A Typology of Situations of Accounting Systems Integration

El Orf, Lazhar Article A Typology of Situations of Accounting Systems Integration Journal of Accounting and Management Information Systems (JAMIS) Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: El Orf, Lazhar (2012) : A Typology of Situations of Accounting Systems Integration, Journal of Accounting and Management Information Systems (JAMIS), ISSN 2559-6004, Bucharest University of Economic Studies, Bucharest, Vol. 11, Iss. 3, pp. 455-483 This Version is available at: https://hdl.handle.net/10419/310502 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ Accounting and Management Information Systems Vol. 11, No. 3, pp. 455–483, 2012 A TYPOLOGY OF SITUATIONS OF ACCOUNTING SYSTEMS INTEGRATION Lazhar EL ORF 1 Conservatoire National des Arts et Métiers, France ABSTRACT This paper presents the first results of a qualitative research about the organization of the Accounting Information Systems (AIS) of four companies operating in different contexts (two medium-sized and two large companies). Our study's main objective is to contribute to the understanding of the determinants of the integration of accounting information systems. It shows that the strategy is, beyond all other considerations, the primary determinant of integration practices of accounting systems of the companies surveyed, followed by the size and elements of context such as the system of management control. Organizations whose activities are not diversified (or monoactivity) opt more for accounting systems partially integrated or stand-alone while those whose activities are diversified prefer more diversified integrated accounting systems whose design is based on event-based approach and multidimensional accounting (Sorter 1969). The integration of accounting subsystems seems to be part of the mechanisms developed by diverse organizations to manage / control their very different structures. Hence, the theory of differentiationintegration (Lawrence and Lorsch 1969) explains very well the practical integration of accounting systems observed. Our study leads to a typology of modes of integration of accounting systems: (1) multidimensional, (2) integrated, (3) partially integrated, (4) autonomous. Theory of differentiation-integration, event-based approach, multidimensional system, integrated system, partially integrated system, autonomous system 1 Correspondence address: Lazhar El Orf,Conservatoire National des Arts et Métiers, Chaire de Comptabilité Financière et Audit, 40 rue des Jeuneurs, 75002, Paris, France; Email : [email protected]  Accounting and Management Information Systems Vol. 11, No. 3 456 INTRODUCTION This paper deals with the organization (or architecture) of Accounting Information Systems (AIS) and as a research integration of accounting information systems. We define Accounting Information System as all technical devices (applications, databases, interfaces, Enterprise Resource Planning (ERP), Data Warehouse, Enterprise Application Integration (EAI) that an organization puts in place to: (1) capture, classify and record data of encrypted database, and (2) provide after appropriate treatment, a set of information consistent with the needs of various stakeholders. Furthermore, as some authors in the field (Dupuy, 1990; Kipfer, 1991; Benchmarking survey of OEC 1998; Grenier, 2000; Tort, 2000; Méreaux, 2011), we retain the broadest definition of AIS including: (1) applications upstream feeding the accounting system data (Purchasing, Production, Sales, Payroll), (2) accounting applications to synthesize data streams from different business units of the company and to produce summary statements (balance, ledgers, balance sheet, income statement) and (3) downstream applications that exploit the data for the particular needs of management control (dashboards) and reporting. We mean by an integrated accounting system, a system which provides the coupling between the various accounting (financial accounting, management accounting) and between them and applications upstream (operations) and downstream (decisions). It should allow (1) the unique but also multidimensional entry of economic events (Purchasing, Production, Sales), (2) the storing of data in its raw state into a common database that is accessible to all users, (3) the restitution of multidimensional and differentiated information. ERP fulfil these conditions. Grenier (2000: 1126) considers that ERP “gather in the same set features previously contained in separate applications: purchasing, production, sales, human resources, accounting, treasury, etc. Most often designed around a central core of an accounting, these systems have the following characteristics: (1) they realize the integration of the different business processes: purchasing, manufacturing, shipping, invoicing, payments, (2) they realize the integration between business processes and management processes, (3) they rely on a single input event described in all their dimensions (hence the name of event-driven systems and multidimensional).” Our study's main objective is to contribute to the understanding of the determinants of the integration of the AIS. It offers, through case studies, to provide qualitative explanations of the integration of accounting systems of the studied companies and to identify their determinants. These practices are poorly studied by the accounting community (El Orf and Tort, 2006; Méreaux, 2011), as pointed out by Bidan (2004: 10): “the practices of integration are a still uncultivated research area”. Meyssonnier and Pourtier (2004: 2) wrote that “the theme of ERP is still not enough dealt with by the accounting community”. Our study also aims to highlight the relevance of the approach of the events accounting which provides a theoretical A typology of situations of accounting systems integration Vol. 11, No. 3 457 framework for the study of integrated accounting information systems. This demonstration was impossible a few years ago because it had never been put in practice before. The emergence of ERP was the starting point of our research. These integrated software packages, which were first implemented in large companies, won the field of SMEs today. The 2006 Survey of the Observatory CEGOS 1 on accounting and finance function performed on a sample of 61 French companies (SMEs and large firms) reveals that 77% of large companies on the panel are equipped with an ERP with an average of 4 modules management (such as Finance, HR, MIS, Sales, Logistics etc.). SMEs also show scores higher than the equipment ERP results observed in previous studies. However, only a few firms implemented all ERP modules (Themistocleous et al., 2002; Bidan et al., 2002). Markus (2000) recognizes that company information systems are often composed of a mixture of several tools (ERP, EAI, Data Warehouse), but he also insists on the fact that one of them is usually the main technology of integration. Reix (2004: 96) notes that “after fifty years of computerization, there is, in most companies, the coexistence of old applications using operating systems 'owners' applications, “client-server” type applications from personal computing and applications focused on Internet technologies.” The general observation is that the organizational practices of accounting systems differ from one company to another or from one unit to another, but the reasons of this discrepancy are not sufficiently known. Our research is an attempt to answer the question: “Why do the integration practices of accounting systems of the companies studied differ?”. This issue can be clarified by the following two questions: “How are the accounting systems of the companies studied organized (integrated, autonomous, etc.)?”, and “What are the contingency factors that explain their degree of integration?” Our work also aims to demonstrate the relevance of Sorter’s event-based approach as a theoretical framework of design of information systems of the companies studied. The problem is not only to describe and explain the practices of non-integration or integration of accounting applications of the companies studied, but also to confront them to the model of reference of Sorter (event-based approach): “Is the event-based approach relevant to understand the practical organization of the accounting systems of the companies studied ?”. Finally, as our work’s objective is to mobilize the theory of Lawrence and Lorsch (1967) that reveals different situations of organizational differentiation and integration, it will be legitimate to ask the following two questions: “are there different situations of differentiation and integration of subaccounting systems?”, “does the theory of differentiation-integration of Lawrence and Lorsch allow us to explain the observed accounting integration situations?” The analysis of the various writings reveals that the theoretical answers to these questions remain intuitive and at odds with reality. Some authors limit themselves to the prediction of favorable factors conducive to the development of integrated Accounting and Management Information Systems Vol. 11, No. 3 458 accounting, such as large businesses, corporate groups, banks (these structures are in fact characterized by a strong need for differentiation of accounting systems). These authors have drafted, based on their common sense and their own experience, the types of practices involving AIS in contingency factors. Beauvoir & Flaters (1995) and Grenier & Bonnebouche (1998), for example, have proposed a theoretical typology involving respectively three types of accounting organization (“Autonomous Accounting”, “Semi-integrated Accounting”, “Integrated Accounting”) into three types of firm size (“small, medium to large, and very large businesses”). Other authors have recently attempted to empirically validate some links between the AIS and practices of contingency factors. Tort’s thesis (2001) shows the relevance of accounting integration in large French companies are often characterized by structural complexity due to the multiplicity of business units and legal entities. Dealing with information systems management of French SMEs, Bidan's thesis (2003) shows that environment and size strongly influence the practices of integration of information systems, whereas Samara's (2004) shows that the practical integration of accounting systems of banks are determined by environment, strategy and size. 1. THE THEORETICAL FRAMEWORK Our study intends to combine two different theories for understanding the determinants of the accounting systems integration: 1.1. Sorter’s theory of events (1969) which was proposed following a study carried out by the researcher on the epistemological status of accounting, considers that the accounting data generated by economic events should be stored in the rough. In fact, the raw data allow differentiated sub-systems to satisfy multiple users whose needs are varied and changing. Each user can indeed build, using data stored in the rough (or disaggregated), the corresponding sub-system to his needs. This normative accounting theory and its extensions propose a method of organizing and processing of accounting data whose principles are to: The capture single but multidimensional data generated by economic events (Purchasing, Production, Sales), The storage of these data in its disaggregated state into a common database that is accessible to all users, The ability to query, on a multidimensional level, the stored raw data for these users. The real application of these principles has emerged in the mid-1990s through the ERP (SAP, BAAN, ORACLE, JD EDWARDS etc.). These software packages allow, indeed, total integration of company information systems (Davenport, 1998; Rowe, 1999; Reix, 2000; Markus & Tanis, 2000; Markus, 2001), and therefore constitute a very complete implementation of Sorter’s theory (Grenier, 2000; A typology of situations of accounting systems integration Vol. 11, No. 3 459 Tondeur & De Villarmois, 2003; Levy, 2004; El Orf, 2005; El Orf & Tort, 2006; Doucet & De Villarmois, 2007). 1.2. The theory of differentiation-integration of Lawrence and Lorsch (1967) shows that the “one best way” does not exist and that the organization system, in order to be efficient, must fit the organizational context of the company (environment, strategy, size, structure etc.) (see Lawrence & Lorsch, 1967; Khandwalla, 1977; Otley, 1980; Mintzberg, 1982; Kalika, 1989). More specifically, the mechanisms of differentiation and integration of the organization must be tailored to the company. Each functional unit has, indeed, its tasks, objectives, constraints, behavior as well as its work horizons, and the company must develop integration mechanisms suited to its specificity such as hierarchy, procedures for managing, coordinating committees, meetings but also the accounting system (Lawrence & Lorsch, 1967). The accounting system, which is part of the organization, must meet the requirements of differentiation and integration of the company (Dupuy, 199; Kipfer, 1991; Bouquin, 1991; Bergeron, 1996; El Orf, 2005; El Orf & Tort, 2006). Indeed, each unit, to cope with its environment, must establish appropriate information systems. The multiplicity of functional units naturally generates a multiplicity of users and a variety of needs, which implies the differentiation of sub-systems of company information. This differentiation can take many forms such as the nature of the data used (data on cost, time, quality etc.) and methods of treating these data (integrated applications, semi-integrated, autonomous, manual processing). Ultimately, our research aims to mobilize the theory of differentiation-integration of Lawrence and Lorsch to provide, by analogy, explanations of integration practices of accounting systems studied. This transposition can be expressed as follows: There are various modes of integration of the organization adapted to different constraints (Lawrence and Lorsch), The accounting information system is a dimension of organization, There may be quite different modes of integration of the accounting system adapted to different constraints. Our work is based, regarding our research issue and accounting literature, on a conceptual framework combining the theory of Lawrence and Lorsch (1967) with the few existing studies on the organization of accounting systems, including De Beauvoir & Flaters (1995); Bonnebouche & Grenier (1998); Leclere (1995); Tort (1998, 2000 and 2003); Samara (2004) and Bidan (2003). Accounting and Management Information Systems Vol. 11, No. 3 460 2. METHODOLOGY We used for this work a method based on a “hybrid exploration” (Charreire & Durieux, 1999) which is to work by back and forth between empirical observations and theoretical knowledge. Indeed, we initially mobilized the theory of Lawrence and Lorsch and integrated the literature regarding the integration of accounting systems (Grenier, 2000; Tort, 2003, etc.), and then relied on that knowledge to make sense of our empirical observations. The exploratory nature of this research led us to choose a qualitative approach which is based on semi-structured interviews and direct observations made with users of the accounting systems of the companies surveyed (accounting, business, buyers, stores, HR, marketing, management controllers). For data analysis, we compared the cases with comparison tables (or matrixes as defined by Huberman and Miles, 1991). We have also mobilized the theory of differentiation-integration to provide explanations for observed integration practices (that is Yin’s method of pattern-matching, 1989). Our analysis method can be described as hybrid (qualitative data analysis supported by Lawrence and Lorsch theory). 2.1 The choice of cases To answer our research questions, we studied four Tunisian companies selected according to criteria of size and strategy (see Table 1). These companies were analyzed by pairs with different characteristics (opposite cases). The first pair consists of two major companies operating in two different contexts (different strategies). The group POULINA is a large company that operates in various competitive sectors and thus faces very heterogeneous and dynamic environments. Its competitive strategy is based on diversification into high value added activities to maximize its profits. Its organization is very differentiated and integration mechanisms are highly developed. They use the matrix structure, meetings, executive committees, rules and procedures and are based on developed management information systems (ERP, Data Warehouse, EAI, CRM, Intranet). Its control system is designed to track the implementation of the strategy of the group by its subsidiaries (controlled by the results in the sense of Mintzberg, 1982: financial control by the holding company coupled with a multi-criteria management control at the subsidiary level). It is based on a cutting of the structure in responsibility centers and the establishment of an transfer pricing system between them. As for its control system, it is designed around a system of multicriteria management control inspired by the Balanced Scorecards. This system is powered by multidimensional and integrated databases (ERP, Data Warehouse) which are installed in all group subsidiaries and used by all units (purchasing, production, sales). Leaders and executives of this company have a strong management culture. They are experts in management. A typology of situations of accounting systems integration Vol. 11, No. 3 461 The SONEDE is a large public company with a monopoly of production and distribution of drinking water. It evolves in a very stable and controlled environment. Its mission is to provide potable water to all parts of the country. Its objectives are social rather than economic. Its functional structure is highly centralized and is not designed for management control. Its control mechanisms are based primarily on procedures and rules (standardized work) but also on the planning of water infrastructure projects (planning control). Its control system is based on qualitative indicators and techniques closely related to its mission of serving water (supply rates of water, quality and water saving etc.). It consumes very little accounting data. Accounting therefore occupies a rudimentary position in its control system. It is primarily designed to manage daily operations (suppliers, customers, banks) but also to produce statutory accounting records. Accounting activities are, like the decision-making activities, highly concentrated within the head office. Accounting applications are therefore centralized and partially integrated (specific applications, proprietary applications from IBM, some ERP modules). The ERP has been installed at the head office, not to control the management of regional entities, but to centralize the flow of accounting data from these entities. Leaders and executives of this company have a culture of public administration. The opposition of these two cases should allow us to highlight the effect of the strategy and size but also the environment, structure and management control over the level of integration of accounting systems. The second pair consists of two medium-sized companies operating in two different contexts (different strategies). The group MEDDEB is a diversified family company in the agribusiness sector. It faces a competitive and varied environment. Its coordination mechanisms are diverse and multiple (functional structure in transition matrix, regular meetings, management reports). Its strategy, which focuses on cost savings and differentiation and diversification of products, is made operational through a system of management control to monitor the profit centers and associated key success factors. Its accounting information system, which plays a central role in the mechanisms of integration, is designed for management control of its operating entities (budget control coupled to a non-financial control). It consists of integrated applications (an ERP) and some specific applications and standard software (CIEL). This integration is designed primarily to facilitate the production of analytical data necessary for the implementation of the strategy of domination by the cost (mainly budget control). This company is owned by a leader with a strong management culture. The SME is a construction firm (construction and public works) that operates in an environment that is both competitive and regulated but also hostile. Its strategy is focused on compliance with specifications relating to contracts with Accounting and Management Information Systems Vol. 11, No. 3 462 its main client (the State and SOEs). Coordination is primarily achieved through standardization of work (technical standards) and the standardization of skills (engineering training) but also the mutual adjustment (project structure). Its management control system is designed to track the key success factors of the sector, namely the time of project implementation and compliance with the technical specifications of the works (it is a control system with a strong technical basis). This system consumes very little accounting data. Accounting thus plays a very timid role in its control mechanisms. Its role is limited to the management of current operations conducted with third parties (suppliers, banks). Its accounting applications are heterogeneous, highly centralized and juxtaposed. The preparation of annual financial statements is outsourced to an accounting firm. Note that this company is headed by a technician in construction (low management culture). The opposition of these two cases should allow us to reinforce and complement the findings from the opposition SONEDE and POULINA cases but also to generate new proposals on the accounting practices of organization of medium-sized family businesses. The table below summarizes the main characteristics of the cases studied. Table 1. Characteristics of firms in our study Company Specificity POULINA SONEDE MEDDEB SME Industry Agriculture, industry and service Exploitation and distribution of drinking water Dairy products and beverages Construction and public works Strategy Diversified Mono-activity Diversified Mono-activity Size Great 7200 employees Great 6851 employees Average 654 employees average 786 employees Age 1967 1968 1996 1993 Number of legal entities 68 companies 1 company 4 companies 1 company legal nature Private company Public company Private company Private company Management structure Decentralized Centralized Few decentralized Centralized A typology of situations of accounting systems integration Vol. 11, No. 3 469 Table 3.Summary of the accounting organization of MEDDEB and SME cases Company Variables MEDDEB SME The ownermanager culture Management culture Engineering culture Strategy Diversification in products with high added value; Cost reduction; Differentiation. Compliance with specifications: delay; Quality; Technical specificity. Environment Competitive and diverse (many manufactured products) Regulated and homogeneous (same constraints in all regions) but hostile. Structure Functional transition matrix: Structure decentralized; Differentiated structures (subsidiaries); Multiplicity of responsibility centers. Project structure: Geographically centralized but decentralized; Homogeneous structure (same type of projects in all regions); No responsibility center. Coordination Standardization of results; Hierarchy. Standardization work; Standardization of skills; Technical reports. Major problems of management Controlling entities: outcomes, cost, revenue. Control of project implementation: deadlines, technical specifications of the final product. Role of accounting in the value chain Accounting is used by the activities of the value chain (purchasing, production, sales) Accounting is used very little by the value chain (construction projects). This uses a lot of data but very little technical accounting data. Organization of accounting systems Differentiated and integrated accounting system: ERP product sub-systems differentiated information to control the management of various structures but also to manage transactions. Accounting system disintegrated (two-dimensional), composed of juxtaposed different applications, implemented at different times on different systems to manage operations. Accounting and Management Information Systems Vol. 11, No. 3 470 4. A TYPOLOGY OF INTEGRATION OF ACCOUNTING SYSTEMS Our goal here is to sketch a typology of configurations of accounting systems based on our findings generated above. In other words, we now organize our findings as a typology of accounting integration. Depending on the size and business strategy (and other intermediate factors: structure, management control, management culture, etc.), it will be possible to consider four modes of accounting integration quite different from each other: (1) Multidimensional accounting system (or multi-criteria accounting system), (2) Integrated accounting system, (3) Partially integrated accounting system, (4) Autonomous accounting system (or two-dimensional accounting system). Each configuration type will be supported by a local conceptual framework explaining schematically the relationship between key variables. 4.1 Case 1 (Multidimensional Accounting System) This system seems perfectly adapted to large differentiated structures with widely diversified activities and facing varied and changing environments. POULINA Group is one of those large diversified and decentralized companies where integration mechanisms are varied (Lawrence & Lorsch, 1967). To control its structural diversity and preserve its unity (unit control is a true management problem for this company because of its strong differentiation, differentiationintegration voltage is very high), this Group has established various integrating mechanisms such as matrix structure, meetings, committees, procedures, company culture, common values, common databases, but also the accounting system. The latter occupies a central place in these mechanisms (it is a tool of control by the results in the sense of Mintzberg 1982). This is a highly integrated information system (ERP) with storage and multidimensional querying devices (Data Warehouse) allowing different users, whose numbers now is close to 1,500, to extract differentiated sub-information systems (monitoring statements of operations, financial statements, budgets, financial dashboards, non-financial scorecards, etc.) to treat and monitor current operations but also to control the management of different activities and group entities (68 companies) whose structures are very heterogeneous and decentralized. The variety and variability of needs of the users of information systems of different structures of the Group, due to the variety of aspects of the environment which they face, seems to justify the integration (integration allows the differentiation in the meaning of Sorter: storing multidimensional data in a raw state into a common database can respond to needs not known in advance). Finally, note that the design of information system of the group cannot be analyzed independently of the strong management culture available to leaders and managers who have been hired to manage the increasing structural complexity due to the increase of group size and the diversification of its activities. The current system (management system and information system) is indeed the work of senior-management experts, graduates of national and A typology of situations of accounting systems integration Vol. 11, No. 3 471 international business schools. Burlaud (1995) said here that “structural constraints favor certain types of leaders who themselves provide certain types of tools.” We can describe as highly integrated POULINA’s accounting system (multidimensional system) because all the subsidiaries have an ERP for entering single but multi-criteria events at the site of their achievement and a Data Warehouse that allows to query the databases of this software in several dimensions and have a by-product in the highly differentiated refunds, financial (revenue per customer, product, region, income per entity, product, activity, subsidiary) but also non-financial (eg delivery time by product, customer), to monitor and control the various entities. Integration goes beyond the simple coupling between the financial accounting and cost accounting (horizontal integration). This is a very complete integration in the meaning of Tort (2003), because it is an integration between the various accounts (horizontal integration) but also between them and the upstream applications, supporting all these accounts with single entry and Multi-axis events, and downstream applications that exploit multidimensional databases using the multi-criteria query system. The Data Warehouse has become the main tool for querying databases of the group units (purchasing, production, sales, accounting, management accounting, financial accounting ...). It is a system deeply rooted in the daily management of the group entities. It can perform multi-criteria queries according to the needs of the period. The results of these queries often take the form of a multidimensional cube combining several lines of information (eg results by division, activity, product, profit center, legal entity, region, period ...). It is a multidimensional system par excellence. Figure 1. Conceptual framework of the accounting organization of POULINA Diverse and unstable Environments Management culture Strategy: highly diversified activities Highly differentiated and decentralized structures (Matrix) Multi-criteria Control = very detailed cost accounting Multidimensional Accounting System Changing needs = unpredictable queries Varied needs = Varied queries Accounting and Management Information Systems Vol. 11, No. 3 472 4.2 Case 2 (Partially Integrated Accounting System) This system seems appropriate to the context of large companies geographically decentralized but with centralized and highly homogeneous structures (case of public company). The logic of result-based management accounting here is often absent and coordination is usually achieved by standardization of work and planning (mechanistic bureaucracy as defined by Mintzberg, 1982). Among the major problems of management of these large structures, often evolving into a stable environment, is the treatment of a large volume of data generated from internal operations and transactions with third parties (suppliers, customers, banks, social security, tax, etc.). SONEDE seems to fit perfectly to this situation. Indeed, despite its size and the geographical decentralization of its business scope, it has a structure that is both centralized and poorly differentiated (structure per function). Written procedures and control planning play a very important integration (same procedures in all regions). Regional structures, although homogeneous since they are in the same activities, produce a huge volume of data. These data are partly captured at the regional level in specific applications and then transported, via software interfaces (“carriers”), at the head office where all accounting activities and the human and computer means required are concentrated. Indeed, the JD Edwards software has been installed at the head office, not to control the management of regional structures, as for POULINA, but to centralize the data produced by these structures (regional activities), mainly the districts (this is a real transactional database in the meaning of Tort, 2003). This centralization is essential to the production of statutory accounting records (journals, balances, balance sheets, income statements) but also to centrally manage current transactions (suppliers, banks ...). Accounting assistant is indeed a tool for managing transactions with third parties (the role of accounting can be reduced to the management of current transactions made with third parties). Financial statements, apart from their binding, used to control the major financial balances, (unlike POULINA financial statements, which are essential tools of financial control of subsidiaries). Management control is rudimentary, as we have already explained. This company has not, in fact, needed to implement such control, because its structure is highly centralized due to the complete absence of competition and strategy of economic competition. Management control here is the implementation of economic rationality (the lack of competition has not encouraged the SONEDE to diversify or to monitor its costs to be competitive). “Our company has no management control tools because it has no competitors. If it had competitors, like most businesses, it would have put in place tools to monitor its costs and revenues in order to remain competitive”. SONEDE has in effect a monopoly on drinking water and its objectives are socio-political rather than economic (providing public services). The control is limited to the planning of water infrastructure investments planned in the Five Year Plan (Planning Control) and overall financial stability, like any other public company (Anthony, 1988). This type of control, very comprehensive (unlike POULINA’s multi-criteria), does not require a detailed, A typology of situations of accounting systems integration Vol. 11, No. 3 473 multidimensional system (cost accounting). The data related to the planning of water infrastructure projects are largely taken from the SPSS software used by management studies. Moreover, the effect of management culture of executives and managers of the SONEDE, most of which are graduated from the Ecole Nationale d'Administration in Tunis (ENAT), has been hampered by the over-regulated environment (status monopoly) and the binding mode of governance. The role of these managers is limited to the common tasks that often have a technical and administrative nature, “our mangers have not been recruited to develop tools for management control but to manage the daily tasks. Even those who are graduates of top business schools acquire over time a culture of public administration. I mean that their culture of management acquired from a university is transformed over time into a public company culture”, says the Financial Chief. Finally, note that the differentiating effect of size on the accounting system was neutralized by the homogeneity of the structures and regional activities (the same activities in all regions), but also by the monopoly status of SONEDE and its structural consequences (no cutting by responsibility centers). SONEDE, indeed, did not need to streamline its management system by cutting the structure into centers of responsibility, firstly because its objective is not economic and also its environment is stable due to the complete absence of competition. The accounting system of Sonede can be described as partially integrated, because it consists of several specific applications and an ERP whose coverage is limited to the functional head (centralized system). This package is implemented not to include general accounting and cost accounting, because it is very rudimentary, but to ensure vertical integration with the functional modules and applications that generate huge data related to transactions with third parties including customers, suppliers and banks. It is interfaced with specific applications installed at the head office (AS 400 applications for HR and accounting clients) but also in regional districts (commercial applications). The objective of this integration / interfacing is not the real-time control operations as for POULINA, but transport and the centralization of transactional data to produce statutory accounting records. “For Sonede, the most important is not the integration of accounting, nor the development of management control, but the centralization of all transactional data in a common database to establish the legal and accounting documents to manage current transactions.” The strong centralization of modules of the ERP at head office has greatly reduced the functional coverage of this software and, by extension, the degree of integration. It is therefore a “partial and centralized integration,” says the financial director, “although we have an ERP, our information system is not integrated: it is a partial and centralized integration.” Accounting and Management Information Systems Vol. 11, No. 3 474 Figure 2. Conceptual framework of the accounting organization of SONEDE 4.3 Case 3 (Integrated Accounting System) This system seems appropriate to the context of corporate groups with mediumsized family leaders with a strong management culture. These companies need an accounting allowing a variety of refunds for management control (mainly budget control) (Tort, 2003). In this sense, the JD Edwards software package developed within the group MEDDEB has greatly facilitated the production of analytical data on the different structures that manage the different activities and products (varied and changing needs of users). Its implementation is part of a logical improvement of management control (budget control), as outlined by the Group CEO: “With the diversification of our activities and products, I found that the level of detail required for the monitoring of our responsibility centers, legal entities and activities is difficult to achieve with our old monolithic applications, too heterogeneous and disintegrated…” “now we can, through our integrated software package, extract very detailed budget data “. Note that the implementation of this package is the work of the owner-manager of the group that has a strong management culture. he is, indeed, Doctor in Management Sciences (management control) of the University of Paris 1 (Sorbonne). This leader also built a structure of management control frameworks composed of young graduates in accounting, audit and control. This structure, whose oversight role was strengthened after the introduction of ERP, is responsible for monitoring activities and products of the group. MEDDEB’s accounting system can be described as integrated as the ERP system in place ensures, like in POULINA, integration between financial accounting and management accounting (horizontal integration) but also between them and applications upstream (purchasing, sales, cash). However, although the basic data entry, which irrigates these accounts is multi-criteria, the query possibilities are still limited, less developed than POULINA’s (it is limited to the financial and Uniform and highly centralized structures (Functional) Planning control = rudimentary cost accounting Partially IntF PMuM ULTIDI MENSI ODIVER SIFIED ACTIVIT IES oAVER AGE SIZE l stable needs = stable queries Homogeneous and stable environments homogeneous needs = homogeneous queries Strategy (homogeneous activities): have the same activities in all regions Culture of public administration A typology of situations of accounting systems integration Vol. 11, No. 3 475 budget aspects). The Query Tool is composed of basic modules of the ERP (no data warehouse). This prevents performing various criteria for very advanced management control. The calculation of certain costs is made on Excel using raw data retrieved from the database of the ERP. Qualitative data are used to produce non-financial indicators. These data, which are produced by machines not connected to the ERP (default quality, waste loss), can establish dashboards with Excel. Figure 3.Conceptual framework of the accounting organization of MEDDEB 4.4 Case 4 (Autonomous Accounting System) This is the typical situation of medium-sized family businesses that are generally owned and run by business-oriented people who often have poor management culture (engineers, technicians etc.). In these companies, generally having a centralized structure (no culture of delegation of power because of the weak management culture, unlike the owner of MEDDEB which delegates authority because of its strong management culture), coordination is generally provided by direct supervision, work standardization (conformity to technical standards) and the standardization of skills (engineering training). The role of accounting is minimal. It is often limited to management of current transactions made with third parties. Management control is rudimentary. The SME whose owner-manager is a technician in construction, fits this situation. Indeed, the control problems in this business buildings and public works are rather technical and financial (to face the hostility of the environment). They relate to purely technical aspects that are intimately related to project implementation (timeliness and technical standards). Therefore, it consumes a lot of technical data and very little accounting data (nonfinancial control). These technical data are also produced by software specific to the construction sector (Software Project). “Cost accounting is very rudimentary so the question of its integration with the financial accounting does not arise,” says the Diverse and unstable Environments Strategy: diversified Differentiated and decentralized structures (Functional /matrix) Budget control Integrated Accounting System Owner-manager: management culture changing needs = unpredictable queries varied needs = varied requests Accounting and Management Information Systems Vol. 11, No. 3 476 Financial Manager. In this context, the needs can be met by standard software packages composed of non-integrated applications (eg. Ciel package) and internally developed applications to meet specific needs. Accounting plays a timid role in the value chain, because it is composed of overtechnical activities. Its role is limited to the management of routine tasks that have gradually developed with the business development of the SME. These tasks have indeed been computerized at different times with different methods to meet urgent but generally stable needs. The current system consists of centralized applications but also heterogeneous and juxtaposed. This is a system that was computerized process by process without any intension or desire for integration, “our information system was managed piecemeal, with no overall vision. Problems are resolved in a hurry, as they arose, without thinking globally, without really taking into account the problems related or options already selected, without seeking sustainable solutions.” The multi-criteria query possibilities are very limited not only because the user needs are limited and stable but also because the input of events is twodimensional (double-entry bookkeeping system). An invoice can be entered into several multiple autonomous systems. This entry mode does not allow multicriteria queries (closed system). The SME system may well be considered as twodimensional and autonomous: it is a compilation of heterogeneous and juxtaposed applications. These applications produce standard and rudimentary management records that have been set to meet the needs usually known in advance. Figure 4. Conceptual framework of the accounting organization of the SME The following typology represents the four modes of organization of accounting described above. It clearly shows that the effect of size varies from case to case. Its effect on the organization and accounting systems of SONEDE and POULINA is not the same as their structures have been developed in different ways. Indeed, the Environments homogeneous and stable but hostile Strategy (homogeneous activities): Construction projects in all regions Homogeneous and centralized structures (Project) Technical control (Nonfinancial control) Autonomous Accounting SysEngi neerin g culture tem Owner-manager: Functiona l StrucVaH ostile environm ent ironments culture stable needs = stable queries Homogeneity needs = homogeneity queries A typology of situations of accounting systems integration Vol. 11, No. 3 477 development of the size of POULINA is the result of a diversification of activities to “maximize profits”, which resulted in the creation of new entities with differentiated structures and equipped with sophisticated mechanisms of integration (ERP high functional coverage, data warehouse, EAI, few specific applications, etc.). The differentiating effect-size integrator (Blau, 1970) was enhanced by diversification (diversification-size combination) and its structural variations (cutting into responsibility centers, subsidiaries). While the development of the size of SONEDE was simply the result of enlarging the scope of activities of production and service of water throughout the country to meet the needs of all regions in drinking water, the differentiating effect size was somewhat mitigated by the homogeneity of regional activities (same activities in all regions) and also by the absence of an organizational division for management control (socio-political goals, public and not economic service). Poor differentiation of regional structures (or homogeneity of the regional structures) explains the underdeveloped mechanisms of integration (ERP low functional coverage, many specific applications). This comparison confirms the theory of Lawrence and Lorsch: the higher differentiation is, the more developed integration becomes. This theory applies to the accounting system. Figure 5. Typology of integration of accounting system Finally, note that this typology can be used by managers as a benchmark for the design of information systems. However, we do not claim to reduce the organizational practices of accounting firms to this synthetic typology, because social phenomena are unique, idiographic, complex and unpredictable. It could, Accounting and Management Information Systems Vol. 11, No. 3 478 indeed, exist in small construction companies that have implemented an ERP but also large diversified firms that have not installed such a system (the same causes do not produce the same effects). In addition, our typology is only a summary of key findings generated by case analysis. It therefore does not have all the variables, especially those who have not been well revealed by our case study, such as the importance of accounting in the value chain. This can be widened further in future studies by comparing the accounting system of a bank for example, where accounting irrigates all the links in the value chain (strategic role), with a company's construction sector, where the chain value uses a lot of technical data and very little accounting data, as shown in the SME case. Other variables can be highlighted such as the business sector (industry, banking etc.). The private or public aspect may also be considered. Indeed, management control, key determinant of the accounting organization as shown in our thesis, is generally more developed in private than in public companies. The variable ownership structure (family or shareholder) is also to be studied deeply. Indeed, the accounting system of the family business often reflects the culture of management of its owner-manager, as shown in the case of MEDDEB and SME, while the accounting system of the company whose capital is open (held by several shareholders) is generally developed (it meets standards for the dissemination of financial information), because these businesses are run by “experts” in management (with a strong management culture) that have an accounting system to make account of their management. Finally, the strategy of management information system is to be more studied. Behind the development of POULINA’s information system lurks a management strategy of the information system that fits into the overall strategy of the group while SONEDE has no such strategy. It has a very oriented computer department towards application maintenance to solve pressing technical issues. Finally, the SME does not even have a computer technician (no department). Its information system was designed piecemeal according to current needs. The role of backers may not be neutral with respect to management practices. The World Bank urged the SONEDE to modernize its management system by implementing an ERP system. This may suggest that the implementation of this software does not always represent a true need for internal management but it is partly driven by external pressure groups, including backers. CONCLUSIONS The contribution of our study is a double perspective. On a practical level, the typology of integration of accounting systems should enable practitioners to position themselves in relation to four types of accounting organization practices: multidimensional, integrated, partially integrated and autonomous systems. To reinforce practitioners in their choice of accounting organization, we explained why such a company has established such a system (Which mode of accounting integration must be chosen according to the constraints which the company faces?). Strategy and size (and other intermediate variables: environment, differentiation of structures, management control, management culture) are here key determinants of