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Lecture notes of 9 pages for the course Management accounting at UBir (-)
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Advanced Management AccountingTopic 4 – Implementing Management Control Systems (MCSs) in NGOs
In preparation for day 4, please read
Chenhall, Hall and Smith’s (2010) CIMA research report,
and respond to all the questions detailed below.
Chenhall, Robert H., Matthew Hall, and David Smith. The Role of Management Control Systems in NGOs. Chartered
Institute of Management Accountants, London, 2010.
http://secure.cimaglobal.com/Documents/Thought_leadership_docs/edu_ressum_social_capital_jun2010.pdf.
Preparation questions
Q1: Explain, in your own words, the difference between bridging and bonding social capital.
Bonding social capital is the way that strong interpersonal relationships are formed within a
community with the shared values and beliefs, whereas bridging social capital is sort of like a network
builder between parties who have different backgrounds in our society (race, religion, social class
etc).
The main point is that the difference between bridging and bonding social capital is that bridging is
primarily focussed on the external relationships of the organisations. So how the organisations has
relationships with other organisations will have bridges with external parties. Whereas bonding social
capital is much more about the internal relationships. It is much more about kind of building this
sense of solidarity within the organisation.
Why talk about social capital? It is often when accountants introduce new systems, they focus on the
technical dimensions which causes major problems over the last decade. So by thinking about social
capital in terms of bridging and bonding social capital, it forces us to think about the people involved
in making the system work. That can be about the external relationships that are crucial. But it can
also be about the internal relationships as well with bonding social capital. The reason to raise it as a
concept is simply to focus our attention on the people involved in making the system work and giving
us a way of thinking about the different dimensions of how humans.
Q2: What is the relationship between bridging and bonding social capital?
They work cohesively to bring about benefits to NGO; bonding being the one who strengthens
interpersonal relationships of a community with similar beliefs and bridging is the action, based on
such values, that will tether the network between various agencies and clients. For example, bonding
social capital aids in the development of solidarity within the NGO (employees), while bridging
extends it to other stakeholders in the same network.
, Q3: Why do the authors think the notion of social capital is useful for studying MCS introduction in
an NGO?
The authors wanted to view this case study from sort of a focus on relationships instead of sort of
asking whether it was the right techniques that has been used for calculations in the system could be
changed. Instead, their understanding of the case is that the system broke down or kind of did not
work because of relationships. But what is interesting is that the system was introduced to help build
relationships. It can be almost like a paradox. You need the system to build relationships externally.
But the system itself breaks down relationships internally or harms the internal bonding. In this sense,
what that allows the authors to do is to focus their study on how an accounting system influences
those relationships. How it influences the network within an organisation and also outside the
organisation. So the authors use social capital because they want to focus on relationships. They see
relationships as the motivation for using the system. They also see relationships as the main problem
of why the system did not work. So social capital in that sense gives the concept to focus us on the
human dimension of management control systems.
So does it mean that management control systems are needed to build external relationships? Because
for example, the donors or the government have an increased emphasis on cost efficiency. At the
same time, it breaks down relationships internally because the objective of the employees internally is
about advancing welfare services and not focussing only on financial things. In this CIMA case study
management control systems are about helping build those external relationships to make it look you
are going to handle money responsible and therefore you can be trusted with money from donors. But
the problem is that the system employees did not trust the system. They thought that the system was
focussed, was turning the NGO and the charity into an organisation focused on money and finance.
And they thought that this was a threat to that provision of welfare services.
Q4: How can we use the notion of social capital to explain the effectiveness of both coercive and
enabling controls? *it combines two different conceptual frameworks*
-> can draw two by two matrix of bridging and bonding one side and coercive and enabling the other
With enabling control, we are trying to encourage the employee to use that decision-making or
problem-solving skill or use their education, their training, their expertise to solve a problem. We are
giving them flexibility to do that, but we are kind of guiding how they do it. It is not complete
autonomy. It is not that there is no rules and there is no guidance at all. We still give them some rough
direction, but we do not really tell them what to do. So how does that relate to social capital? Well,
when would an employee be more comfortable in using their own judgement? Would they be more
comfortable in using their own judgement if they had a sense of solidarity knowing that their team
will support them in either fixing it if it goes wrong or helping to sort of put my decision into practice.
And if my decision goes well, will I receive recognition for that? Do I trust the company to recognise
my work? If it does not go right, is that a huge risk or will people understand?
The point is that if you have got quite a strong sense of bonding, social capital or strong sense of
solidarity, people will be more willing to use their own judgement. When there is quite a strong
bonding social capital, there is a strong sense of solidarity. And in that regard, people might be more
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