3. IMPACTO FINANCIERO DEL SIDA
3.1. IMPACTO MACROECONÓMICO DEL VIH/SIDA
Organisational hierarchical level (OHL) is identified in the following paragraphs as playing
both an antecedent and a moderating role. As an antecedent variable it influences the PES that
superiors adopt, and also likely moderates the effects o f PES.
OHL as an Antecedent of PES
While uncertainty has been identified and investigated as a moderator o f the effects o f PES on
behaviour (Hirst, 1983; Govindarajan, 1984; Chapman, 1997), Galbraith (1977) describes it in
terms o f the level of difference between the information organisations posses and that required
to carry out its functions. He suggested that organisations bridge this difference through their
structure thus variations in organisational structure reflect “ ...variation in the capability o f the
organisation to process information about events that could not be anticipated in advance...
[the information in turn being]... a function o f the output diversity', division o f labour, and the
level o f performance” (Galbraith, 1977, pp55-56). On one hand, organisational structure could
be viewed as the grouping o f resources and individuals who carry' out similar tasks together
into units and the grouping o f these units together in some configuration based on work
Chapter 3 Theory D evelopm ent and H ypothesis Formulation 52
the basic building block o f organisational structure is the formation o f work units around
similar and/or related tasks aimed at a work output depending on the nature of the task. In
investigating the effects of PES, previous studies have adopted this view o f structure as
organisations’ response to uncertainty by looking at differences between different types of
organisations and work units/departments. Galbraith (1977) posits that the nature o f tasks at
each OHL require different roles and organisational behaviour. Generally, tasks are
progressively more complex and non-programmable higher up the hierarchy and so also does
the time frame between actions and the full realisation of its consequences increase higher up
the hierarchy (Jaques, 1964a; 1979; 1990).13 Thus, higher up the OHL, knowledge o f cause
and effect relationships decreases as tasks become increasingly non-programmable and the
action-result time frame lengthens. This implies that it is more feasible and probably less
costly to monitor the effectiveness of task related effort lower down than higher up the OHL.
As a result, the type/nature of information, i.e. performance measures and ‘targets’, used to
evaluate performance at each hierarchical level likely differs and, probably, so would the
manner in which the information is interpreted and assessed.
On the other hand, organisational structure, i.e. organisational hierarchical levels (OHLs)
could also be viewed in terms o f the people carrying out the tasks and the various authority or
superior-subordinate(s) relationships underpinning the various work units. Simons (2000)
discusses organisational structure in terms of the ‘span o f control’ and ‘span o f accountability’
structures within the firm. Thus, OHL as sets of superior-subordinate relationships in an
organisation reflect both span of control and span o f accountability. Simons posits that both
span o f control and span of accountability determine the ‘span of attention’ o f managers - i.e.
the domain o f activities within a manager’s field o f view that he attempts to gather
information on and influence. Span o f control indicates the number o f direct subordinates or
functions under a manager, while span o f accountability' expresses the range o f performance
13 This applies particularly to managerial jobs. Though some lower level jobs, e.g. nursing in the context o f a hospital, may appear to be quite complex but in large part they are still programmable i.e. consists o f clear and detailed steps to take in defined circumstances.
Chapter 3 Theory D evelopm ent and H ypothesis Formulation 53
measures used to evaluate a manager and at the basic level defines the financial statement elements a manager is held accountable. Thus, span of control and span o f accountability are
inherent elements of the organisational design which vary across the OHLs. For most types of
organisations, it would appear that lower down the OHL, the number o f subordinates a
superior directly supervises, i.e. span of control, tends to increase while span o f accountability
narrows, i.e. they tend to be held accountable for specific single line items in the financial statements.
As span o f control increases at lower levels, i.e. the more people a superior has to evaluate, so
would the need to be perceived as objective and fair in evaluating and rewarding performance.
This for instance may drive the predominant use of quantitative performance measures, which
are perceived as more objective compared to non-quantitative measures. Also, as span of
accountability is narrower at these levels, less aggregated information is needed, all implying
that quantitative non-financial information may be used more extensively to measure, evaluate and reward performance at low OHLs. Given also that tasks are more programmable at lower
OHL and that the action-results time frame is short, this makes the use o f the non-quantitative
measures in a TF PES amenable at these levels.
On the other hand, task is less programmable at higher OHL and effort less easily monitored.
Also, span o f accountability is broader and action-results time frame longer. Thus while more
quantitative non-financial information may be used more extensively at lower OHLs, more
aggregate measures of performance, usually financial measures, are required for higher OHL.
In general, financial information usually reflects aggregate actions o f many lower level
subordinates making it somewhat predictable, thus it may be seen as ameliorating some o f the difficulty in measuring performance posed by non-programmability o f tasks at higher OHLs.
However, it is also much more likely that the quantitative measures would be used in
combination with qualitative information in evaluating and rewarding performance at higher
Chapter 3 Theory D evelopm ent and H ypothesis Formulation 54
Financial information usually relates to shorter time frames and thus do not fully reflect the
impact o f all the relevant contemporaneous actions/decisions o f managers. Moreover, because
financial information is highly aggregated at higher OHLs, it may also mask other managerial
deficiencies making its combined use with additional qualitative information more desirable.
In summary, it is argued that OHLs would influence PES in determining both the nature/type
o f information used as well as the manner such information is used. Though quantitative measures are used across OHL, the discussion above suggests that more non-financial
(financial) quantitative measures are used at lower (higher) OHL. In addition, the quantitative
non-financial measures are likely to be used extensively and emphasised at lower OHL, i.e. a
high TF PES. However, the financial measures are less likely to be used in such a manner at
higher OHL. Financial measures are more likely to be used in some balanced combination
with other qualitative information, i.e. a low to moderate rather than high TF PES.
Hypothesis 5
a) There is no difference in the amount o f quantitative information used to evaluate performance at low vs. high OHL.
b) Non-financial information is used more extensively to evaluate performance at low OHL than at high OHL; and conversely financial information is used more extensively at high OHL than at low OHL.
c) PES dominantly used at high OHL will be different from that used at low OHL; i.e. the manner in which quantitative information is used for performance evaluation would be different at low compared to high OHL - with high (low) TF PES dominantly used at low (high) OHL
OHL as a Moderator of PES Consequences
Empirical evidence from early studies suggests that OHL not only influences PES used but
also possibly moderates the impact of TF PES. For example, Otley (1978, p. 143) attributed
the difference in the distributions of PES observed in his study compared to that in Hopwood’s (1972) study to the type o f responsibility' centre studied - profit centres in the
Chapter 3 Theory D evelopm ent and H ypothesis Formulation 55
case o f Otley and cost centres in the case of Hopwood. Similarly, Brownell (1982a) also
attributed the difference in the PES distributions between his study and Otley’s to the same
factor. Brownell (1982a, p. 16 footnote 4) suggests that “apparently, profit centre managers (Otley’s sample) are evaluated much more on the basis of accounting information than cost-
centre managers (Hopwood’s sample and the sample in this study), as reflected in the dominance o f the non-accounting sty le in Hopwood’s and my samples, o f only trivial
importance in Otley’s sample.” Responsibility' centre type in these studies obviously reflects
the OHLs of the managers surveyed. The results of these studies were also significantly
different with regards to the effects of PES, and these differences spurred the RAPM series of
studies (Hartmann, 2000). While Hopwood and Brownell found some evidence that (at lower
OHL) high RAPM compared to low' RAPM sty le of performance evaluation was less
associated with performance, and more associated with dysfunctional behaviour and stress,
Otley found no such evidence (at higher OHL). Otley found that (at higher OHL) high RAPM
was more associated with performance and had no significant association with dysfunctional
behaviour. These results suggest differential effects of high RAPM at different OHL, which
implies that OHL moderates the effects o f PES on behaviour and performance. On the other
hand, the pattern o f dominant PES also suggests that OHL is an antecedent o f PES.
One strong explanation that has been offered as accounting for the differences in PES distribution among the three studies cited above makes it difficult to base any hypothesis
about the antecedent and moderating effects o f OHL on the empirical evidence provided by these studies without controlling for this factor -i.e. the financial/economic condition faced by
an organisation. The organisation Otley (1978) studied was facing difficult economic
conditions, which may not have been the situation with Hopwood’s (1972) and Brownell s
(1982a) sample firms. Otley found that tighter control systems were adopted in the units
having the greatest impact on the profitability' o f the firm, and he suggested that “in the most
difficult economic conditions, a tight system of control was adopted..., in slightly easier but
Chapter 3 Theory D evelopm ent and H ypothesis Formulation 56
stable conditions, a less rigorous approach prevailed ... intervention occurring only when
profitability appeared threatened.” (p. 141). Imosili (1989, p.332) reaffirmed this explanation for the differences in PES and effects of PES as he notes that:
...perhaps when organisations are facing financial hardship, the differential effects of
performance evaluative style on work outcomes may be difficult to isolate empirically. It
is likely that when companies are undergoing periods of declining profitability, there might
be so much emphasis on financial data in performance evaluation that it may be difficult to
truly classify managers into different styles on the basis of how much consideration is given to budget data in performance evaluation. In this study however, this factor is ruled
out as the case organisation is not facing financial difficulties, to the contrary it is one of
the most successful in its industry as indicated by their financial statements. Thus, any
confounding effects of economic conditions on PES and its effects are substantially
controlled for in this study. Empirical and anecdotal evidence from the stream o f literature
focused on control systems in professional accounting firms also indicate that the
incidence of dysfunctional or inappropriate behaviour is lower at more senior compared to
more junior levels in the organisation (Kelly and Margheim, 1990; Pierce and Sweeney,
2004; . For instance, Kelly and Margheim 0 9 9 0 ) found that dysfunctional behaviour was
more common among lower level auditors. Similarly, Pierce and Sweeney (2004) found a higher level o f dysfunctional behaviour among audit juniors compared to audit seniors,
though difference was not tested for statistical significance.
These results further suggest that OHL may moderate the impact of PES on dysfunctional
behaviour. Moreover, OHL provides a context within which the appropriateness o f a TF PES
may be adjudged given the discussions in the preceeding sub-section, and therefore likely to
moderate PES effect on behaviour. A high TF PES may be seen as inappropriate at high OHL
given less knowledge o f cause and effect, less programmability o f tasks, and longer action-
Chapter j Theory D evelopm ent and H ypothesis Formulation 57
more appropriate, than low TF PES given greater span o f control at these levels. Therefore the following proposition is put forward:
Hypothesis 6
OHL moderates the effects o f TF PES on behaviour and performance such that:
a) QTB is more positively associated with TF PES at higher than at lower OHL
b) IT is more positively associated with TF PES at higher than at lower OHL
c) Effort is more positively associated with TF PES at lower than at. higher OHL
d) Performance is more positively associated with TF PES at lower than at higher OHL