Management Accounting Research 20 (2009) 283–295

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Management Accounting Research

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Performance management systems: A conceptual model

Jane Broadbent a,∗ , Richard Laughlin b
a
Vice Chancellor’s Office, Roehampton University, Roehampton Lane, London SW15 5PH, United Kingdom
b
Department of Management, King’s College London, University of London, Franklin-Wilkins Building, 150 Stamford Street,
London SE1 9NH, United Kingdom

a r t i c l e i n f o a b s t r a c t

Keywords: This paper builds on the view that too much attention in the management, management
Performance management systems (PMS) control and management accounting literatures has been given to ex post performance
Communicative rationality
measurement as distinct from ex ante performance management. The paper develops a
Instrumental rationality
conceptual model of Performance Management Systems (PMS) building on the work and
Transactional PMS
Relational PMS insights of primarily Otley (1999) and Ferreira and Otley (2005, 2009) who share similar
concerns. Particular attention is given to analysing the underlying factors that influence
the nature of any PMS, which Ferreira and Otley (2005, 2009) address only to a limited
extent in their model. This analysis into these factors leads to the development of Ferreira
and Otley’s conceptualisation into a ‘middle range’ (Laughlin, 1995, 2004; Broadbent and
Laughlin, 1997) model of the alternative nature of PMS lying on a continuum from ‘transac-
tional’ at one end to ‘relational’ at the other built on respectively underlying instrumental
and communicative rationalities and guided by a range of contextual factors.
© 2009 Elsevier Ltd. All rights reserved.

1. Introduction
The analysis of performance measurement systems is
considerably more extensive than the analysis of perfor-
mance management systems (PMS) (cf. Fitzgerald et al.,
1991; Otley, 1999; Brignall and Modell, 2000; Kloot and
Martin, 2000). In fact, as Kloot and Martin (2000: 233)
highlight, PMS ‘. . .often. . . refer to individual performance
management or appraisal schemes’. Despite the work of
these authors to open up this understanding of PMS the
wider conceptual debate has, in some cases, been closed
down again by a concentration on how to measure this
wider emphasis—for instance through the ‘balanced score-
card’ (cf. Kaplan and Norton, 1992, 1996). This paper
distances itself from such a narrowing of understanding of
what constitutes PMS and builds on the work of Fitzgerald
∗ Corresponding author.
E-mail addresses: jane.broadbent@roehampton.ac.uk (J. Broadbent),
richard.laughlin@kcl.ac.uk (R. Laughlin).
et al. (1991), Fitzgerald and Moon (1996), Otley (1999) and
Ferreira and Otley (2005, 2009) that PMS are concerned
with defining, controlling and managing both the achieve-
ment of outcomes or ends as well as the means used to
achieve these results at a societal and organisational, rather
than individual, level. The aim of this paper is to build on
but also develop this ‘results and determinants framework’
(cf. Fitzgerald et al., 1991).
Otley (1987, 1999) and Ferreira and Otley (2005, 2009)
have made considerable progress on the conceptual under-
standing of PMS and it is their model which forms the
starting point for the conceptualisation in this paper. Otley
(1999) and Ferreira and Otley (2005, 2009) build their
conceptual model of PMS empirically by drawing from
an analysis of management control systems in a range of
organisations. Otley (1999) poses his conclusions from this
analysis in terms of five ‘issues’ or ‘questions’ that need to
be answered by any organisation in relation to the design
and nature of its PMS. This is extended in Ferreira and
Otley (2005, 2009) to twelve questions—eight of which
relate to PMS design and the other four to issues and

1044-5005/$ – see front matter © 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.mar.2009.07.004
284 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
questions related to what they initially referred to as the
underlying ‘culture and context’ which are seen to have a
fundamental influence over the nature of the PMS in any
organisation. However, Ferreira and Otley (2009) delib-
erately distance themselves from describing these four
questions as addressing cultural and contextual factors.
In their 2009 paper, only two (questions 9 and 10) relate
specifically to the underlying nature of any PMS.
This paper builds on this framework and, in effect,
extends the understanding that is primarily contained in
these two questions in the Ferreira and Otley (2009) anal-
ysis. Key in this extension relates to alternative ‘models of
rationality’ that are underlying forces at work in mould-
ing the nature of any PMS. The concern with rationality
and rationalisation will be a key theme of the paper. The
logic for this is because the pursuit of ends to achieve
and the specification of the means to achieve these ends
through action – which are the key elements of any PMS
– involves, as Townley, Cooper, and Oakes (2003: 1045)
indicate, the ‘. . .pursuit of reason in human affairs’, which
can be directly related to what they call the ‘discourse of
rationalisation’. This rationalisation assumption, of course,
assumes that actions have an intentionality rather than
being completely random events. They are, in this sense,
‘goal-oriented’ (Hoogenboom and Ossewaarde, 2005: 602)
using ‘goals’ in a broad sense related to intentionality. Con-
text also plays a major role in moulding the nature of any
PMS. This relates to the societal and organisational situa-
tion in which any PMS is located and is trying to control.
It also includes the intervening instruments that are used
to attempt to ensure that the PMS aspirations are achieved
in and through these situations. In this paper direct and
indirect financial flows and accountability mechanisms are
argued to be of central importance in this intervening
role.
The paper is primarily conceptual. It attempts to
develop a ‘middle range’ (cf. Laughlin, 1995, 2004;
Broadbent and Laughlin, 1997) theoretical framework that
can provide a language for analysing any PMS that builds
on the PMS conceptualisation of Ferreira and Otley (2005,
2009). This conceptual ‘skeleton’ is not predictive and it
is not possible to use it to build hypotheses that can be
tested empirically, but rather it presents, in a ‘skeletal’
sense, a set of possible conceptual alternatives that could
be present in the empirical analysis of any PMS and a lan-
guage by which to portray these situations. The empirical
detail does not test these models—it provides the ‘flesh’
which makes the ‘skeleton’ meaningful as well as providing
a source to reshape the conceptual framework should it fail
to adequately express, in a ‘skeletal’ sense, the empirical sit-
uation. As a ‘middle range’ theory, its empirical application,
as a vehicle for future empirical studies of PMS in organ-
isations, and for reinterpreting existing studies of PMS,
is never far from consideration. The concluding section,
therefore, provides pointers to this empirical engagement
as a way to demonstrate the usefulness of the conceptual
insights developed in the paper.
The paper is divided into three further sections followed
by a reflective conclusion. The following (second) section
explores current thinking on the nature of PMS, with
a concentration on a critical analysis of the conceptual
model of Otley (1999) and Ferreira and Otley (2005)1 .
The third and fourth sections extends and refines the
conceptual model of Ferreira and Otley (2005) to provide
a ‘middle range’ theoretical understanding of the nature
of any PMS. Finally, the reflective conclusion will draw
the analysis together, providing pointers to the way the
conceptual model can be used to inform the empirical
study of PMS in any organisation.
2. An analysis of current conceptualisations of
performance management systems
Performance management, and PMS, are widely used
and yet when probed provide substantial differences of
meaning. For example, PMS is often used in the context of
human resource management (HRM) systems and in rela-
tion to controlling individual (employee) behaviour:
‘. . .. . .performance management includes:
• planning work and setting expectations,
• continually monitoring performance,
• developing the capacity to perform,
• periodically rating performance in a summary
fashion, and
• rewarding good performance
(United States Office of Personnel Management,
http://www.opm.gov/perform/overview.asp.)
In the management, management control and account-
ing literature there is, however, more of a debate on the
nature of PMS. Otley (1999: 364) links PMS to ‘overall con-
trol systems’ which he reminds his readers goes ‘. . .beyond
the measurement of performance to the management of per-
formance’ (Otley, 1999: 364 (emphasis in the original)).
This reminder for the management and accounting com-
munity is required because of the focus on measurement
in these disciplines as the introduction to this paper makes
plain, and the judgement that this has had a limiting effect
on conceptualising PMS.
Fitzgerald et al. (1991), Fitzgerald and Moon (1996) and
Otley (1999), build and develop the initial work of Otley
(1987), and provide a development of this broader con-
ceptualisation. As indicated in the introduction, Fitzgerald
et al. (1991) make clear that PMS involves the manage-
ment of results (ends) and the determinants of these results
(means) without specifying exactly what these involve
conceptually or empirically. Otley (1999: 365) reshapes
this understanding to develop ‘. . .five main issues that need
to be addressed in developing a framework for managing
organisational performance’. These are posed as questions
1
Primary attention in the following is given to Ferreira and Otley (2005)
rather than their 2009 paper. The latter’s major change is their disassoci-
ation from their initial more extensive claims about exploring the ‘culture
and context’ of any PMS. Ferreira and Otley (2005) now restrict their anal-
ysis to describing the nature of any PMS and the way it changes rather
than explaining the factors leading to PMS design and use. Ferreira and
Otley (2009) do recognise the importance of the latter concerns and give
some recognition in their model to them. The current paper, therefore, is
intended to complement and extend, rather than contradict and disagree,
with the analysis of Ferreira and Otley.
 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
on the grounds that empirical answers to these ques-
tions would, according to Otley, supply pointers to and
insights into the design of particular PMS. These five ques-
tions/issues are as follows:
1. ‘What are the key objectives that are central to the
organisation’s success, and how does it go about eval-
uating its achievement for each of these objectives?
2. What strategies and plans has the organisation adopted
and what are the processes and activities that it has
decided will be required for it to successfully implement
these? How does it assess and measure the performance
of these activities?
3. What level of performance does the organisation need
to achieve in each of the areas defined in the above two
questions, and how does it go about setting appropriate
performance targets for them?
4. What rewards will managers (and other employees) gain
by achieving these performance targets (or, conversely,
what penalties will they suffer by failing to achieve
them)?
5. What are the information flows (feedback and feed-
forward loops) that are necessary to enable the
organisation to learn from its experience, and to adapt
its current behaviour in the light of that experience?’
(Otley, 1999: 366).
As Otley (1999: 366) makes plain ‘. . .these questions
relate very closely to some of the central issues of modern
management and management accounting practice’. They
also give a more conceptual definition to the management
of results (ends) (issues 1 and 3) and the management of the
determinants of these results (means) (issues 2, 4 and 5). It
is also apparent that the HRM understanding of PMS is also
accommodated in Otley’s framework in issue 4 but with an
acknowledgement that ‘rewards’ need to be ‘. . .understood
in the widest possible sense, and not restricted to just
short-term financial rewards’ (Otley, 1999: 366 (footnote
6)).
Ferreira and Otley (2005) develop Otley’s (1999) frame-
work in a number of ways. First, they rename PMS, a
Performance Management and Control Framework (PMCF).
Whilst PMCF gives a more thorough description of the sys-
tems, the PMFC and PMS are identical, so to avoid any
further confusion the descriptor PMS will be retained in this
paper. Second, they add another dimension to the under-
standing of PMS by drawing from Simons’ (1995) concept of
‘levers of control’. Third, they draw from a further set of case
studies data that can be used to help refine the insights of
Otley (1999) and Simons (1995) into a more developed con-
ceptual model (framework) of PMS. Fourth, they expand
the five issues (questions) to twelve – eight of which relate
to similar more functional concerns about PMS design with
a further four to attempt to capture some of the more
underlying factors – which, in Ferreira and Otley (2005)
they initially refer to as ‘culture and context’ even though in
Ferreira and Otley (2009) they have removed this collective
descriptor for these questions.
The eight more functional issues/questions specify in
more depth and detail issues related to the management of
ends (results) to achieve and the management of the means
285
(determinants) to achieve these ends. The eight more func-
tional issues/questions are as follows:
1. ‘What is the vision and mission of the organisation and
how is this brought to the attention of managers and
employees?
2. What are the key factors that are believed to be central
to the organisation’s overall future success?
3. What strategies and plans has the organisation adopted
and what are the processes and activities that it has
decided will be required for it to ensure its success?
4. What is the organisation structure and what impact does
it have on the design and use of the performance man-
agement and control system? How does it influence and
is influenced by the process of strategy implementation?
5. What are the organisation’s key performance measures
deriving from its key objectives, key success factors,
and strategies and plans? How does the organisation go
about assessing and measuring its success in achieving
them?
6. What level of performance does the organisation need
to achieve in each of the areas defined in the above
questions, and how does it go about setting appropriate
performance targets for them?
7. What processes does the organisation use for evaluat-
ing individual, group, and organisational performance?
How important is formal and informal information on
these processes? What are the consequences of the per-
formance evaluation processes used?
8. What rewards (both financial and non-financial) will
managers and other employees gain by achieving perfor-
mance targets (or, conversely, what penalties will they
suffer by failing to achieve them)?’ (Ferreira and Otley,
2005: 43).
Questions 1, 2 (in part), 5 and 6 are concerned with the
ends to achieve whilst the focus on the means to achieve
them are apparent in Questions 2 (in part), 3, 4, 7 and 8. It is
also possible to see that the HRM emphasis is encapsulated
as an expanded sub-element in this framework; Questions
7 and 8 being aligned to these concerns.
The nature of any PMS not only relates to the answers
to the above 8 issues/questions, but is also located in a set
of underlying issues which ‘. . .permeate(s) the whole of
the performance management and control (PMC) system’
but are ‘. . .not addressed by the above questions’ (Ferreira
and Otley, 2005: 41). Drawing from a range of literature
Ferreira and Otley (2005: 41) point out that it has been
‘. . .shown that variables relating to external environment,
strategy, culture, organisational structure, size, technology
and ownership structure have an impact on the control
system’. They then go on to point out that strategy and
organisational structure are ‘. . .already explicitly built into
the framework’ (Ferreira and Otley, 2005: 41) leaving the
other elements as more ‘contextual’ variables that guide
the nature of any PMS.
Their understanding of these contextual issues is
expressed in terms of a further four questions/issues.
Answers to these questions, as with the eight functional
questions, are intended to provide key insights into the
nature of any PMS. These four questions/issues are as fol-
286 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295

what distant from the actual PMS design but guides its
nature by changing the way the eight more functional ques-
tions are asked and answered.
The primary focus on this paper is on the outer rim of
Fig. 1. Whilst Questions 9 and 10 (particularly) and Ques-
tions 11 and 12 do indeed address some aspects of the
important contextual issues guiding the nature of any PMS
they fail to capture the complexity involved or how they
can reshape the way the more functional questions can be
asked and answered. The following provides an enriched
understanding of these dynamics.

3. Alternative models of rationality and PMS

The framework of Ferreira and Otley (2005) has demon-

Fig. 1. Ferreira and Otley’s Performance Management Framework
strated considerable progress in defining the conceptual
(Adapted from Figure 2 from Ferreira nnd Otley (2005: 42)).
nature of any PMS and the answers to the eight questions
will provide clear pointers to the functional character-
lows:
istics to be considered in developing any PMS. Yet, the
argument of this paper is that the underlying factors that
9. ‘What specific feedback and feed-forward information
mould the nature of the eight more functional questions
flows has the organisation devised for itself? What sort
and the answers to these questions will not be accessed
of information flows have been created for monitoring
only through the questions and answers to the remain-
current performance and bringing about adaptation of
ing four questions in Ferreira and Otley (2005, 2009). In
current behaviour? What types of feedforward infor-
this section and the one following this claim is developed,
mation flows (if any) have been formulated to enable
starting with an analysis of different underlying ‘models of
the organisation to learn from its experience, to gener-
rationality’
ate new ideas and to recreate strategies and plans?2
Fig. 2 provides a summary of the main thesis in rela-
10. What type of use is given to feedback and feedfor-
tion to these ‘models of rationality’. In broad terms, the
ward information flows and to the various control
argument is that ‘rationalities’ can be of two dominant
mechanisms in place? Is use predominantly diagnostic,
types, typecast as either ‘instrumental rationality’ or ‘com-
interactive, or a combination of both?3
municative rationality’. The overall thesis is that how the
11. How has the performance management and control
more functional questions related to ends and means – Fer-
system changed in the light of the change dynamics of
reira and Otley’s eight questions, contained in the middle of
the organisation and of its environment? What changes
Fig. 2 – are asked and answered, leading to differences in the
have occurred at the level of those systems in anticipa-
actual PMS design, will depend on the rationalities that are
tion or response to such stimuli?
operative. The outcome is what can be referred to as either
12. How strong and coherent are the links between the
a ‘transactional’ or ‘relational’ PMS, which is at the base of
components of the performance management and con-
Fig. 2. The following provides a detailed explicatation of
trol system (as denoted by the above 11 questions)?’
this logic.
(Ferreira and Otley, 2005: 43).

The twelve questions/issues, around which Ferreira and 3.1. Models of rationality: an overview
Otley’s (2005: 41) PMS framework is built, provide ‘. . ..an
heuristic tool to facilitate the rapid description of signifi- The ‘project of rationalisation’ ‘. . .shapes the structure
cant aspects of control systems design and operation’. Fig. 1 and functioning of work organisations’ (Hasselbladh and
illustrates these elements.
Fig. 1 illustrates that the design of any PMS, at the
centre of this Figure, is guided by answers to the eight
functional questions which are closest to this centre point.
These questions, in turn, are moulded by four further
questions—mapped in the outer rim of Fig. 1, being some-

2
In Ferreira and Otley (2009) this is rephrased as ‘What specific net-
works, systems and information flows – feedback and feed-forward – has
the organisation in place to support the operation of its PMS?’ (emphasis
in the original).
3
In Ferreira and Otley (2009) this is rephrased as ‘What types of use
is made of information and of the various control mechanisms in place?
Can these uses be characterised in terms of various typologies in the lit-
erature? How do controls and their uses differ at different hierarchical
levels?’ (emphasis in the original). Fig. 2. PMS: a conceptual model taking account of models of rationality.
 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
Table 1
Contrasting ‘ideal type’ rationalities in PMS design.
Underlying rationalities description
Ends defined derived using
Performance indicators (PIs) derived using
Choice of means to use to achieve the objectives and PIs using
Probability of different stakeholders owning ends and means
Underlying authority structure
Kallinikos, 2000: 697). This is exactly the intention of any
PMS through defining ends and specification of means of
organisational actions and activities. This ‘project of ratio-
nalisation’, in turn, is a central theme in the ideas and
thinking of Max Weber and his critics, notably Jurgen
Habermas4 . It is to the understanding of these scholars we
turn in the first instance to gain an understanding about
models of rationality.
In turning to Weber concentration will be given to his
understanding of the rationalisation process in his theory
of social action5 . As indicated in the introduction Townley,
Cooper and Oakes (2003: 1045) refer generically to ratio-
nalisation as the ‘pursuit of reason in human affairs’. This,
to Weber, in the context of social action, assumes a concern
to structure and make transparent intended ends and the
means to achieve such ends. It is for this reason that Weber
saw rational social action as inevitably ‘instrumental’ in the
broad sense of defining social action as ‘intentional’. Inten-
tionality relates to the attempt to define and achieve some
end state, as well as clarifying the means to achieve these
ends. It seeks to make as transparent as possible any likely
indirect repercussions of this intentionality and involves,
as Weber (1978: 26) himself makes plain:
‘. . .the rational consideration of alternative means to
the end, of the relations of the end to secondary con-
sequences and finally of the relative importance of
different possible end states.’
The move to what Hoogenboom and Ossewaarde (2005:
603) refer to as ‘goal-oriented rationality’ is, to Weber,
inescapably linked with the change from pre-modern to
modern society:
‘Weber claims that the transition from pre-modern to
modern society was accompanied by a transition from
(mainly) a traditional form of social action, which was
based on ‘ingrained habituation’, to a goal-oriented
rational form of social action, that is, action in which the
means to attain a particular goal are rationally chosen.’
(Hoogenboom and Ossewaarde, 2005: 608)
Wallace (1994) makes plain that this recognition does
not define the actual ends to be pursued or the means that
should be adopted to achieve these ends. Neither does it
indicate what secondary consequences might arise. The
4
It is recognised and clearly acknowledged that to concentrate on
Weber and Habermas’ understanding of rationality in the following cov-
ers only a part, albeit an important part, of the overall thinking of these
great social scientists and their understanding of society and social action.
5
Allen (2004: 134/135) drawing from Collins (1986), notes there are at
least three different ways that Weber explores rationalisation processes.
This paper explores just one of these.
287
Instrumental rationality Communicative rationality
Instrumental rationality Communicative rationality
Formal rationality Substantive rationality
Theoretical rationality Practical rationality
Likely to be low Likely to be high
Legal-rationality Reflexive
PMS directing social action and the underlying rationalities
at work are always, we would argue, empirically defined.
Nevertheless, it is possible to provide some ‘skeletal’ ‘mid-
dle range’ ‘ideal types’ of the models of rationalities that
might be present. Working under one or other of these ideal
types will directly affect the way the 8 questions of Ferreira
and Otley (2005) are asked, as well as what would consti-
tute a ‘coherent’ set of answers according to the logic that
is at work through these ideal types.
Table 1 provides a summary of two alternative rational-
ity clusters that form ‘ideal types’ that, we argue, underlie
the design of any and all PMS. Each cluster is collectively
named after the dominant ends-based rationalities.
The communicative rationality cluster pursues ends that
are formed by communicative rationality. It has perfor-
mance indicators determined by substantive rationality,
where measures used are discursively agreed and are
conducive with desired, agreed ends, and the use of prac-
tical rationality which allows a diversity and discursively
agreed choice of means to pursue these agreed ends. The
resulting PMS are likely to be accepted and ‘owned’ by
the participants/stakeholders involved in any action-based
organisation because they have been actively involved in
discursively agreeing their design and content. To pursue
these requires a deliberate acceptance that the legitimate
authority structure is one built on reflexivity.
The alternative instrumental rationality cluster has ends
formed by instrumental rationality. Here, performance indi-
cators are generated by formal rationality, where measures
come first and either assume or seek to define the implied
values underlying these numbers. The use of theoretical
rationality leads the choice of the preferred means for
achieving these ends. ‘Ownership’ of the PMS may be dif-
ficult to achieve if the required ends do not reflect the
taken-for-granted organisational values. This can lead to
displacement of established norms of behaviour, alienation
and also resistance. To operationalise such an imposition is
reliant on legal-rational authority.
3.2. Characteristics of communicative and instrumental
rationality clusters
(i) Instrumental versus communicative rationality
The ‘orthodox translation’ (Wallace, 1994: 25) of what
Weber calls Zweckrationalitat is ‘instrumental rationality’.
In this context Weber’s analysis is focused on the individual
who has a clear and unambiguous end state, and a single
purpose in mind.. ‘Instrumental rational action’ is taken to
be:
‘. . .based on rational calculation about the specific
means of achieving definite ends – you do something
288 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
because it is the effective means of achieving a specific
goal.’ (Allen, 2004: 78)
Whilst Weber is of the view that ‘instrumental rational-
ity’ will, in the end, develop into the ‘iron cage’, where even
individual self-interest will give way to a more abstract set
of bureaucratic goals, he does pose an alternative form of
rationality that leads to a more idealistic end state. This
he describes as Wertrationalitat, or as Wallace (1994: 25)
describes it, ‘learned non-self-interest rationality’. The rea-
son for this altruistic descriptor is due to the examples
of end states coming from this form of rationality, which
would include:
‘. . .actions of persons who, regardless of possible cost
to themselves, act to put into practice their convictions
of what seems to them to be required by duty, honour,
the pursuit of beauty, a religious call, ‘personal loyalty’,
or the importance of some ‘cause’, no matter in what it
consists.’ (Weber, 1978: 25)
Weber was pessimistic about the possibility of avoiding
the problems of the ‘iron cage of bureaucracy’ and moving
instead towards the less self-interested and more altruis-
tic rationality, which he considered could only be achieved
through the ‘. . .wills of charismatic leaders’ (Habermas,
1984: 352).
This prescriptive alternative has been questioned on a
number of fronts. Bologh (1990) provides a clear critique
of Weber’s prescription:
‘What is Weber’s solution to the problem of bureau-
cratic organization. . .? For Weber, the solution came at
the level of the individual who can negotiate between
means and ends, between formal rationality and human
values. Weber looked to the heroic individual, a strong
leader, who can take charge of the state bureaucracy
and master it, subordinating bureaucratic rules and
methods to sustantive, political ends. . .. Only a politi-
cal leader able to control the bureaucracy and act out
of commitment to some substantive cause – such as
imperial greatness – can rescue the nation from the
ossification of bureaucratic rationalisation and bring
dynamism to a society.’ (Bologh, 1990: 92/93)
She taunts Weber’s narrow mindedness and his rejec-
tion of alternatives:
‘Weber saw no modern choice other than capitalist
bureacratization tempered by patriarchal leaders. This
stand led him to reject socialism or anything like a fem-
inist solution.’ (Bologh, 1990: 94)
Habermas (cf. 1984 and 1987) has also reacted strongly
to Weber’s pessimism and the weakness of his prescriptive
alternative. Habermas argues a case for a new theory of
‘communicative rationality’ and resulting ‘communicative
action’ to fill the void:
‘. . .that makes possible a mutual and constraint-free
understanding among individuals in their dealings with
one another. . .. This means, on the one hand, a change
of paradigm within action theory: from goal-directed
to communicative action, and, on the other hand, a
change of strategy in an effort to reconstruct the mod-
ern concept of rationality that become possible with
the decentration of our understanding of the world.’
(Habermas, 1984: 391/392)
Key to Habermas’ model is a view that a definition of
ends to achieve should come out of systematic ‘discourses’
between participants/stakeholders leading to a ‘consensus’
on ends and, therefore, performance. Put simply, ends, in
whatever form, should not be predefined either instrumen-
tally or through abstract values or through any charismatic
leader but should find their definition, and legitimacy,
through the discursive processes and consensus agreement
of the participants/stakeholders to any action situation.
Such processes assume defined rules of engagement (cf.
Habermas, 1984; Laughlin, 1987; Arrington and Puxty,
1991; Power and Laughlin, 1996; Cooke, 1997; Broadbent
and Laughlin, 1997) (e.g. equal opportunity to offer speech
acts and the only force allowed is the force of the better
argument) so that it is possible to judge whether the result-
ing consensus on the nature of the PMS is ‘grounded and
justified’.
(ii) Formal vs Substantive Rationality
The two forms of fundamental rationalities (instrumen-
tal and communicative) are extended and given meaning
by linking these to the four other rationalities highlighted
by Weber. These other rationalities give direction on the
design of performance indicators and also the means to
achieve these end states. Thus, as Wallace (1994) suggests,
substantive versus formal rationalities link directly to differ-
ent forms of performance indicators and theoretical versus
practical rationalities relate to the diverse PMS controls
over the means used to achieve the ends required.
Substantive and formal rationalities, concerning perfor-
mance indicators, need to be considered together since, as
Allen (2004: 138) indicates, the former is less clear and
appears to be defined in terms of everything the latter
is not. Formal rationality is defined ‘. . .according to the
degree in which the provision of needs, which is essential
to every rational economy, is capable of being expressed in
numerical, calculable terms and is so expressed’ (Weber,
1978: 85). Allen notes ‘. . .accounting and calculation
are....the defining terms of formal rationality’ (Allen, 2004:
138). He argues that Weber’s definition of substantive
rationality is ‘less clear-cut’ and is ‘a catch-all space
for anything that is not formally rational’ (Allen, 2004:
138 (emphasis added)). According to Weber (1978: 85
(emphasis in the original)) substantive rationality applies
to: ‘. . .certain criteria of ultimate ends, whether they be
ethical, political, utilitarian, hedonistic, feudal, egalitarian
or whatever, and measure the results of economic action
. . .against these scales of “value rationality” or “substantive
goal rationality”’.
This has tended to set any form of formal measurement,
in which accounting is clearly implicated, as something
that has no place in substantive rationality, yet this is
too simplistic. The key is the nature of the way the sys-
tems are used. Accounting and calculation can come from
working under substantive rationality as long as they fairly
reflect the values and concerns of stakeholders to the PMS
 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
design. In formal rationality, on the other hand, the mea-
sures adopted may derive and define, and therefore impose
a set of values upon, those who are to be ‘managed’.
(iii) Theoretical vs Practical Rationalities
Theoretical and practical rationalities relate more to the
choice of means to achieve the ends desired. Wallace (1994:
34/35 (emphasis in the original)) contrasts these two forms
of means-related rationalities in the following way:
‘In theoretical rationality, the means in question are
mental “concepts” and the end is the “theoretical mas-
tery”, or mental understanding of the world. In practical
rationality, the means are both mental and physical
(i.e. both conceptual know-how and physical do-how,
a combination that accounts for Weber’s calling them
broadly “means”) and the end is the human physical
control of the world. Weber proposes, then, one type of
rationality directly (but of course not exclusively) serv-
ing the human ideal interest, and another serving the
human material interest.’
(iv) Stakeholder involvement and authority structures
These different overall rationality clusters also have an
implied authority structure underlying them. Authority to
Weber (1978: 53) is ‘the probability that a command with
a specific content will be obeyed by a given group of per-
sons’. To Weber there are three types of authority structure,
which he refers to as ‘traditional’, ‘charismatic’ and ‘legal-
rational’. To Hoogenboom and Ossewaarde (2005) instru-
mental rationality (and formal and theoretical rationalities)
is reliant on a legal-rational authority structure which rests
‘. . .on a belief in the legality of enacted rules and the right
of those elevated to authority under such rules to issue
commands’ (Weber, 1978: 215). Whilst Weber’s pessimism
maintained there was no escape from this – the iron cage
cannot be avoided – Hoogenboom and Ossewaarde (2005:
613), like Habermas, are more optimistic:
‘As the iron cage of modernity opens up as a conse-
quence of the process of reflexivization, the ‘spell’ of
legal-rationality authority is broken. Late modern actors
no longer believe that rational rules of modern bureau-
cracies and those who are elevated to enact these rules
to be legitimate.’
To Hoogenboom and Ossewaarde, there is a possibil-
ity that a new authority structure can emerge in modern
society. They refer to this as ‘reflexive authority’:
‘. . .which can be defined as the belief in the ability of
institutions and actors to negotiate, reconcile and repre-
sent arguments, interests, identities and abilities. . .. Like
legal-rational authority, reflexive authority is resting on
the belief in the legitimacy of rationality, but in the case
of reflexive rationality the nature of the rationality is
not fixed. In late modern society, authoritative decision-
making is guided by rules which are negotiated in the
process itself by all the actors concerned.’ (Hoogenboom
and Ossewaarde, 2005: 614 (Emphasis in the Original))
289
This is closely aligned and realised through communica-
tive rationality (and substantive and practical rationalities).
However, Hoogenboom and Ossewaarde’s, optimism that
there is an inevitable move to this idealistic state is not
borne out by the evidence. It is a ‘counterfactual’ possibil-
ity where the ‘iron cage’ can be broken through but it is not
inevitable.
What Table 1 also highlights is that the presence of one
or other of the overall rationality structures are likely to
lead to different stakeholder ‘ownership’ of the PMS. The
logic is that where the resulting PMS has not been sub-
ject to extensive discourse between stakeholders, as is the
case with the instrumental rationality cluster, then ‘own-
ership’ is likely to be low. On the other hand where ends
and means have been the subject of extensive consultation
and agreement, stakeholder ownership is likely to be high.
3.3. Relational and transactional PMS
As indicated above, the assumptions enshrined in the
different rationality clusters lead to the functional ques-
tions contained in the middle box of Fig. 2 to be asked
and answered in different ways. This leads, in turn, to two
entirely different types of PMS which are labelled ‘rela-
tional’ and ‘transactional’ at the bottom of Fig. 2. What
this is arguing is that these terms provide a language for
describing the design of PMS in any organisational setting.
This ‘middle range’ theoretical language typecasts any PMS
but does not specify the actual specifics of the design.
This framework suggests that whenever a particular
PMS is conceptually defined as ‘transactional’ it is likely
to have a high level of specificity about the ends to be
achieved (e.g. through performance measures, targets, etc.)
and often a clear specification of the means needed to
achieve these defined ends. Transactional PMS are often
organised as projects, with requirements linked to con-
tracts over a defined period of time. It is for this reason
that a PMS defined as ‘transactional’, at its simplest, is sim-
ilar to a simple, in effect, ‘exchange transaction’ to achieve
a particular end state through a defined set of means6 .
When a PMS is categorised as ‘relational’ the expecta-
tion is that the ends and means are deliberately subject to
a discourse between the stakeholders and chosen by them.
Specificity of the sort demanded by a transactional PMS is
possible but only if chosen and subject to the agreement of
stakeholders. The key factor in this is the extent of choice
and ownership of the specific ends and particular means
of achieving them. Often the specific focus will be less like
a defined project, less short-term in nature and more con-
cerned with the long term survival and sustainability of
the organisation/unit through which the stakeholders are
working.7
6
An example might be the task of requiring a number of engineers to
undertake a particular defined and clearly specified engineering job to be
completed by a set date with clearly specified outcomes and ways these
are to be achieved.
7
An example might involve the bringing together of a number of engi-
neers to analyse and resolve an engineering concern where the outcomes
and the ways these are defined and achieved are subject to discursive
negotiation and agreement.
290 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295

These are general conceptual traits and it is important to

stress again that there are limits to how much further detail
is possible to provide independent of empirical application.
The argument to be made in the concluding section is that,
despite this caveat, the conceptual language of ‘transac-
tional’ and ‘relational’ provides a powerful and meaningful
way of categorising, in broad conceptual terms, different
PMS.
Two further points need to be made by way of conclu-
sion to this sub-section. First, it is important to recognise
that some transactional characteristics may be apparent
in the relational form but the use of some of the latter’s
characteristics may be less likely in the former. Transac-
tional PMS require certain rules of behaviour, which may
preclude less seemingly ‘rigorous’8 and ‘precise’ practices
that are normal to the way of proceeding with thinking
based on a relational approach. There can be a tendency in
a relational PMS to avoid the level of precision expected
with a transactional model, very largely because such lev- Fig. 3. PMS: a conceptual model taking account of models of rationality
els of precision do, as Hasslebladh and Kallinikos (2000: and context.
705) indicate, lead to ‘ideals’ giving way to ‘techniques
of control’ as the discourse shifts from ‘. . .oral language
to formal codification’. However, the important point to Fig. 3 extends Fig. 2, adding two more elements. The
stress is that this is not programmable in quite the way first element, referred to as simply ‘context’, signifies the
they suggest. The key criterion is whether this increased importance of understanding the focus, i.e. what the PMS
formalisation is understood and owned by the discursive is intended to control. It recognises the external and inter-
participants/stakeholders such that they adequately reflect nal environment will provide challenges and opportunities
desired end states. If it is, then such increased codification to which the organisation will need to choose whether to
is entirely acceptable. If it is not then the dangers to which react or not. This organisational context will play a part in
Hasslebladh and Kallinokos, and Weber and others, draw moulding the functional questions that are asked in rela-
attention are genuine and real and need to be resisted. tion to the PMS design as the connecting lines in Fig. 3
Second, whilst the transactional and relational are abso- indicate. This specific context, in Fig. 3, however, does not
lute ideal-types it is possible and appropriate to see them directly feed into or determine the different rationalities.
empirically as two ends of a continuum. At the ends there However, this is not saying that the rationality assump-
are potentially pure empirical examples of PMS in each tions are in any way a-contextual. The contextual roots of
category—either transactional or relational. More likely it these models of rationality lie in the nature of the par-
is that there will be a situation signified by a point along ties involved in the PMS design and even the history of
the continuum where different PMS elements are mixed the organisation in which these designers are located. The
in different proportions. Our argument, however, is that context that influences directly the eight functional ques-
the transactional and relational categories are analytically tions is more specific to the nature of these questions, and
distinct very largely because they reflect the fundamental whether all questions need to be asked in all situations,
divide between instrumental and communicative rational- rather than as to how these questions are asked in the
ities. first place, which is traceable to the models of rational-
ity. In relation to contextual factors, there is no doubt that
the eight questions need to be asked for the organisational
4. Context and PMS
as a whole but when looking at the PMS for a part of the
organisation, some of them may be reshaped and some may
Context, in broad terms, refers to the nature of the
not need to be asked at all if they are dealt with in other
organisation or the part of the organisation which the
parts of the organisation. Equally if, as we will see below,
PMS is attempting to control. It also refers to the channels
the organisation is a regulatory body, whose purpose is to
through which the PMS attempts to achieve the aspirations
regulate or attempt to regulate other organisations, then
it has through the organisations or parts of organisation
the PMS will be controlling the effectiveness of, in effect,
that it is trying to control. These two contextual elements
another organisation. In these circumstances the questions
are depicted in Fig. 3.
that are asked to guide the design of the PMS will be directly
affected by the organisational context of this regulatory
complexity.
8
Words such as ‘rigorous’, ‘precise’ and ‘precision’ are dangerous since The second new element in the bottom of Fig. 3 high-
they could be seen as downgrading anything that does not fall under such lights the possibility of an intervening filter that can be used
descriptive categories. It is important to stress that this is not meant to
imply that practices that are more relational are not rigorous or precise
to mediate the aspirations of the PMS and the organisation
but rather they have a different understanding of rigour and precision to or part of the organisation that is to be the vehicle to achieve
those coming from instrumental rational practices. these aspirations. Fig. 3 depicts this as being an implicit or
 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
explicit money transfer and the attendant accountability
requirement. What this implies is that whilst the PMS is, in
effect, the material depiction of the set of aspirations that
the organisation needs to achieve, the funding supplied is
the medium, or instrument, through which these aspira-
tions are enabled, and the accountability mechanisms are
the way the PMS can tell whether these aspirations are
being achieved. This makes the PMS, in effect, a transferor
of monetary resources through which messages are con-
veyed aligned to the aspirations of the PMS. This same filter
is the receiver of accountability information as to how suc-
cessful the actual or implicit resource transfers have been
in achieving the aspirations intended.
The following explicates these two elements in more
depth starting with the ‘context’, the upper box in Fig. 3.
4.1. Context as organisation and environment
The context of PMS, in simple terms, is the organisation
or part of the organisation in which it is embedded and
which it is intended to control. This context varies consid-
erably depending on history, purpose, technology, people,
environment, etc. This contextual complexity has design
implications for the PMS, two of which are of particular
importance. These are firstly, in relation to disaggregated
and divisionalised organisations and, secondly, to organ-
isations whose function it is to regulate, in effect, the
PMS of other organisations. The following looks at each of
these.
In the case of disaggregated organisations Ferreira and
Otley (2005) recognise that their 8 questions apply to the
PMS of the organisation as a whole. Ferreira and Otley
(2005: 44) implicitly recognise this in terms of the need
to confirm the relevance of their questions/issues by ‘use’
but that ‘. . .use requires the questions to be asked at
several hierarchical levels right down to first level man-
agement, and evidence gathering about patterns of usage
and behaviour at each level’. The implication of this is that
all the questions should be asked at each level within any
organisation. The logic for this is that all organisational
sub-units, like the organisation as a whole, are assumed
to have an intentionality in their actions and activities
which involves pursuing identifiable ends through selected
means. At least this is what the PMS is trying to engen-
der and the eight questions clarify the design of this PMS
with regard to these ends and means. Organisationally
these are intended to nest together to form an aggregated
organisation perspective on these ends and means even
though it is widely recognised that simple aggregation is
unlikely for well known behaviour reasons about the rela-
tion between individuals and organisations. Despite this
widely acknowledged ‘noise’ in this aggregation process it
still does not detract from the fact that organisations are
intentional, and pursue ends through defined means, and
that organisational sub-units cannot escape similar inten-
tionalities even though they are likely to be flavoured with
more personal dimensions at lower levels in the organ-
isation. The PMS is actually trying to ensure that this
organisational intentionality is present and the norm at
all levels in the organisation. In that sense Ferreira and
Otley are right to argue that all the eight functional ques-
291
tions need to inform the design of the organisational and
sub-organisational PMS. Yet it is possible that at different
levels in any organisation the PMS may, quite rightly, give
greater attention to one or more of the questions. This does
not mean that the other questions are not being asked and
answered at other organisational levels but that in certain
sub-units they do not need to be asked again. In the final
analysis, this, however, has to be an empirical question.
But conceptually it cannot be denied that one or more of
Ferreira and Otley’s questions are likely to be given more
attention than others in PMS design depending on which
part of the organisation is being attempted to be controlled.
By the same logic there has to be a conceptual possibility
that an organisational PMS which targets different organi-
sational sub-units could be more ‘transactional’ at one level
and more ‘relational’ at another or vice versa. It is likely
that the overall organisational PMS will be either trans-
actional or relational but that at lower levels the PMS may
well adopt characteristics which look like they are borrow-
ing from a different type of rationality relative to what is
happening in the organisation as a whole. Organisationally,
as the previous section has argued, the PMS is going to be
either ‘transactional’ or ‘relational’ although where the PMS
is more to the mid-point on this continuum then it is pos-
sible that there may be a greater presence of the opposite
rationality type. But whatever constitutes the rationality
type for the organisational PMS will predominate even if it
is closer to the mid-point rather than the extreme. Where
the opposite rationality is at work in operational levels of
the organisation it will always be subject to an organisa-
tional veto if it should seek to challenge the PMS for the
organisation as a whole. Again though this is an empirical
question and, like all middle range theories, is a conceptual
possibility but nothing more.
The second contextual issue that needs exploration is
in relation to those specialist societal organisations that
have a role to regulate or attempt to regulate the behaviour
of other organisations. The purpose of such organisations
is to design their PMS in such a way that manages its
own organisational behaviour to deliberately target other
organisational PMS to attempt to ensure compliance to
some regulatory requirement. This makes the nature of the
PMS as well as the answers to the eight questions more
complex. It also raises a range of conceptual possibilities in
terms of the PMS being transactional or relational. A pos-
sible situation is that the regulatory organisation could be
using a transactional PMS to both order its own behaviour
as well as impose a transactional logic in its regulatory
processes onto organisations who think and are operating
under a relational PMS. In this case there are all manner
of challenges for the regulation to be effective along with
a range of questions as to whether the regulatory body
should be trying to impose a different form of rationality
onto the organisations which are subject to these regula-
tory processes. Again these questions and concerns cannot,
in the final analysis, be answered conceptually. They do
need to be answered empirically. More importantly, for the
purpose of this sub-section, is to note that the complexity
of context plays a major part in the PMS design and the
way Ferreira and Otley’s more functional eight questions
are asked and answered.
292 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
4.2. Finance and accountability as context
The second contextual element added to the concep-
tual model in Fig. 3 is the intervening filter controlling
the relationship between the PMS and the organisation
and sub-organisational units the PMS is trying to control.
Whilst the control intentions of any PMS is, as the title
implies, the ‘performance’ of any organisation it is not clear
how the former leads to the latter and what, if any, the
intervening, enabling instruments might be. As Fig. 3 indi-
cates, the argument of this paper is that financial transfers
(explicit and implicit) and allied accountability require-
ments form the key intervening instruments between the
aspirations in a PMS and actual performance. Based on this
logic, a PMS has a focus upon and uses the unique role of
money to ensure that the desired ends are achieved and
the chosen means to achieve these ends are pursued.
Habermas’ (1987) understanding of money provides
an insightful vehicle for explicating this conceptual
role9 . Money is what Habermas calls a ‘steering media’
(Habermas, 1987: 165 et seq) which ‘mediate’ (Power and
Laughlin, 1996: 444) between values to achieve (Haber-
mas’ ‘lifeworld’) and the action elements which achieve
these values (Habermas’ ‘systems’). Broadbent, Laughlin
and Read (1991: 3 et seq) demonstrate that lifeworlds,
systems and steering media can be given meaning as tangi-
ble societal underlying values, regulatory institutions and
organisations. However, it is also possible to understand
these distinctions ‘. . .heuristically. . .as a basis for organis-
ing empirical enquiry’ (Power and Laughlin, 1996: 444). In
this context, steering media can be seen to ‘. . .mediate sys-
tem and lifeworld and which allow the normative priorities
of the latter to flow into the former’ (Power and Laughlin,
1996: 444). Specifically, in the context of this paper, and
following this logic, it is possible to typecast any PMS as
containing ‘lifeworld’ values, which attempts to ensure that
‘systems’ achieve these values. Based on this thinking the
ways in which these PMS ‘lifeworld’ values are achieved
through organisational ‘systems’ is through money as a
‘steering media’ to ensure the latter adequately achieves
the former.
In Habermas’ earlier work, money and power, often
together, are key steering media. In his later work he
focussed more on law (Habermas, 1996) somewhat eclips-
ing the relevance of the former two elements. Yet the
practical power of money as a steering medium is illus-
trated by Habermas (1987: 264) since money makes ‘. . .it
possible to produce and transmit messages with a built-in
preference structure’. Habermas saw money’s power to be
all encompassing, having the ability to decouple itself from
lifeworld direction and control. Because of this danger,
Habermas shifted his normative emphasis to administra-
tive power and then to law which he saw as seemingly
more powerful ways to steer systems as well as being a
form of steering that has less chance of decoupling from
lifeworld concerns. The latter is significant since one of
9
As previously the introduction of some of the thinking of Habermas
at this point is not claimed to represent the entire treatise of thought of
this great social and political theorist.
the key characteristics of money is its flexibility to be used
for other purposes once received. Or as Dodd (1994: xxiv)
puts such an argument: ‘. . .money is accepted as payment
almost entirely on the assumption that it can be re-used
later’. Whilst this is a genuine danger there is a sense that
Habermas’ down-grading of money as an important steer-
ing media belittles its significance, as Dodd (1994: 74 et
seq) and Power and Laughlin (1996: 458 et seq) argue.
Money is, as Habermas makes clear, a powerful ‘. . .code
by means of which information can be transmitted from
a sender to a receiver’ (Habermas, 1987: 264) but needs
the imprint of the lifeworld (the PMS in the context of
this paper) to provide the details of this information cod-
ing. Money is, as Simmel (1978: 211) makes clear, a ‘pure
instrument’ which can be a vehicle for good or ill but, even
if used for the latter, should not disguise the immense
power it holds as a potential channel and instrument for
control. More generally there is no more powerful steering
mechanism than money to ensure that the PMS (lifeworld)
demands are met by those given the task to achieve these
requirements (the systems or organisations or parts of the
organisations). It is for this reason that a PMS’s intentions
are invariably expressed in and through the ‘pure instru-
ment’ of money.
As Fig. 3 indicates, accountability processes are also
a key intervening instrument between the PMS and the
organisation or part of the organisation it is trying to con-
trol. Roberts and Scapens (1985: 447) define accountability
as the ‘giving and demanding of reasons for conduct’10 .
In the context of this paper the PMS is the vehicle by
which the ‘demands’ are made concrete and the account-
ability system ‘gives’ the required information. The reason
why accountability is of key importance as an interven-
ing instrument, is because the success of any PMS is based
on knowing whether its current strategies are achieving
their intentions in organisations or parts of organisa-
tions. Constant, up-to-date accountability information, not
necessarily through formal reports, is vital to allow this
judgement to be made. This intelligence is essential to
know whether PMS strategies are working or whether they
need to be changed.
Finally, in this section a legitimate question is whether it
is only money and accountability that constitutes the inter-
vening instruments that the PMS can and do use. Whilst this
is, in the final analysis, an empirical, rather than concep-
tual, question two conceptual points can be raised. First,
most organisations are reliant on money to achieve their
purposes whatever they are. No matter whether an organ-
isation is trading its output in the market or not, money
and its use, is of central importance. Whilst money may
not always be directly of concern, actions and activities
invariably have an indirect linkage back to monetary allo-
cations. Equally it is difficult to imagine a situation where
there is no interest in seeking and securing ‘reasons for con-
10
It is this intentionally that the paper is concentrating upon. It does not
say anything about what the actual demands are or what is supplied in the
way of accountability information. Even a cursory look at the extensive
literature on accountability provides more than enough pointers to the
extensive and conflicting views there are on this demand and supply. It is
not necessary for this paper to explore this detail.
 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
duct’ (accountability information). Second, just as not all
the 8 functional questions necessarily need to be asked in
all contexts it is entirely conceptually possible that, in cer-
tain circumstances, no intervening instruments are needed.
Money and accountability insights remain nothing more
than ‘instruments’ for ensuring PMS aspirations are pur-
sued and achieved through the organisations and part of
the organisations that are subject to PMS controls. If the
intervening instruments of money and accountability are
not needed for this achievement strategy then they are
not needed. However, it is worth repeating whilst this
is a conceptual possibility it is anticipated that money
either used directly or indirectly, thorough a transfer or
implicit transfer between a PMS transferor and an organisa-
tional receiver (transferee), is invariably used to ensure any
organisation or part of any organisation is pursuing PMS
aspirations. A similar point applies to the general expecta-
tion that a PMS will want to know ‘reasons for conduct’ and
hence accountability information.
In the final analysis, the presence (or absence) of these
intervening contextual elements and their actual nature
and function can only be partially answered conceptually.
These questions need to be answered in the empirical anal-
ysis of different PMS.
5. Some concluding comments
The paper has provided a conceptual model of Perfor-
mance Management Systems developing Otley’s (1999)
and Ferreira and Otley’s (2005, 2009) conceptualisation
as a starting point. A PMS, in a generic sense, is a con-
trol framework which attempts to ensure that certain ends
are achieved and particular means are used to attain these
ends. Whilst much of Otley’s (1999) and Ferreira and Otley’s
(2005, 2009) model is retained – particularly in relation to
the eight questions about ends and means that dominate
any PMS – the paper extends their insights about the con-
textual factors that mould the nature of any PMS. As such it
extends the more contextual Questions 9 to 12 in Ferreira
and Otley (2009), with particular emphasis on Questions 9
and 10.
This developed conceptual model is summarised in dia-
grammatic form in Fig. 3, which, in turn, builds in Fig. 2.
Fig. 2 highlights the key role of alternative models of
rationality leading to any PMS being able to be described
conceptually and empirically as either ‘transactional’ or
‘relational’.
A relational PMS is driven by the exercise of communica-
tive rationality between stakeholders to debate and derive
a consensus on objectives to achieve, leading to the discur-
sively agreed definition of performance indicators based on
substantive rationality which could, if discursively agreed,
use quantitative measures to typify performance indicators
but often may be more comfortable with qualitative indi-
cators. It also relies on practical rationality in the choice of
means to achieve these objectives, performance indicators
and targets. In a relational PMS, targets aligned to the per-
formance indictors are assumed to be discursively agreed
between the stakeholders. The key underlying theme is that
there is ‘ownership’ by the stakeholders of the PMS that
293
drives action in any organisation working under a reflexive
authority structure.
A transactional PMS is driven by instrumental rationality
to define the objectives, which take on the characteris-
tics of being highly functional and directed to specific
outcomes. In this context ‘ownership’ is associated and
linked either to a particular sub-group of stakeholders or
to an abstract requirement seemingly owned by no-one.
Performance indicators are defined through formal ratio-
nality, which has a tendency to be more comfortable with
precise and quantitative forms of measurement. In gen-
eral, theoretical rationality, with a certain reluctance to
use practical rationality, due to its perceived lack of pre-
cision, guides the choice and use of means to achieve these
objectives. Targets are taken to be driven by what either a
defined sub-group of stakeholders determine or what the
seemingly abstract definer of objectives and performance
indicators requires. Implicit in this framework is a reliance
on legal-rational authority structure to ensure compliance.
Wide-scale ‘ownership’ has the potential to be problematic
when this transactional PMS is in place.
Fig. 3, extends Fig. 2, and traces the way not only ratio-
nalities but contextual factors have an effect on the design
of the PMS. This is encapsulated in two ways. First, the
addition of the organisation or part of the organisation, set
within a particular environment, through which the aspi-
rations of the PMS are to be achieved. Second, the addition
of ‘intervening instruments’ that the PMS is likely to use
to help ensure that the organisation or part of the organi-
sation achieves the aspirations that the PMS intends these
organisational units should achieve.
This typecasting forms a theoretical language, in a ‘mid-
dle range’ sense (cf. Laughlin, 1995, 2004; Broadbent and
Laughlin, 1997), for analysing empirical situations. Whilst
the exact nature of any PMS is dependent on empirical
explication, the conceptual model developed in this paper
provides a language to direct this explication. The ‘middle
range’ conceptual model cannot predict the exact config-
uration of any empirical PMS but it provides important
pointers to its design. However, empirical ‘surprises’ are
still possible. In fact, such ‘surprises’ can also reshape the
conceptual language where it fails to provide meaningful
‘placeholders’ for the analysis.
Whilst the paper is primarily conceptual, its ‘middle
range’ nature means that the empirical application and
use of this conceptualisation is of paramount importance.
Two comments need to be made on this important issue
to demonstrate the potential of this conceptualisation for
enriching the empirical understandings of PMS.
First, what this conceptualisation enables is a recogni-
tion that there are alternatives to whatever is discovered.
As already pointed out the ‘middle range’ conceptualisation
is not predictive as to what might exist in any empirical
situation. It provides a conceptual language for articu-
lating the nature of any and all PMS. The continuum of
conceptual possibilities from ‘transactional’ to ‘relational’
PMS also provides empirical alternatives. If, for instance,
a more ‘transactional’ PMS is apparent empirically, what
the conceptualising indicates is that it could be different
and that there are genuine alternatives which could be
adopted.
294 J. Broadbent, R. Laughlin / Management Accounting Research 20 (2009) 283–295
Second, even though the conceptualisation is intended
to provide a way of developing an improved understanding
of any and all PMS it is particularly powerful for develop-
ing a critical understanding of empirical areas which have
been actively engaged in changing PMS designs. Wher-
ever performance is attempted to be managed a PMS will
be present in some form or other and in this sense the
conceptualisation in this paper is argued to provide a vehi-
cle for articulating a better understanding than would be
possible without it. But new areas of PMS development
provide a particularly interesting focus for conceptual and
empirical analysis. A notable case in this regard is the pub-
lic services across the world, who, under the broad guise
of the ‘new public management’, have been engaged in a
systematic attempt to control performance over the last
few decades (cf. Hood, 1991, 1995; Olson, Guthrie and
Humphrey, 1998; Modell, 2003). Developments such as
these, where the PMS designs are changing, can be argued
through this conceptual language as a move from rela-
tional to transactional. This analytical framework provides
a constant reminder, before practices become too embed-
ded and established, that alternatives are not only possible
but also could become reality. A particular area of the public
services where this reminder is needed is higher educa-
tion where there is an increasing interest being given to
performance measurement and management and its anal-
ysis. This has been manifest in a move to greater levels of
transactional PMS, using the conceptual language of this
paper (cf. Modell, 2003, 2005; ter Bogt and Scapens, 2008;
Broadbent, 2007; Broadbent, Gallop and Laughlin, 2008).
Whilst this does seem to be the trajectory of change, the
conceptualisation provides, we would argue, not only a
new way of looking at these changes, and similar devel-
opments in other areas, but also providing alternatives to
this trajectory.
As already indicated, this conceptualisation not only
provides a way to gain a richer understanding of actual
practices but also provides a critique of these practices
by raising alternatives. This raises wider questions about
the appropriateness, or otherwise, of any PMS and how
this can be judged. This paper ends, therefore, with
some brief comments on this important evaluation issue.
Throughout this paper it has been assumed that a PMS
has a legitimate right, power and authority to direct or
attempt to direct the behaviour of organisations or parts
of organisations. Habermas’ discursive model argues that
this type of steering, in the broadest sense, needs to
be ‘regulative and amenable to substantive justification’
(Habermas, 1987: 365–366) to be legitimate. Those steer-
ing mechanisms, which are perceived to be ‘constitutive
and legitimised only through procedure’ (Habermas, 1987:
365–366), fail this test. What he means by ‘regulative’ is
that it formalises already established and accepted pro-
cesses (such as the rules of safe driving). The addition
of ‘amenable to substantive justification’ reinforces the
important consensual nature of the regulation. In this case
the regulation is going to be, as Habermas’ (1987: 367)
suggests, ‘freedom-guaranteeing’ where ownership by key
stakeholders is assured. On the other hand, if any regu-
lations are perceived to be ‘constitutive and legitimised
only through procedure’ then stakeholder ‘ownership’ is
far less assured and it is, therefore, within wider societal
perspectives, ‘freedom-reducing’ (Habermas (1987: 367).
The likelihood is that a ‘relational’ PMS will be ‘regulative
and amenable to substantive justification’ and, therefore,
‘freedom-guaranteeing’ whereas a ‘transactional’ PMS will
fail to satisfy these ‘rules of thumb’ and instead be ‘constitu-
tive and legitimised only through procedure’ and therefore
‘freedom reducing’. However, this conceptual coupling is
subject to the empirical situations and the actors in these
situations that are the subject of the analysis. However, this
evaluation remains a second stage concern to the value of
the conceptual language to describe the nature of any and
all PMS design in all and every organisation or part of any
organisation.
Acknowledgements
The authors would like to acknowledge, with thanks,
the support of the ESRC Public Services Programme for the
financial support of the research from which this paper is
drawn (Award res-153-25-0057).
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