-adjUsted

2 The main purpose of this study is to investigate the impact of ABC implementation with and without cultural consideration. I believe that conducting comparative case studies in the same country will provide better control over exogenous variables because all organizations are in the same environment. By contrast, a cross-cultural study, using both the U.S. and Thai organizations, will be in different environments with many exogenous variables that are difficult to control. Moreover, I use the findings from McGowan's (1994) and Brewer's (1994) studies as a basis of comparison.

27

TABLE 2

Comparison of the ABC Implementation

Non-Culturally-Adjusted Culturally-Adjusted

Empowerment

Job Effort

Planning/Performance Measurement

Giving production • department access to and control over information Independent decision • making of production department

Requires production department to keep track of all activities they conduct and to make decisions by using the ABC information

Use the ABC information for both purposes Let subordinates participate in setting performance measurement

Keeping access to and control over information within accounting department Production department makes decisions by relying on information from the accounting department

No extra effort for production department Accounting is responsible for collecting and processing information

Use the ABC information for only planning purpose No subordinates' involvement in setting performance measures

Teamwork Encourages cross-functional teamwork

Encourage working as a team, but the team members are in the same department

28

ABC"). The other two organizations have implemented the ABC concept with

consideration for national culture ("culturally-adjusted ABC"). I posit that the

organizations with cultural considerations will mitigate the dysfunctional behavioral

attributes and resistance to the new system. Due to the higher level of willingness to use

the new system, the latter organizations ("culturally-adjusted ABC") are more likely to

have a successful implementation of the new costing system than the former organization

("non-culturally-adjusted ABC").

As discussed earlier, Thailand is in a relatively large power distance situation.

The Thai people accept inequality and control by more powerful others as "natural." In

this environment, the empowerment caused by the "non-culturally-adjusted ABC"

implementation may create negative attitudes from accounting and other departments.3

Prior to implementing ABC, the accounting department has control over all costing and

financial information. To make any decisions related to financial issues, other

departments, such as production, have to rely on the information compiled.and provided

by the accounting department. After the "non-culturally-adjusted ABC" implementation,

the production department has access to and control over the information. It empowers

production employees by giving them the chance to make their own financially related

decisions and lead continuous improvement initiatives.

3 An alternative argument comes from the premise that "people from high power distance cultures tend to be more obedient toward their superiors than people from low power distance cultures" (Hofstede 1980 as cited in Brewer 1994, 81). This premise suggests that the implementation of ABC in a high power distance culture should have less resistance because subordinates expect to be told what to do. If the initiation of the ABC implementation is coming from the high-level management, the subordinates should be more likely to accept it. However, to provide a guideline for investigation, I derive my propositions based on another personality variable, the external locus of control-by more powerful others, which I believe has more impact on behavioral attributes such as empowerment. The alternative argument of obedience may be used as a potential explanation if I find that the results icontradict my propositions.

29

Due to the redistribution of power, the accounting department may resist the

"non-culturally-adjusted ABC" implementation because of the fear of losing power. At

the same time, "production managers may not desire to assume the empowered role . . .

[because] making empowered decisions may be overstepping their bounds within the

hierarchical order" (Brewer 1994, 38). On the contrary, the "culturally-adjusted ABC"

implementation will face less resistance from both departments if it reduces the impact of

empowerment by keeping access to and control over information within the accounting

department. Although the "culturally-adjusted ABC" implementation may increase the

job efforts of employees in the accounting department, it should not create resistance

because it allows the accounting department to remain in power.

In addition, Thai culture is collectivist, and the concern for saving face is an

important concept. The "non-culturally-adjusted ABC" implementation may threaten

production employees because it requires them to keep track of all the activities they

conduct and gives them chances to make decisions. Their inability to understand the new

system or fear of making inappropriate decisions by using information from a new

system may threaten their face because it sends a "failure" signal to co-workers.

According to Brewer (1994, 39), "when one's face is threatened, a defensive posture is

assumed." In the "culturally-adjusted ABC" implementation, an increase in the job effort

of the production employees by keeping track of all activities they conduct is not

required. The "culturally-adjusted ABC" implementation keeps the responsibility for

collecting and recording information within the accounting department. This results in

maintaining the face of the production employees. Once face is not threatened, the level

30

of resistance in this "culturally-adjusted ABC" implementation is expected to be lower

than that in the "non-culturally-adjusted ABC" implementation. The first two

propositions are stated as follows:

Proposition 7: In a large power distance culture with the acceptance of external locus of control due to more powerful others, such as that in Thailand, an ABC system that causes empowerment and redistribution of power will face a higher level of resistance.

Proposition 2: In a collectivist culture with concern for saving face, such as that in Thailand, an ABC system that causes an increase in job effort in departments other than accounting will face a higher level of resistance.

The next behavioral attribute concerns the use of ABC information for planning

and/or performance measurement. According to McGowan (1994), the use of ABC

information for planning purposes has an impact at the organizational level, rather than at

the individual level. On the other hand, the use of ABC information for performance

measurement has an impact at the individual level. Therefore, employees will be more

resistant if they perceive that information generated by the new system will be used for

performance measurement and may affect their status. Moreover, the "non-culturally-

adjusted ABC" implementation allows subordinates to be involved in setting performance

measurements.

This situation may be appropriate in a low power distance culture such as that in

the U.S., but it may be inappropriate in a high power distance culture, as in Thailand.

Child (1981), as cited in Harrison (1993, 322), posits that "an involvement of

31

subordinates . . . could be regarded as a sign of poor leadership, and hence generate

anxiety, by employees in a country where submission to authority figures is ingrained in

the culture." Therefore, the "non-culturally-adjusted ABC" implementation focusing on

performance measurement and subordinates' involvement may face higher resistance

levels in a large power distance culture. On the contrary, the main purpose of ABC

information usage in the "culturally-adjusted ABC" implementation is planning and

improved overhead allocation. As a result, the resistance levels from the "culturally-

adjusted ABC" implementation are expected to be lower. The third proposition is stated

as follows:

Proposition 5: In a large power distance culture, such as that in Thailand, an ABC system that focuses the use of information on planning purpose will face less resistance level than the one focusing on performance measurement.

The last behavioral attribute that may influence resistance levels is teamwork. As

discussed above, the ABC system promotes the use of cross-functional teams. However,

this encouragement from the "non-culturally-adjusted ABC" implementation may create

negative attitudes in a collectivist culture.4 "The loyalty to the group . . . is an essential

element of the collectivist" (Hofstede 1991, 59). The requirement to participate in cross-

functional teams may make employees in a collectivist culture feel uncomfortable

4 An alternative argument comes from Hofstede's (1980) premise that "people from individualist cultures tend to have a preference for autonomy, while people from collectivist cultures tend to have a preference for group affiliation" (Brewer 1994, 80). This premise suggests that the encouragement of working together as a team in the collectivist culture should create less resistance than in the individualist culture. I agree that teamwork in the same department will be more acceptable in the collectivist culture. However, cross-functional teamwork is another issue that may create more resistance because it results in loyalty betrayal.

32

because they feel that they betray their original group, particularly their department. This

may cause an increase in resistance levels. On the other hand, the "culturally-adjusted

ABC" implementation encourages teamwork, but the team members come from the same

department, such as accounting. This encouragement does not create a betrayal of

loyalty. As a result, the resistance levels from the "culturally-adjusted ABC"

implementation should be lower. The fourth proposition is stated as follows:

Proposition 4: In a collectivist culture, such as that in Thailand, a new ABC system that encourages the use of cross-functional teamwork will face higher resistance levels.

CHAPTER 4

RESEARCH METHODOLOGY

Research Type

The research methodology in this study is a comparative case study. According to

Yin (1989,13), "Case studies are the preferred strategy when 'how' and 'why' questions

are being posed, when the investigator has little control over events, and when the focus

is on a contemporary phenomenon within some real-life context." This study is an

attempt to explain why resistance levels differ and how the cultural differences affect the

success of costing system implementation using ABC concept in Thai organizations.

Moreover, the only way to answer the research question addressed in this study is to refer

to the actual environment in which the phenomenon of interest occurs. Therefore, a

comparative case study seems to be most appropriate.

This comparative case study focuses on three Thai organizations. All

organizations are in the utility industry, are government-owned companies, and are being

prepared for privatization. One organization has implemented the ABC concept without

concern for cultural differences, whereas the others have made modifications in

implementing ABC to reflect cultural differences between Thailand and the United

States. The study analyzed the modifications of the ABC implementation for the latter

33

34

organizations and determined cultural influences based on Hofstede's (1980) theories and

the extended Brewer (1994) model. I also analyzed data at a micro-level, examining

management's and employees' attitudes and perceptions. Structuration theory1 suggests

that, in introducing a new practice, the researcher should not pay attention only to

executives and management who made the decision to change existing practice, but also

to the employees' responses to the new practice.

Data were collected from documentation reviews, structured interviews, and

questionnaires. The formal theoretical propositions discussed earlier provided guidelines

for investigation. The interview guide and questionnaire development are discussed

later in this chapter. According to Merchant et al. (1995, 621), "This method emphasizes

depth of situational understanding and provides opportunities for following up on

unexpected findings and revelations, thus enhancing opportunities for new theoretical

developments and refinements." Although the use of a small sample-size sacrifices the

possible statistical significance of findings, several researchers have called for case

studies as a necessary building block to precede statistical studies. Moreover, forming

conclusions by totally relying on statistical analysis could cause sub-optimal use of the

data collected. Therefore, the methods used for analyzing the data comprise both

statistical and narrative analysis.

1 "Structuration is a theoretical stance for looking at human phenomena in the world - a way of understanding" (Yates 1997,162). 2 This methodology is supported by structuration theory. "Structuration is a perspective, a meta-theory, rather than a domain-specific theory that can be proved or disproved.... It focuses our attention and our questions as we engage in . . . but does not give us specific answers to these questions" (Yates 1997, 181).

35

Justification for Organization Selection

There are several reasons to choose government-owned and utility organizations.

First, the majority of businesses in Thailand are small- or middle-sized companies with

limited funds. On the other hand, the government-owned organizations are operated

under a government budget that allows them to invest in new projects to improve the

effectiveness and efficiency of these organizations. The government-owned

organizations with relatively large funds have greater opportunities to employ new

techniques or knowledge. Second, government-owned organizations are better

representatives of Thai culture than are private or publicly-owned companies. The parent

Western companies of the private or publicly-owned companies may influence their

organizational culture, whereas government-owned organizations are more likely to

maintain Thai beliefs and norms. Therefore, the effect of cultural differences should be

more obvious in government-owned organizations. Finally, the organizations chosen in

this study are ones that currently employ the ABC concept, are in the same industry, and

have the same mission as a result of the national governmental policy. Consequently, the

confounding factors related to differences in organizational culture should be minimized.

Table 3 presents the size of the three organizations selected in this study.

Subjects

The study focuses on the comparison of the ABC implementation in three

organizations and its impact on participants' attitudes. An understanding of the ABC

implementation was obtained from documentation of practices and plans for

36

TABLE 3

Size of Organizations (Fiscal Year 1996)

Total Assets Sales Number of (Million Baht) (Million Baht) Employees

Organization 1 295,976.58 109,387.49 32,867

Organization 2 117,805.57 75,766.30 30,850

Organization 3 59,213.41 60,585.50 12,971

implementation, as well as from structured interviews using an interview guide. The first

group of interview subjects included executives (i.e., president, CEO, and vice president)

and managers, mostly from the accounting department, who initiate and are responsible

for the implementation. The information gathered in the initial interviews helped identify

the second group of managers for the departmental interviews. The subjects in this

second group varied depending on the implementation scope of each organization. The

managers from the departments that participate in and are affected by the new system

were interviewed. For example, the subjects from one organization that implemented the

ABC systems for the whole organization included managers of the electric generation

department, the maintenance department, the quality control department, and the internal

audit department.

37

Next, I used questionnaires to collect data concerning the ABC impact on

employees' attitudes. During the interviews, I asked managers to provide a list of all

employees with appropriate qualifications. I randomly selected subjects from that list to

complete the questionnaire. Following Brewer (1994), these qualifications include (1)

having a general awareness of the new ABC system, (2) having received ABC/ABM

training, and (3) having participated in activity analysis. Unlike those in Brewer's study,

the subjects in this study included representatives from accounting and other departments,

as well as the production department. Additionally, I asked the managers to complete the

questionnaire before the interviews, in order to provide a basis for comparison with the

responses from lower level employees.

Data Collection

As discussed above, data were collected primarily from three sources:

documentation of practices and plans for implementation, structured interviews with key

personnel, and questionnaires. The data collection process started with obtaining

documentation and the in-depth structured interviews. The documentation obtained

includes training documents, progress reports of the implementation process, and meeting

minutes of the steering committee and executives. Interviews ranged from 20 to 30

minutes. Then the questionnaires were distributed to employees who are involved in

and/or are impacted by the implementation of ABC, based on the information gathered in

the interviews. The questionnaire development is discussed later. To maintain the focus

38

of the interview and allow the interviewees latitude in responding, the interview guide

was developed (see appendix B).

The interview guide contains two portions. The first portion is a guide for

interviewing the key personnel who initiate and are responsible for the implementation of

ABC (the first group of subjects, as mentioned earlier). There are 18 open-ended

questions. Responses from questions 1-7 provide background information about the

adoption and implementation of ABC concerning reasons to adopt, expected benefits,

scope, and stages of implementation, as well as the time frame. Question 8 asks whether

the organization uses outside consultants and if so, it asks for an identification of their

roles. The response from question 9 is used as a measure for the job effort/personal

responsibility variable. Questions 10-11 solicit the distribution and use of information

from the new system, representing as an indicator for the planning/performance measure

variable. Question 12 provides information concerning the behavioral attribute of

empowerment. The impact of the new system on teamwork and cross-functional

communication is identified by the responses of questions 13-14. Question 15

determines the resistance caused by the ABC implementation and the way to handle it.

Question 16 determines whether productivity is improved after implementing ABC.

Moreover, the list of ABC benefits (see appendix E) was used during the interview to

help interviewees to identify the impact of ABC implementation and to determine

potential productivity measures other than total factor productivity. Finally, question 17

asks whether there is similar understanding about the purpose and usefulness of the new

system across departments.

39

The second portion of the guide (departmental interviews) was used for

interviewing managers of the departments, other than accounting, that are affected by

and/or participate in the implementation of the ABC system. This portion contains 11

open-ended questions. The first five questions (1-5) determine the implementation

process in the department, concerning the role of the department, ways to implement, and

problems and concerns that occurred during and after the implementation. Question 6

provides an additional measure to assess the impact on cross-functional teamwork.

Responses to question 7 provide surrogates for empowerment and job effort, while those

of questions 8 and 9 identify the use of the ABC information, a surrogate for the

planning/performance measurement variable. The impact of ABC on productivity is

solicited from question 10. Lastly, question 11 provides information concerning the

overall attitude toward the impact of the ABC on individuals.

Questionnaire Development

The questionnaire used in this study was designed to gather information on

management's and employees' attitudes toward the use of the ABC system and their

perceptions of the impact of the system (see appendix C). It was also designed to

measure cultural and personality variables, as well as acquiescence response bias. The

majority of the questionnaire uses a five-point Likert scale. The questionnaire contains

five portions. The first portion collects data to verify that the subjects are in a collectivist

and high power distance culture. The measures of the cultural dimensions are questions

from the "Hermes" attitude survey questionnaire used in Hofstede (1980). The responses

40

to questions 1-6 in the questionnaire measure individualism/collectivism. These

questions ask each subject to indicate the importance of six job attributes to him/her.

These job attributes are challenge, training, physical conditions, freedom, use of skills,

and personal time. The five-point response scales are anchored by 1 = of utmost

importance and 5 = of very little importance. The measure of power distance dimension

contains three questions. Questions 7-8 refer to four types of managers and require the

subjects to choose which one they would prefer to work under and which one most

closely corresponds to their manager. Question 9 asks the frequency of the situation

when employees are afraid to express disagreement with their manager, based on a five-

point scale from 1 = very seldom to 5 = very frequently.

The purpose of the second portion is also to verify that the subjects have

culturally related personalities, as expected. This portion also includes the measure of

acquiescence response bias. In the collectivist culture, the subjects are expected to be

more concerned with maintaining face. The measures of the personality variables are the

same as the ones used in the Brewer (1994) study. To measure the concern for saving

face variable, Brewer created a 10-item subscale from 36-item scale of Good and Good's

(1973) Fear of Appearing Incompetent Scale. "The rationale for item construction was to

think of either situations in which an individual might reasonably worry about his

competence, as perceived by others, or of attributes on which he might worry about

possible negative evaluations from others . . . for example, as not [being] intelligent

enough for one's job" (Good and Good 1973, as cited in Brewer 1994, 50). Items 10-19

41

in the questionnaire are the measure of this personality variable, using a five-point Likert

scale.

In a high power distance culture, subjects are expected to have a belief that they

are more externally controlled by more powerful others. Brewer (1994) measured the

external locus of control due to more powerful others variable by using a 7-item "P"

subscale from Levenson (1974). The subscale is presented in items 20-26 of the

questionnaire. In addition, previous research showed that there is a tendency for people

from a collectivist culture to give a positive answer, or to acquiesce, to survey questions.

Thus, Brewer (1994) included acquiescence response bias as a covariate. He created a

subscale to measure this variable by choosing six culturally neutral items from the

Marlowe and Crowne (1964) Social Desirability Scale. Items 27-32 in the questionnaire

represent this subscale.

The third portion of the questionnaire (items 33-45) provides a measure of the

resistance level variable. These items are similar to the ones used in the Brewer (1994)

survey. Brewer measured resistance levels, or "willingness to use the ABCMS," by using

the Performance subscale of Schultz and Slevin's (1975) IAQ. "The IAQ was designed

specifically to measure employee attitudes toward MIS implementation" (Brewer 1994,

51). This study employs the IAQ scale by using a five-point Likert scale format to

measure the subject's belief that the new costing system enhances his/her performance

capability and visibility. Prior research, including Brewer's (1994), found that there is a

"P" is the powerful other portion of Hanna Levenson's (1974) Internal, Powerful Others, Chance (IPC) locus of control scale.

42

direct relationship between users' attitudes about the performance-enhancing capability

of an information system and their willingness to use and their actual usage of the system.

The fourth portion contains items used to measure the behavioral attribute

variables. The response from this portion provides information concerning the impact of

ABC implementation as perceived by the subjects. Most of the items are selected from

McGowan's (1994) seven-section questionnaire. According to McGowan (1994,40),

constructs in one of the sections "represent hypothetical constructs concerning behavior

changes and effectiveness outcome." The response for the first three behavioral

attributes is scored on a five-point scale4 from 1 = great improvement to 5 = extensive

decay. The first behavioral attribute is empowerment, measured by items 46-50, such as

measuring the subjects' perceptions toward information accessibility, a sense of

ownership, and recognition of their ideas. Items 51-55 measure the second attribute, job

effort. These items include job complexity, workload, task variety, and level of

responsibility.

Performance measurement, the third behavioral attribute, is measured by items

56-60. The items consider performance criteria in terms of number, stringency,

applicability, fairness, and difficulty. The next item (61) measures the subjects'

perceptions toward their productivity as impacted by the ABC implementation. The last

attribute is teamwork. Items 62-66 measure this variable concerning the level of

communication, the amount of presence, and the impact and benefit of using cross-

4 McGowan's (1994) questionnaire uses various scale format, mostly a 6-point Likert scale. However, I employed a 5-point Likert scale format to maintain consistency with the other instruments used in the study.

'43

functional teamwork. The last item in this portion (67) measures the overall attitudes of

the subjects toward the new system. Table 4 presents the summary of questions/items

and variables measured in the questionnaire. Finally, the last portion solicits information

concerning the subject's demographic characteristics.

The questionnaire was first developed in English. It was then translated into Thai

by a bilingual person who grew up in Thailand, obtained her doctorate in the U.S., and

has been teaching in Thailand for the last seven years. Next, another bilingual person

translated the Thai version back into English. The reverse translation and the original

were carefully compared and examined to assure that there are no significant differences

between the English and Thai versions. The English and Thai versions of the

questionnaire may be found in appendixes C and D, respectively.5

5 In the actual questionnaire (Thai version), questions/items are presented in a random order to avoid any order effects.

44

TABLE 4

Summary of Questionnaire

Questions/Items Variables

1-6 Individualism

7-9 Power Distance

10-19 Concern of Saving Face

20-26 External Locus of Control Due to More Powerful Others

27-32 Acquiescence Response Bias

33-45 Resistance Level (IAQ)

46-50 Empowerment (Emp)

51-55 Job Effort / Personal Responsibility (JE)

56-60 Performance Measurement (PM)

61 Productivity

62-66 Teamwork (Team)

67 Overall Attitude

CHAPTER 5

RESULTS AND DATA ANALYSIS

Data Analysis

To form conclusions through optimal utilization of the data collected, the data

analysis was conducted using both the statistical and the narrative method. After each

interview, I transcribed the interview data and prepared interview notes. The narrative

analysis and findings from the interviews are discussed in the next section. For statistical

analysis, I coded the data from the questionnaires to produce a data matrix in spreadsheet

format. I computed Cronbach's coefficient alpha, a measure of reliability, to indicate the

degree of internal consistency among items in the questionnaire. Because this study

holds culture constant, subscales representing cultural and personality variables were not

included in the analysis. The main purpose of collecting these data was to verify that the

subjects are in a collectivist and high power distance culture and to confirm that the

subjects are more concerned with maintaining face and have a belief that they are more

externally controlled by more powerful others.1 Initially, data from subscales

representing acquiescence response bias were intended to be used as a covariate.

1 This portion of the questionnaire was also distributed to employees in another government-owned organization that has not implemented the ABC. The responses were used as a basis of comparison. The results indicate no significant difference across organizations, and the mean values of these cultural and personality variables are similar to the results from the Hofstede (1980) and Brewer (1994) studies.

45

46

Unfortunately, the alpha coefficient for the acquiescence response bias scale (0.0336)

indicated unsatisfactory reliability. Moreover, the difference in mean values was not

statistically significant at the .05 level. As a result, I decided to drop this variable from

further analysis.

The subscales used to measure resistance levels were coded based on a five-point

scale ranging from 1 = strongly agree to 5 = strongly disagree. All items in those

sections are stated in the affirmative; thus responses closer to "one" indicate a positive

perception, and responses closer to "five" represent a negative perception. Subscales

used to measure the subjects' perceptions of behavioral attributes (empowerment, job

effort, and performance measurement) and productivity were coded using the five-point

scale. Responses of "one" indicate that the subjects believe that great improvement has

been made relative to each item, and responses of "five" represent extensive decay

relative to each item. Subscales used to measure the subjects' perceptions toward the last

behavioral attribute, teamwork, as well as the overall attitude were also coded using the

five-point scale. Whereas responses of "one" indicate positive perception, responses of

"five" represent negative perception.

2 This decision may raise a validity issue. Brewer (1994) included the acquiescence response bias as a covariate because his subjects consisted of people from several countries with different cultures, and there is a tendency that people from collectivist culture will give a positive answer to a survey. However, the subjects of this study are in the same country. Although people from Thailand, a collectivist culture, may have a tendency to acquiesce in answering a survey, the effect of this tendency is bias across all subjects. As a result, dropping this variable should not create a validity problem in this study.

47

Although these subscales were used and tested in previous research, Cronbach's

alpha coefficients were recalculated for the current set of data to ensure the reliability of

the instrument. Table 5 presents the alpha coefficient for each variable used in the

statistical analysis. Separate coefficient alphas were calculated using all 130 subjects.

The sample included 47 subjects from Organization 1, 48 subjects from Organization 2,

and 35 subjects from Organization 3. The results of these calculations indicated

satisfactory overall reliability of all variables, as well as satisfactory reliability for

Organizations 1 and 2. The alpha coefficients for job effort (JE) and empowerment.

TABLE 5

Reliability Statistics

Cronbach's Alpha

Variables All Org. 1 Org. 2 Org. 3

Resistance Level .90 .89 .89 .88

Empowerment .76 .82 .74 .56

Job Effort .72 .75 .73 .54

Performance .76 .79 .75 Measurement .76 .79 .75 .70

Teamwork .70 .72 .68 .70

48

(Emp) indicated questionable reliability for Organization 3. The alpha coefficients of the

rest of the variables for Organization 3 indicated satisfactory reliability because the

values exceed conventional levels of acceptability (Nunnally 1978).3

The next section discusses statistical findings based on data collected from

questionnaires, including descriptive statistics, correlation coefficient, and regression

analysis.

Descriptive Statistics

A total of 60, 65, and 40 questionnaires was distributed to Organizations 1,2, and

3, respectively. Fifty-one responses were received from Organization 1, a "non-

culturally-adjusted ABC," for a response rate of 85 percent. Forty-seven of those

responses were completed correctly and useable. Fifty-four responses were received

from Organization 2, "culturally-adjusted ABC," for a response rate of 83 percent. Forty-

eight of those responses were completed correctly and useable. Thirty-five responses

were received from Organization 3, "culturally-adjusted ABC," for a response rate of

87.5 percent. All of them were completed correctly and were useable. The total number

of useable questionnaires completed by all three organizations was 130.4 A demographic

profile of these 130 subjects is presented in tables 11-15 in appendix G.

3 Nunnally (1978,245) stated that "what a satisfactory level of reliability is depends on how a measure is being used . . f o r which purpose reliabilities of .70 or higher will suffice." 4 Questionnaires were distributed through managers of each department, who strongly requested their subordinates to complete and return all questionnaires. In a high power distance culture such as that in Thailand, subordinates always try to fulfill their superior's request, resulting in a high response rate.

49

Table 11 describes the subjects in terms of gender, indicating that 64 of 130

subjects were male. Table 12 indicates that the largest number of subjects from

Organizations 1 and 2 were in the 41-50 age bracket, while that of subjects from

Organization 3 were in the 31-40 age bracket. Table 13 indicates that only 5 of 130

subjects obtained their last degree from overseas;5 hence, education does not have a

significant impact on this study. Table 14 indicates that the subjects from Organization 2

had a longer tenure at their organization, but the difference is not statistically significant

among the three organizations. However, there is a statistically significant difference in

the average number of years worked in their current position. Subjects from

Organization 1 had worked for a shorter period in their positions. One possible

explanation is that this organization is moving towards privatization; therefore, there is

some organizational restructuring. Table 15 indicates that approximately two-thirds of

the subjects use activity-based information as an aid in decision making.

Table 6 presents the means and standard deviations of each variable included in

regression analysis, whereas table 7 presents cross-organization comparisons of each

variable among three organizations, using ANOVA and Kruskal-Wallis Tests. The IAQ

score is a measure of resistance level. It represents the willingness to use the ABC

system. The higher the IAQ score, the lower the resistance level. The subjects from

Organization 2 had mean scores of 28.021, whereas the subjects from Organizations 1

and 3 had mean scores of 31.700 and 31.890, respectively. Mean scores of IAQ for

Organization 2 were significantly lower than those for Organizations 1 and 3 (F-statistic

5 All of these are subjects from Organization 1.

50

= 5.22, Chi-square = 11.45, and p-value <01). The result indicates that the subjects from

Organization 2 have higher resistance levels than do the subjects from Organization 1.

This finding contradicts ex ante expectations.

The lower resistance level in Organization 3 is consistent with the propositions.

One possible explanation is that the higher resistance level in Organization 2 may be

caused by the recent changes in the organization. This organization has implemented the

new system within the last two years, compared to Organization 1, which implemented

the ABC system more than four years ago. Although the ABC implementation in

TABLE 6

Means (Standard Deviations)

Variables All Org. 1 Org. 2 Org. 3

Resistance 30.392 31.700 28.021 31.890 Level (6.615) (6.900) (5.606) (6.750)

Empowerment 11.223 11.830 10.583 11.286 (2.337) (2.705) (2.201) (1.742)

Job Effort 11.438 12.085 10.729 11.543 (2.252) (2.348) (2.331) (1.721)

Performance 11.746 11.957 11.292 12.086 Measurement (2.354) (2.331) (2.432) (2.241)

Teamwork 10.300 10.426 10.208 10.257 (3.368) (3.821) (3.010) (3.275)

51

Organization 2 was culturally adjusted, it is normal to face higher resistance at the

beginning phase when people are unfamiliar with the new system.

Table 7 also indicates two other variables for which the mean values were

significantly different among the organizations. These were empowerment (F-statistic =

3.53, Chi-square = 7.36, and p-value <.05) and job effort (F-statistic = 4.60, Chi-square =

7.61, and p-value <.05). Using pairwise analysis, there was no statistically significant

difference at the .05 level on all variables between Organizations 1 and 3. On the other

hand, the difference in mean values of empowerment between Organizations 1 and 2 was

significant (F-statistic = 6.08, Chi-square = 6.85, and p-value <.02), whereas the

difference between Organizations 2 and 3 was not significant at the .05 level. The

pairwise analysis indicates the same finding for the difference in mean values of job

effort. The difference between Organizations 1 and 2 was significant (F-statistic = 7.98,

Chi-square = 7.01, and p-value <.01), while the difference between Organizations 2 and 3

was not significant at the .05 level.

These results indicate a higher level of empowerment and more improvement in

job effort after the implementation of ABC in Organization 2 (mean scores are 10.583

and 10.729, respectively) than that in Organization 1 (mean scores arel 1.830 and 12.085,

respectively). These findings contradict ex ante expectations. From the interviews

discussed in detail later, there are several explanations for these contradictory results.

First, the perception of a higher level of empowerment in Organization 2 may result from

the communication during training sessions that gave the subjects a good impression of

the ABC implementation. For example, the subjects learned during the training sessions

52

that they have opportunities to suggest some change in standard costs if their tasks and

activities change. Once they think that their ideas will be recognized and followed, they

perceive that they are empowered. On the other hand, the subjects from Organization 1

found that they were not actually empowered. After implementing the ABC system for a

while, their suggestions were not followed because of the government rules and

regulations that do not easily allow any changes in the work process.

TABLE 7

Cross-Organization Comparison

Variables ANOVA Kruskal-Wallis F-Statistic Chisq-Statistic

Resistance Level 5.22 11.45 (p = 0.007) (p = 0.003)

Empowerment 3.53 7.36 (p = 0.032) (p = 0.025)

Job Effort 4.60 7.61 (p = 0.012) (p = 0.022)

Performance 1.46 3.14 Measurement (p = 0.236) (p = 0.208)

Teamwork 0.05 0.36 (p = 0.949) (p = 0.834)

53

Second, Organization 2's perception of improvement in job effort may be caused

by the assistance of the implementing team. The improvement in job effort can be

interpreted as a decrease in job complexity, workload, and other causes. The

interviewees said that the implementing team provided extensive supervision and

assistance to the participants in conducting activity analysis during the implementation

process. With the implementing team's assistance, it is possible that the subjects felt that

their jobs were less complex and their workload was reduced. On the other hand, the

subjects from Organization 1 did not indicate the increase in job effort, as expected. One

possible explanation is that the scope of ABC implementation in Organization 1 changed

from the individual level to the departmental level. There was no requirement for the

subjects to keep track of their individual activities. This issue is discussed in detail under

the Narrative Analysis section.

The results of the descriptive statistics also indicate that the subjects from all three

organizations feel that there is relatively no change in performance measurement after

implementing the ABC system. Table 6 shows that the mean scores of this variable for

Organization 1, 2, and 3 were 11.957,11.292, and 12.086, respectively. Table 7 indicates

no significant difference in the mean values of performance measurement variable across

organizations (F-statistic = 1.46, Chi-square = 3.14, and p-value >.10). The mean scores

of the teamwork variable in table 6 were 10.426, 10.208, and 10.257 for Organization 1,

2, and 3, respectively. Referring to table 7, there was no significant difference in the

mean scores of this variable (F-statistic = 0.05, Chi-square = 0.36, and p-value >.10).

These findings indicate that all subjects, on average, feel that there is adequate

54

communication across functions during the ABC implementation and the cross-functional

work teams provide moderate contributions and create some cooperation among

members.

Correlation Coefficient

Table 8 summarizes the correlation among all variables used in this study. The

correlation coefficients between the IAQ and empowerment (.497, p = .0001) and job

effort (.503, p = .0001) and performance measurement (.424, p = .0001) indicate that

these three variables should provide some explanations for the changes in the IAQ scores.

On the other hand, the correlation coefficient between the IAQ and teamwork (.206, p =

.0186) was relatively low. There were high correlations between empowerment and job

effort (.777, p = .0001), and performance measurement (.657, p = .0001). There was also

a high correlation between job effort and performance measurement (.694, p = .0001).

However, I believe that these variables measure different attributes.6 Therefore, I

decided to include all of them in the regression analysis. The highly correlated

independent variables may cause multicollinearity problems, resulting in insignificant

coefficients of some independent variables in the regression model. Thus, I conducted

two statistical tests to examine whether there is a multicollinearity problem. These tests

are discussed in the Regression Analysis section.

6 The empowerment variable measures the subjects' perceptions toward information accessibility, a sense of ownership, and recognition of their ideas. The job effort variable measures job complexity, workload, task variety, and level of responsibility. The performance measurement variable measures characteristics of performance criteria in terms of stringency, applicability, and fairness.

55

TABLE 8

Correlation Matrix

IAQ Emp JE PM Team

IAQ 1.00 (0.0)

Emp .497 1.00 (Pa =.0001) (0.0)

JE .503 .777 1.00 (P = =.0001) (P = .0001) (0.0)

PM .424 .657 .694 1.00 (P- = .0001) (P = .0001) (P = .0001) (0.0)

Team .206 .221 .185 .223 1.00 (P = =.0186) (P = .0115) (P = .0352) (p = .0108) (0.0)

Regression Analysis

The dependent variable in this study is resistance level, whereas the independent

variables are four behavioral attributes (empowerment, job effort, performance

measurement, and teamwork). The IAQ score is a measure of the resistance level. The

higher the IAQ score, the lower the resistance level. Additionally, due to the differences

in the implementation process and the phase of implementation, I included two dummy

variables representing the organizations to partition the effects of organizational

56

differences.7 The regression equations used for testing the relationships between the

dependent variable and independent variables are as follows:

IAQ = po + Pi Emp + P2 JE + P3 PM + P4 Team + P5 Orgl + p6 Org2

where:

IAQ = willingness to use the ABC system (IAQ scores)

Emp = behavioral attribute - empowerment

JE = behavioral attribute - job effort/individual responsibility

PM = behavioral attribute - performance measurement

Team = behavioral attribute - teamwork

Orgl = dummy variable for Organization 1

Org2 = dummy variable for Organization 2

Table 9 presents the result of the regression model including all variables. The

adjusted R2 for the model is .2874. The overall model was statistically significant (F-

value = 9.673, p = .0001). In this regression model, empowerment and job effort had

significant coefficients at the .10 level. This result indicates that these two variables

provide significant explanations for the variation in the IAQ scores. Additionally, the

coefficient of the dummy variable for Organization 2 was significant at the .05 level. The

interpretation of these results is discussed later. The high correlation among independent

variables discussed earlier could result in multicollinearity problems. Therefore, I

conducted two statistical tests. First, I ran the simple regressions between two behavioral

7 Instead of running regression models for each organization separately, including dummy variables for organizations and running the whole data together avoids overestimating the effects of organizations.

57

attribute variables and examined whether the R2 of those regressions were higher than

their correlations.8 I found that each of the R2 was lower than the corresponding

correlation. Second, I ran SAS program for Collinearity Diagnostics. It provided an

analysis of collinearity among the independent variables, with the intercept variable

adjusted out. The condition indices from this analysis were lower than 10, indicating

below moderate multicollinearity.9 The results of these two statistical tests indicate that

there is no multicollinearity problem in the regression model.

A possible explanation for insignificant coefficients of the performance

measurement and teamwork variables is that there was no statistically significant

difference in mean values across three organizations (refer to descriptive statistics in

tables 6 and 7). The insignificant differences in mean values may contribute to the low

explanatory power of these variables for the IAQ scores. Moreover, the correlation

coefficient analysis indicates a low correlation between the teamwork and the IAQ

scores. Therefore, it is not surprising that the coefficient for the teamwork variable was

not significant.

The results in table 9 indicate that the dependent variable is significantly

explained by two independent variables: empowerment and job effort and a dummy

variable for Organization 2. The parameter estimates for both variables are positive and

significant. The result of empowerment supports the formal theoretical Proposition 1,

whereas that of job effort contradicts Proposition 2.

8 The R2 that is higher than its correspondent correlation indicates the multicollinearity problem in the regression model. 9 The rule of thumb for condition index is that if it is between 10 and 30, there is moderate to strong multicollinearity, and if it exceeds 30 there is severe multicollinearity (Belsley et al. 1980).

58

TABLE 9

Regression Model

Adjusted Parameter Test R2 Estimate Statistic P-value ,

Model .2874 9.673 .0001

Intercept 12.637 4.055 .0001

Emp 0.623 1.786 .0766

JE 0.675 1.773 .0788

PM 0.206 0.673 .5020

Team 0.190 1.259 .2105

Orgl -0.894 -0.707 .4811

Org2 -2.706 -2.153 .0332

Proposition 1 posits that in Thai culture, an ABC system that causes

empowerment and redistribution of power will encounter a higher level of resistance.

The Likert scale used to measure the empowerment variable indicates that the lower point

means changes in empowerment and represents redistribution of power, while the middle

point means no change. From the detailed analysis of raw data, more than 90 percent of

the subjects chose the middle point or lower. Therefore, the higher the value of the

59

empowerment variable, the less the change in empowerment. The positive coefficient

between the IAQ scores and the empowerment means that no change in empowerment

creates more willingness to use the ABC system—in other words, a lower resistance level.

This finding supports Proposition 1.

Proposition 2 posits that, in Thai culture, an ABC system that causes an increase

in job effort will face a higher level of resistance. The Likert scale used to measure the

job effort variable indicates that the lower point means improvement in job effort, while

the middle point means no change. The improvement in job effort can be interpreted as a

decrease in job effort. Like the empowerment variable, the detailed analysis of raw data

indicates that more than 90 percent of the subjects chose the middle point or lower.

Therefore, the lower the value of the job effort variable, the lower the job effort spent.

The positive coefficient between the IAQ scores and the job effort means that a decrease

in job effort creates less willingness to use the ABC system—in other words, a higher

resistance level. This finding contradicts Proposition 2. However, if the results are

analyzed in terms of changing in job effort, the positive coefficient is reasonable, because

the higher job effort score means no change and results in more willingness to use the

ABC system and lower resistance level. It is not unusual for people not to like change

because it creates uncertainty. Therefore, people are reluctant to use a new system that

causes many changes in their situation or position.

Another significant coefficient is that of the dummy variable for Organization 2.

This finding indicates that there is a significant difference in the willingness to use the

ABC system (the IAQ score) for Organization 2. The negative coefficient of this dummy

60

variable shows that Organization 2 is less willing to use the ABC system—in other words,

a higher resistance level.. This result is consistent with the descriptive statistics. As

discussed earlier, a higher resistance in Organization 2 may result from the phase of the

ABC implementation. Organization 2 has just implemented the new system within the

last two years. The recent changes in organization may cause a higher resistance level.

Most of the above statistical analysis examined the whole data from three organizations

together. The following analysis examines data from the interviews as an individual

organization. Table 10 presents the classification of subjects in the interviews.

TABLE 10

Interview Subjects

From From Total Accounting Other

Department Departments

Organization 1 9 3 6

Organization 2 6 2 4

Organization 3 6 2 4

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Narrative Analysis

Organization 1

Organizational Profile and Reason for the ABC Implementation

Organization 1 is a government enterprise that is responsible for providing an

adequate and efficient electricity supply to serve all types of the country's requirements.

It began operations 28 years ago and has managed and developed a power system

consistent with Thailand's National Economic and Social Development Plans. In 1996

there was major organizational restructuring, dividing the organization into six business

units and five operative units. The business units were comprised of the transmission

system, generation, maintenance, mining, engineering, and construction. Each business

unit includes policy and planning, account and finance, administration, new business

ventures, and hydroplants. There is a privatization plan to transform those business units

with high business potential into limited companies that will later turn into public

companies and float their shares in the stock market.

At the end of fiscal year 1996, Organization 1 's power system had a total installed

generating capacity of 13.5 million kilowatts. Sales of electric energy rose to 79,451

million kilowatt-hours. In financial terms, its total assets amounted to 295,977 million

baht (equivalent to US$7,399 million), and its total revenue from energy sales and other

income rose to 116,141 million baht (equivalent to US$2,904 million) in 1996. Net

income amounted to 27,093 million baht (equivalent to US$677 million) in 1996.

Organization 1 has successfully achieved good operational performance based on the

62

government's five performance criteria.10 It has carefully pursued steps towards the

privatization goal set by the government.

The starting point of the ABC implementation is a plan to privatize the

organization. The outside consultant, Price Waterhouse, suggested that the organization

needed to have a new accounting system in order to provide better information for timely

and effective management decision making and to prepare for privatization. ABC is one

of the options in the package of the new accounting system. The main reason for the

ABC implementation is to provide relevant, accurate, and timely information for

management's use in planning, control, and decision making. The organization also

evaluates each activity and tries to eliminate or reduce non-value-added activities.

Another reason is to use ABC information in the budgeting process. As a result,

management can compare actual output with budget and take any actions required to

improve both organizational and individual performance.

The ABC Implementation Process

With the assistance of Price Waterhouse in 1992, the organization began the

development of the new accounting system, both financial and managerial. At the same

time, there were training sessions held to provide executives and departmental

management with an understanding of the ABC concept. A steering committee Was

formed, consisting of a deputy governor of finance, a leader, and deputy or assistant

10 The five criteria are (1) rate of net income remitted to the government, (2) return on assets at replacement cost, (3) ratio of Salaries and other compensation to total costs, (4) productivity ratio and (5) the progress of private sector's involvement.

63

governors from other functional areas. The steering committee developed an

implementation plan and submitted it to their subordinates.

From the interview, the organization decided to implement the ABC system for

the whole organization at one time. This was done to standardize the accounting system

and to ensure that every department could communicate with one another. Each member

in the steering committee was responsible for forming a subcommittee under his/her

functional area, consisting of directors of all divisions. Then, each director formed a

team, comprised of managers from all departments in his/her division. The team

members were responsible for identifying activities conducted in their departments, as

well as cost drivers.

The initial implementation plan was ambitious. Everyone in the organization was

talking about activities that seem to be easier to understand and more related to his/her

job than account code. The entire activity list contained more than 2,000 activities.

Unfortunately, these activities were the ones conducted in the department, rather than the

ones conducted by individuals. One interviewee explained that there was idle time when

individuals did nothing, such as waiting periods for new construction. Moreover,

individuals needed to perform some activities that were not their job description

responsibility, such as attending meetings as the representatives of their superior.

Moreover, the organization was large, comprised of more than 30,000 employees.

Implementing the ABC system for the whole organization required an adequate support

of information technology and database to collect data concerning individual activities

and cost drivers. However, the current information system of the organization did not

64

have that capability. As a result, the steering committee decided to change the level of

the ABC implementation, requesting a list of the smallest activities that each department

conducted, instead of individual activities.

For the benefit of comparison, the lists of activities from each team were

presented to the subcommittee for revising and ensuring that the same task had similar

activities. Then the subcommittee sent those revised lists to the steering committee for

approval. The approved lists were sent to Price Waterhouse for another review and

integrated into the new accounting system by creating a general ledger account code

based on the activity. During the implementation process, the lists of activities from each

department indicated many redundant activities among departments. Theoretically, there

should be an organization restructuring to improve work process. However, the

organization restructuring was not practical because government rules and regulations do

not allow the organization easily to make any changes.

For example, the cost information reports provided by the ABC system indicated

that the cost per activity conducted by Organization 1 was much higher than the one

conducted by outside subcontractors. However, Organization 1 cannot hire outside

contractors because it leaves its employees idle. Unlike private businesses, Organization

1 cannot just fire employees who do not provide value-added services to the organization.

It also cannot change some work processes that are not effective or efficient. These

processes are required by law and need to be conducted that way. Consequently, one of

the initial objectives in implementing the ABC system, continually to improve work

processes, was not viable.

"65

The steering committee decided, however, to continue the implementation

process. Instead of using the ABC information for continuous improvement, the

organization uses the information for budgeting and control. Each department is required

to set a budget based on activities in its approved list. Then departments can compare

actual with budget to control their spending. The benefit of setting budgets based on

activities from the perception of employees from other departments is that activity is

easier to understand than the account code. The ABC system was fully implemented in

December 1993 for use in budget setting (activity-based budgeting) for the fiscal year

1994. Since then, the lists of activities has been continually reviewed and revised.

Major Results and Findings

The ABC implementation in Organization 1 had a good starting point. At the

beginning, everyone, particularly members of the steering committee, subcommittee, and

departmental teams, studied all materials and tried to understand the ABC concept. In

addition, the members attended the training sessions11 conducted by professors of a well-

known university and ABC experts from the U.S. and Price Waterhouse. Activity

analysis was conducted; the employees' ambition was to be the first organization that

participated in a modern practice, exactly followed theoretical steps, and successfully

implemented the new system. However, the plan of implementing the new system for the

whole organization at one time required an adjustment in the level of activity analysis.

111 reviewed training document and found that they provide general information on the definition of ABC, the reasons for using the ABC, steps in implementing the ABC, and changes caused by the ABC implementation. The information from training document is consistent with the findings from interviews.

66

As discussed above, the participants were requested to identify activities at the

departmental level, instead of at the individual level.

Once the lists of activities were created, there were several meetings to determine

consistency and develop a standard. The committee found that several departments

conducted the same activities. Then they tried to find the way to reduce these

redundancies. From several discussions, they finally concluded that the organizational

restructure was not under their authority. As a result, they decided to change their

strategy by grouping the similar activities and giving a general name for those activities.

However, the grouping system caused more problems. Similar activity names were

different in details among departments because it was not the activity conducted by

individuals, but it was the smallest activity that the department performs. For example,

activity "repair" in one department meant repairing or even overhauling a tractor,

whereas "repair" in another department meant repairing electric outlets. There were

many conflicts in setting standard activities and cost drivers, causing changes and delays

in the implementation process.

The conflicts created doubts in committee members' minds. Thus, the committee

requested that Price Waterhouse provide some documentation to reconfirm that the ABC

system was appropriate for the operation of Organization 1. Price Waterhouse's

documentation provided both pros and cons in implementing the ABC system, but the

main limitation of Organization 1 is that it is a government enterprise operated under

government rules and regulations. Although the implementation of ABC has many

benefits, the organization could not obtain those benefits. For example, activity analysis

67

identified redundant or non-value-added activities that should be eliminated or reduced.

Unfortunately, any changes in work processes cannot be done easily. They must be

approved by law.

Consequently, the ABC implementation provided only limited benefits to the

organization. As discussed above, the committee decided to apply the ABC concept for

budget setting. The main benefit of this decision was to improve communication and

understanding among departments. Departments other than accounting, specifically

engineering and production, found it is easier to set their budget based on activities rather

than to refer to account codes, which they cannot compare with their jobs. The

interviewees in those departments said that they could control their costs better. With the

reports based on activities, they could identify which part of their job needs changes.

Although the organizational restructure was not possible, the interviewees said that their

departments were comprised of technical personnel. They would rotate people within the

department to reduce costs of some activities.

On the other hand, the interviewees from the service or support line, such as

quality control and internal audit departments, felt that the ABC system was nothing but

another way of classifying costs. In those departments, their activities were grouped into

two or three general names. For example, there were three general activities in the

internal audit department: auditing, administration, and management. They simply

needed to set their budget based on these three activities, regardless of the

appropriateness and accuracy of the classification. With no detailed analysis concerning

how each individual performed his/her job together, along with government enterprise

68

limitations, there was no way to make changes. Another interviewee mentioned that

some policies from top executives were stated on the cost element basis with no relation

to any activities. For example, the recent policy required that every department reduce

overtime expenses by 50 percent, regardless of activities, conducted. Therefore, the

interviewee felt that the ABC system was not actively used in the organization.

In general, the ABC implementation in Organization 1 seemed to stop at some

point because of numerous conflicts. The implementation process that initially followed

a theoretical concept had faded away, and a modified ABC system was created for the

organizational structure and culture by using it for budget and control purposes.

Although the organization-wide implementation was not successful, the knowledge

obtained at the initial stage of implementation has been continuously used in smaller

units, such as departments, without calling it "ABC." For example, the maintenance

department has its own maintenance management report that provides detailed activities

of each job at the individual level. The department uses the report for its internal

management and performance improvement. One interviewee commented that the scope

of implementation, setting up a standardized system for the whole organization, was too

big. If the steering committee had decided to implement the ABC system in a small

scope such as a stand-alone unit in a department or division, the implementation process

would have succeeded long ago.

Referring to the expected results discussed in the proposition section,

Organization 1, having a "non-culturally-adjusted ABC" implementation, is expected to

face more resistance because the implementation encourages a redistribution of power.

69

Although the accounting department of Organization 1 had control over financial

information prior to the implementation, the other departments did not totally rely on the

information. The problem was that the accounting department could not provide timely

information to the other departments. An interview with the accounting personnel

indicated that the old accounting information systems did not have enough capacity to

process and provide reports sooner than one to two months after receiving raw data. The

size of the organization and too much data caused an information overload. As a result,

the non-accounting departments had to collect their own data for timely decisions. At the

same time, the accounting department tried to solve its problems by developing a new

accounting system, including the ABC system.

Regardless of the fact that the accounting department could not provide timely

information, some of the accounting personnel still believed that they had control over

financial information and were afraid that they would lose their power after implementing

the ABC system. There was resistance from these accounting personnel. As a high

power distance culture, it is usual for the resistance to occur when there is a fear of losing

power. On the other hand, personnel from the departments other than accounting did not

think that the accounting department had that much power because they did not rely on

information from the accounting department. If the ABC implementation could provide

more relevant information on a timely basis, the change should be supported. These

personnel also did not think that they were overstepping their bounds. With either the old

or new accounting system, the accounting department was responsible for providing or

making funds available to support any project, such as equipment acquisition or

70

i 'j 1

construction. Therefore, there was very little, if any, resistance caused by

empowerment and redistribution of power from the personnel of departments other than t

accounting. The descriptive statistics also indicated that the subjects in this organization

thought that there was relatively little change in empowerment after the ABC

implementation (mean scores = 11.830 referred to table 6).

Moreover, the current organization-wide ABC system did not require participants

to extend extra effort. Referring to the discussion in the proposition section, this

organization, as a "non-culturally-adjusted ABC" implementation, was supposed to have

higher resistance because it required participants from departments other than accounting

to keep track of all activities they conduct and to understand the new system in order to

make appropriate decisions. However, changes in the implementation plan from the

individual level to the departmental level reduced participants' extra effort. Participants

did not need to collect detailed activities. What they needed to do was set their budgets

based on departmental activities and collect the actual data to compare with the budgets.

They had collected their own data even before the ABC implementation because the

accounting department could not provide them timely information. Therefore, their job

effort did not increase because of the ABC implementation, thereby causing no resistance

12 As a government enterprise, the organization had a lot of funds available in the past. The departments other than accounting just needed to include the project they wanted to do in their budgets and the accounting department would allocate funds to support that project. Unfortunately, during these last two years, Thailand has faced an economic crisis that has caused budgeting cuts. There are limited funds, and every department is required to control its costs. However, the personnel believe that they can control costs more easily based on the ABC system, as discussed earlier. As a result, they did not resist the implementation of ABC.

71

from the job effort attribute. The descriptive statistic (mean scores = 12.085 in table 6)

and the results of regression analysis support this expectation.

Moreover, the interviewees said that Organization 1 's policy encourages

employees, at least at the management level, in every department to have an

understanding of business processes and accounting. The organization sent the

employees to conferences or business management short courses, including accounting.

Consequently, the employees had the ability to use information in making decisions.

Their faces would not be threatened by the new accounting system, so the ABC

implementation did not cause any resistance. Although the concern of saving face did

not cause resistance in Organization 1, it caused a change in the implementation plan. As

discussed earlier, one of the reasons that the implementation level had changed from

individual to departmental was the idle time situation. Participants wanted to save face.

They did not want to document that there were several times when they did nothing

Moreover, they were afraid that their activities were viewed as non-value-added.

Therefore, the implementation plan was adjusted by using ABC information only for

budgeting and control.

Initially, the uses of ABC information were not only for planning purpose, but

also for measuring individual performance. One interviewee said that there were many

discussions and much resistance from participants when they tried to establish key

performance indicators (KPI). For example, the manager of one electric generating plant

said that it was not fair to compare his plant's performance with that of another, newer

plant. The older plant had higher equipment maintenance and higher employee salaries.

72

If the executives used the same KPI, his plant would never meet the requirements. As

discussed in the Proposition section, the use for performance measurement creates

individual impact, thus it may cause higher resistance. However, the KPI is not currently

in use because of many conflicts. Organization 1 asked Price Waterhouse to review the

KPI, but Price Waterhouse broke the contract. As a result, the project was stopped. The

current ABC system-activity-based budgeting-is used only for planning and controlling

purposes. This may be another reason why I found no difference in the performance

measurement variable of Organization 1, compared to that of the others.

The last behavioral attribute is teamwork. Organization 1 formed a steering

committee comprised of members from all functional areas. The meeting of this cross-

functional group created communication among divisions. As mentioned earlier, the

activity analysis provided more understanding of who does what and how a particular

activity affects others. This is the main benefit of the ABC implementation. However,

there were many conflicts when the committee tried to eliminate redundant activities

from some departments. As a collectivist country, loyalty to the group is an important

cultural factor in Thailand. Each member tried to protect his/her subordinates in the same

department from losing their jobs. Although this situation did not expand because of the

limitation on making any changes, as discussed earlier, the conflicts in the committee

caused the implementation process to slow down and the enthusiasm to fade.

Another important issue is that the members of the smallest team who conducted

activity analysis are employees from the same department. The questionnaire was

distributed to these members and asked whether there was cross-functional teamwork

73'

during the implementation process. The members of the smallest team may view that

their team was not cross-functional because all of them were from the same department.

This may be an explanation concerning why the descriptive statistics indicate no

statistically significant difference in the teamwork variable across three organizations.

Organization 2

Organizational Profile and Reason for the ABC Implementation

Organization 2 is a government enterprise under the Thai Ministry of Interior. It

was established under a 1960 Act by a Royal Decree executed on 20 September 1960,

and published in the Government Gazette on 27 September 1960. Its major objectives are

to improve the process of provision and distribution services of electric energy for

customers; to achieve an acceptable level of sufficiency, efficiency, and reliability

commensurate with safety practices; to meet the timely need of customers; and to keep

pace with changing circumstances. The organization's plans and projects have been set

in accordance with the National Economic and Social Development Plans for operational

and service capability as well as for the rural electrification expansion program.

The service area of Organization 2 accounts for approximately 99 percent of the

total area of the country. There are 1,214 sub-offices scattered throughout the country in

73 provinces, rendering service to their customers. The organization has grouped its

service area into four regions. Each region contains three service divisions, for a total of

12 divisions. In 1996, its electricity generation and purchase totaled 45,092 million

kilowatt-hours, and its total sales came to 42,390 million kilowatt-hours. In financial

74

terms, its total assets amounted to 117,806 million baht (equivalent to US$2,945 million),

and its total operating revenues rose to 77,921 million baht (equivalent to US$1,948

million) in 1996. Net income amounted to 12,029 million baht (equivalent to US$301

million) in 1996.

The Economic Board of Government recommends that the organization improve

its operational management, including its cost management. The previous costing system

of the organization does not provide enough detailed information to meet the

requirements of management. There is a need for a new cost management system that

can provide better information and useful management report for planning, decision

making, control, and evaluation, resulting in more effective cost management. In

addition to using responsibility accounting, the organization has developed a new cost

management system based on the ABC concept for indirect cost allocation in order to

provide more accurate product costing information. Additionally, the new cost

management system identifies non-value-added activities. If the organization can

eliminate or reduce those activities, its effectiveness and efficiency will be improved.

The ABC Implementation Process

The organization hired a consulting team by a professor from a well-known Thai

university to study the project of improving the cost management system in September

1995. One of the suggestions was to apply the ABC concept for indirect cost allocation

in order to provide more accurate product costing, as well as to improve organizational

performance by eliminating or reducing non-value-added activities. The implementation

75

process started by forming an implementing team comprised of members of the

consulting team and employees of Organization 2 from the accounting department. The

implementation scope included electric transmission departments and departments of the

distribution system construction in 12 service divisions. The implementing team went to

each department to determine its activities and identify cost drivers by interviewing key

personnel and observing their working process. Then the team prepared lists of activities

and cost drivers and presented them to divisional management for approval.

After receiving the approved lists, the implementing team collected costs for each

activity, calculated the cost per unit, and issued reports to be used as a handbook of

working process for each department. The reports presented detailed activities, cost

drivers, and the standard cost per unit. Once the standard cost reports were completed,

the implementing team conducted a two-day training session for the representatives of 12

service divisions and of the head office in August 1996. The training session13 covered

the definitions and concepts of ABC and how to calculate the cost per unit and set

standard costs. Using the standard costing system, employees need only to estimate units

of activities and input into a preformatted form to calculate product costs. However, the

accounting department needs to review and adjust standard costs to ensure that they are

accurate, up-to-date, and appropriate for the current situation. During the training

session, participants also learned what kind of data were required for calculating standard

costs, how to collect the data, and how to revise those standard costs. Standard costs can

13 From the documentation review, I found that general information from the training documents and progress reports is consistent with the findings from interviews.

76

also be used for control purposes by comparing the standard with the actual, examining

any variances, and making decisions to solve problems causing those variances.

In addition to standard cost reports, the implementing team prepared

recommendation letters, identifying redundant or non-value-added activities and

providing suggestions to improve working processes. According to the interviews,

although these suggestions made sense and should help the organization improve its

effectiveness and efficiency, many could not be followed. Organization 2 faced the same

problem as Organization 1. As a government enterprise, it has to operate under

government rules and regulations that have standardized requirements for work processes

and are difficult to change. Therefore, the current use of the ABC system is to provide

better indirect cost allocation and more accurate product cost. The implementation

process is at the initial stage and was conducted in selected departments as the pilot

project; however, there is a plan to expand the scope of implementation in the future.

Major Results and Findings

It was mostly the consulting team who performed the implementation of ABC in

Organization 2. Employees were not given an active role in the implementation process.

As noted in the discussion in the Proposition section, this organization is representative of

a "culturally-adjusted ABC" implementation that is expected to find a lower resistance

level. The implementation process and the requirements after the completed

implementation in this organization were adjusted to incorporate the collectivist Thai

culture with high power distance. For the purpose of implementation, there does not

'77

seem to be any empowerment or redistribution of power, because the main purpose of the

ABC implementation is to improve indirect cost allocation and to provide more accurate

product costing information. Although the participants can suggest that the standard

costs need to be updated to be consistent with their activities, the accounting department

is still responsible for processing and providing the standard costs and other related

reports. Therefore, the accounting department remains in power in terms of controlling

information. However, the descriptive statistics provide contradicting results. The

subjects think that there is some improvement in empowerment after the implementation

of ABC (mean scores = 10.583 in table 6). According to the detailed analysis of raw

data, the subjects feel that they have more access to process information, as well as

involvement in making work-related decisions. This impression may come from the

opportunity to provide suggestions during the standard cost setting, as discussed above.

The implementation of ABC in Organization 2 did not increase the job effort of

the participants because the activity analysis was conducted under the supervision and

assistance of the implementing team. To adjust to Thai culture, the participants of the

departments other than accounting do not need to keep track of their activities. If they

suggest that standard costs should change, the accounting department is responsible for

collecting and processing the information. Although this may increase the job effort of

employees in the accounting department, it should not create resistance, because it allows

the accounting department to remain in power. It also results in maintaining the face of

the participants from the departments other than accounting. The issue of face being

threatened by making inappropriate decisions has not occurred in this organization. As a

78

high power distance culture, the top executives are the ones who make most of the

decisions. The participants were not involved in making any decisions because of a

government enterprise nature that has to operate under government rules and regulations.

The descriptive statistics in table 6 not only indicate that there is no increase in

job effort, but also show a decrease in job effort (mean scores = 10.729). This result may

contradict with the job effort of the accounting department. One possible explanation is

that the ABC implementation in Organization 2 is at the initial stage, in which the

implementing team supervised and assisted the participants in conducting activity

analysis and setting standard costs. After the implementation, the accounting department

is solely responsible for reviewing and revising standard costs. However, as of now, the

accounting department has not yet performed this responsibility on its own. With the

assistance of the implementation team, it is possible for the subjects to feel that the

complexity of their jobs and the effort expended on their jobs are reduced.

Through the interviews, it was identified that the use of the ABC information was

mainly for planning purposes. Organization 2 implemented the new system to obtain

better information that would be useful for planning and decision making. The new

standard costs based on the ABC concept improve the cost management system. Until

now, there has not been a policy from the executives to use the AB.C information for

performance measurement purposes. The descriptive statistics provide results supporting

this issue. One of the limitations caused by the nature of the organization is that there are

central rules to evaluate an employee's performance for the government enterprises. In a

high power distance culture, any changes in these rules have to come from the top .

79

executives of the organization, as well as from the government. The use of ABC

information for performance measurement that allows subordinates' involvement

contradicts Thai culture, especially in the government enterprises. Therefore, as the

"culturally-adjusted ABC" implementation, Organization 2 did not use the ABC

information for performance measurement. The mean scores of 11.292 (in table 6)

indicate that the subjects found no change in performance measurements after the ABC

implementation.

As discussed in the Implementation Process section, there is no cross-functional

team during and after implementation process. The members of the implementing team

are mostly outside consultants, with some employees from the accounting department.

As a result, there should not be any betrayal of loyalty that may cause a high resistance

level. All behavioral attributes in the ABC implementation of Organization 2 have been

culturally adjusted. This organization should have a low resistance level. However, the

descriptive statistics in table 6 indicate that the mean value of the IAQ scores was 28.021.

It was the lowest value of the three organizations. A possible explanation for these

contradicting results discussed earlier is that the recent change in this organization may

be a primary reason for high resistance from employees. The new system has been

implemented within the last two years. When people are unfamiliar with the new system,

they may be reluctant or hesitate to use it. Another possible explanation is that the

outside consulting team has little power to convince the employees to accept the new

system. Moreover, the employees have no loyalty to the outside consultants and

therefore feel no obligation to follow their recommendations.

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Organization 3

Organizational Profile and Reason for the ABC Implementation

Organization 3 is a government enterprise that has a vision of becoming a leading

organization of public electrical utility whose strengths include services and social

responsibility. The heart of its philosophy is a commitment to total customer satisfaction.

The organization is responsible for distributing adequate, reliable, and safe power to meet

the demands of residential, business, and industrial customers in the area covering the

Bangkok Metropolis as well as neighboring Nonthaburi and Samutprakarn provinces.

Due to economic and social changes, there is increasing competition in the electric power

sector from private participation. Organization 3 has improved and developed principal

operation strategies in an attempt to search for customers' greatest satisfaction, as well as

to maintain the requirements of a "good state enterprise" of the Finance Ministry and to

prepare for privatization.

In addition to the improvement of a power distribution system for sufficient and

reliable distribution, the organization has put more technology and service stations into

operation to improve services for customers' convenience and satisfaction. In 1996 its

electricity purchase totaled 32,367 million kilowatt-hours, and its total sales came to

31,004 million kilowatt-hours. In financial terms, its total assets amounted to 59,213

million baht (equivalent to US$1,480 million), and its total operating revenues rose to

63,174 million baht (equivalent to US$1,579 million) in 1996. Net income amounted to

4,816 million baht (equivalent to US$120 million) in 1996.

81

There are several reasons for the ABC implementation. First, the organization

needs a costing system that can provide useful information for effective management and

decision making. As noted above, the organization is planning for privatization. The

privatization policy requires that the organization hire outsiders or subcontractors to

perform some tasks if the related costs are lower. Therefore, the organization needs

accurate cost information for comparison with subcontractors' price lists. Second, in the

previous accounting system, responsibility accounting classified expenses into

controllable and noncontrollable cost elements and did not provide relevant information

for continual improvement in individual performance. On the contrary, the ABC system

that classifies expenses based on activities will provide more relevant information for

individuals to monitor and to continually improve their performance. Finally, the

organization has a policy for decentralization and restructuring into several business

units. The ABC system that encourages empowerment is appropriate for this policy.

The ABC Implementation Process

The organization began the study of the ABC project in 1994.14 The study

provides executives and boards of directors with some understanding and identifies

opportunities to apply the ABC concept to the organization's tasks and working

processes. During that time the organization was implementing a new computerized

accounting system without the options of including ABC or responsibility accounting

141 reviewed progress reports, as well as meeting minutes, and found that they provide information consistent with the findings from interviews.

82

(this project was started in 1992). It would cost the organization a large amount of

money and time to change to the computerized system because of its fully integrated

process. Therefore, the executives decided to implement the ABC system as a pilot

project and planned to expand the current system to include the ABC capability in the

future. This way of implementation will incur lower costs and still have higher potential,

providing the executives a better understanding of how the system works and its impact

on the organization.

The pilot project began during 1995 in the revenue department of one district (out

of a total of 14 districts) and it took eight months before the first ABC report was issued

in March 1996. This pilot project is an in-house implementation by the accounting

department, which formed an implementation team made up of accounting personnel who

have knowledge about and understand the ABC concept. The team went to the pilot

project location to train both management and subordinates of the department, thus

providing an understanding of the ABC system and how to conduct activity analysis.

With the assistance of the implementation team, participants identified activities. The

implementation team specified cost drivers from the list of activities and took them back

to obtain agreement from participants. Once the activities were specified, participants

were required to weight each activity they performed weekly and send them to the

accounting department to process and issue summary reports on a monthly basis.

The summary reports provide top executives and department management

information for decision making, control, and evaluation, as well as giving opportunities

for subordinates to monitor and continually improve their performance. The reports

'83

present the cost per unit of each activity and highlight fluctuations, allowing management

to use them for more effective cost management. Top executives can also use

information in the ABC reports to compare with the price lists from outside

subcontractors and make more appropriate "make or buy" decisions. Moreover,

individually weighted reports provide management information about individual

workload and performance that is useful in human resource management.

As of now, the ABC system in the pilot project location has been routinely

operating. In an attempt to develop ABC Stand Alone, the system was also expanded to

the other seven districts in 1997. Moreover, this expansion was not only conducted in the

revenue department of each district, but also included customer service departments of

those districts as implementing units. However, according to one interviewee, the

expansion was a "snapshot" under the control of the accounting department, which

provided only summary reports based on the requests of top executives and departmental

management. There was also an attempt to fully integrate the ABC system and

responsibility accounting, with financial accounting using a computerized system.

Unfortunately, the accounting department found that there was a shortage in personal

knowledge and expertise, as well as an ambiguous management policy in the

development of a management accounting system and organizational restructure. As a

result, the accounting department recommended hiring an outside implementator.

However, the economic crisis in Thailand during the last two years has caused a delay in

the expanded implementation process.

84

Major Results and Findings

The ABC implementation in Organization 3 was partially adjusted to Thai culture.

An advantage to implementing a pilot project is that the implementation team can

observe participants' reaction and adjust the plan along the way. One interviewee said

that the adjustment in the implementation process was done to ensure that there would be

as little resistance as possible. First, in order to adjust to the Thai culture of high power

distance, the ABC implementation was structured not to cause the redistribution of

power. Although the participants had to keep track of their activities, they had to send

the data to the accounting department to process and provide them reports. In this case,

the accounting department remained in power by controlling the availability of

information. However, the participants earned some benefits from being involved in the

activity analysis. They could request that the information be present in the format that

was most useful in the decision-making process. In other words, the ABC system has

satisfied users' information requirements. The only problem was that the accounting

department took a long time to process the data and to provide reports requested by

participants. There was a suggestion to let the participants process their own data and

become a stand-alone unit. Unfortunately, to avoid resistance from the accounting

department because of the fear of losing power, the suggestion was not followed. As

shown by the descriptive statistics in table 6, the subjects of this organization thought that

there was relatively no change in empowerment after the ABC implementation (mean

scores = 11.286).

85

In terms of job effort, there was an increase in individual responsibility. Every

participant was required to complete a form by weighting his/her weekly activities, as

discussed earlier. As learned in the interviews, everyone felt that it was difficult, took a

lot of time to fill out the form, and required extra effort at the beginning. However, after

a while, the participants were more familiar with the form, had more understanding of

what they needed to do, and could do it as easily as any routine job. Moreover, they felt

that the ABC system could provide more relevant information, especially indicating how

well they performed, compared to others. As a result, the increase in job effort did not

cause higher resistance at that time. Additionally, there was no resistance from the

accounting department, although the job effort increased because of having more data to

process and more reports to generate. However, the accounting department remained in

power.

The concern for saving face that may cause higher resistance because of the fear

of making inappropriate decisions, as mentioned in the Proposition section, was not an

issue in this organization. The participants were not involved in making any decisions

because Organization 3 is a government enterprise that has to operate under government

rules and regulations. Employees at the departmental level had limited authority to use

the ABC information in changing any work processes. As a high power distance culture,

the top executives are the ones who make most of the decisions. The ABC system

provides more relevant information for the decision-making processes on the basis of a

particular activity consistent with the format of the proposal offered by outside

86

subcontractors.15 Once face was not threatened, there was no resistance to using the new

system.

The uses of the ABC information were for both planning and performance

measurement. For planning purposes, the management of the organization used

information to determine which activity was performed inefficiently and at high costs and

whether they should hire outside subcontractors to implement it. They also used

information to plan for improvement in the work processes and tried to maximize the

effectiveness of the cost management system. For performance measurement purposes,

participants could use the ABC information to monitor their performance. However, the

management system did not emphasize performance management. The compensation

system was not mainly based on performance measurement, but on the length of service.

Information from the ABC system was collected as statistical reports and used only as an

operation report to control performance and ensure that it meets the standard of

performance (SOP). Although the ABC information was used to monitor individual

performance, there was no specific policy to tie the performance to an individual

compensation plan.16 As a result, the use of ABC information for performance

measurement did not create high resistance, as expected.

Although the implementation process began in 1995 and there were many training

sessions on the ABC concept held during the last three years, understanding of the ABC

15 Before implementing the ABC system, the decision-making processes relied on the information generated by predicting, projecting, and roughly allocating expenses based on cost elements. 16 The current ABC system is a pilot project in only one department. The top executives have no policy to change performance measurement system and compensation plan for only one group of employees. They said they have to wait until the system is implemented for the whole organization.

87

system did not expand to the whole organization. The understanding was limited to the

accounting department. One interviewee said that this situation was caused by the fear of

losing jobs and power. The accounting department wanted to keep its control over

accounting information. There was no cross-functional team formed during or after the

ABC implementation process. This situation fits the characteristic of a collectivist

culture. Employees in the accounting department had loyalty to their own group and

tried to project their group's benefits. As discussed in the Proposition section, if there is

no cross-functional team, then there is no loyalty betrayal. Consequently, the resistance

level of Organization 3 was lower. However, there is no statistical result to support this

argument, because the correlation coefficient between the IAQ scores and the teamwork

variable was relatively low, and there was no significant difference in mean values of the

teamwork variable among the three organizations.

Summary

The regression analysis provides evidence supporting Proposition 1 that the

changes in empowerment and redistribution of power cause higher resistance level. The

results from regression analysis, however, contradict Proposition 2. The positive

coefficient between job effort and the IAQ scores indicates that the improvement in job

effort results in higher resistance level. There is no statistical evidence to address

Propositions 3 and 4. The coefficients between the IAQ scores, performance

measurement, and teamwork variables are not statistically significant because there is no

difference in mean values of both variables across organizations. The narrative analysis

88

indicates that, although Organization 1 initially intended to use the ABC information for

performance measurement, it failed to identify key performance indicators. Then the

plan was stopped. Organizations 2 and 3, as the "culturally-adjusted ABC"

implementation, did not plan to use the ABC information for performance measurement

purposes. Consequently, the responses from the subjects indicated that there was no

change in performance measurement.

Organization 1 formed a steering committee comprised of the members from all

functional areas and then, subcommittees and departmental teams. From the interviews,

the cross-functional committee created many conflicts in an attempt to protect the

benefits of their own departments. On the contrary, to be culturally adjusted and to avoid

loyalty betrayal, Organizations 2 and 3 included only members from the same

department, particularly the accounting department, in an implementing team. From the

narrative analysis, the teamwork variable of Organization 1 differed from that of

Organizations 2 and 3, but the descriptive statistics indicated insignificant difference in

mean values among three organizations. One possible explanation is that the members in

the smallest team of Organization 1 came from the same department to conduct activity

analysis for their departments. Another explanation is the lack of using ABC information

for performance measurement. In all three organizations, the ABC implementation did

not change performance measure that may cause conflicts of interest in cross-functional

teams. Moreover, working in government enterprises is a secure job. When there is

secure employment and no conflict of interest, there is no teamwork impact.

• 89

Although the regression analysis provides some support for formal theoretical

propositions, the descriptive statistics show some contradictory results for the

empowerment and job effort. The subjects from Organization 2 indicated a higher degree

of empowerment than those from Organizations 1 and 3. As the "culturally-adjusted

ABC" implementation, Organization 2 should have had no change in empowerment.

However, the opportunity to provide suggestions during the standard cost setting may

make the subjects feel that they have more access to process information, as well as the

involvement in making work-related decisions. The results from the questionnaire

responses indicate stronger empowerment. On the other hand, the initial implementation

of ABC may have encouraged empowerment in Organizations 1 and 3, but later the

subjects learned that their suggestions for continual improvement were not applicable

because of the limitation of a government enterprise. Employees at the departmental

level had limited authority in changing any work processes. Under a high power distance

culture, the top executives are the ones who make most of the decisions. Consequently,

the subjects from Organizations 1 and 3 who have implemented the ABC system for

more than three years indicated no change in empowerment.

The explanations for contradictory results on the job effort variable are as follows.

First, Organization 1, as the "non-culturally-adjusted ABC" implementation, should

indicate an increase in job effort. However, the changes in the implementation plan from

individual activities to departmental activities eliminated the job effort required to keep

track of all activities each individual conducted. Second, the ABC system in

Organization 3 required the participants to keep track of their individual activities. Many

90

interviewees said that it was difficult to do so and required extra effort at the beginning,

but after a while, the participants became familiar with the new system with the result

that they could do it as easily as any routine job. Consequently, the subjects from

Organizations 1 and 3 indicated that there was relatively no change in their job effort.

Finally, Organization 2, as the "culturally-adjusted ABC" implementation should have

indicated no change in job effort, but the descriptive statistics show that there was a

decrease in job effort. This may be caused by the length of time after the

implementation. As discussed earlier, Organization 2 has just implemented the new

system within last two years. The implementing team provided extensive supervision

and assistance in activity analysis and setting standard costs. The accounting department

did not need to review and revise standard costs on their own. The assistance of the

implementation team could make the subjects feel that the complexity of their jobs and

the effort expended on their jobs were decreased.

As noted in the narrative analysis above, the ABC implementation in

Organization 2 has been fully adjusted to Thai culture, as stated in the Proposition

section, and is expected to have the lowest resistance level, compared to the other

organizations. Unfortunately, the descriptive statistics provide contradictory results.

Organization 2 has the lowest IAQ scores, on average. Moreover,.the coefficient of the

dummy variable for Organization 2 in the regression model is statistically significant and

negative. The results indicate that Organization 2 is less willing to use the ABC system

and has higher resistance than the other organizations. One possible explanation for these

contradictory results is the varied implementation phases. Whereas Organizations.! and

91

3 have implemented the ABC system for three to four years, Organization 2 has

implemented the system within only the last two years. The perception of participants

toward the new system at the beginning of the implementation process may differ from

those with three to four years of experience of implementation. Once the employee is

more familiar with the new system, the resistance level should decrease. In other words,

the high resistance levels in Organization 2 may be totally caused by the changing

process, regardless of any cultural adjustments in the implementation.

Another possible explanation is the use of outside consultants in the

implementation process of Organization 2. The outside consulting team has little power

to convince the employee to accept the new system. Because the employees have no

loyalty to the outsiders, they may be reluctant to follow the outsiders' recommendations.

Additionally, Organization 1 did not fully implement the ABC system. For example, the

organization does not use the ABC information for the performance measurement

purpose, as intended. Moreover, the limitation of being a government enterprise has

caused no organizational restructuring and no improvement in work processes. The

organization could not gain the benefit of ABC. At the same time, there is little threat to

the current positions of employees. As a result, the resistance level of Organization 1 is

lower than expected.

Two other issues need to be considered. First, the development of Proposition 4

assumed a department as a group that employees should have loyalty to. However, it is

possible that the employees may view the whole organization as the group to which to be

loyal. Unfortunately, the current study did not test for this perception. The issue of

92

loyalty to a whole organization or to a particular department is testable and needs to be

done in future research. Second, one of the assumptions for Proposition 2 is that the

employees prefer less job effort and view it as an improvement, resulting in a lower

resistance level. However, it is possible that people determine a decrease in job effort as

a decrease in the importance of their position and resist the new system that reduces their

job effort. This different interpretation of improvement in job effort is another

explanation for the contradictory results.

CHAPTER 6

LIMITATIONS AND CONCLUSIONS

Limitations

This study has many limitations. The most important limitation is the

generalizability of the findings due to the nature of this study and the use of a small

sample size. The differences in the organizational culture of government-owned utility

enterprises limits the ability to extrapolate the findings to private or public companies, as

well as to other industries. However, Yin (1989,21) stated that "case studies, like

experiments, are generalizable to theoretical propositions . . . and the investigator's goal

is to expand and generalize theories (analytic generalization) and not to enumerate

frequencies (statistical generalization)." While this study helps build a theory about a

specific setting, future research should replicate in other settings in order to increase

external validity of the theory.

Second, the field-based nature of this study implies that many extraneous

variables exist and are uncontrollable. For example, the comparability among three

organizations is limited in terms of implementation phases. Each organization

implements ABC at a different time period. The perception of employees toward the new

costing system at the beginning of the implementation process may differ from the one

93

94

after three to four years since the implementation (when the employee is more familiar

with the new system). An interesting future research question is to examine the

employees' perceptions of the new system in Organization 2 at the same time period as

Organizations 1 and 3 (about three to four years after the implementation). This future

research should provide more understanding about whether the "culturally-adjusted

ABC" implementation is more successful and has less resistance than the "non-culturally-

adjusted ABC" implementation. This would eliminate the uncontrollable variable, which

is the changing process that results in high resistance because of the introduction of the

new system.

Third, the use of self-reported measures is a limitation. According to Brewer

(1994, 17), "Subjects will only report what they know and choose to relate about their

beliefs . . . [that] do not necessarily correlate with an individual behavior." Fourth,

although the study tried to control for the confounding effect of acquiescence response

bias in the questionnaire, the measure of acquiescence response bias in this study has

unsatisfactory reliability. As a result, the variable was dropped, and further analysis was

conducted without the control of this variable. Moreover, that effect cannot be controlled

in the interview session. "Acquiescence is the tendency to give a positive answer to any

question, regardless of its content" (Hofstede 1980, 78). Unfortunately, people from

Southeast Asian countries such as Thailand tend to exhibit a high acquiescence response

bias (Hofstede 1980). The detailed analysis of raw data supports this issue. Most of the

subjects provided the responses to the questionnaire on the positive side. For example, in

answering the behavioral attribute items, if the subjects did not choose the "no change"

95

option, most of them chose at least the "moderate improvement" option. However, this

study compared three organizations in the same culture. Although there was a high

acquiescence response bias, it would create the same impact on the responses of all three

organizations. Therefore, this limitation should have little or no impact on the overall

results.

Conclusions

There are conflicting results in this study. Although the regression analysis

provides some support to the formal theoretical proposition, the descriptive statistics

indicate some contradictory results. As mentioned in the Limitation section, there is an

uncontrollable variable that could have driven the overall results. That variable is the

stage of the implementation that differs among three organizations. Future research

examining Organization 2 in the next two to three years may provide better comparability

and more understanding concerning the impact of "culturally-adjusted ABC"

implementation. The other possible explanations for contradictory results include the use

of outside consultants and the extent and scope of implementation.

Although there are many limitations in this study, the findings provide some

contributions. First, this study makes some contributions to the cross-cultural behavioral

research in accounting that attempts to answer the question of whether the accounting

practices in one culture can be transferred without modification for effective use in

another culture (Perera 1989). With the accelerating globalization of business, the

importance of this issue is increasing. Companies have to be concerned with "whether

96

management methods which work effectively in one national setting will be as effective

when applied in another national setting without change" (Chow et al. 1997, 348). The

results from narrative analysis indicated that there were several modifications when the

organizations attempted to implement the ABC system in the Thai environment.

Second, this study provides some contributions to activity-based costing

literature. As seen from the literature review, there are a limited number of studies

concerning the behavioral impact of the ABC implementation. The current study

provides more understanding of four behavioral attributes in implementing the ABC

systems. Specifically, the findings identify the impact of the empowerment behavioral

attribute on the resistance levels. Finally, this study is mainly beneficial to both Thai

businesses and governmental organizations. Although the generalizability is limited, as

discussed above, this study is a starting point for developing a model for the

implementation of ABC in the Thai environment. This model still needs further tests on

other companies in various industries. Nevertheless, it provides useful suggestions to

companies or organizations that plan to adopt and implement the ABC concept.

Regardless of the conflicting statistical results, the narrative analysis identifies some

cultural considerations and modifications needed to mitigate resistance to implementing a

new costing system.

The results of this study support Proposition 1 that an ABC system that causes

empowerment and redistribution of power will encounter a higher resistance level,

particularly in Thailand where there is large power distance and people accept external

locus of control by more powerful others as the norm. On the other hand, the results do

97

not support Proposition 2 and provide no evidence to address Propositions 3 and 4.

Although the propositions posited in this study are logical, there is no strong evidence to

support them due to several confounding factors not included in their development.

These factors are the extent and scope of implementation, the stage in the implementation

process, the unique context of the enterprise, and the use of outside consultants. The

details of each factor are discussed as follows.

First, Organization 1 did not fully implement the ABC system as intended. Due

to the limitation of being a government enterprise, there was relatively no change in work

processes. Moreover, the organization could not identify key performance indicators,

causing an inability to use the ABC information for performance measurement purposes.

As a result, the resistance level in Organization 1 was found to be low. Second, the

different stage in the implementation process among three organizations is another

important factor that could have driven unexpected results. Specifically, the beginning

phase of the ABC implementation in Organization 2 causes a higher resistance level

because people are not familiar with the new system and resist any changes that affect

their current situation. The results from Organization 3 indicate that once the employees

became familiar with the new system, the resistance level is reduced. Third, the unique

situation of a government enterprise causes changes in the implementation processes.

The implementation plan does not follow as intended and leads to unexpected results.

Fourth, the use of outside consultants may create higher resistance because the outsiders

have little power to convince the participants to accept the new system. The employees

have no loyalty to the outside consultants to follow their recommendations.

98

Identifying these confounding factors is beneficial to future research. Researchers

should recognize the importance of these three factors when investigating the ABC

implementation in future studies. Moreover, there is a need for future research to

increase the generalizability of Proposition 1 by examining the ABC implementation in

the public and private companies in the same industry, as well as in other industries.

Finally, globalization makes the world smaller, but the influence of cultural differences is

still posing great challenges in future research.

APPENDIX A

RESEARCH MODEL

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APPENDIX B

INTERVIEW GUIDE

101

102

Interview Guide

1. Why did you adopt an ABC system?

2. When was the system adopted? How long did it take to implement?

3. What are the expected benefits of ABC adoption? Did you get the benefits you

expect?

4. Describe the scope of implementation

a. Whole Organization

b. Department / Division

5. Describe the stages of ABC implementation (Project schedule)

6. What was/is the time frame for each stage of implementation? How did the actual

implementation go?

7. Describe the current stage of implementation

8. Did you use:

a. Outside implementers/facilitators

b. Inside implementers/facilitators

What is the role of the consultants who helped implement ABC?

9. Who is responsible for collecting and/or analyzing information required for the ABC

system?

a. Accounting

b. Production

c. MIS

103

d. Other departments

10. Who will the information be distributed to or to whom is it distributed?

11. What will the information be used for (or what is the information used for)?

a. Planning and decision making

b. Performance measurement

c. Other

Are there written procedures and documents in place for the use of data?

12. Describe the decision making process in the organization before and after the ABC

implementation.

a. Individual vs. Group

b. Empowered vs. Autocratic

13. Was there team development during and after the implementation of ABC? Was

there encouragement of cross-functional teamwork during and after the

implementation of ABC?

14. Has the ABC implementation had any effect on cross-functional communication?

15. Did you encounter any resistance to the implementation? How did you handle it?

16. Do you see the improvement of productivity after implementing ABC? How do you

measure productivity? Do you use total factor productivity (TFC = ratio of output to

aggregate input) as a measurement? What other measures do you use?

17. Do Production managers, Engineers, and Accountants have different views as to the

purpose/usefulness of the ABC system?

104

Departmental Interviews

1. Describe your role in the implementation of ABC.

2. How was the implementation handled in your department?

3. What problems were encountered during implementation?

4. What were some concerns expressed during and after implementation? How were

these concerns addressed?

5. What would you have done differently when implementing ABC?

6. Is there development of teamwork with other departments?

7. Describe the primary sources of information that are available to you for decision

making?

a. Before ABC implementation

b. After ABC implementation

8. How do you use ABC information in your job?

a. Planning and decision making

b. Performance measurement

c. Other

9. Have performance evaluation criteria changed since the ABC implementation?

10. Do you think ABC improves your ability to positively affect the productivity of the

organization? How, or why not?

11. What concerns have been expressed (do you have) about how ABC might affect

individuals (you) and/or the way you perform your duties?

APPENDIX C

QUESTIONNAIRE (ENGLISH VERSION)

105

106

Questionnaire

Instructions

People differ in what is important to them in a job. The following list is a number of factors which people might want in their work. Please indicate how important each of these is to you.

In answering questions 1-6, try to think of those factors which would be important to you in an ideal job; disregard the extent to which they are contained in your present job.

PLEASE NOTE: Although you may consider many of the factors listed as important, you should use the rating "of utmost importance" only for. those items which are of the most importance to you.

With regard to each item, you will be answering the general question:

"HOW IMPORTANT IS IT TO ME TO . . . "

Please circle the number based on the following scale.

1 = Of Utmost Importance to me 2 = Very Important to me 3 = Of Moderate Importance to me 4 = Of Little Importance to me 5 = Of Very Little or No Importance to me

1. Have challenging work to do—work from which I can get a personal sense of accomplishment?

1 2 3 4 5

2. Have training opportunities (to improve my skills or to learn new skills)?

1 2 3 4 5

3. Have good physical working conditions (good ventilation and lighting, adequate workspace, etc.)?

1 2 3 4 5

4. Have considerable freedom to adopt my own approach to the job?

1 2 3 4 5

5. Fully use my skills and abilities on the job? 1 2 3 4 5 6. Have a job which leaves me sufficient time for my personal or

family life? 1 2 3 4 5

107

The descriptions below apply to four different types of managers. First, please read through these descriptions:

Manager 1 Usually makes his/her decisions promptly and communicates them to his/her subordinates clearly and firmly. Expects them to carry out the decisions loyally and without raising difficulties.

Manager 2 Usually makes his/her decisions promptly, but before going ahead, tries to explain them fully to his/her subordinates. Give them the reasons for the decisions and answers whatever questions they may have.

Manager 3 Usually consults with his/her subordinates before he/she reaches his/her decisions. Listens to their advice, considers it, and then announces his/her decision. He/she then expects all to work loyally to implement it whether or not it is in accordance with the advice they gave.

Manager 4 Usually calls a meeting of his/her subordinates when there is an important decision to be made. Puts the problem before the group and tries to obtain consensus. If he/she obtain consensus, he/she accepts this as the decision. If consensus is impossible, he/she usually makes the decision him/herself.

7. For the above types of manager, please mark the one which you would prefer to work under.

1. Manager 1 2. Manager 2 3. Manager 3 4. Manager 4

8. To which one of the above four types of managers would you say your own manager most closely corresponds?

1. Manager 1 2. Manager 2 3. Manager 3 4. Manager 4

9. How frequently, in your experience does this problem — Employees are afraid of express disagreement with their managers ~ occur?

1. V ery frequently 2. Frequently 3. Sometimes 4. Seldom 5. Very seldom

108

After reading each of the 36 items in this questionnaire, please provide an honest indication of the extent to which you agree or disagree with each statement by circling the number based on the following scale.

1 = Strongly Agree 2 = Agree 3 = No Opinion 4 = Disagree 5 = Strongly Disagree

10.1 would never worry that others might think I have poor judgment in some situations.

1 2 3 4 5

11.1 would never worry about the possibility of being judged a fool in some activities.

1 2 3 4 5

12.1 would never worry about appearing to be beyond my capabilities at work.

1 2 3 4 5

13.1 tend to worry that others may think my beliefs and opinion are incorrect or funny.

1 2 3 4 5

14.1 tend to worry that others will think I am not keeping up with my work.

1 2 3 4 5

15.1 tend to worry that others may think I do not know what I am doing.

1 2 3 4 5

16.1 tend to worry that others may think I do not keep well informed about development in my field.

1 2 3 4 5

17.1 tend to worry that others may think I am not intelligent enough for my job.

1 2 3 4 5

18.1 rarely worry about being considered by others to be misinformed or ignorant about certain things.

1 2 3 4 5

19.1 have a tendency to worry that others will laugh at my ideas. 1 2 3 4 5 20. People like myself have very little chance of protecting our

personal interests when they conflict with those of more powerful people.

1 2 3 4 5

21. My life is mainly controlled by powerful others. 1 2 3 4 5 22. In order to have my plans work, I make sure that they fit in

with the desires of people who have power over me. 1 2 3 4 5

23. If important people were to decide they did not like me, I probably would not make many friends.

1 2 3 4 5

24.1 feel like what happens in my life is mostly determined by powerful people.

1 2 3 4 5

25. Getting what I want requires pleasing those people above me. 1 2 3 4 5

109

26. Although I might have good ability, I will not be given leadership responsibility without appealing to those in position of power.

1 2 3 4 5

27. There have been occasions when I took advantage of someone.

1 2 3 4 5

28. No matter who I am talking to, I am always a good listener. 1 2 3 4 5 29.1 have never strongly dislike anyone. 1 2 3 4 5 30.1 have never felt that I was unfairly punished. 1 2 3 4 5 31.1 have never been bothered when people express ideas very

different from my own. 1 2 3 4 5

32.1 am sometimes bothered by people who ask favors of me. 1 2 3 4 5

Each of the next 13 items is to be read:

"As a result of using an activity-based costing system . . . "

33. My job will be more satisfying. 1 2 3 4 5 34. Others will better see the results of my efforts. 1 2 3 4 5 35. It will be easier to perform my job well. 1 2 3 4 5 36. The accuracy of information I receive will be improved. 1 2 3 4 5 37.1 will have more control over my job. 1 2 3 4 5 38.1 will be able to improve my performance. 1 2 3 4 5 39. Others will be more aware of what I am doing. 1 2 3 4 5 40. My job will be made easier. 1 2 3 4 5 41.1 will spend less time looking for information. 1 2 3 4 5 42.1 will be able to see better the results of my efforts. 1 2 3 4 5 43. The accuracy of my cost figures will improve. 1 2 3 4 5 44. My performance will be more closely monitored. 1 2 3 4 5 45. The department will perform better. 1 2 3 4 5

Since the initial phase of implementing activity-based costing systems, indicate the extent and direction of the change in the following attributes by circling the number based on the following scale.

1 = Great Improvement 2 = Moderate Improvement 3 = No Change 4 = Moderate Decay 5 = Extensive Decay

110

46. Respect from others in workplace. 1 2 3 4 5 47. Access to process information. 1 2 3 4 5 48. Ownership of information. 1 2 3 4 5 49. Opportunity to suggest work related improvement. 1 2 3 4 5 50. Involvement in making work related decisions. 1 2 3 4 5 51. Complexity of my job. 1 2 3 4 5 52. Effort expended on my job. 1 2 3 4 5 53. Overall work load. 1 2 3 4 5 54. Variety of tasks I am required to perform. 1 2 3 .4 5 55. Level of responsibility connected with my position. 1 2 3 4 5 56. Stringency of performance criteria. 1 2 3 4 5 57. Number of performance criteria. 1 2 3 4 5 58. Applicability of performance criteria to my job. 1 2 3 4 5 59. Fairness of performance criteria. 1 2 3 4 5 60. Difficulty in attaining the level of performance expected. 1 2 3 4 5 61. My productivity in terms of providing more relevant

information. 1 2 3 4 5

Using the following five-point scale, for each question, select the descriptor that best describes each attribute during the implementation of ABC.

62. Level of communication across functions. 1 2 3

Excellent Good Adequate 4

Poor Extremely Poor

63. Amount of presence of cross-functional work teams 1 2 3 4

Very substantial Present Teams present Few teams with presence and with moderate but not present some contribution contribution functional contribution

No teams present

If the answer of item 63 is 5, please skip items 64-66

64. The spirit of cooperation and teamwork across functions increases throughout the organization

1 2 3 4 5 Strongly Agree No opinion Disagree Strongly agree disagree

Ill

65. Working in cross-functional teams creates among members. 1 2 3 4 5

Extensive Moderate No Change Some Many cooperation cooperation disputes disputes

66. Using cross-functional teamwork in problem solving and process understanding is 1 2 3 4 5

Very useful Useful Somewhat Not useful Not used useful

67. My attitude toward the implementation of ABC is 1 2 3 4 5

Very positive Moderately Passive Somewhat Very negative positive negative

Additional Information

1. What is your gender? Male Female

2. What is your age? 20-30 years old 51 -60 years old 31 -40 years old 60 or more years old 41-50 years old

3. Where did you get the last degree In Thailand Oversea, please specify the country

4. Organization Name

Department

5. How many years have you worked here?

How long have you worked in your current position?

6. Have you received training in activity-based costing? Yes No

7. Do you use activity-based information as an aid in decision making? Yes No

APPENDIX D

QUESTIONNAIRE (THAI VERSION)

112

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33. €u|flnvifl ,l^mj-3n\4ii9j€uyinTu 1 2 3 4 5

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V 45. mbs jvnu^rwwuVt fn lu 1 2 3 4 5 !

117

V I

(Activity-Based Costing System)

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2 = nmfwwvn ihunfns

4 = i f lau fwihunan

46. mn thn^nn^wh i f o j j f l V

1 2 3 4 5

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•ww to

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56. nnnjflT^ylynn?^auV^'.ntjonunnr«inv3ni4 1 2 3 4 5

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IiJ?(^iflanfliCT9uv!a5untJ^uft^^tin^run?riJijijry^i?fu-/iunsnrrij (Activity-3ased Costing

System) l i h i n H

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63. (Cross functional teams)

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U I V

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ash-asu

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1.

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2. 31iJ

20 - 30 U 51 - 60 t3

31 - 40 t l 60 l ! v m w n n r m

41 - 50 t l

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fiirril 10,000 UT/l 60,001 - 100,000 UT/l V

10,000 - 30,000 UT/l 100,000 UT/l i i u l l ]

30,001 - 60,000 UT/l

4. fliusunn?Finwimflwnr/Huu

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prwikrivifl,

5. Ss?in?

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. ifiti l i i i f i j j

8. «wH^Qyflsnn?ruuury^^tr/i:ii^ri?ti)Tioiilunn?Ffesu^':,v'^,Uj

H u iH

APPENDIX E

ABC BENEFITS

120

121

ABC Benefits

1. More accurate product costs 2. Assists in product design and product mix 3. Facilitates elimination of waste by providing visibility of non value-added activities 4. Provides behavioral incentives to improve manufacturing excellence 5. Encourages commitment to quality and continual improvement 6. Mitigates against the misuse of resources 7. Identifies the source of cost by identifying cost drivers 8. Links corporate strategy to operational decision making 9. Ensures that time, quality, flexibility and conformance to scheduled goals are

achieved by linking performance measures to strategy 10. Encourages continual improvement and total quality control because planning and

control are directed at the process level 11. Encourages the effectiveness of budgeting by identifying the cost/performance

relationship of different service levels 12. Improves profitability by monitoring total life cycle cost and performance 13. Helps managers to understand what company does, how it does it and whether it

contributes to the corporate objective 14. Facilitates improved traceability 15. Facilitates accountability 16. Forces management attention on interdependencies of departments 17. Increases comparisons between divisions 18. Breakdown of functional line communication barriers 19. Employee empowerment 20. Increases customer satisfaction 21. Lower costs 22. Increases profitability 23. Increases flexibility 24. Increases speed of response 25. Information more accessible and more timely 26. Increases understanding of overhead costs 27. Improves shareholder value 28. Sustains competitive advantage

Source: McGowan (1994, 130)

APPENDIX F

RESULTS OF RAW DATA

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APPENDIX G

TABLES

147

TABLE 11

Subjects by Gender

148

Total Male Female

Organization 1 47 36 11

Organization 2 48 14 34

Organization 3 35 14 21

Total 130 64 66

TABLE 12

Subjects by Age

Total 20-30 Year of 31-40

Age 41-50 51-60

Organization 1 47 3 8 30 6

Organization 2 48 - 10 27 11

Organization 3 35 3 15 12 5

Total 130 6 33 69 22

149

TABLE 13

Subjects Education - Obtained Last Degree

Total In Thailand Oversea

Organization 1 47 42 5*

Organization 2 48 48 -

Organization 3 35 35 -

Total 130 125 5

Four subjects received their last degree from U.S., and another received from France

TABLE 14

Subjects Average Years of Experience

Avg. Number of Years Avg. Number of Years N Employed at the Worked in current

organization position

Organization 1 47

Organization 2 48

Organization 3 35

Total 130

19.2

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6.0

5.0

150

TABLE 15

The Utilization of ABC Information by Organization*

Total "Yes" responses "No" responses Data Missing

Organization 1 47 33 12 2

Organization 2 48 36 11 1

Organization 3 35 17 17 1

Total 130 86 40 4

* Question: Do you use activity-based information as an aid in decision making?

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