ACCOUNTING, RELIGION, AND POLITICS: PERFORMANCE ...
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ACCOUNTING, RELIGION, AND POLITICS: PERFORMANCE MEASUREMENT PRACTICES IN IRANIAN PUBLIC MANAGEMENT Siamak Nejadhosseini Soudani 01517739 DISSERTATION eingereicht im Rahmen des PhD Programm Management (Doktoratsstudium) an der Leopold-Franzens-Universität Innsbruck Hauptbetreuer: Univ.-Prof. Dr. Silvia Jordan Weiterer Betreuer: Univ.-Associate Prof. Dr. Afshin Mehrpouya Erstbeurteilerin: Univ.-Associate Prof. Dr. Afshin Mehrpouya Zweitbeurteiler: Univ.-Prof. Dr. Martin Messner Innsbruck, im Mai 2021
Transcript of ACCOUNTING, RELIGION, AND POLITICS: PERFORMANCE ...
ACCOUNTING, RELIGION, AND POLITICS:
PERFORMANCE MEASUREMENT PRACTICES IN IRANIAN
PUBLIC MANAGEMENT
Siamak Nejadhosseini Soudani
01517739
DISSERTATION
eingereicht im Rahmen des
PhD Programm Management (Doktoratsstudium)
an der Leopold-Franzens-Universität Innsbruck
Hauptbetreuer: Univ.-Prof. Dr. Silvia Jordan
Weiterer Betreuer: Univ.-Associate Prof. Dr. Afshin Mehrpouya
Erstbeurteilerin: Univ.-Associate Prof. Dr. Afshin Mehrpouya
Zweitbeurteiler: Univ.-Prof. Dr. Martin Messner
Innsbruck, im Mai 2021
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Abstract
This study analyzes the interrelationship between accounting, religion, and politics, specifically
the role of Islam, political discourses, and anti-imperialist beliefs in the adoption of performance
measurement systems in the context of Iranian public management. I conducted a qualitative case
study in the Iranian petroleum industry drawing on interviews, observations, and document
analysis. The data analysis process followed an abductive approach, which facilitated systematic
data analysis, interpretation and enabled the development of theoretical concepts by moving back
and forth between data and theory. I discussed my findings by drawing on two theoretical
frameworks. First, I used post-colonialism (mainly Bhabha, 1994) to explain the role of Islam and
anti-imperialist beliefs, movements, and discourses on shaping the local identity construction and
the performance measurement practices in the context of the Iranian petroleum industry. Second,
I applied the literature on “orders of worth” (Boltanski & Thévenot 1999, 2006) to explore how
people cope with multiple value regimes co-existing within the society and the organization and
how they justify their actions legitimately. My findings reveal that the hybridization of Western
management approaches with Islamic ideology has produced an ambivalent variant of performance
evaluation systems in the Iranian petroleum companies; one is characterized by mimicry of
Western management thoughts and techniques, and the other is characterized by resistance to it by
emphasizing Islamic values. The Islamic ideology has shifted public management identity
construction by emphasizing the entanglement of religion and government as a dominant value in
managing the country and has shaped the practices of management control systems by measuring
and managing staff’s performance based on Islamic values in public organizations. This study
shows that Islamic management is not a unified concept. It may take different meanings even
within the same organizational context, and it may be mobilized for political purposes in a
totalitarian regime in ways that depart significantly from Islamic management principles derived
from Islamic faith, tradition, and practices. The study extends sociological approaches to
management accounting and management control research by revealing that the management
control systems can act as mediating tools between multiple value regimes that coexist within
society and organizations. More broadly, this study also contributes to the interdisciplinary
perspectives on accounting and the literature on the roles of accounting in society and
organizations.
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ACKNOWLEDGEMENT
This dissertation could not have been completed without the support of many people, within and
outside academia, who contributed to its production. First and foremost, my parents and my sisters.
Without their support and encouragement, this adventurous journey would have been far more
challenging.
I want to take this opportunity to extend my gratitude to several people who have made valuable
contributions to the completion of this PhD thesis. First of all, I want to appreciate my principal
supervisor Prof. Dr. Silvia Jordan who made this dissertation project possible in the first place. I
am grateful for your guidance, constructive feedback, and trust, as well as your encouragement to
pursue my interests. I am delighted to say that I have not only found a supervisor, and a co-author
in you, but also a good friend.
Secondly, I would also like to express my appreciation to my co-supervisor and examiner Prof.
Dr. Afshin Mehrpouya. Thank you for taking the time to supervise and evaluate me. You are an
extraordinary academic, and I have learned from you in so many ways through the valuable
feedback, advice, and comments you gave me on my PhD research project. Thank you also to my
second examiner Prof. Dr. Martin Messner for taking the time to examine and provide feedback to
this dissertation.
I am also very grateful for the valuable and constructive feedback and advice that I received from
other scholars, such as Prof. Dr. Albrecht Becker, Prof. Dr. Claire Dambrin, Prof. Dr. Keith
Robson, and Prof. Dr. Rania Kamla.
Furthermore, I am also indebted to the managers of the NIOC, the case study organization in
Tehran (Iran), for their hospitality, openness, and willingness to participate in my study. I am
extremely grateful to those people who provided me with access to the data, especially the Deputy
Minister of Science, Research, and Technology, the head of the Student Affairs Organization, as
well as the head of the Research and Technology Centre of the NIOC.
A part of this PhD thesis was financed by the scholarship, which I was kindly granted by the
University of Innsbruck, the Vice-Rectorate for Research (Vizerektorat für Forschung). I would
like to extend my sincere thanks to the University for this scholarship, without which, this
dissertation would have taken much longer.
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LIST OF ABBREVIATIONS
ALOP
APOC
BP
BSC
CIA
CVA
EPC
EPCF
EPCM
EVA
EW
GDP
ICOFC
ILP
IMF
INSTEX
IOC
IOOC
IRGC
IRI
JCPA
KEPCO
KPI
LNG
MCS
NICO
NIDC
NIGC
Anglo-Iranian Oil Company
Anglo-Persian Oil Company
British Petroleum
Balanced Scorecard
United States Central Intelligence Agency
Cash Value Added
Engineering, Procurement, and Construction
Engineering, Procurement, Construction and Financing
Engineering, Procurement, Construction and Management
Economic Value Added
Economics of Worth (also it refers to Orders of Worth)
Gross Domestic Product
Iranian Central Oil Fields Company
Institutional Logics Perspective
International Monetary Fund
Instrument in Support of Trade Exchanges
International Oil Companies
Iranian Offshore Oil Company
Islamic Revolutionary Guard Corps
Islamic Republic of Iran
Joint Comprehensive Plan of Action
Khazar Exploration and Production Company
Key Performance Indicators
Liquefied Natural Gas
Management Control System
Naft Iran Company
National Iranian Drilling Company
National Iranian Gas Company
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NIOC
NIORDC
NIPC
NISOC
NITC
NPM
OESC
OIEC
OILSO
OPEC
OPG
PEDEC
PMM
PMS
POGC
PPS
ROA
SPMS
STIPEC
National Iranian Oil Company
National Iranian Oil Refining and Distribution Company
National Iranian Petrochemical Company
National Iranian South Oil Company
National Iranian Tanker Company
New Public Management
Oil Exploration Services Company
Oil Industry Engineering and Construction Company
Oil Industry Logistics and Services Organization
Organization of the Petroleum Exporting Countries
Operating Profit Growth
Petroleum Engineering and Development Company
Performance Measurement Matrix
Performance Management System
Pars Oil and Gas Company
Performance Pyramid System
Return On Asset
Staff Performance Management System
Strategic Transformation in the Iranian Petroleum Companies
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LIST OF TABLES AND FIGURES
Table 4.1: Participants’ qualification by gender
Table 4.2: Some revisions on original and emergent themes during the data collection process
Table 4.3: Extract of the open coding spreadsheet from the first round interview transcript
Table 4.4: an exemplary integration of stems and codes
Table 5.1: Main Iran’s state-owned petroleum companies
Table 5.2: Iran proven crude oil reserves (1998-2018)
Table 5.3: Iranian oil refinery capacity (1998-2018)
Table 5.4: Iranian natural gas reserves (1998-2018)
Table 5.4: Iranian natural gas production (1998-2018)
Table 7.1: The evaluation sheet of general managers
Table 8.1: The ambivalence of the colonial process in the practice of PMS
Figure 2.1: Uncertainty, decision making and the roles of accounting practice
Figure 4.1: The process of qualitative data analysis
Figure 5.1: The significance of oil in Iran’s economy
Figure 5.2: Iranian oil daily average production (1973-2018)
Figure 5.3: Iranian oil production fluctuation (1918-1973)
Figure 5.4: Organizational chart of Iranian petroleum industry
Figure 5.5: Iranian crude oil daily average exports (1980-2018)
Figure 6.1: The decision-making process in the Iranian petroleum industry
Figure 6.2: Free market rate VS. Official rate of IRR per US dollar
Figure 7.1: The NIOC’s Balanced Scorecard generic strategy map
Figure 7.2: The organizational hierarchy of the accounting department in the NIOC
Figure 7.3: A design blueprint of the Staff Performance Management System
Figure 7.4: The profit center structure of NIOC
Figure 7.5: The Strategic and comprehensive planning hierarchy of NIOC
Figure 7.6: The NIOC’s ICT strategy roadmap
Figure 7.7: The discussion of change program results in NIOC’s project meeting
Figure 7.8: The KPIs linkage at the organizational levels
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Figure 7.9: A feedback sample of the Staff Performance Management System
Figure 7.10: A sample of the security department’s evaluation form
Figure 7.11: The general assembly of the NIOC
CONTENTS
ABSTRACT ...................................................................................................................................... i
ACKNOWLEDGEMENT .................................................................................................................. ii
LIST OF ABBREVIATIONS ............................................................................................................ iii
LIST OF TABLES AND FIGURES ................................................................................................... v
CHAPTER ONE: INTRODUCTION
1.1 Motivation ............................................................................................................................. 1
1.2 Research Aim and Objectives ............................................................................................... 3
1.3 Research Methodology .......................................................................................................... 4
1.4 Theoretical Background ........................................................................................................ 5
1.5 Research Findings ................................................................................................................. 6
1.6 Structure of the Thesis........................................................................................................... 7
CHAPTER TWO: PERFORMANCE MEASUREMENT AND MANAGEMENT AND
THEIR STUDY AS SOCIAL AND ORGANIZATIONAL PRACTICES
2.1 Introduction ........................................................................................................................... 9
2.2 Concepts of Performance .................................................................................................... 11
2.3 Definitions of Performance Measurement and Management .............................................. 12
2.4 The Development of Performance Measurement and Management ................................... 14
2.5 Different Roles of Performance Measurement and Management Systems in Organizations
and Society ................................................................................................................................ 18
2.5.1 The Use of PMS as an Answer Machine ...................................................................... 19
2.5.2 The Use of PMS as a Learning Machine ...................................................................... 22
2.5.3 The Use of PMS as a Political Machine ....................................................................... 25
2.5.4 The Use of PMS as a Justification Machine ................................................................. 27
2.6 Socio-cultural Impacts on the Use of Performance Management Systems ........................ 29
2.7 Summary ............................................................................................................................. 36
CHAPTER THREE: THEORETICAL FRAMEWORK
3.1 Introduction ......................................................................................................................... 38
3.2 Institutional Logics in Organizational Studies .................................................................... 39
3.2.1 Institutional Logics in Action ....................................................................................... 41
3.2.2 Institutional Logics as Culture ...................................................................................... 42
3.3 Theory of Justification ........................................................................................................ 44
3.3.1 A Framework for Analyzing and Reporting within Common Worlds ......................... 48
3.3.2 Orders of Worth ............................................................................................................ 51
3.3.3 Organizing Dissonance, Compromising Accounts, and Productive Friction ............... 57
3.4 Postcolonial Theory............................................................................................................. 60
3.4.1 Mimicry ........................................................................................................................ 65
3.4.2 Hybridization ................................................................................................................ 66
3.5 Summary ............................................................................................................................. 67
CHAPTER FOUR: METHODOLOGY
4.1 Introduction ......................................................................................................................... 69
4.2 Characteristics of the Quality Criteria in Qualitative Research .......................................... 70
4.3 Research Method ................................................................................................................. 73
4.3.1 Epistemological Foundations ....................................................................................... 74
4.3.2 Theoretical Sensitivity .................................................................................................. 76
4.4 Data Collection Methods ..................................................................................................... 77
4.4.1 Interviews ..................................................................................................................... 77
4.4.2 Observations ................................................................................................................. 81
4.4.3 Documents .................................................................................................................... 83
4.5 Data Analysis ...................................................................................................................... 85
4.5.1 Data Analysis During Data Collection ......................................................................... 86
4.5.2 Description of the Coding Process ............................................................................... 88
4.6 Ethical Consideration .......................................................................................................... 93
4.7 Summary ............................................................................................................................. 94
CHAPTER FIVE: THE DEVELOPMENT OF THE IRANIAN PETROLEUM INDUSTRY
5.1 Introduction ......................................................................................................................... 95
5.2 The Development of the Iranian Petroleum Industry Before 1979 ..................................... 98
5.2.1 Foreign Influence .......................................................................................................... 99
5.2.2 Nationalization............................................................................................................ 100
5.3 The Development of the Iranian Petroleum Industry after the Revolution of 1979 ......... 104
5.3.1 Organizational Changes .............................................................................................. 106
5.3.2 Oil Production and Reserves ...................................................................................... 109
5.3.3 Gas Production and Development .............................................................................. 114
5.4 Summary ........................................................................................................................... 117
CHAPTER SIX: THE IMPACT OF INTERNAL AND INTERNATIONAL POLITICS ON
THE IRANIAN PETROLEUM INDUSTRY
6.1 Introduction ....................................................................................................................... 119
6.2 The Political Culture of Iran.............................................................................................. 121
6.2.1 Pre-Islamic Political Perspectives .............................................................................. 122
6.2.2 Post-Islamic Political Perspectives ............................................................................. 123
6.3 The Political Structure of the Iranian Petroleum Industry ................................................ 130
6.3.1 The Role of the Islamic Revolutionary Guard in the Petroleum Industry .................. 133
6.3.2 Structural Reforms of the Iranian Petroleum Industry ............................................... 136
6.4 The Impact of International Sanctions .............................................................................. 138
6.4.1 International Sanctions Since 1979 ............................................................................ 142
6.4.2 The Impact of Sanctions on Technology Development for the Iranian Petroleum
Industry ................................................................................................................................ 149
6.5 Summary ........................................................................................................................... 153
CHAPTER SEVEN: THE PERFORMANCE MEASUREMENT AND MANAGEMENT
SYSTEMS IN PRACTICE
7.1 Introduction ....................................................................................................................... 155
7.2 Aspirations of Performance Measurement and Management ........................................... 157
7.2.1 Iran’s 20-year National Vision and the Fifth and Sixth Development Plans ............. 157
7.2.2 The Change Program (STIPEC) Proposal of Performance Measurement and Reporting
............................................................................................................................................. 161
7.2.3 Interviewees’ Statements on What the New PMS Should Ideally Look Like ............ 167
7.3 Actual Practices of Performance Measurement and Evaluation ....................................... 170
7.3.1 The Actual Design of the Performance Measurement and Evaluation Systems ........ 171
7.3.2 The Use of KPIs for Performance Evaluation and Budgeting .................................... 183
7.4 Factors Which Shape the Use of PMS .............................................................................. 195
7.4.1 Islamic Management................................................................................................... 196
7.4.2 Domestic Factors ........................................................................................................ 202
7.4.3 International Factors ................................................................................................... 206
7.5 Summary ........................................................................................................................... 210
CHAPTER EIGHT: DISCUSSION OF FINDINGS
8.1 Introduction ....................................................................................................................... 214
8.2 Post-colonialism and the Ambivalent Practice of Performance Management Systems .... 215
8.3 Orders of Worth and the Role of Performance Management System ............................... 225
CHAPTER NINE: CONCLUSION
9.1 Introduction ....................................................................................................................... 238
9.2 General Synopsis and Findings ......................................................................................... 239
9.3 Contributions to Knowledge ............................................................................................. 243
9.4 Limitations and Potential for Future Research .................................................................. 245
APPENDICES ............................................................................................................................ 247
REFERENCES ........................................................................................................................... 252
DECLARATION OF ACADEMIC HONESTY ……………………………….…………………. 286
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CHAPTER ONE: INTRODUCTION
1.1 Motivation
Performance management and measurement is one of the main areas of interest in managerial
practice and has generated much coverage in accounting and organization studies over the past
decades (e.g., Brignall & Modell, 2000; Carlsson-Wall, Kraus, & Messner, 2016; Chenhall, Hall,
& Smith, 2013; Jørgensen & Messner, 2010; Jordan & Messner, 2012; Mehrpouya & Samiolo,
2019; Spekle & Verbeeten, 2014). While the performance measurement and management literature
typically argues that to succeed at enhancing organizational performance, an organization must
establish a comprehensive performance management system (PMS) to provide employers and
employees with clear directions and goals set by the enterprise (e.g., Kaplan & Norton 1992, 1996;
Valmohammadi & Ahmadi 2015; Tseng & Lee 2014), interpretive and critical accounting studies
seek to describe and explain performance measurement practices and draw attention to the
potential unintended and problematic effects of performance measurement systems (e.g., Espeland
& Sauder, 2007; Henri, 2006; Mouritsen & Kreiner, 2016; Roslender, 1996).
Studies that investigate performance measurement practices most often concern organizations
situated in Europe, Canada, the United States (US), and Australia. While some of these studies
focus on the influence of politics and wider cultural factors such as neoliberal discourses, this is
typically confined to “Western” cultural contexts (Cooper, Hayes, & Wolf, 1981; Miller 1991,
1998; Power 1994, 1997). Although some studies within management accounting research concern
practices of PMS in non-Western societies (e.g., Chen, 2017; Ezzamel, Xiao, & Pan, 2007;
Ezzamel & Xiao, 2015; Firth, 1996; Franke, Hofstede, & Bond, 1991), we still have limited
knowledge of how PMSs are understood and practiced in non-Western contexts, especially
regarding the interplay between historical, cultural, religious, and political parameters and
performance measurement practices. More specifically, we lack accounting research that
investigates the ways in which religious rationales and practices affect the use of PMS. In many
cultural contexts, religion still plays an important role in politics and organizations (Behery &
Paton, 2008). Islamic societies provide a fruitful empirical arena in this regard, since politics,
religion, and organizational management are particularly intertwined, as is indicated by notions
such as “Islamic finance” and “Islamic management” (Hidayah, Lowe & Woods, 2019; Kamla &
Haque, 2019; Kamla, Gallhofer, & Haslam, 2006; Napier, 2009; Napier & Haniffa, 2011). While
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recently, accounting research has started to investigate Islamic finance and accounting professions
in Islamic societies (e.g., Gallhofer, Haslam & Kamla, 2011; Mihret, Mirshekary & Yaftian, 2020),
we lack in-depth studies on performance measurement and management practices within
organizations situated in these contexts. This PhD thesis addresses this gap and studies the tension
between religious values and industrial modes of evaluation in the Iranian petroleum industry. It
explores how managers cope with the intertwining of competing orders of worth within the
organization. In doing so, I investigate how the particular historical, cultural, religious, and
political context of Iran affects Iranian public management and has shaped the application of
‘Western’ performance management concepts in the Iranian petroleum industry. The term
‘Western’ performance management is used in my study to refer to the widely dispersed
management technologies and techniques that have been practiced within Western cultural
contexts such as the US, Canada, Europe, and Australia.
Iran has always been a central point of Western powers’ attention due to its rich natural resources
(e.g., oil and natural gas) and its geopolitical position in the so-called “Middle East”. Although
Iranian society was never colonized by Western powers directly, historical domination of Western
powers (mainly, the UK and the US) as part of cultural and political influence led to an opposition
to Western imperialism and modernization in Iran’s society. For example, the colonial influence
of the UK on the Iranian petroleum industry from 1908 to 1951 had a significant impact in this
regard (see chapter 5). Nonetheless, the nationalization of the Anglo-Iranian Oil Company (AIOC)
in 1951 and the later victory of the Islamic revolution in 1979, have considerably diminished the
domination of Western powers. The Islamic revolution of 1979 played a significant role in
promoting Islam by generating anti-imperialist debates and movements (see chapter 6). This
perspective significantly influenced the development of “Islamic management” concepts and
practices in dealing with managerial issues in the Iranian public management, by emphasizing the
entanglement of religion and government as a dominant value in managing the country. The
emphasis on the Islamic nationalist ideology in dealing with social issues shows resistance and a
general rethinking of dominant Western historiography that places the ‘West’ at the center of the
world. It also indicates cultural hegemony that provides clergies with the right to gain control over
economic, social, and political activities (see chapter 6). However, during this period, Iranian
society has constantly been affected by political and economic upheaval (mainly economic
sanctions, the involvement of focal power players, and mismanagement), which has directly
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influenced the development, reformation, and performance of the Iranian petroleum industry. All
of these events have made Iran a fascinating case study.
1.2 Research Aim and Objectives
Studies of accounting as a social and institutional practice typically attempt to investigate
accounting from a broad perspective, examining the applications of accounting practices in the
social and organizational contexts in which they occur. Such studies indicate that accounting is
more readily understood as a dynamic and socially constructed practice with implications for the
behavior of individuals and the functioning of organizations and societies (Burchell et al., 1980;
Miller & O’Leary, 1987, 1994; Hines, 1988, 1991; Hopwood, 1992; Miller, 1994; Simons 1990,
1995). However, these studies are mostly focused on organizations situated in Western contexts,
with only a few studies focused on the specific context of China (e.g., Ezzamel & Xiao, 2015;
Ezzamel, Xiao & Pan, 2007; Peng, 2003). Very rarely, PMS are studied in the context of Islamic
societies; especially the ways in which socio-cultural aspects such as Islamic values, political
tensions, and transnational capitalism shape practices of performance measurement and
management in these societies are rarely investigated. Extant studies on management accounting
practices in Islamic societies (e.g., Alnamri, 2015; Etemadi et al., 2009; Kamla & Haque, 2019;
Napier, 2009) are often based on questionnaires and tend to draw on Hofstede’s (1980, 1984)
relatively static and simplistic cultural dimensions (see Baskerville, 2003; Ahrens & Chapman,
2006). Some studies point to the divergence between “ideal” Islamic principles and actual Islamic
management practices. However, these studies do not explain these gaps in much detail, and
perhaps even more importantly, they do not investigate how organizational actors themselves use
and promote the concept of “Islamic management” in day-to-day actions.
This study contributes to the literature on the interplay between accounting and its roles in society
and organizations by investigating how the specific historical, cultural, and political parameters
have shaped public management identity construction and the application of ‘Western’
performance management in the Iranian petroleum Industry. In doing so, this research seeks to
address the following questions:
1. How are performance measurement and management systems understood and practiced in
a non-Western context?
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2. How has Islamic ideology shaped the practices of performance measurement and
management?
3. How do managers cope with conflicting values (such as religious value and industrial
value) in the practices of performance measurement and management?
1.3 Research Methodology
This study draws on qualitative methodology due to the epistemological (interpretivism) and
ontological (constructivism) characteristics of the research topic. As relatively little research has
explored how PMS is understood, implemented, and practiced in the context of Islamic societies
more broadly and Iran more specifically, a qualitative approach suited this study by providing an
in-depth exploration of how people perceive and enact their social realities in complex social
networks. As pointed out by Gay et al. (2009), qualitative research approaches provide an
opportunity for researchers to interact with and gather data directly from their research participants
to identify how their experiences and behavior are shaped by the context of their lives, such as
their culture, their social life, and the economy. Qualitative field researchers agree that “social
reality is emergent, subjectively created, and objectified through human interaction” (Chua 1986,
p. 615). In doing so, I used various data collection methods such as interviews, observations, and
organizational documents to gain more comprehensive knowledge and insights into the practice of
PMS in the Iranian petroleum industry.
I used semi-structured interviews with key actors, observed meetings, participated in everyday
organizational activities from the year 2017 to 2018, and analyzed documents to gain insights into
the practices of PMS in the Iranian petroleum industry. Participant observation and document
analysis are adopted as a supplement to the interview method of data collection. Observation
enabled me to learn about the people’s actions, interactions, and views in organizational settings
by providing meaningful properties of the specific characteristics and conditions of using PMS in
the Iranian petroleum industry, such as practices of the Iranian variant of Islamic management,
economic sanctions, and the political role of the petroleum industry in the region. The reason for
selecting document analysis was to investigate the phenomenon from secondary data (Payne &
Payne, 2004) as well as a relevant source of the political discourse in analysis and interpretation.
Participants for the interviews were selected from a wide variety of functions, hierarchical levels
and duration of organizational affiliation in order to cover a broad range of viewpoints. I sought to
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include managers from all levels and not just the top management to reflect the diversity (i.e.,
various viewpoints) in the study.
In the process of data analysis, I analyzed important information line by line to develop categories
and codes (major themes) as they emerged from the data. All the significant information was
codified through NVivo and the results were exported into a Microsoft Excel spreadsheet, in order
to easily modify codes, introduce new coding at different times during the process, recode data
with multiple codes, and sort the spreadsheet by codes or participants. Secondary data was also
used for description or clarification purposes in the analysis of primary data. The analysis process
involved the abductive approach to facilitate systematic data analysis, data interpretation, and
develop the theoretical framework by moving back and forth.
1.4 Theoretical Background
I discuss my findings by drawing on two theoretical frameworks: Post-colonialism (mainly
Bhabha, 1994) and the Orders of Worth (Boltanski & Thévenot 1999, 2006). I first discuss my
findings through the post-colonial lens which enables me to explain the interrelationship between
accounting and religion, specifically the role of Islam and anti-imperialist beliefs in the practice of
performance measurement and management by investigating the enactment of new public
management in the context of the Iranian petroleum industry. Then, I interpret my findings in terms
of the theoretical framework of orders of worth or economies of worth (EW) in combination with
post-colonialist theory in order to theorize the impact of the specific historical, cultural, and
political context on performance measurement practices, and hence the co-existence of multiple
value regimes in Iranian public management.
Although post-colonial studies have paid much attention to the particular historical, cultural, and
political contexts of colonial and post-colonial societies by means of which they analyze the
continuing resistances, appropriations, and transformations of dominant, (i.e., “imperial”)
discourses, institutions, and methodologies of colonized societies (e.g., Ashcroft 2013, 2017;
Bhabha 1983, 1984; Gandhi, 2019; Said 1979, 1993, 2003; Spivak, 1987), the Islamic thought
system (e.g., Islamic management) has not received much attention in post-colonial studies, and
this body of work is limited in how it deals with issues related to Islam. Furthermore, existing
studies have mainly investigated the role of accounting in different Western nations by drawing
on the EW framework to demonstrate the variety of competing orders of worth co-existing within
societies or organizations as well as for the analysis of conflicts and tensions between the different
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values. So, they have limitations regarding its relevance beyond the Western social context in
which it is tacitly embedded. Indeed, they do not acknowledge the ongoing significance of
historical, cultural, and political relations in accounting practices, specifically, the effect of
postcolonial discourses and anti-imperialism in shaping the performance measurement and
management practices and shifting identity construction in non-Western contexts. Therefore, I
draw on postcolonial theory as a supplement to the orders of worth theory in order to address these
issues.
1.5 Research Findings
My findings reveal that the historical domination of Western powers (mainly the UK and the US)
as part of cultural and political influence, led to the formation of an ideology and practice of
“Islamic management” principles in dealing with managerial issues in the Iranian management
context after 1979. This ideological view significantly emphasizes the solidarity of religion and
government as a dominant value in managing the country and has been adopted into the legislation
of public organizations. This study highlights how the hybridization of Islamic management with
Western management approaches has produced ambivalent practices of PMS in the Iranian
petroleum companies. On the one hand, PM practices are characterized by mimicry of Western
management approaches, which is justified by the ideology of modernization and development.
On the other hand, PM practices are characterized by resisting Western management approaches,
which is justified by drawing on Islamic nationalist ideology to control and secure the Iranian
petroleum companies from foreign influence. However, the practices of PMS are enacted as a
composite object to solidify a compromise between multiple value regimes that co-exist within the
organization and help actors to mobilize the plurality of rationalities in the organization. For
example, how competing values such as religious values and industrial values are afforded in
individual performance evaluations, and by doing so, become influential in decision making in the
Iranian petroleum companies. These findings highlight the organizational actors in the process of
justification and how those actors engage with a plurality of orders of worth to maintain legitimacy,
specifying their capacity to strategically mobilize orders of worth within their political interest in
order to strengthen their discourse.
Moreover, this study indicates an aspect that has not yet been adequately addressed in the literature:
the significance of using a contextualized approach to hybridization processes in Islamic societies
that takes into account how former colonial experiences as well as local cultural context can
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interfere with the practice of Western management technologies. Accordingly, my study
contributes to management accounting literature on the globalization discourse (Cooper &
Ezzamel, 2013) as well as the ideological discourse (Ezzamel et al., 2007) by articulating how
accounting technologies (such as PMS) infuse the Western management approaches with the local
ideology to produce a hybrid version. In doing so, I also demonstrate how local managers
mobilized the global discourses to formulate their own space of discursive expressions wherein
they reimagine their managerial circumstances and identities.
1.6 Structure of the Thesis
This study is presented in nine chapters. Following this introductory chapter, chapter two reviews
relevant literature on the role of performance measurement and management as social and
organizational practices, specifically focusing on studies that have investigated the impact of
cultural factors on performance management practices. In this chapter, I highlight some
shortcomings of the extant PMS literature regarding the impact of political and socio-cultural
factors on performance management practices and discuss how my study seeks to address these
gaps.
Chapter three discusses the theoretical frameworks, with particular consideration of Boltanski and
Thévenot’s (1999, 2006) Orders of Worth or Economies of Worth (EW) theory and Post-
colonialism theory (mainly Bhabha, 1994). In this chapter, I also consider the institutional logics
perspective and its relation to the EW approach, both in terms of its contribution as a theoretical
starting point and its limitations to investigating my research questions. In addition, I highlight the
theoretical gaps in the extant literature.
Chapter four is devoted to the methodology and the methods of data collection and analysis.
Guided by the philosophical considerations, this study undertakes a qualitative research method,
as it provides an in-depth exploration of how people perceive and enact their social realities in the
complex social network. The process of data analysis involves the transcription of the verbal
interviews, informal conversations, and the data documented in notes into structured written form.
Furthermore, data analysis also entails the systematic identification of themes through careful
reading, and establishing themes based upon objectives, research questions, and conceptual
frameworks of the qualitative study. The chapter concludes with a discussion of the ethical issues
that were considered during the research process.
8
Chapter five introduces the context of the study. It provides general information about Iran with a
particular focus on the Iranian petroleum industry. This chapter demonstrates the historical
development of the Iranian petroleum industry before and after the Islamic revolution of 1979, the
influence of foreign powers, and the nationalization of the industry.
Chapter six presents the impact of internal and external parameters on the Iranian petroleum
industry. This chapter includes fundamental political, social, and economic transformations
(during monarchism, liberal nationalism, and Shi’ism as the country’s dominant cultural tradition)
in the Iranian petroleum industry.
Chapter seven is dedicated to the presentation and interpretation of the research findings. This
chapter focuses on the practices of PMS in Iranian petroleum companies, particularly the National
Iranian Petroleum Company (NIOC). The interpretation of findings takes the internal and external
environment of companies, including the interviewees’ perspectives, my observation, and
organization documents in the implementation and practice of PMS into consideration. This
chapter also highlights the factors which have shaped the practices of performance management
in the Iranian petroleum industry.
Chapter eight discusses these findings through a theoretical lens. This chapter seeks to interpret
the findings within the extant literature by drawing on the combination of post-colonialism and
EW theoretical frameworks.
This dissertation concludes with chapter nine, which provides a summary of the study, highlights
how the findings of this study contribute to extant research, and discusses the study’s limitations
and potential directions for future research.
9
CHAPTER TWO: PERFORMANCE MEASUREMENT AND
MANAGEMENT AND THEIR STUDY AS SOCIAL AND
ORGANIZATIONAL PRACTICES
2.1 Introduction
The idea that “you can’t manage what you can’t measure” has been central in the development and
promotion of organizational performance management systems (PMS) (e.g., Armstrong, 2009;
Garvin, 1993; Harbour, 2017; Salaheldin, 2009). Consequently, PMS seek to render diverse
dimensions of organizational performance measurable in order to assist the development and
achievement of an organization’s objectives (e.g., Burney et al., 2009; Bedford, 2015; Eccles &
Pyburn, 1992; Hoque, 2004). However, measuring and managing organizational success seems to
be a constant challenge for both managers and researchers (Bourne & Neely, 2002; Maltz et al.,
2003). As a result, a series of various types of performance measurement and management
systems, each with their own promises of “better” performance measurement and management
have been developed, such as shareholder value-oriented systems (e.g., EVA by Stern Stewart &
Co) and diverse multi-dimensional PMS such as the Balanced Scorecard (Kaplan & Norton, 1992).
In management accounting research, PMS constitute one of the most prominent research objects,
attracting researchers with backgrounds as diverse as accounting, operations management,
marketing, finance, economics, psychology, and sociology (Neely, 2002). Specifically since the
late 1970s and early 1980s, when several authors criticized the traditional backward looking
accounting systems (e.g., Roslender, 1996; Johnson & Kaplan, 1987; Kaplan, 1983, 1984 ) and
started to promote more forward-looking, comprehensive performance measurement systems, the
literature on PMS has expanded rapidly (see e.g., Neely, 1999). The expansion of PMS literature
also corresponded with the ever-increasing adoption of PMS not only in for-profit organizations,
but also in public and non-profit organizations which aim to render these organizations more
transparent, accountable and performance-oriented (e.g., Boyne & Chen, 2006; Dimitropoulos et
al., 2017; Goh, 2012; Hoque, 2008; Johnsen, 2000; Moriarty & Kennedy, 2002; Popovich &
Brizius, 1998; Radnor & Lovell, 2003; Radnor & McGuire, 2004; Sanger, 2008).
Many PMS studies focus on the design elements of performance measurement systems and the
ways in which these design elements lead to desirable or undesirable consequences (e.g., De Waal,
10
2003; Dumond, 1994; Lawson et al., 2003; Moreira & Tjahjono, 2016; Neely, 2002; Sandt et al.,
2001). However, since my aim in this PhD thesis is to investigate how the particular historical,
cultural, religious, and political context of Iranian public management shapes performance
management practices in the Iranian petroleum industry, I will emphasize those studies which
investigate PMS as social and organizational practices in this literature review. Studying
accounting as a social and organizational practice means to investigate the ways in which
“accounting exerts an influence on, and in turn is influenced by, a plurality of agents, agencies,
institutions and processes” (Miller 1994, p. 1). In this view, PMS are not seen as neutral
representations of organizational success, but as practices which interact with ways of managing
organizational and social life. The use of PMS is thus seen to be dependent on the specific
organizational and social context in which it operates (Hopwood, 1983). The ways in which
context factors such as specific organizational cultures or broader discourses and political
developments shape performance measurement and management practices, as well as the ways in
which PMS practices shape how people govern others and themselves have been central research
questions in this research tradition.
Studies of accounting as a social and institutional practice typically attempt to investigate
accounting from a broad perspective, probing the applications of accounting practices in the social
and organizational contexts in which they occur. Such studies indicate that accounting is merely
understood as a dynamic, socially constructed practice, even to the point where researchers have
asserted that there is no ‘natural’ or ‘fixed’ domain to which accounting practices are, or should
be, applied, nor can the existence of a static array of practices that usually fall within the accounting
domain be assumed (Miller, 1991, 1998; Miller & Napier, 1993; Power, 1994, 1997). They usually
indicate the application of accounting practices within specific organizational and social contexts,
with implications for the behavior of individuals and the functioning of organizations and societies
(Burchell et al., 1980; Miller & O’Leary, 1987, 1994; Hines, 1988, 1991; Hopwood, 1992; Miller,
1994). As a consequence of its ability to create possibilities for action in organizations and
societies, accounting has become an influential model of management of organizational and social
patterns in a diverse range of settings (Burchell et al., 1980; Hopwood, 1990; Parker & Guthrie,
1993; McSweeney, 1994; Miller, 1994).
This chapter is organized as follows. At first, I will present different concepts and definitions of
“performance” and of performance measurement and management, and I will provide an overview
11
of significant PMS developments. I will then review studies which investigate performance
measurement and management as social and organizational practices. In this respect, I will present
studies that investigated different roles of PMS in organizations and society first, and then
specifically focus on studies which investigated the impact of cultural factors on performance
management practices. In the concluding section, I will highlight the extant management
accounting literature gaps regarding the impact of political and socio-cultural factors on the
practices of performance management, and discuss how my PhD research project seeks to address
these gaps.
2.2 Concepts of Performance
By its nature, performance is a diverse subject (Otley, 1984). There have been much debated
conceptions of performance, because of which multiple and often ambiguous connotations have
accumulated in different disciplines (Sonnentag & Frese, 2002). For example, psychology, social
sciences and managerial sciences typically use different definitions with regard to individual,
societal, and organizational performance (Van Dooren et al., 2010). Concerning organizational
performance, for instance, Chamoni et al. (2006) state that performance can be understood as an
organization-internal or organization-external individual or group’s contribution to achieving the
organization’s goals. In an attempt to provide a rather generic conceptualization of performance,
Dubnick (2005, p. 351) asserts that: “outside of any specific context, performance can be
associated with a range of actions from the simple and mundane act of opening a car door, to the
staging of an elaborate reenactment of the Broadway musical ‘Chicago’. In all these forms,
performance stands in distinction from mere “behavior” in implying some degree of intent”.
Dubnick thus associates performance with intentional behavior, which can be individual or
organizational. Although this concept of performance may seem simple, due to multiple potential
actors with different aims, performance becomes a multi-dimensional term including a variety of
meanings, so that precise definitions of performance depend on the specific actors and the context
in which they “perform”.
Tangen (2005) states that the definition of performance depends on what point of view we take.
Accordingly, Thomas (2006, p. 19) explains: “…much of the literature implies that performance
is an objective phenomenon…in reality, however, performance is a social construct…securing
agreement on what constitutes a performance, especially successful performance, performance is
a multi-faceted and subjective phenomenon...an acceptance of ambiguity, contingency, plurality,
12
and controversy can be seen as signs of organizational health, not as signs of confusion, lack of
clarity and poor performance...”.
According to Van Dooren et al. (2015), there are two important dimensions that a perspective
attaches to the quality of performance; quality is either the quality of the actions being performed,
or the quality of what has been achieved because of those actions. From the first perspective, when
performance is about the quality of the actions, and not as much about the quality of the
achievements, performance is conceptualized as competence or capacity (Dubnick, 2005). Hence,
performance becomes associated with the competence of the performing institution (Van Dooren
et al., 2015). From the second perspective, when performance is about the quality of the
achievements and not as much about the quality of the actions, performance equals results
(Dubnick, 2005). Therefore, when performance is conceptualized with attention to both the quality
of actions and the quality of achievements, it may be characterized as sustainable results (Van
Dooren et al., 2015). With respect to “organizational performance”, it is often argued that
organizations should display and manage both of these aspects of performance. Organizations
therefore should develop the competence and commitment of individuals, and should ensure that
they work towards the achievement of shared and meaningful objectives (Lockett, 1992).
Following this reasoning, several authors have argued that both inputs (behavior) and outputs
(results) need to be considered when measuring and managing organizational performance
(Brumbach, 1988; Lebas, 1995). I will discuss definitions of organizational performance
measurement and management in more detail in the following section.
2.3 Definitions of Performance Measurement and Management
The term performance appears continuously in the literature about management. One of the most
fundamental purposes of performance measurement and management has been described as
aligning individual and organizational objectives (Armstrong, 2006), so that ideally everything
people do at work may lead to outcomes that further the achievement of organizational goals. The
normative literature is relatively simplistic, i.e. assuming that organizational goals are clear,
unambiguous and unproblematic. However, there is also a debate about what relevant
organizational goals are (different organizational actors may have different views in this respect:
e.g., long-term vs. short-term goals; shareholder value maximization goals vs. sustainability goals,
see McSweeney, 2008). Although there are various definitions of organizational performance
management systems in the literature, there are two interrelated terms that commonly occur,
13
performance measurement (PM) and performance management system (PMS), which tend to be
used interchangeably (Franco-Santos et al., 2007). Consequently, I will provide different
definitions of both terms and explain the relationship between them by reviewing management
literature.
Neely et al. (1995, p. 80) defined PM as “the process of quantifying the efficiency and effectiveness
of action”, while Rouse and Putterill (2003, p. 4) defined it as “the comparison of results against
expectations with the implied objective of learning to do better”. Measuring performance is thus
often described as systematically collecting data by observing and registering performance-related
issues for some performance purposes (Van Dooren et al., 2015). Amaratunga and Baldry (2002)
assume that measurement is not an end in itself, but a tool for more effective management, as the
results of performance measurement indicate what happened, not why it happened or what to do
about it. Also, Bourne et al. (2003, p. 4) defined PM as “the use of a multi-dimensional set of
performance measures for the planning and management of a business”.
The term PMS is generally used to express a range of managerial actions aimed to monitor,
measure and modify aspects of organizational performance through different management controls
(Franco-Santos et al., 2007). According to Armstrong and Baron (1998, p. 7), PMS is defined as
“a strategic and integrated approach to delivering sustained success to organizations by
improving the performance of the people who work in them and developing the capabilities of
teams and individual contributors”. In this regard, PMS is essentially about the management of
expectations (Armstrong, 2006). In the other words, the practices of PMS create a shared
understanding of what is needed to improve performance, and how it will be achieved, by
clarifying the objectives and agreeing on what people are expected to do and how they are expected
to behave at the workplace. It uses these approaches as the basis for measurement, evaluation, and
the preparation of comprehensive plans for performance improvement and changes (Fletcher,
1993). Furthermore, Bititci et al. (1997, p. 533) defined PMS as a “process by which the company
manages its performance in line with its corporate and functional strategies and objectives”. From
the strategic point of view, PMS is a system that not only enables an organization to cascade down
its business performance measures but also provides it with the information essential to
challenging the content and validity of the strategy (Ittner et al., 2003). Many authors argue that
performance management needs the measurement of performance (Drucker, 2012; Grosswiele et
14
al., 2012; Hatry, 2006; Kaplan & Norton, 1996; Kugler, 2014; Neely, 2002), drawing on the often-
quoted phrase “you can’t manage what you can’t measure” (e.g., Garvin, 1993, p. 89).
The distinction between performance measurement and performance management systems
becomes more explicit when the literature (such as Ittner et al., 2003; Neely et al., 2005; Otley,
1999; Simons, 1990) begins to consider expanding the scope of PM to include the development of
strategies or objectives and the taking of actions to improve performance based on performance
measures (Neely et al., 2005). Some authors argue that performance measurement is the act of
measuring performance, whereas performance management aims to respond to the “outcome”
measure, using it to manage performance (e.g., Radnor & Lovell, 2003). Hence, to make effective
use of its performance measurement outcomes, an organization must be able to shift from
measurement to management (Ittner et al., 2003). On the other hand, performance management
may not only involve the actions taken based on performance measures, but also the development
of strategies. For instance, Lebas (1995) argued that performance management creates the context
for the measures of performance. He believes understanding the processes underlying performance
is the only way to define the measures that lead to actions. However, as Neely (1999, p. 222)
contends, “it is widely accepted that business performance is a multi-faceted concept […]” and
therefore, “it is not obvious which measures a firm should adopt”.
In Western societies, the promise of ever increasing performance, along with calls for transparency
and accountability have become dominant agendas in both, the private and public sector, so that
many organizations have adopted performance measurement and management systems. However,
over time, different types of performance management systems have been promoted. In the
following section, I will provide an overview of the most significant PMS developments.
2.4 The Development of Performance Measurement and Management
Financial measures have long been used as the sole criteria when evaluating the performance of
organizations. According to Lebas (1995), the traditional managerial accounting model of a firm
is focused on product-costing and defines performance as income, that is, the difference between
sales and costs. Bourne et al. (2003, p. 4) state that “traditional accounting-based performance
measures have been characterized as being financially based, internally focused, backward-
looking and more concerned with local departmental performance than with the overall health or
performance of the business”. In the course of the “relevance lost” debate of the 1970s and 1980s,
the use of financial performance measures was heavily criticized. Most prominently, Johnson and
15
Kaplan (1987) highlighted the failure of financial performance measures to reflect changes in the
competitive circumstances and strategies of modern organizations. Following this line of
reasoning, Kaplan and Norton (1992) argued that traditional financial measures fail to provide
information on what customers expect and how competitors are performing. As such, traditional
measures of financial performance do not enable organizational actors to manage their
organizations effectively and efficiently and therefore should be complemented by non-financial
parameters (Kaplan & Norton, 1992; Venkatraman & Ramanujam, 1986).
The “relevance lost” debate provided the background for what some have called a performance
measurement and management “revolution” that began in the early 1990s. Many researchers and
consultants started to develop new PMS which promised to overcome the shortcomings of
traditional PMS. The management literature (such as Radnor & McGuire, 2004; Neely, 2005;
Wilcox & Bourne, 2002) suggests that the development of performance measurement went
through three main stages. Traditional performance measurement was developed from cost and
management accounting (1850-1925). The second stage emerged in the 1980s when financial
performance measures were problematized and multi-dimensional performance measurement
frameworks (such as Performance Measurement Matrix (PMM), Performance Pyramid System
(PPS), and Balanced Scorecard (BSC)) were developed (Keegan et al., 1989; Lynch & Cross,
1991; Kaplan & Norton, 1992). The third stage began in the mid-1990s when performance
measurement literature was dominated by the debate about “strategic performance management”,
proposing for instance the use of strategy maps to develop strategic objectives and to link different
key performance indicators (Kaplan & Norton, 1996; Wilcox & Bourne, 2002). According to
Madsen and Stenheim’s (2015) citation analysis, the Balanced Scorecard (BSC) seems to be one
of the most influential concepts in the field of performance measurement and management. Kaplan
and Norton (1992, 2004) presented the BSC as a strategic performance management tool designed
to enable managers to measure, evaluate, and guide business activities from typically four
perspectives (e.g., financial, customer, internal process, and learning and growth), as well as to
enhance their problem-solving and decision-making capabilities by the examination of cross-
functional relationships.
Kaplan and Norton (1996, 2001) suggest that BSC measures should be linked together in a series
of driver (leading indicators) and outcome (lagging indicators) relationships, which ultimately
culminate in the financial dimension. These cause and effect linkages describe how the
16
organization will create value for its shareholders and stakeholders as reflected in the firm’s
strategy map (Kaplan & Norton, 2001). From this perspective, the strategy is no longer a ‘black
box’ that accounting measures have to implement through faithful representation and functional
measurements (Chenhall, 2003; Pavlov & Bourne, 2011). Rather, performance measures are seen
as playing an active and enabling role in strategy definition and decision-making (Hansen &
Mouritsen, 2005; Jørgensen & Messner, 2010). As argued by Franco-Santos and Bourne (2005)
and Merchant (2012), strategy maps may help to formalize managers’ business models as a step
for creating a reliable strategy. Strategy maps can be used to visualize the organization’s strategic
goals through the assumed causal relationships. This can be a convenient way to facilitate strategic
discussions among top managers and communicate the strategy to the rest of the organizational
members in order to achieve the organization’s strategic goals. As such, the BSC has been
promoted not primarily as a “performance measurement” system, but rather as a broader and more
holistic “performance management” system which may be used to develop, demonstrate,
communicate and implement an organization’s strategy (Kaplan, 2008, 2012). Some empirical
studies on BSC practices indicate that an organization which interprets and implements the BSC
as a performance measurement system may experience different effects than an organization which
interprets and implements it as a strategic management system (Braam & Nijssen, 2004; De Geuser
et al., 2009; Neely et al., 2005; Perkins et al., 2014; Speckbacher et al., 2003).
In more general terms, performance measurement systems have come to occupy an ever more
significant position in the functioning of modern industrial societies. Emerging from the
management practices of the state, the trader, and the rudimentary enterprises (Neely, 2005), it has
developed into a substantial component of modern organizational and social management. Within
the organization, either private or public, PMS developments now are seen as being increasingly
linked not only with the managing of financial and non-financial resources but also with shaping
particular patterns of organizational visibility (Tangen, 2005), the articulation of forms of
management structure, and organizational segmentation (Kaplan & Norton, 1992). The factors that
are measured can shape organizational participants’ perspectives of what is significant, while the
categories of dominant economic discourse and organizational functioning that are implicit within
the performance framework are helpful when formulating an overview of organizational reality
(Pritchard, 1995). At a broader social level, performance measurement has become no less
prominent, as it has come to function in a multitude of diverse and ever-changing institutional
17
areas (Kennerley & Neely, 2003). The emergence of the modern state has been particularly
influential in this respect. The outcomes provided by PMS have come to be used not only as the
basis for how well an organization’s system is working toward achieving goals but also as a means
for enabling the more general economic management policies of the state to grow in significance
and impact (Melkers & Willoughby, 2005; Wang, 2000).
In addition to the rise of multi-dimensional PMS, there have been other significant developments
of PMS: shareholder value-related measures (such as EVA introduced by Stern Steward
Corporation) were put in place in order to focus managers’ attention on the delivery of shareholder
value (Otley, 1999), and more recently, “sustainability measures” (e.g., Adams et al., 2014;
Gadenne et al., 2012) and “risk performance measures” (e.g., Leggio & Lien, 2003; Soin & Collier,
2013) were developed. These developments are partly interdependent. For instance, Butler et al.,
(2011) argue that “by integrating sustainability measures into business practices and by clearly
linking an organization’s competitive strategy to its green outcomes, the BSC clarifies the
relationship between sustainability outcomes and profitability or shareholder interests” (p. 2). The
use of PMS is also expanded in public organizations by emphasizing ideals of new public
management (NPM). NPM denotes a significant paradigm transformation in how the public sector
is to be governed (Lane, 2000). The increased attention to performance evaluation by public sector
managers, consultants and academics reflects the increased pressure on public organizations to
improve performance to prevail in today’s competitive and global operating environment and to
illustrate this to external as well as internal stakeholders. Therefore, the use of PMS (such as BSC)
by public non-profit and non-governmental organizations demonstrates the relevance of using
performance measures not only for internal, but also for external purposes of illustrating
performance and managerial rationality to a wide variety of stakeholders including media,
community, and external funding agencies in the quest for increasing transparency and
accountability (Bevir et al., 2003; Cavalluzzo & Ittner, 2004; Herawaty & Hoque, 2007; Ittner &
Larcker, 1998). While many management accounting studies explicitly or implicitly propose a
particular “function” of PMS, studies which investigate performance measurement and
management as social and organizational practices do not presume a particular functionality and
are more reflective about the potentially diverse roles of management accounting tools (e.g., PMS)
in organizations and society. In the following section, I will review practice-based studies of
18
management accounting, and organize the review according to the different roles PMS play in
organizations and society, as highlighted in these studies (Burchell et al., 1980).
2.5 Different Roles of Performance Measurement and Management Systems in
Organizations and Society
Studies which investigate performance measurement and management as social and organizational
practices do not take the role of these accounting technologies for granted (e.g., as instruments
which ensure rational decision-making that is aligned with strategic objectives, as proposed by
much of the normative PMS literature), but investigate the ways in which they are actually used in
different contexts. I will organize the review of these studies based on the different roles of
accounting described by Burchell et al. (1980) in their seminal paper. Burchell et al. (1980)
highlight four different roles of accounting: accounting as an answer machine, as a learning
machine, as an ammunition machine, and as a legitimation machine. Based on Thompson et al.’s
(1959) model of organizational decision-making, they argue that each of these roles might be more
or less prominent in different decision situations, depending on the uncertainty over the objectives
for organizational action and the uncertainty over the patterns of causation which determine the
consequences of action (see figure 2.1).
Figure 2.1 Uncertainty, decision making and the roles of accounting practice.
Uncertainty of objectives
Low High
Low Answer machines Ammunition machines
High Answer
machines Legitimation machines Learning
machines
In line with Burchell et al.’s (1980) description of the roles of accounting, literature about
management accounting and controlling often describes performance measurement as an
organizational response to support the organization’s ability to react to changing and uncertain
conditions (Burchell et al., 1980; Chenhall, 2003; Merchant & Van der Stede, 2007). Over time,
the impact of uncertainty on the design and use of performance measurement has become one of
Uncertainty
of cause and
effect
Source: Burchell et al. (1980, p. 14)
19
the most studied topics (Heinzelmann, 2016) in order to reveal the way performance, accounting,
and control systems are mobilized to make complexity and uncertainty manageable in an
organization (Chenhall & Moers, 2015). Thereby, PMS can play various roles in organizations and
society, as both reflecting and enabling the construction of society with both institutional forms
and modes of social actions intertwined with its emergence and development. In the following
sections, I discuss how management accounting studies have investigated the different roles of
PMS and I will then focus on studies which have specifically focused on the impact of cultural
factors on performance management practices.
2.5.1 The Use of PMS as an Answer Machine
The role of an “answer machine” refers to the use of accounting as a primarily computational
practice, i.e. using specific accounting technologies that provide clear answers in order to solve
predefined problems. Much of the normative PMS literature presumes this function (e.g., Atkinson
et al., 1997; Hatry, 1999; Wholey, 1999; cf. Kasperskaya & Tayles, 2013). Burchell et al. (1980)
suggest that accounting primarily assumes the role of an “answer machine” in organizations and
societies when causal relationships are known and goals are shared. Therefore, the role of
accounting as an “answer machine” is to accumulate and report financial information about the
performance, financial position, and cash flows of a business to reach decisions about how to
manage the business in a situation where objectives are clear and uncertainty of cause and effect
is low (Burchell et al., 1980).
Many researchers have pointed to the roles which PMS can and should play in providing relevant
information for decision-making, improving the rationality of the decision-making process
(Askim, 2008; Taylor 2009, 2011) and maintaining the organization in what is seen as a state of
control (Ghalayini & Noble, 1996; Otley, 1999). However, the problem with such a perspective is
that the relationship between performance information and decision-making has rarely been
examined critically (Van Dooren & Van de Walle, 2016). The link between performance
measurement and the use of this information in decision making has been presumed rather than
described (Burchell et al., 1980). For instance, it was assumed that the design, implementation and
use of PMS lead to better decision-making, that the roles played by PMS in decision-making can
be immutable across a multitude of various decisions in complex and ambiguity situations and that
performance information is there to facilitate and ease rather than influence and shape the decision-
making process more actively (Saaty, 1990). However, some empirical studies point out that
20
patterns of information use are different at the various stages of the decision-making process (e.g.,
Van Dooren & Van de Walle, 2016).
According to Van Dooren and Van de Walle (2016), the role of performance information in the
rational decision-making model is rather straightforward: neat performance information
contributes to the attainment of neatly define organizational goals. Similarly, Chapman (2005)
stated that performance information plays a central role in shaping wide-ranging discussion that
drew together many inter-functional relationships which open up possibilities for managers to
model the business for themselves, especially the ways in which they were linked to operational
and strategic issues. However, rational decision-making models fail to recognize that performance
information may actually amplify uncertainty rather than reduce it, as there is a much more
complex relationship between PMS and decision-making when we look at the ways in which
performance measurement is used in practice (Mouritsen & Kreiner, 2016; Taylor, 2011). For
example, March (1991, p. 97) explains that “rational decision models are problematical because
alternatives, consequences, preferences and rules are not stable”. Limitations on rationality are
therefore important and this implies that the logic of appropriateness1 often outweighs the logic of
consequence in decision-making processes (March & Olsen, 1989). Therefore, when decision-
making is considered as a rational procedure, accounting is understood as an “answer machine”
calculating the economic consequences of various decision alternatives (Mouritsen & Kreiner,
2016). Surprisingly few PMS studies illustrate in detail how PMS come to be used as “answer
machines” in specific organizational contexts. Prominently, Simons (1990, 1995) argues that
“programmed”, diagnostic uses of management control systems such as performance indicators
are observable with regard to aspects that do not concern “strategic uncertainties” for a particular
organization, based on empirical studies of management control practices. Hence, according to
Simons (1990, 1995) the use of PMS as an answer machine depends not only on the specific
industry that an organization operates in, but also on the particular way in which the organization
competes within that industry. Other studies suggest that the enactment of PMS as an answer
1 The logic of appropriateness is a perspective that sees human action as driven by rules of appropriate or exemplary
behavior, organized into institutions. Decision-making processes follow the logic of appropriateness if they are biased
toward what social norms deem right rather than what cost-benefit calculations consider best. For example, rules and
interests give actors more or less clear behavioral guidance and make it more or less likely that the logic of
appropriateness or the logic of consequentiality (presuming self-interested rational actors with fixed preferences
whose behavior is determined by the calculation of expected returns from alternative choices) will dominate (March
& Olsen, 1995).
21
machine depends on organizational actors’ shared beliefs and values. For instance, Heinzelmann’s
(2016) study of performance measurement practices in venture capital firms indicates that strong
belief in the representational qualities of performance measurement numbers lead to the enactment
of PMS as “answer machines”. Simons (1995) explains that a diagnostic control system can be
made interactive by continued and frequent management attention and interest that facilitates
organizational learning and deals with strategic uncertainties, as he states that “the uncertainties
and contingencies that could threaten or invalidate the current strategy of the business.[…]
Strategic uncertainties derive from senior management’s perception of the known and unknown
contingencies that could threaten or invalidate the assumptions underlying the current strategy”
(Simons 1995, p. 94). Simons’ (1995) levers of control framework show that management control
systems (MCS) influence an organization’s strategic capabilities through the routines they
stimulate (Franco-Santos et al., 2012). While “a control system must trigger revised action plans”
(1995, p. 108), “interactive control systems must generate new action plans to adjust emerging
strategy on a real-time basis”, and diagnostic control systems help to communicate and then
implement intended strategy (Simons 2000, p. 221). Harlez and Malagueno (2016) examine the
joint effects of strategic priorities, the use of management control systems, and personal
background on hospital performance. They described two styles of PMS used in the hospital setting
in terms of Simons’ (1995) diagnostic and interactive uses of control systems. They illustrate that
when managers use MCS diagnostically, the formal, information-based routines and procedures
lead them to establish guidelines, identify performance variables and targets, measure any
deviations from this performance level, and take corrective actions. This traditional feedback
system, typically viewed as an “answer machine” (Burchell et al., 1980), primarily reflects a
cybernetic use of routines and procedures because it denotes a self-correcting mechanism that
tends to reduce any deviations from pre-set standards of performance, contributes to a top-down
strategy execution, standardization, and efficiency (Simons, 1995) and because organizational
attention to new opportunities is limited (Mintzberg, 1990). In contrast, when managers use MCS
interactively, formal information-based routines and procedures encourage debates to resolve
strategic uncertainties and inspire organizational members (Bisbe et al., 2007). Instead of an
“answer machine” of the diagnostic method, Harlez and Malagueno (2016) observe a “learning
machine,” in that members use these routines “to explore problems, ask questions, explicate
presumptions, analy[z]e the analy[z]able and finally resort to judgement” (Burchell et al., 1980,
22
pp. 14-15). Therefore, Harlez and Malagueno (2016) argue that unlike diagnostic use, interactive
use represents an opposite force of routines and procedures because it designates a self-reinforcing
technique that seeks to promote innovation by offering a higher degree of freedom of actions (p.
4), encourages the development of bottom-up strategies and experimentation of new ideas
(Simons, 1995), and emphasizes the organizational attention given to opportunities for learning
(Mintzberg, 1990). I will focus on studies, which investigate how PMS may be in involved in
organizational learning in more detail in the following section.
2.5.2 The Use of PMS as a Learning Machine
Burchell et al. (1980) refer to the use of accounting with clear objectives but uncertain causation
as “learning machine”, where accounting systems do not provide answers, but rather assistance to
judgmental (rather than computational) decision-making through e.g., what-if models, ad hoc
analyses and sensitivity analyses. PMS can act as “learning machines” and as “problem-solving
tools” (Vandenbosch, 1999) by revealing cause and effect relationships between internal processes
and the achievement of objectives (Emsley, 2000; Malina, 2017; Van Veen-Dirks, 2010).
According to Kasperskaya and Tayles (2013), strategic roadmaps in PMS have significant
potential as communication and rhetorical devices, which facilitate an understanding of causal
links and draw managerial attention to key issues. Thus, causal maps would provide a reference
point, create shared values and beliefs, provide inspiration for managers and act as a platform for
the discussion of strategic uncertainties as well as cause and effect assumptions. In this respect,
causal chains produce prevailing beliefs and individual mental models of managers in
organizations. Viewing PMS as learning machines thus highlights the ability of PMS to develop
new causal properties in the world and hold uncertainty of goals at bay (Mouritsen & Kreiner,
2016).
Some empirical studies on PMS practices directly draw on Burchell et al.’s (1980) notion of
“learning machines”. For instance, Heinzelmann (2016) reports that one of the venture capital
firms he studied mobilized an actor-centric approach leading to an open, holistic PMS which was
based on non-financials, a close involvement in operational matters and actors’ judgement, by
using accounting as “learning machines”. Heinzelmann argues that this actor-centric approach was
guided by specific values about actor-world relations that were characterized by relative
skepticism in the representative qualities of PMS numbers. However, Burchell et al. (1980) do not
explain how managers learn and which type of learning the use of accounting systems may bring
23
about (Heidmann, 2008). Other studies have focused more specifically on the learning that may
be involved in the use of PMS. For instance, Jönsson (1996) provides a valuable description of
how experiential learning in association with local planning and problem solving is implicated in
using accounting for improvement. He indicates how control through words and dialogue can
assist organizational actors to determine what conditions are “true” and valid.
A range of PMS studies draw on the concepts of “interactive” (Simons, 1990, 1995) and “enabling”
(Adler & Borys, 1996; Ahrens & Chapman, 2006) uses of management control systems, when
investigating the ways in which PMS are related to learning within organizations. Simons (1995)
argued that interactive control systems are “used to direct organizational attention to stimulate
organizational learning and the emergence of new ideas and strategies” (p. 7). In an exploratory
study, Simons (1994) conducted interviews with ten appointed top managers to understand how
they used control management systems as tools of strategic change and renewal in a complex
situation. He indicates that after putting the fundamentals of the business in place, nine managers
began to use one control system interactively to focus organizational attention on the strategic
uncertainties associated with their vision for the future. The interactive use helped to generate
organizational learning, and over time, new strategies would emerge from the process.
Drawing on Simons’ concept of interactive control, Vaivio (2004) highlights the potential of non-
financial measures and claims that their use provokes discussions that may consequently lead to
more effective knowledge management by making tacit knowledge more explicit and manageable.
The relationship between the interactive use of performance measurement systems and
organizational learning is also confirmed by Henri (2006), who studied 383 mid-sized Canadian
manufacturing firms. He strongly supports a direct positive relationship between interactive use
and organizational learning. The relationship also holds in a sub-group analysis in which
Heidmann (2008) examined firm size, organizational culture, and environmental uncertainty.
Some studies investigate factors, which may lead to more programmed, diagnostic versus more
interactive, learning-focused uses of PMS. For example, one study reveals that users with an
accounting background tended to place more emphasis on the technical aspects of PMS and were
more likely to interpret and use PMS in the traditional ‘accounting way’ as a performance
measurement system (Collins, 1982). In contrast, users with an HR or organizational background
were more likely to interpret and use the PMS as a tool for strategy development and
implementation (De Haas & Kleingeld, 1999). Jordan and Messner (2012) show that managers’
24
attitudes towards the design characteristics of performance indicators play a key role when it comes
to coercive versus enabling uses of PMS. They also highlight that these attitudes can change over
time. Henri (2006, p. 5) asserted that when management control systems are used interactively,
data are discussed and interpreted among organizational members of different hierarchical levels.
Therefore, management heterogeneity is positively related to the interactive use of PMS (Naranjo-
Gil & Hartmann, 2007), as it leads to diversity of information sets. Furthermore, heterogeneous
managers may interpret information in different and perhaps conflicting ways (Knight et al., 1999).
This may also lead to a greater diversity in proposed decision-making alternatives (Knight et al.
1999, p. 447) and increased debates among managers about the appropriateness of current
strategies, as well as strategic alternatives (Carpenter 2002, p. 277), which are all constitutive
elements of the interactive use of PMS.
Busco and Quattrone’s (2015) study focuses on the Balanced Scorecard and argues that the BSC
is specifically prone to being used as a learning machine, as a tool for prompting innovation rather
than just a means of strategy implementation. They characterize the BSC as a “rhetorical machine”
composed of four key features (visual performance space, method of ordering and innovation,
means of interrogation and motivating ritual) which allow the BSC to evolve depending on the
contingent strategic concerns. It helps to pragmatically address these functions by establishing a
relationship between performance measurements (Hansen & Mouritsen, 2005) and strategizing
practices (Jørgensen & Messner, 2010)., Busco and Quattrone (2015) also argue that the adoption
of the BSC is facilitated by its ability to translate organizational complexity into clear visual
representations, which allows for a continuous mediation amongst the various parties involved in
the design of performance measurement systems. They argue that the BSC constitutes an “ecology
of signs”, meaning that it is a system of visual representations which is intrinsically narrative
because it enables users to build a plot through such signs (i.e., a series of visual representations
which connects elements of strategy and organizational actors into other management practices
such as budgeting and costing system). This makes “the BSC a practice able to transform itself”
(Busco & Quattrone 2015, p. 1258) and a performable playground where various organizational
rationalities can meet and negotiate.
Some studies argue that the ways in which PMS are developed and implemented affect their use
as learning machines (Messner, 2016; Wouters & Wilderom, 2008). If the approach is
implemented interactively, and cause and effect linkages underlying the strategy are open for
25
discussion and questioning, the PMS framework may potentially engage companies in strategic
learning (Heidmann, 2008). However, if the causal links are perceived as self-evident, imposed by
top management in a top-down fashion without further inquiries, they may act as strategic
“blinders” and result in a misalignment of the organization to its strategy (Kasperskaya & Tayles,
2013).
2.5.3 The Use of PMS as a Political Machine
Thompson et al. (1959) suggested that when objectives are uncertain (e.g., because they are
unstated or because the organization is situated in a rapidly changing environment), but the cause
and effect relationships are assumed to be known, there may be disagreement or conflict over
which objectives should take precedence. In this situation, decision-making is political rather than
a computation process with a variety of interests being articulated and the outcomes being
determined by bargaining and compromise. Drawing on this argument, Burchell et al. (1980) state
that “rather than creating a basis for dialogue and interchange in situations where objectives are
uncertain or in dispute, accounting systems are often used to articulate and promote particular
interested positions and values...Organizations are arenas in which people and groups participate
with a diversity of interests with political processes being endemic features of organizational
life...The design of information and processing systems are also implicated in the management of
these political processes...the powerful are helped to observe the less powerful but not vice
versa...Moreover, by influencing the accepted language of negotiation and debate, accounting
systems can help to shape what is regarded as problematic, what can be deemed a credible solution
and, perhaps most important of all, the criteria which are used in their selection. For rather than
being solely orientated towards the provision of information for decision-making, accounting
systems can influence the criteria by which other information is shifted, marshalled, and
evaluated” (p. 17). Therefore, with respect to the accounting role explained by Burchell et al.
(1980), PMS may also act as “ammunition machines”.
Based on Burchell et al.’s (1980) argument, Mouritsen and Kreiner (2016) asserted that when
decision-making is understood in less rational terms, performance measurement may be seen to
play much more complex roles such as the role of “ammunition machines” (p. 21). As an
ammunition machine, PMS is understood to be involved in political conflicts when goals are not
shared clearly. This perspective has inspired early work on the politics of accounting, decision-
making, and budgeting (Covaleski & Dirsmith, 1983; 1986; 1988). The politics of budgeting has
26
been analyzed as the process of mobilizing accounting with other organizational planning
mechanisms such as strategy (Boland & Pondy, 1983, 1986). Politics also assume accounting as a
“political machine” where the information needs of management are understood as different from
those of labor (Amernic, 1985; Cooper & Essex, 1977; McBarnet et al., 1993; Owen & Lloyd,
1985). Similarly, Macintosh (1994) argues that management control systems are implicated in
relations of domination and power: “…Command over them is a key allocation resource used by
upper-level executives to hold dominion over the organization’s physical and technical assets. The
master budget, for example, contains the detailed and all-encompassing blueprint for resource
allocation for the entire organization and is a powerful lever in term of ability to make a difference,
to get things done and to dominate the organization” (p. 175).
Scholars who consider political factors of PMS uses typically emphasize the role of the specific
context (Pettigrew et al., 1992) to achieve political power or a bargaining advantage (Drury, 2013)
together with the involvement of relevant decision-makers and information users (Berman &
Wang 2000; Moynihan 2005). For example, Cepiku et al. (2017) argue that public managers use
performance information in several ways, such as managerial and political ways, pointed at
improving strategic decision-making and resource allocations, and a passive (or bureaucratic) use,
which stands for the effectiveness of performance data limited to meet procedural requirements of
the law (Radin, 2006; Moynihan & Lavertu, 2012). According to Boyne (2003), public
organizations have obscure and often conflicting goals imposed through political processes. Public
policy ambiguity implies that strategic decision processes may not follow the same trajectory in
the public sector (Abdel-Maksoud et al., 2015). Similarly, Chang (2009) also explained how
political pressures for short-term understandable results overshadowed managerial intentions to
use performance measures for rational management reforms. He observed how specific issues
emerging as especially important on the government policy agenda gradually skewed the
performance measurement framework in the UK National Health Service in favor of particular
interests. As the study indicates, accounting has been used by the central government to regulate
financial and reporting practices, which falls under the notion that “[a] central government
normally has the power and authority to define the norms and standards of conduct that direct
behavior of local units” and the formulation of a reporting system “is not a neutral process but
dominated by the institutional interests of a more powerful government” (Chang 2009, p. 149).
Cooper et al. (1981) also draw attention to the role of accounting systems as “coercive” (p. 182)
27
because they limit choice processes and legitimate the very conditions that enable such structuring
to occur (for example, organizational culture and power relations within organizations). Ansari
and Euske (1987) argue that the socio-political role of information focuses “on the way in which
accounting systems are used to rationalize and justify organizational actions to members, and to
influence the attitude and beliefs of the participants to gain negotiating advantages” (p. 552).
Endeavoring to articulate the worth of particular conceptions of the organizational objectives
(Batstone, 1978) and to selectively route the distribution of information (Pettigrew, 1973),
participators implicated in organizational action can propose new mechanisms for organizational
control and data management by and through which interested parties seek to promote their
particular position (Van Dooren & Van de Walle, 2016).
Investigating the Balanced Scorecard specifically, Qu and Cooper (2011) analyze the exercise of
power in the development of BSC indicators and illustrate how consultants and clients sought to
influence the project in the pursuit of their own aims. They show how the BSC, as a visual
inscription, enables the process of generating new rationales for its use beyond those intended by
its proponents. It can be concluded that PMS may constitute significant elements of the power
system in organizations in the way in which they are used to achieve political power or a bargaining
agreement. Moreover, these studies have contributed to a broader understanding of how
performance measurement and management systems function in an organizational and societal
context and the way in which they can be used by interested parties to reinterpret and transform
existing perceptions of reality.
2.5.4 The Use of PMS as a Justification Machine
Under conditions of uncertainty over both objectives and causal-effect relations, PMS may be used
to justify and legitimize actions that have already been decided previously (Henri, 2006). This role
is represented by Burchell et al. (1980) in terms of a “rationalization machine” where there is often
a need for a retrospective understanding of the emergence of an action (Feldman & March, 1981).
Suchman (1995) defines legitimacy as: “a generalized perception or assumption that the actions
of an entity are desirable, proper, or appropriate within some socially constructed system of
norms, values, beliefs, and definitions” (p. 574). He further identifies three kinds of legitimacy:
moral (appealing to what is normatively right, including reference to formal authority),
instrumental (justifying actions in terms of self‐interest and practical consequences), and cognitive
(justifying action concerning the comprehensibility and taken for granted or subconscious beliefs
28
about what is appropriate). In another approach, legitimation refers to the justification of past,
current, and future actions based on personal interest and the exercise of power (Ansari & Euske,
1987). By means of their apparent objectivity and rationality, accounting and control systems are
used to legitimize organizational actions (Markus, 1983). They can establish authority and
maintain credibility (Dermer, 1990). Weick (1995) asserts that sequences, whereby people's
actions precede goals, perhaps a more precise depiction of organizational functioning than the
more common goal-action paradigm. Dirsmith and Jablonsky (1979) and Covaleski and Dirsmith
(1983) suggest that systems such as planned programmed budgeting and management by
objectives and budgets are used in governmental and health sectors in large part to provide an
appearance of rationality and legitimation of activities. Earl and Hopwood (1981) and Burchell et
al. (1980) also indicate numerous examples in which managers utilize accounting data as an ex-
post justification rather than an informational input. A justification is ex-post, which implies that
accounting hides fundamental organizational hypocrisy (Brunsson, 1993). Accounting produces
the “evidence” for decision-makers to claim that the pre-existing solution is indeed a solution to
the problems that constituted the decision opportunity (Mouritsen & Kreiner, 2016, p. 24).
Cooper et al. (1981) state that “accounting systems which record and report the results of activities
provide an authoritative means of explaining the past and thereby providing a guide to the future.
Such observations have led to the suggestion that sophisticated accounting systems may, rather
than aiding efficiency itself, instead provide a dramatization of efficiency, maintaining a rational
facade and thus providing a respectable identity for an organization. In general, the processes
associated with accounting in organizations may be interpreted as a way of facilitating what has
happened in the past and attaching meaning to previous actions. Future actions may then be
justified by the same explanations which have helped to make sense of previous actions. The rituals
of accounting may provide the legitimation for continuing current organizational activity” (Drury
2013, p. 715). In such circumstances, accounting information can act as signals and symbols,
which can be used to endow past action and decisions with legitimacy (Drury, 2013). In this
respect, accounting systems act as “justification machines” (Burchell et al., 1980). As a
“justification machine”, accounting is involved in justifying and creating legitimacy (Mouritsen &
Kreiner, 2016). For example, Courtney et al. (2009) provided evidence of strategic planning in
public organizations being used both as a legitimacy device to convey accountability to oversight
and regulatory bodies and as means of appearing to set rational objectives, in line with the
29
arguments of “new public management” (Hood, 1995). As a consequence, the use of PMS may
greatly reduce the cognitive complexity for decision-makers and potentially serve as a
communication tool (Kasperskaya & Tayles, 2013), which also guides managers to justify their
actions and decisions under conditions of uncertainty (Mouritsen & Kreiner, 2016). It should be
noted that many accounting studies, which investigate accounting as a rationalization machine,
draw on new institutional theory (e.g., Meyer & Rowan, 2012; Rowan & Meyer, 2006).
In general, I reviewed management accounting studies based on Burchell et al.’s categories to
explain that those prescriptive studies not only presuppose one particular function of PMS, but
also that these studies presuppose a universal context. In contrast, Burchell et al.’s framework
suggests that contextual factors matter, even though they do not explicitly speak about “cultural
factors”. Moreover, these studies are relevant for my PhD research project because I seek to
investigate how socio-cultural factors affect the roles that PMS comes to play in the Iranian
petroleum industry. Therefore, I combine the socio-cultural approaches with the different roles of
accounting systems. In the following section, I will focus on studies that investigate the impact of
the institutional and cultural contexts on the practices of PMS in more detail.
2.6 Socio-cultural Impacts on the Use of Performance Management Systems
An important stream of management accounting research mainly concerns the adoption of PMS in
organizations and how PMS are interpreted, understood and practiced between organizations in
different national and cultural contexts. Researchers have argued that the use of PMS can differ
across countries and industries because of cultural issues (Salk & Brannen, 2000), governmental
regulations or policies (Morishima, 1995; O’Connor et al., 2006), competitive priorities (Boxall &
Steeneveld, 1999), and diverse adoption of managerial practices (Snell & Dean, 1992). For
example, Firth (1996) and Chen (2017) show that market competition has a positive direct effect
on the adoption of Western management controls in non-Western countries (such as China).
However, it also has an indirect effect because it is associated with higher growth industries, which
were the first to experience the reduced political constraints that can slow the adoption of Western
management controls. Other studies also indicate how institutional factors (e.g., politics,
regulations, and industry norms) still present the rules of the game and continue to evolve in the
non-Western context, such as China (Peng, 2003), and interact with firm resources to impact
dynamic capabilities and firm performance (Jiang, 2014).
30
Several researchers suggested that cultural differences make it difficult to standardize aspects of
performance management practices (Pucik, 1985; Vance et al., 1992). For example, Van Dooren
and Van de Walle (2016) assert that large differences exist between countries concerning the
patterns of how PMS are used. Similarly, Boys et al. (2005) argue that there are subtle differences
between the countries that may impact the implementation and use of the PMS, including differing
laws and regulations, such as labor and tax laws that impact compensation systems, differing
financial reporting standards which impact the amount and type of financial data collected,
managers’ attitudes towards governmental intervention in the economy, and divergent levels of
social support systems. Adler et al. (1986) state that culture influences organizations through
societal structures such as laws and political systems; and also through the values, attitudes,
behavior, goals, and performances of participants. Accordingly, people with different backgrounds
and cultures behave differently in the workplace, which can be caused by people’s different goals,
expectations and work values (Nejati et al., 2010). Although many studies have addressed the
conditions needed to be considered for performance measurement and management systems to be
adopted and implemented in organizations (Arnaboldi et al., 2015; Julnes & Holzer, 2002; Hoque,
2008; Verbeeten, 2008; Van Dooren & Van de Walle, 2016), they have rarely paid attention to the
cultural conditions that impact PMS practices (Goh, 2012; Spekle & Verbeeten, 2014; Gerrish,
2016; Kearney, 2018). Similarly, O’Connor (1995) argues that if delineations of effective MCS
practices derive from the West, and Eastern culture differs from Western culture, then MCS
practices may differ in Eastern organizations.
According to Schwartz (1999) and Hofstede (1980, 1984), cultural differences are essential factors
that affect the work practices and values of employees in the workplace. The most employed model
in organizational research is proposed by Hofstede (1980, 1984) who described national cultures
in five bipolar and exclusive dimensions; power distance, individualism, masculinity, uncertainty
avoidance, and long-term vs. short-term orientation. However, Baskerville (2003) criticized
Hofstede’s work on culture. She argued that utilizing Hofstede’s cultural criteria implies a lack of
adequate evidence for the reasons behind the rejection of such a universalist approach in
anthropology and sociology (i.e., the assumption of equating a nation with a culture and the
complexity and limitations of an understanding of culture through numeric indices and patterns).
Furthermore, she argued that cultural diffusion and the dynamism of both national and ethnic shifts
may be problematic where reification and indexation of culture are concerned. The conclusion of
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Baskerville’s (2003) analysis suggests that the manner in which Hofstede established the
dimensions of culture, and the subsequent reification of “culture” as a variable in cross-national
studies in accounting research, led to a misleading dependence on cultural indices as an
explanatory variable of differences in accounting practices and behavior (pp. 1-2). However,
Ahrens and Chapman (2006) asserted that Baskerville’s critique of Hofstede’s (1980) study says
nothing about the interactions between those traits (e.g., professionalism, secrecy and
conservatism) or the ways in which they can be enacted and changed through practice (p. 829).
Cultural assumptions frame particular sets of organizational values, norms, symbols, beliefs, and
artifacts that managers perceive as being consistent with their basic assumptions, influencing the
process of organizational decision-making (Hofstede, 1980; Schneider, 1989; Needle, 2010). It
provides “…the basis for the choice, by a social group, of particular ends and of particular means
by which these ends are to be accomplished” (Lachman et al., 1994, p. 41). People judge
organizations and respond according to stable core cultural values and less abiding peripheral
values, whose breach brings less severe sanctions (Efferin & Hopper, 2007). However, Bhimani
(1999) notes that delineations of national culture can owe more to power relations exercised by
powerful institutions such as the government than beliefs grounded in a community. Thus, when
national culture is used, its empirical veracity needs establishing with respect to antecedents,
inculcation2, and incorporation into action (Efferin & Hopper 2007, p. 255). Thus, the predominant
management strategy within a country can be classified as the overall set or pattern of behavioral
attributes that characterize the country’s general approach to management (Pascale & Athos,
1981). These behavioral features are based on the cultural values, expectations, norms, beliefs, and
assumptions predominantly held by the people within a society and are conveyed in the
organization (Hofstede, 1980). Romani (2007) stated that “focusing on cultural dimensions
provides the means for evaluating the shared experiences of people who belong to that society”
(p. 142). Accordingly, cultural impact manifests itself in the performance management and
evaluation process, in terms of providing feedback, levels of power and decision-making
devolvement and their implication for the recruitment interview, communication, negotiation, and
participation processes (Aguinis et al., 2011).
2 The process of fixing beliefs or ideas in someone’s mind, especially by repeating them often (such as religious
values, political culture, etc.).
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According to Fletcher (2001), cultural differences have implications both for the design of
performance measurement and performance evaluation systems. Several authors have argued that
Western performance measurement and management technologies may not be easily adaptable to
non-Western contexts (e.g., Mendonca & Kanungo, 1996; Pun et al., 2000; Etemadi et al., 2009;
Alolah et al., 2014, Ambrosini et al., 2015). For example, according to Zeng and Luo (2013),
Chinese managers had found that the benefits of applying Western management tools did not meet
their initial high expectations, and scholars began to question the suitability of importing Western
management theories without adapting them to Chinese culture despite lacking a clear alternative.
Their finding shows that when the PMS is transplanted into the Chinese cultural setting, it faces
an obstacle in terms of cultural adaption because local culture shapes people’s behavior and
management practices. Moreover, Lindsay and Dempsey (1985) find that traditional Chinese
culture and modern socialist development have merged to produce unique forms of managerial
behavior which do not match Western models. Cooper and Ezzamel (2013) similarly propose the
significance of local adaptations and social skills in a major multinational company attempting to
implement PMS in the organization. They highlight how local managers understand, interpret, and
reconstruct corporate objectives and techniques to fit local concerns and obligations, managing
globalization through localizing measurement and management technologies. Efferin and Hopper
(2007) illustrate that culture and ethnicity in a Chinese Indonesian company play a key role in the
design and use of the management controls of the organization, which is embedded in religious
and social beliefs. They perceived that the intricate socio-cultural differences among Javanese and
Chinese employees had created complex power struggles that underpinned the operation of the
organization’s management controls. Moreover, some other studies investigated the impact of their
specific cultural and societal context on accounting practices (Chiwamit, Modell & Yang, 2014;
Efferin & Hopper, 2007; Ezzamel & Xiao, 2015; Ezzamel, Xiao & Pan, 2007; Yang & Modell,
2015). These studies investigated the role of political and religious ideologies such as Maoism,
Dengism and Confucianism in context of China. For example, Ezzamel et al. (2007) examined
how discourse shifted from conceptualizing accounting as ideologically-laden under Mao, which
emphasizes the primacy of class struggle, public ownership, and central planning to a neutral
technology. Under Deng, on the other hand, it is more concerned with economic development,
marketization, and mixed-ownership. They show that the shift from one regime to the other would
have unavoidably changed the political and ideological discourse, impacting on all aspects of
33
Chinese society, including accounting practice. Therefore, they argue that accounting is construed
as a malleable object shaped by the force of the dominant political discourse (Ezzamel et al. 2007,
p. 669).
However, other studies such as Geertz’s (1983) and Dent’s (1991) show that changes in
measurement technologies led to widespread changes in socio-cultural fabric. For example, the
longitudinal study of the cultural transformation of a railway company by Dent (1991), indicates
how accounting is implicated in the reproduction of the dominant organizational culture. Dent’s
contribution conceptualizes organization as culture, which points to the central role of symbols
and artifacts in uncovering the corporate culture and its multifaceted interplay with accounting
systems. In particular, drawing on Geertz’s (1973, 1983) study, he investigated the social processes
through which action and interaction dedicate accounting practices with significance and actively
shape “the dominant meanings given to organizational life” (p. 708).
While most studies on the use of performance management technologies in different national and
cultural contexts have focused on China, there are also a few studies which have been conducted
in the context of Islamic societies. For example, Abdallah and Alnamri’s (2015) study of 180 Saudi
manufacturing subsidiaries in different industrial cities indicates that the greatest challenge for the
management in Saudi Arabia is the adoption of Western management tools of performance
measurement and evaluation, to evaluate the productivity and performance due to cultural issues
(e.g., religion, history, education, and attitudes) and differences in business practices (e.g.,
political, economic, and social variables). Similarly, Harbi et al. (2017) and Idris (2007) asserted
that cultural issues and work practices pose a particular challenge to the development of PMS in
Saudi Arabia compared with Western international companies. Furthermore, Idris (2007) argued
that while the focus of control in Western contexts is usually placed on individual performance, in
Saudi Arabia, there is a tendency to emphasize collective performance. Therefore, recognizing
individuals’ performance is contrary to cultural values of group work. Behery and Paton (2008)
argued that Islamic beliefs and practices influenced by the national culture, have an impact on
employees’ performance and performance management in the United Arab Emirates. Etemadi et
al. (2009) focused on middle-level managers in the 300 Iranian manufacturing companies in
different sectors; their finding shows convincing evidence that the application of management
tools and techniques developed in Western countries for effective management performance is not
as useful in the Iranian context. They stated that diverse cultural backgrounds caused PM tools to
34
have dysfunctional impact on managerial performance within different organizations in Iran.
Moreover, they argued that Iran after the revolution (1979), provides an interesting cultural
contrast to Western countries due to its renewed emphasis on Islamic principles and values
(Etemadi et al., 2009). According to Namazie and Frame’s (2007) study, the cultural challenge
was seen in management practices in the Iranian context, especially in performance appraisals.
That appears to be a re-emphasis of Islamic values and therefore Islamic management may
represent an important environmental change. Giangreco et al. (2010) examined the
implementation and use of performance appraisal systems (PAS) in organizations in the Middle
East. They argued that the PAS design, according to Western principles cannot be merely
transferred across contexts and cultures according to a top-down approach, without considering
the contextual and cultural elements, peculiar to the host region (p. 161).
In addition, there are also some interpretive and critical accounting studies that focus on the role
of Islamic values in Islamic societies, most of these studies focus on Islamic banking and finance
(e.g., Hidayah, Lowe & Woods, 2019; Kamla & Haque, 2019; Napier, 2009; Napier & Haniffa,
2011), and the professions of financial accounting and auditing (e.g., Gallhofer, Haslam & Kamla,
2011). These studies find that companies in Islamic societies only use Western management
accounting tools and techniques to a limited extent due to high levels of power distance and
collectivism in these societies. Some of these studies also argue that Islamic values affect all
aspects of life in Muslim societies, including organizational life. These studies highlight the
relevance of “Islamic management” for performance assessment and evaluation practices. Often,
“Islamic management” is referred to in a prescriptive way in terms of ideals derived from the
Quran and the Sunnah (e.g., Kamla et al., 2006). However, these studies are often based on
questionnaires and tend to draw on Hofstede’s (1980, 1984) findings which other scholars
criticized for its relatively static and simplistic cultural dimensions (see Baskerville, 2003; Ahrens
& Chapman, 2006).
Other studies on the impact of socio-cultural factors on performance management practices draw
on the concept of ideology. Historically, the sociology of knowledge has focused on ideology as
the examination of how ideas are rooted in the social structure and how they are used to serve
group interests. According to Marx, ideology concerns the creation of illusions (Gordon, 1978).
An ideology is seen as a false consciousness created by the ruling class to legitimize and reproduce
the social system (Alvarez 1998, p. 28-29), which consists only of “reflexes” and “echoes” of the
35
real processes of life, serving the interests of the dominant class (Ricoeur, 1986). In contrast,
Mannheim (2013) views an ideology as knowledge intended to integrate and preserve social order;
nonetheless, no social group can evade egotistical interest, with the possible elimination of
intellectuals, who may at least avoid it in their arguments. From such a more neutral aspect,
ideology is usually viewed as a significant expression of society and not as something imposed or
inadequate, which should not be taken to mean that it refuses criticism of the social structure
bearing the ideology of a given society (Arbib & Hesse, 1986). In other words, a neutral conception
of ideology does not exclude its being linked with power and domination (Neimark, 1992).
According to Bourguignon et al. (2004), each society has its distinctive ideological approach to
social issues, i.e., ideology variety among capitalist and socialist societies, and that the
distinguishing ideology of a society is embedded in the methods and techniques used for that
society’s collective action. They argue that management approaches are mechanisms that can
contribute to constructing hierarchies, making people obey and cope with ambiguity, and that they
rely on certain ideas about how to formulate social order, which refers to the ideological
assumptions of management methods (Bourguignon et al., 2004). Similarly, Mihret et al., (2020)
study of Iran indicates that how this country has promoted an ideological aspect of professional
autonomy as independence from Western influence by resisting external pressures for adaptation
of professional accounting to transnational neoliberal norms. Indeed, they highlights the role of a
country’s ideology in shaping adaptation of regulatory institutions for alignment to transnational
norms as well as the ideological foundation of the state dynamic (Mihret et al., 2020).
Consequently, resistance and adoption to the international norms in the era of globalization may
shape by the countries’ ideological perspectives (Halliday & Carruthers, 2009). This means that
the transferred methods and techniques may undermine the existing social order, which may
explain local resistance to them (Alvarez, 1998). In this regard, Bourguignon et al. (2004) show
that the BSC has not received a particularly warm welcome in France, where the tableau de bord
(dashboard) has been practiced for at least 50 years. This is due to the degree of consistency
between the tableau de bord and the BSC with the distinct general beliefs bearing the ways of
forming and maintaining social order in French and American society. Their findings indicate the
significance of local ideology, especially in the practices of control systems and development in
ideologically distinct settings. An ideology is manifested within the structure of interactions among
people of a society, their institutions, and their artifacts. Implicitly, it relies on individual, more or
36
less conscious, cognitive paradigms that are socially assimilated (Arbib & Hesse, 1986). However,
similar to language, the ideology of a society can be constructed imperfectly within the mind of
people and represent in various ways in heterogeneous people (Bourguignon et al., 2004). In
organizations, ideologies are embedded not only in the employees’ and the employers’ approaches
but also in management tools and techniques. Thus, management methods tacitly rely on
ideological assumptions, (such as specific beliefs, norms, knowledge and ideas) concerning the
construction or maintenance of social order (Mannheim, 2013). In general, any device associated
with hierarchy, planning, control and performance measurements may be expected to “resonate”
differently (Bourguignon et al. 2004, p. 129) in any society, especially between West and East
(Javidan & Carl, 2004). Accordingly, the absence of consistency between the ideology of society
and the ideological assumptions of globalized management approaches developed in Western
countries may not be compatible in non-Western countries. However, management methods that
do not fit with the dominant ideology of a society are not necessarily rejected, but they may also
shape (Nørreklit, 2003) or in turn be shaped by the local ideology.
Consequently, the impact of culture can be vital for transforming and translating management
accounting technologies in different nations. Although management accounting technologies and
techniques can help to improve managerial performance in one organization, they may have a
dysfunctional impact in another organization with a different socio-cultural background.
2.7 Summary
In this chapter, I reviewed the literature on the concepts of performance, performance measurement
and management, and I focused especially on studies which investigate PMS as organizational and
social practices. I reviewed the management accounting literature with regard to the different roles
that PMS can play in organizations and society, and the ways in which PMS practices are shaped
by the specific socio-cultural context. The literature has acknowledged the importance of these
phenomena. The literature review also uncovered that these concepts are subject to various
interpretations and meanings. They are also subject to change in specific historical and socio-
cultural settings. According to Hopwood (1976), “unfortunately, however, although recognized as
important, all too often accounting has been seen as a rather static and purely technical
phenomenon. Nothing could be further from the truth. The purposes, processes, and techniques of
accounting, its human, organizational and social roles, and the way in which the resulting
information is used has never been static. The economic distinctions drawn by accountants and
37
the methods which they use are themselves creations of the human intellect and reflect social as
well as economic evaluations. They have evolved, and continue to evolve, in relation to changes
in the economic, social, technological and political environments of organizations” (p. 1).
This literature review also reveals certain empirical gaps in practices of performance measurement
and management, specifically with regard to how these practices are shaped by different historical,
political, and cultural contexts. Studies on PMS practices have mostly focused on organizations
situated in Western cultural contexts, such as the US, Canada, Europe, and Australia. A few studies
have focused on the specific context of China, but very rarely PMS are studied in the context of
Islamic societies, especially the ways in which socio-cultural aspects such as Islamic values,
political tensions and transnational capitalism shape practices of performance measurement and
management in these societies. Moreover, extant studies on management accounting practices in
Islamic societies are often based on questionnaires and tend to draw on Hofstede’s (1980, 1984)
relatively static and simplistic cultural dimensions (see Baskerville, 2003; Ahrens & Chapman,
2006). However, these studies do not explain these gaps in much detail, and perhaps even more
importantly, they do not investigate how organizational actors themselves use and promote the
concept of “Islamic management”.
Consequently, we lack an understanding of how Islamic management practices shape the use of
PMS and how the specific geopolitical role of the so-called “Middle East” impacts PMS practices.
Although there are over two decades of literature and theories about the various roles of
performance measurement and management systems in practice, this literature is still not
exhausted. The phenomenon is hugely complex and multidisciplinary, and there is still a need for
a deeper understanding of how performance management technologies (such as PMS) are
understood and practiced in different socio-cultural contexts, such as the context of Islamic
societies. Furthermore, there are also conceptual and theoretical shortcomings of the extant
literature. Suggestions for how to study the impact of socio-cultural factors on the use of PMS
seem to be relatively vague, and most existing frameworks do not account for the impact of
different value systems or ideologies in diverse socio-cultural contexts.
I will address these conceptual shortcomings in the following chapter in which I develop the
theoretical foundations for the study of PMS practices in the context of the Iranian petroleum
industry.
38
CHAPTER THREE: THEORETICAL FRAMEWORK
3.1 Introduction
This chapter is devoted to the theoretical perspectives framing my research, which gives particular
consideration to Boltanski and Thévenot’s (2006) orders of worth and Stark’s (2009) concept of
organizing dissonance. These theories along with postcolonial theory play an essential role in
guiding the examination of my empirical data. I draw on the ‘order of worth’ framework (Boltanski
& Thévenot, 1999, 2006; Stark, 1990, 2009) and postcolonial theory to investigate how particular
historical, cultural, and political contexts impact performance management practices in complex
social networks and in uncertain situations, especially when multiple orders of worth co-exist
within an organization. I use these theoretical frameworks to analyze the impact of socio-cultural
aspects and systems of values that shape the use of PMS. Cultural sociology, in general, has
undergone a tremendous expansion that leads to a rich, as well as fluid and quite a polemical scene
(Silber, 2016). Culture affects practically all aspects of organizational interactions as well as
activities in upper-level management (Chatterjee et al., 1992). As part of control practices and
organizational activities, the use of PMS and the diversity of performance measurement and
management criteria are also influenced by culture (Bhimani, 2003). Thus, the attributes of PMS
reflect aspects of organizational values (Henri, 2006). According to Schein (1985), culture and
values are connected to the elements of an organization that are most stable and least malleable.
They act as a starting point for the design and use of management control systems (Flamholtz,
1983). According to Rousseau (1990), control systems are behavioral patterns, which are
influenced by the underlying value structure and create meaning in the organization. Although the
most employed model in organizational research is proposed by Hofstede (1980, 1984), who
described the structural elements of culture in five dimensions (power distance, individualism,
masculinity, uncertainty avoidance, and long-term vs short-term orientation), his work was
criticized in accounting research by Baskerville (2003), who argued that utilizing Hofstede’s
cultural method illustrates a lack of adequate consideration for the reasons behind the refusal of
such a universalist approach in anthropology and sociology (i.e., the assumption of equating a
nation with a culture and the challenge, and limitations on an understanding of culture through
numeric indices and matrices) and also led to a misleading sequence on cultural criteria as an
39
illustrative variable of diversity in accounting practices and behavior (see chapter 2). Therefore,
there are still conceptual and theoretical shortcomings in the extant literature, as most existing
frameworks do not account for the impact of different value systems of ideologies in diverse socio-
cultural contexts.
Boltanski and Thévenot (2006) conceptualize individuals as living in various ‘orders of worth’,
where each order of worth privileges distinct forms of evaluation that require discrete metrics,
measuring tools, and proof of worth in diverse social contexts. Instead of implementing a particular
principle of evaluation as the only adequate framework, it is recognized that it is legitimate for
actors to articulate alternative concepts of what is worthy, where multiple value regimes can
potentially synchronize and compete in any given field (Moor & Lury, 2011; Stark, 1996, 2009).
In this chapter I also consider the institutional logics perspective and its relation to the orders of
worth approach, both in terms of its contribution as a theoretical starting point and its limitations
for investigating my research questions. In the following sub-chapters, I will first present the
concept of institutional logics in organization studies, and I will then specifically focus on
Boltanski and Thévenot’s (2006) orders of worth theoretical framework as well as postcolonial
studies. I draw upon postcolonial studies in order to supplement the orders of worth framework by
a framework that is able to theorize the specific historical and cultural context and hence the orders
of worth in the Iranian public management.
3.2 Institutional Logics in Organizational Studies
The “institutional logics” approach was first introduced by Alford and Friedland in 1985, to
describe “the contradictory practices and beliefs inherent in the institutions of modern Western
societies” (Thornton & Ocasio 2008, p. 99). It is a hub concept in organizational studies and
sociological theory, which focuses on how broader belief systems shape the cognition and behavior
of actors (Thornton, 2004; Lounsbury, 2007). According to Powell and DiMaggio (2012),
institutions are “both supra-organizational patterns of activity by which individuals and
organizations produce and reproduce their material subsistence and organize time and space.
They are also symbolic systems, ways of ordering reality, thereby rendering the experience of time
and space meaningful” (p. 243). In organizational studies, it has long been authenticated that
businesses may require to take into account and comply with the diversified expectations that their
different stakeholders set upon them (Mitchell et al., 1997).
40
The institutional logics approach, while building from the neo-institutional framework, takes a sort
of middle ground in theorizing the link between agency and structure in organizational studies.
Proponents deliberately avoid rational actor models by characterizing individual interests,
identities, and understandings as embedded within logics, while at the same time describing actors
as competent of overcoming institutional constraints to innovate (Greenwood et al., 2008).
Greenwood et al. (2011, p. 320) highlighted that such a contradictory and complex practice in
organizations has been implicit in institutional scholarship since “Meyer and Rowan’s (1977)
observation that organizations confront socio-cultural as well as commercial expectations - and
that these may be incompatible”. However, a tendency to separate socio-cultural elements from
practices in organizational activities persisted dominantly until the turn of the century, when
several scholars (e.g., Scott et al., 2000; Lounsbury, 2002; Thornton, 2002) stressed the social
embeddedness of technical factors and developed the use of the institutional logics perspective as
a means to challenge the idea of institutional and technical forces as ‘separate’. While DiMaggio
and Powell’s (1983) theorized alternative forms of isomorphism (e.g., normative, coercive and
mimetic) are respectively located in the professions, state and market, Thornton et al. (2012) point
out that the “meaning of rationality” remained invariant across sectors such that isomorphism is
obtained through “relatively mindless behavior in response to structural rationalization” (p. 27).
Neo-institutionalism lacked a theory of actor interest and hence had neither a basis for individual
agency nor consequently for theorization of institutional change, which posed an “astonishing
deficit” (p. 29). Critical of the institutional focus on isomorphism and the inherent stability of
institutions, the institutional logics camp developed a meta-theory and analytical framework that
allows an analysis of the interrelations between institutions, organizations, and individual actors
(Thornton et al., 2012). Since then, the institutional logics perspective has been frequently used in
organizational studies, both as a meta-theory and a method of analysis (Thornton et al., 2012) with
a greater emphasis on the normative and structural aspects of institutions, mainly focused on their
cognitive and symbolic elements (Friedland & Alford, 1991).
Thornton and Ocasio (1999) used elements from Friedland and Alford’s (1991) perspective to
define institutional logics as “the socially constructed, historical patterns of material practices,
assumptions, values, beliefs, and rules by which individuals produce and reproduce their material
subsistence, organize time and space, and provide meaning to their social reality” (p. 804). The
logics approach views cultural content, the symbols and practices of each logic, as potentially
41
complementary or contradictory. It is through transposing symbols and practices across
institutional orders within an institutional field that change occurs (Thornton, 2004; Padgett &
Powell, 2012). Similarly, DiMaggio’s (1997) concept of institutional logics as a theory and method
of analysis for understanding the influences of societal-level culture on the cognition and behavior
of individual and organizational actors brings attention to the link between intra-institutional and
inter-institutional domains.
3.2.1 Institutional Logics in Action
While logics can be perceived as constraining, in as much as an actor’s social status makes
particular logics more accessible, the fact that actors are exposed to multiple logics allows for their
agency. Individuals and organizations are part of multiple institutional logics, which provide both
symbolic and material resources (Dobbin & Vican. 2015). Thus, actors can merge logics, highlight
contradictions, and otherwise reinterpret and mobilize meanings and practices to drive institutional
change (Thornton & Ocasio, 2008). Recent empirical work has supported these theoretical claims
by examining how such situations affect the organization’s activities and decisions. For example,
Carlsson-Wall et al. (2016) provide an illustrating discussion of a football club to show how
different logics are placing conflicting demands on organizational actors. They distinguish the
operation of the football club under two principal institutional logics: the sports logic and the
business logic. They highlight how the roles and positions of these logics do not remain constant
in their organization, but their significance depends on a variety of factors, including how the
organization is performing in terms of sports and financials, as they claim “on the organizational
level, logics are not compatible or incompatible per se, but are accorded different priorities in
different situations” (p. 48). Furthermore, they indicate how the tensions deriving from various
institutional logics can be managed in an organization by three strategies. First is decoupling,
which implies that the objectives, expectations, and practices stemmed from one logic are only
symbolically followed, whereas the actual operations are organized according to the other logic.
In practice, this often results in gaps between an organization’s talk, decisions, and actions, which
is broadly identified and discussed by scholars in various fields of literature (e.g., Brunsson, 1989;
DiMaggio & Powell, 1983; Lounsbury, 2007; Reay & Hinings, 2009; Boiral, 2013). The second
strategy identified as structural differentiation (Carlsson-Wall et al., 2016), implies dividing the
organization into various subunits that can operate fairly independently by allowing distinct parts
of an organization to accept various institutional logics. It can result, for instance, in organized
42
hypocrisy (Brunsson, 1989; Cho et al., 2015) or compromise, which is also identified as the third
strategy by Carlsson-Wall et al. (2016).
Recent management accounting literature has subsequently begun to address how accounting in
general and multiple performance measurement and management systems, in particular, can play
an important role when an organization attempts to manage conflicting institutional logics (e.g.,
Burchell et al., 1980; Miller & Power, 2013; Chenhall et al., 2013). Scholars have shown that the
role played by performance measurement systems in organizations facing multiple institutional
logics and inconsistent demands depends on how managers use PMS in evaluating performance
and in their decision-making. For example, Carlsson-Wall et al. (2016) indicate that the design and
use of performance measurement systems can relate to each of the three strategies (decoupling,
structural differentiation, and compromise) used to deal with conflicting institutional logics. From
a decoupling strategy, it can be concluded that performance measures in organizations do not
necessarily relate to actual decisions and actions, but are rather used solely to reassure internal and
external stakeholders, or to gain legitimacy for the organizational actions. Such decoupling may
also be inadvertent, especially when the formal measurement systems have not kept up with the
development of organizational practices, and the organizational decision-making draws on some
informal metrics. As for structural differentiation, the organization can use an assemblage of
separate performance measurement systems based on different goals sought in various
organizational subunits without having the targets combined to a sufficient extent (see Carlsson-
Wall et al., 2016). Therefore, each subunit can achieve its particular objectives and meet the
demands of a particular institutional logic, while other subunits would be drawing to a distinct
direction with a different set of goals. In respect to remedy such an action, multiple performance
measurement criteria may be used to integrate various metrics in attempts to ensure that the
organization as a whole progresses toward the desired objectives. This activity is referred to as
compromising, which is defined by Carlsson-Wall et al. (2016) as a third strategy. A prominent
example of a compromising tool is a balanced scorecard, which can be used in attempts to combine
and integrate a variety of performance metrics (see Kaplan & Norton, 1992).
3.2.2 Institutional Logics as Culture
Like culture, institutional logics can be referred to as infinite unexplored topics, such as how
objects, spaces, and technologies shape and frame social relations (Thornton, 2015). Thornton et
al. (2015) view institutional logics not only as a way to pluralize institutional rationalities beyond
43
state, market and professions, but a way to place an exterior culture manifest in material practices
and cultural “vocabularies of practice”. Their coherence across time does not depend on
internalized values and thus, on the one hand, provides a basis for “mindful” and “strategic” agency
and transformation through the multiplicity of logics, and their “nearly decomposable capacity”
on the other (p. 59-60). Thornton et al. (2015) argue that “...culture is not internalized as in the
Parsonian (1951) view; instead it is externalized in institutional practices and vocabularies that
shape not only habitual action, but also strategic decisions” (p. 106). In this respect, people’s
actions are motivated by cultural norms, habits, and routines (Bandelj & Morgan, 2015).
Sociologists perceive actors embedded in broad-scale contexts of meaning, which shape what is
considered to be rational (see Meyer & Rowan; 1977; Meyer et al., 2009; Bandelj & Morgan,
2015). Thornton (2004) treats culture as an independent variable, to interpret organizational
decision-making changes based on how different institutional logics focus actors’ attention.
However, Thornton (2015) argues further that culture can also be viewed as a dependent variable
by illustrating how alternative meanings of cultural symbols and material practices, as influenced
by different institutional logics, wane and wax over time and context. It is in transposing symbols
and practices across institutional orders within an institutional field that change occurs (Thornton,
2004; see also Padgett & Powell, 2012).
Thornton (2004) suggests that the institutional logics act as “axial principles of organization and
action based on cultural discourses and material practices prevalent in different institutional or
societal sectors” (p. 2). This perspective stresses how higher-level societal logics partly shape and
often conflict with the actions undertaken in the major institutional sectors of society such as “the
market, the state, the corporation, the professions, religion, and the family” (Thornton 2004, p.
42). Although the ways in which multiple institutional logics “focus attention” in different kinds
of situations and their contingent effects in reproducing or transforming them (Thornton et al.,
2012) have been studied, there is still a gap in exploiting the affinities between institutional logics
and cultural theory. In this respect, institutional change requires and evokes intense passions, while
Institutional Logics Perspective (ILP) remains predominantly in the cognitive or instrumental
domain, employing concepts such as focus, schema, and goals. Religion, which carries an
emotional charge, is neither developed nor linked to an institutional logic per se. Institutional
logics not only depend on distinctive modes of actions with their diction, expression, and the
schemata formed through them, they likely are contingent on specific emotional registers, on
44
structures of experience in which emotions are inseparable. Furthermore, coexisting or alternating
dominant logics, with the constraints they might entail (Friedland & Alford, 1991), are the
backdrop against which ILP analyzes how actors draw upon different worlds of worth within day-
to-day action. The institutional logics are limited to the contention of logics, specifically, an
analysis of compatibility, dynamics of material, and conflict within the organization (such as “How
do people reach agreement in organizations?”, “How do organizational actors cope with pluralistic
demands in institutional complexity?”, “On what basis do people reconcile disparate views?). In
this PhD research, I examine how the organizational actors cope with the multiple value regimes
that coexist within the society and the organization and justify their positions. Thus, in the
following section, I build on insights from the Orders of Worth approach, a developed version of
ILP, which extends it by current conceptualizations of legitimacy maintenance and justification.
3.3 Theory of Justification
The theory of justification is a part of an epistemology that attempts to understand the justification
of propositions and beliefs. Boltanski and Thévenot (2006) developed a system of evaluation in
On Justification: Economies of Worth, which highlights the importance of making explicit the
positions from which critiques are issued: to understand how organizational arrangements persist,
researchers must analyze social settings through the representations given by the agents involved.
They examined sources of agreement and disagreement not confined to any particular sphere or
logic in the theory of justification. They suggest that justifications which can be invoked by anyone
to criticize or reach agreement stay on six worlds of reference, corresponding to six polities or
higher common principles which co-exist in contemporary social settings. These forms of
generality are “not attached to collectivities but to situations” and actors involved in a situation
can, and often do, shift from one form of measure of worth to another (Boltanski & Thévenot,
2006, p. 16) in the course of critiques and justifications.
The subject of how agreements are reached is one of the primary issues that the social sciences
have taken over from political philosophy, allocating it in the languages of order, equality, norms,
culture, and so forth (Habermas, 2018). Boltanksi and Thévenot (2006) identify and describe a
framework used by social actors to critique or justify their behavior in the face of critique: when
trying to make their point of view predominate, actors invoke principles of equivalence that allow
them to assess the relative value of the beings engaged in the dispute or to use the authors’
vocabulary, their worth. Their field of research led to the identification of six principles of worth
45
operating in different kinds of everyday life social interactions. By undertaking theoretical work
in synergy with empirical research, the authors formalized these principles regarding classical
constructions of political philosophy (Boltanski 2011, p. 27), and each of them is based on a form
of common good referred to as a polity (Boltanski & Thévenot 2006, p. 15). A polity is a legitimate
order, that is, the ‘higher common principle’ that will sustain justification (p. 66).
These diverse principles of worth stay on a common structure, which allows the reduction of
tensions between two recurrent constraints in everyday situations, such as the constraint of equality
(all men are equal in principle by virtue of belonging to a common humanity) and the constraint
of order (which surfaces in situations where humans find themselves in hierarchical or
asymmetrical positions). Thus, Boltanski and Thévenot (2006) formulated four assumptions about
the principle of common humanity and the principle of differentiation including common dignity,
the ordering of worth, the investment formula, and the common good (pp. 74-79). There are six
constraints on the constitutive elements of the polity but also on the problems it confronts, the
main one being that it attempts to combine two antagonistic imperatives such as the imperative of
common humanity positing an identity shared by all people and the imperative of an order that
governs this humanity.
The first axiom is the principle of common humanity, which entails a form of basic equality among
all persons (all of whom belong to humanity on the same basis) and rejects (on the basis of their
inability to legitimately justify themselves) political constructs that include subhumans or slaves
(Boltanski & Thévenot, p. 74). The second axiom is the principle of differentiation, which assumes
at least two possible states of worth for the members of a polity and the necessity to establish under
what conditions the members of the polity can access those various states. The principle of
differentiation allows for forms of justification of actions as well as tests designed to attribute the
states (Boltanski & Thévenot, p. 75). The third axiom is common dignity, which states that all
members of the community have the same power to access different states in it. The fourth axiom
is the order of worth, which claims that the different possible states are ordered (in terms of value
or worth). However, in order to explain why all members of the different polities are not in the
highest state of worth despite having access to it by their common humanity, the fifth axiom as an
investment formula comes in to play (p. 76). This fifth principle links the benefits of higher state
to a cost or a sacrifice that is required for access to that state. This sacrifice might diminish or
eliminate the tension between common humanity and a ranking of states, but it does not ensure a
46
solid and generally accepted agreement, as people in the lower state tend to challenge the cost that
the access to the higher states necessitates. Thus, the investment formula might lack solidity unless
it is reinforced by the sixth axiom as the principle of the common good (p. 76).
This supplementary and overarching axiom plays a principle role in the polity model in that it
brings the various states together by positing that happiness, which increases as people advance
towards the higher states, benefits the polity as a whole. The common good is thus opposed to the
individual good, which has to be sacrificed to some extent in order to reach a higher state of worth.
Only by adding this supporting axiom to the rank ordering of states can one speak of a true order
of worth (Herzog, 2018).
Since political philosophies remain at the level of principles, they cast no light on the conditions
under which an actual agreement is reached. They do not explain how states of worth are evaluated
or attributed to particular persons. Once they established the constraints under which the principles
of justice are built, Boltanski and Thévenot (2006) examine the conditions under which those
principles are applied, by focusing on the shift from legitimate argumentation to actions
coordinated in practice. They argue that the requirement of a common dignity (p. 75) makes it
difficult to definitively attribute a state of worth to persons based on personal characteristics. The
basic property of the polity model declares that all members can accede to all states, which
introduces a degree of uncertainty in the assessment of worth and makes this assessment the focus
of contention whenever a dispute occurs. In order to examine how judgments and justifications are
tested and to present a theory that accounts for specific conditions, Boltanski and Thévenot (2006)
turn their attention to cases that involve the combination of humans and objects in a given action.
They argue that the involvement of objects requires human beings to rise to the occasion, to
objectify themselves by bringing objects into play and valorizing them, that is, endowing them
with value (p. 131). The use of objects enables people to distinguish a single situation in which
they find themselves with other circumstances; recourse to the higher common principle can be
achieved by means of tools. Objects prove worth, but at the same time, they impose restrictions on
tests that required valuation. A test does not depend on the viewpoint of an individual, nor is it a
ritual or a ceremony that could be properly called symbolic on the grounds that it depends on
objects or relationships that are deviant (Boltanski & Thévenot, 2006). Therefore, a test of worth
must not be confused with a theoretical debate. Worth is “the way in which one expresses,
embodies, understands, or represents other people” (Boltanski & Thévenot 2006, p.132), and a
47
test of worth engages people in a world of objects without which the dispute lacks the material
means to be resolved by testing. It is the presence of things that allow people to move from the
particular to the general by comparing the singular situation in which they are engaged with other
situations. A challenge to a situation that calls for a test appears when a disagreement between the
worth of the persons and objects involved becomes apparent in the form of deficiency (Boltanski
& Thévenot 2006, p. 134). For example, in the industrial world, guided by the higher principle of
efficiency, a machine breaking down or an employee being late are examples of deficiency. In the
domestic world, where primary attention is given to manners and habits anchored in tradition and
personal relations, a deficiency can emerge for example in the form of somebody attending a
traditional wedding wearing blue jeans. A contentious process then develops around the exposure
of a lack of worth, around some lack of justness in an arrangement. Both people and objects can
collapse: people fail when they do not rise to the occasion when they fall short of carrying out the
sacrifice required by their presupposed state of worthiness. Objects may also fail when they do not
accomplish the role required of them in a given situation (i.e., when the machine is breaking down,
it fails to fulfill its purpose).
A contention provoked by the failure of persons or objects leads to a decision. The contention is a
disagreement over the worth of persons, and thus over the equitability of the way worth has been
distributed in the situation. A contention will thus originate in a challenge to the view according
to which the prevailing situation is well ordered and in demand for readjustment of worth. For
example, a situation is not harmonious if in that situation the way a qualified operator works in is
not adjusted to the capacities of his machine (Boltanski & Thévenot 2006, p. 133). Such a situation
calls for readjustment of the arrangement. Sometimes the worth of the beings found deficient is
diminished and has to be excluded from the situation. However, if the observation of their
deficiency is not considered conclusive, beings may be given another opportunity to prove
themselves. A very common line of argument that often leads to an observation of deficiency being
considered unresolved is the claim that the contingencies involved in the situation are purely
accidental (e.g., illness for a person or malfunction for an object). This argument leads to a new
test that, since it accounts for the accidental contingencies, is considered purer than the previous
one. The function of every test, then, is to purge uncertainties, resolve disagreements, and purify
the situation by establishing a new distribution of the persons and objects to which worth has been
ascribed. However, the purity of any situation is maintained only as long as participants in the test
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are able to remain in a single world and keep recourse to alternative worlds of worth at bay, and it
is important to note that no situation, no matter how pure, can permanently eliminate the existence
of potential contingencies gravitating around an established order. Thus, “the noise of the world”
or contingencies, although they can be temporarily silenced and absorbed by a test, are what keep
the world in motion (Boltanski & Thévenot 2006, p. 135). This endless chain of disruption means
that each particular world (in which the polity model is realized), when taken in itself, is
characterized by completeness and self-sufficiency, and allows for the possibilities of other worlds.
Such an Eden-like universe in which “nothing ever happens by chance” (p. 135) is reduced to a
common world that is free of contingencies and would be a universe of definite worth in which
tests would be unnecessary.
3.3.1 A Framework for Analyzing and Reporting within Common Worlds
According to Boltanski and Thévenot (2006), a comparison between a test of worth and a court
trial is offered to help clarify the way in which a higher common principle must involve both
persons and objects in their state of worthiness, in order to be implemented (p. 139). This
comparison stresses the significance of the relation between the establishing facts concerning
humans and recording those facts in a coherent report in which beings are qualified and their
relationships with one another are established. In a report similar to a court trial, things and facts
can be manipulated during a test and their engagement in the situation may be questioned in a
reconstitution of the facts. Tests are thus subjected to constraints that introduce the objective order
to the sort of rules that govern the construction of a well-founded argument and requirements. As
stated earlier, the consequence of a test cannot just be established by recourse to rhetoric and
language, reporting activities attached to tests means that the latter is subjected to the similar
grammar-like rules that allow and constrain the elaboration of a coherent argument. The order of
a given world can be described in reports (with the limitations that reporting implies) via categories
defining subjects (the list of subjects), objects (the list of objects and arrangements), qualifiers
(state of worthiness), and relations (natural relations among beings). Boltanski and Thévenot
(2006) use these categories to construct the following analytical framework, which distinguishes
between circumstantial actions that bring beings into mutual engagement based on a higher
common principle (pp. 140-144). In the following paragraphs, I will describe the most relevant
concepts of Boltanski and Thévenot’s framework.
49
Higher common principle – is a principle of coordination that characterizes a polity as a convention
that stabilizes and generalizes a form of association and thus makes it possible to establish
equivalence among beings. It ensures that beings are qualified (the condition for assessing objects
as well as subjects), and their value can be determined beyond contingencies. Based on this
principle, justification claims are compared and tested, to evaluate which claim or critique has a
higher worth. For instance, in the market polity, competition plays the role of a higher common
principle, and the status of worth is estimated according to the worth and desirability of a good:
the price is the means by which people express their judgment (Naccache & Leca, 2008).
State of worthiness – describes the various states of worth that are defined as highly dependent on
how the state or worthiness is characterized. The state of deficiency can be defined either
negatively, as lacking the quality of worthiness, or by the observation that the unworthy are
reduced to enjoying only self-satisfaction. Worthy beings, on the contrary, by virtue of their high
level of generality, serve as gatekeepers of the higher common principle and as reference points,
contributing to the coordination of the action by which value is evaluated. The deficient might feel
tempted to cast doubt upon the superiority of worth from which they can benefit, however, this
temptation is tempered by the unavoidable anxiety the unworthy experience in regards to
contributing to the collapse of the principle from which they derive their share of worth.
Human dignity – is the system of legitimate orders of worth in which people share a common
humanity that is expressed in common capacity to rise to the occasion for the sake of the common
good. The specific characteristics of human dignity in each polity must be inscribed in human
nature and anchor the order of worth in a particular aptitude; thus, each polity focuses on some
particular faculty (e.g., memory, habit, emotion, and so on) that persons can transform into a
capability which allows them to reach agreements with others.
List of subjects – is the list of subjects that can be established for each world in terms of their state
of worth: unworthy beings or worthy beings.
List of objects and arrangements – these are unevenly developed in each world, particularly when
objects or their combination in more complicated arrangements, are arrayed with subjects, in
situations that hold together. They help to assess the worth of the persons involved and the more
prominent the possibility of implementing mechanisms of worth in one particular world, the easier
it is to establish people’s worth.
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Investment formula – is a key condition of a polity’s equilibrium. This formula constitutes an
economy of worth by linking access to the state of worthiness to sacrifice, so that the benefits
possessed by the worthy are balanced by a degree of renunciation of self-satisfaction.
Relation of worth – specifies how the state of worthiness contributes to the common good by
absorbing the state of deficiency. It spells out the relation of order among states of worth. For
example, delegation, membership, or representation constitute relations of worth in the civic
world, anchored in the higher common principle of inclusion. People granted the power of
representation are worthy because they encompass others who, in turn, acquire worth by breaking
out of their isolation and becoming part of a group (Bastid, 1970).
Natural relations among beings – are expressed by the use of verbs in reports, must be in harmony
with the worth of the beings they link, and are based on the relations of equivalence established by
the polity. Some natural relations entail worth of equal importance, while others indicate a
hierarchical distribution. For instance, the market world is anchored in reality by the place it
allocates to goods. Similarly, in the industrial world, which is highly objective, objects are arrayed
without the help of persons.
Harmonious figures of the natural order – describe the relation of equivalence, which can only be
revealed by a distribution of states of worth that is in harmony and conformity with the investment
formula. Harmonious figures of the natural order are able to identify as a reality that conforms to
the principle of equity. For example, in the world of fame, which is dominated by the opinions of
others, one can argue that an opinion is also a reality.
Model tests – are a peak moment in a situation that holds together and is prepared for a test whose
outcome is uncertain, entailing a consistent arrangement of beings belonging to the same world.
For instance, a traditional wedding is a test of domestic worth (grounded in the principle of
tradition).
Mode of expression of judgement – is examined by ratifying a test which is expressed in different
ways in the different worlds. The form in which the higher principle is manifested in each world
dictates the model of expression in which the judgement is expressed.
Form of evidence – indicates that evidence must be presented in a form appropriate to the world
under consideration.
State of deficiency and decline of the polity - are characterized by self-satisfaction and are often
more difficult to qualify than states of worthiness, either because qualification is no longer
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possible on the brink of chaos, or because a designation of deficiency reveals a different type of
worth that, having been denounced, has also been diminished.
The achievement of a justifiable agreement not only presupposes the possibility of devising a
framework such as the one depicted above which will guide, constrain and govern the agreement-
reaching process, but also presupposes that people have the necessary capacities to function within
those constraints. Boltanski and Thévenot’s (2006) project takes into account what people do know
about their behavior, and the possible ways to justify it. Thus, they take to respecting a
distinguishing feature of human beings: moral sense – implies the integration of the two basic
constraints that underline the polity: the requirement of a common humanity (one must recognize
the human beings with whom agreement is to be reached as sharing a common human identity),
and the requirement of a general principle of order governing possible associations (pp. 144-145).
However, when the polity is extended into one of the worlds described in the next section, people
must, in order to judge justly, be able to adjust to each situation they engage in by bringing into
play the corresponding principle of justice.
3.3.2 Orders of Worth
Boltanski and Thévenot (2006) investigated the implementation of the higher common principles
in everyday situations by using the analytical framework demonstrated above. They used
contemporary manuals dedicated to instructional guidelines and illustrated common scenarios in
order to prevent the idea that each order of worth has its own separate space. One of the conditions
imposed in the source texts was that all six manuals must apply to a common space: the
professional organization. The other condition is that each text has to describe the relevant polity
“in the purest way possible” (p. 151). Using only terms and formulations that appear in each of the
selected manuals, Boltanski and Thévenot constructed six representative samples in which each of
the polities are realized under their respective principles of worth. The samples are constructed
following a single model based on the categories illustrated earlier (higher common principle,
subjects, objects, etc.), which allows a systematic comparison of and shifts between the various
worlds. In the following section, I will present an overview of each world and its higher common
principle in everyday situations. Then I will review the empirical studies, which have used
Boltanski and Thévenot’s (2006) order of worth framework to analyze organizational settings,
specifically accounting practices.
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In the inspired world, worth is defined in terms of creativity and inspiration. However, the
creativity manual must also exit from the polity and even denounce its canonical expressions in
order to open up the possibility that creativity can be learned, through methodical exercises of an
industrial nature that justify the manual’s existence, and more generally, the profession of the
person who wrote it (p. 154). Visionaries and artists are some of the beings that inhabit this world,
which relishes the imaginary and the unexpected. People in this world are moved by the desire to
create and the necessary sacrifice to acquire worth is escaping from habits and accepting risks.
In the domestic world, worth is defined in terms of respecting tradition, responsibility, and personal
relationships, but not only those unfolding within families. Worth in the domestic world is “a
function of the position one occupies in chains of personal dependence” (p. 165). Respect of
tradition and hierarchy are the central values of this world in which beings achieve superiority
through the judgement of a superior.
In the world of fame, worth is defined in terms of recognition and popularity, which comes
exclusively from the opinion of others, and public relations hold sway. People in a state of
worthiness in the world of fame are driven by self-love and a desire to be recognized and respected.
Boltanski and Thévenot (2006) state that “persons are relevant inasmuch as they form a public
whose opinion prevails” (p. 179). When thinking in terms of organizations, it is this craving for
the respect which means that “the staff... likes to be made aware of the role it plays. In the same
way, questioned by someone from outside his own company..., the participant wants to be able to
explain what his own role is, and to be respected everywhere, since part of the reputation of the
company for which he works reflects back on him” (p. 179).
In the civic world, worth is defined in terms of solidarity, representation, and freedom. The
significant feature of the civic world is that “it attaches primordial importance to beings that are
not persons” (p. 185), and its higher common principle is the pre-eminence of the collective.
Accordingly, factors like human rights, participation, legislation, the state, and democratic
institutions are celebrated because of their role in nurturing social cohesion. The object of all
arrangements in the civic world is to stabilize the collective and protect it against individual
interests.
In the market world, worth is defined in terms of money, gain, and self-interest. It is underlined by
the higher common principle of competition, which is not a mere sphere of economic relations.
Boltanski and Thévenot (2006) argue that “economic actions are based on at least two main forms
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of coordination, one by the marketplace, the other by an industrial order, and that each has its
own way of setting up a reality test” (p. 194). In the market world, where the desire of individuals
to possess objects motivates actions and affects prices, the search for wealth, interest, ambition,
and freedoms are considered positive values in that they stimulate innovation (Cloutier et al.,
2017).
In the industrial world, worth is defined in terms of efficiency, productivity, and mastery.
According to Boltanski and Thévenot (2006), the ordering of beings is based on their efficiency,
“their performance, their productivity, and their capacity to ensure normal operations and to
respond usefully to needs” (p. 204). However, they precaution upon the assumption that the
industrial world is solely delimited by the boundaries of industry. It is the world of all beings
giving priority to notions of efficiency, organization, and progress. It is the world of engineers and
specialists, whose objective is to optimize performance and for whom notions of expertise,
usefulness, and evaluation are central. In the industrial world, beings manifest their worthiness
through “their capacity to integrate themselves into the machinery, the cogwheels of an
organization, along with their predictability, their reliability, and it guarantees realistic projects
in the future” (p. 205).
Disagreements may be more readily solved within the same common world, where people share
the same worth. However, agreements are more difficult to reach when people invoke different
orders of worth to justify themselves. The common worlds address typical criticisms to one
another. For example, the domestic world criticizes the poor quality of standardized products in
the industrial world, and the latter denounces local privileges in the former. Situations in which a
form of injustice is voiced calls for a test that can lead to a clash or a compromise.
By following the deployment of objects in a coherent world, Boltanski and Thévenot (2006)
explicate how relations among the six worlds of worth unfold and what happens when people and
things belonging to different worlds converge in a test, especially situations of discord and a
possible return to agreement, which they call “compromise” (p. 277). Disagreement is more readily
resolved when it arises within the limits of one single order of worth resided by social beings who
share a common logic. However, permanently attaching the different worlds and their identical
worth to various persons would go against the principles on which the polity is based. Furthermore,
Boltanski and Thévenot (2006) argue that one of the essential observations in their undertaking is
that humans can inhabit different worlds and, in order to function in society, they must be able to
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adjust to situations stemming from different forms of generality on a regular basis (p. 234). They
refer to the existence of a varying degree of uncertainty about people’s actions that accounts for
the fact that tests arising in situations that include people and things belonging to different worlds
are not fatally undone by disputes.
While the coexistence of elements of a different nature is possible in a test – and it is this possibility
of taking recourse to other worlds that critique often relies upon – incongruous setups can create a
great deal of anxiety or discomfort among participants (Cloutier et al., 2017). Actors need to set
up situations that hold together in order to avoid incongruity and clashes, scenes that when
confronted with a test are coherent in one world. However, in some cases, participants might decide
to suspend a clash without recourse to a test. They might opt for a compromise reaching for a
common good that transcends varied forms of worth (Boltanski & Thévenot 2006, p. 278).
According to Cloutier et al. (2017), “object” and “subject” correlated with different worlds are
thus of particular interest for the sociology of valuation because they continue the material “proofs”
of worth distinctive to each specific world, which allows evaluation, calibration, and interpretation
of value within each world’s value system (p. 246).
The orders of worth framework has been applied mostly in Western empirical studies in diverse
organizational settings. Those settings include public goods (Lafaye, 1990), health care (Dodier,
1993), banks (De Blic, 2000), the media (Lemieux & Leclerc, 2001), the energy industry (Patriotta
et al., 2011), and auditing firms (Ramirez, 2013) and the studies focused on issues of valuation in
situations where multiple orders of worth co-exist and may need to be justified (see Stark, 2006).
For example, Huault and Rainelli-Weiss (2011) demonstrated efforts to form the market for
weather risk as a meeting space for different metrics for evaluation. The creation of the new market
implied interaction between the various worlds of worth associated with different standards of
evidence for proving value (p. 1396). They drew on the order of worth framework to describe the
fragility of the new market, given the challenge of reaching a sustainable compromise between the
different measurement systems. Patriotta et al. (2011) constructed a framework that links the
notions of justification, institutional work, and sense-making, and used it to analyze controversy
about safety following a nuclear accident. They assume that different stakeholders mobilize
various orders of worth in their communication activities. These orders of worth are present in
rationalized myths through which agents describe events and justify their positions concerning the
debate surrounding the accident. Ramirez (2013) examined the operations of a monitoring unit set
55
by the Institute of Chartered Accountants in England and Wales in order to comply with European
company legislation. He draws on the framework developed by Boltanski and Thévenot (2006),
and particularly on their concept of the test, to analyze reforms that were perceived as challenging
new situations by chartered accountants. Reinecke (2010) used the orders of worth framework to
reveal political and moral construction underpinning price setting practices by the Fairtrade
Labelling Organization. She explained how this organization constructed practices which support
a theory of value that links industrial and civic orders of worth in battle to notions of value lying
behind economic liberalism (based on market order of worth). She particularly refers to cases when
the organization coupled the calculations of real costs for producers (an industrial notion of worth)
with a democratic forum for incorporating the views of all stockholders (a civic notion of worth),
substituting direct market interactions between producers and distributors (Reinecke 2010, p. 565).
Although the above examples show how scholars focus on different aspects of Boltanski and
Thévenot’s theory in the ongoing process of valuation, few studies describe how actors actually
proceed in their justification work. A study of non-profit technology by Mclnerney (2008) presents
an interesting analysis of ‘justification work’ based on ethnographic fieldwork. He focuses on
accounts as a mechanism by which institutional entrepreneurs seek to shape fields. A theory of
accounts is contracted based on the order of worth framework and states that “accounts become
conventions as actors seek to normalize their narratives by anchoring them to situationally-
appropriate orders of worth and convincing powerful actors within their field to adopt them. When
successfully underpinned by orders of worth, conventionalized accounts can enable institutional
entrepreneurs to construct organizational fields” (Mclnerney 2008, p. 1093). He documents how
two institutional entrepreneurs (Stuart and Fanning) drew on two opposing accounts (i.e., orders
of worth) to organize the field. Stuart maintained a community logic of promoting social justice
by distributing free information technologies to non-profit and grassroots organizations that share
their vision of social justice, by drawing on a civic order of worth. Meanwhile, Fanning realized a
political opportunity to advance an alternative account by drawing on an industrial and a market
order of worth as explained by Mechnerney (2008, p. 1107): “Stuart’s account of technology in
the non-profit sector as promoting social justice failed because it was anchored to civic order of
worth that did not align well with industrial and market orders of worth the foundation world had
recently began to employ to justify the new direction they were heading. Taking advantage of these
ascendant orders of worth, Fanning recognized a political opportunity to advance an alternative
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account of technology as efficiency, an account anchored to orders of worth that aligned well with
the foundation officers’ understanding of how their own work ought to be done”. This study
indicates that the competencies actors have for differentiating between various orders of worth and
utilizing them in distinct ways are essential for their possibilities of gaining organizational
legitimacy. According to Jagd (2011, p. 351), employing the orders of worth framework allows
Mclnerney (2008) to capture co-existing evaluative frameworks revealing how actors mobilize
them at different points in time in an attempt to assert their interest.
In another study, Reinecke et al. (2017) examined how dialogue helps establish moral legitimacy
in contexts where multiple moral frameworks co-exist and compete with each other. They draw
on Boltanski and Thévenot’s framework to highlight the structure of clash in moral frameworks
by arguing that moral legitimacy ‘truces’ can be established as an outcome of dialogical processes
where relations between the moral frameworks that social actors refer to are frequently negotiated
and renegotiated through effective exchange with diverse audiences. They developed a model that
suggests three dialogic paths to achieve such truces in a situation of moral multiplexity, which
includes transcendence, compromise, and antagonism. Moreover, they also explicate how
individuals manage organizational pluralism in different contexts by providing theoretical
arguments supporting the idea that legitimacy is not a binary variable, but one that can diversify
both in terms of scope and certainty. Similarly, Jaumier et al. (2017) investigated how individual
actors respond to organizational pluralism in day-to-day activities, by examining how French
cooperators publicly justify the cooperative principles. They explain how actors in complex
organizations instantiate conflicting logics in practice, relying on positive affirmations as well as
critical mobilization of various logics. They show that individuals often represent the same logic
in different ways, and the ambiguity associated with these different instantiations allows
compromises between logics to be settled.
Although these articles addressed some of the shortcomings of managing organizational pluralism
and also investigated the ongoing articulation between multiple orders of worth within
organizations, notably by using Boltanski and Thévenot’s orders of worth framework in order to
better understand the specific mechanisms, whereby settlements in disputes are reached or
alternately explore what prevents such settlements or compromises from being formed, many
aspects of different value systems or ideologies in diverse socio-cultural contexts remain
unexplored. In the next section, I will explain how organizations are conceptualized as settings in
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which multiple orders of worth co-exist in complex networks (i.e., organizing dissonance,
compromising accounts, and productive friction) by drawing on Stark’s (2009) order of worth
framework.
3.3.3 Organizing Dissonance, Compromising Accounts, and Productive Friction
Organizational scholars have recently engaged with the growing stream of research on the social
practice of valuation (Lamont, 2012), by relying on the Economies of Worth (EW) or the order of
worth framework, in order to understand how people assess and determine ‘worth’ (of objects,
actions, and persons) and how heterogeneous actors engage routinely with multiple orders of worth
in organizations (see Stark, 2009). The book of The Sense of Dissonance: Accounts of Worth in
Economic Life (Stark, 2009), is rightly regarded as a contribution to the theoretical path outlined
by Boltanski and Thévenot, which explicitly acknowledges the influence of their book’s On
Justification. However, according to Stark (2009), “in everyday life, we are all bookkeepers and
storytellers. We keep accounts, and most importantly, we can be called to account for our actions.
It is always within accounts that we ‘size up the situation’, for not every form of worth can be made
to apply and not every asset is in a form mobilizable for a given situation” (p. 5). Stark (2009)
concentrates not on isomorphism as an outcome of rationalization (from a neo-institutionalists’
perspective) but dissonance in organizational life that results from the meeting of rationalizing
forces with concrete situated practices. In this view, practice is complex and often embedded in
situations that call for attention to multiple (if not conflicting) evaluative principles (Dahler-
Larsen, 2019). Stark (2009, p. 27) mobilized the concept of “organizing dissonance”, which posits
that the coming together of multiple evaluative principles has the potential to produce a ‘productive
friction’ that can help organization to recombine thoughts and attitudes in productive and
constructive ways.
For instance, Annisette et al. (2017) used the EW framework as a conceptual toolbox for studying
accounting as a situated practice by drawing on two cases: a not-for-profit welfare agency and a
government-owned water utility. They followed the unfolding of disputes in which accounting
processes and measures were implicated by mobilizing the EW framework to explain how
accounting is used to justify decisions and actions in various organizational situations and how it
helps with “holding things together” in compromise arrangements, by serving as a stabilizing
device and thus facilitating coordination (p. 209). From this perspective, the role of accounting as
an ‘ambiguous object’ (something relevant in multiple worlds) or ‘controversial device’ (a tool
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that is subject to debate) is what gives it an agency for making about institutional change (Cloutier
et al., 2017). Furthermore, Annisette et al. (2017) highlighted clashes between orders of worth as
potentially generative for a new institutional arrangement for the governing of collective action.
In another study, she shows the power of the internal logic of imperialism by illustrating how the
interests of a UK-based accountancy institution intermeshed with those of the local accounting
elite to subvert the nationalistic goal of indigenizing accountancy training in Trinidad and Tobago
(Annisette, 2000). This process also shaped them in ways that have excluded segments of the local
populations based on ethnic and cultural criteria and in line with Anglo-American interests
(Annisette, 2003). From another perspective, Joannidès de Lautour et al. (2020) by drawing on the
EW framework, indicate how critique contributes to disputes in accounting research. Their
analysis reveals two responses to critique: (1) reality critiques, uncovering how a research program
is diffused and accepted; and (2) truth critiques, questioning object justness and legitimacy. They
argue that reality critiques occur before truth critiques but after isolated attempts at emancipation
from the dominant perspective. Thus, the best way to justify a critique is to emancipate oneself
from it and behave as a neglecter (p. 150). Mailhot and Langley (2017) also draw on the EW
framework to examine the process of knowledge commercialization in academia as a valuation
exercise, in which new forms of value are assigned to knowledge as it passes into practice. They
illustrate how the EW framework may help in understanding the assignment of worth to
knowledge-based objects in the context of multiple and potentially competing systems of value
evaluation. They also show how ‘composite objects’ that achieve compromises between different
value systems may be constructed and sustained. They suggested that durable compromises
between competing systems of valuation might be achievable if oriented around the composite
object that draws together objects and subjects from different worlds of worth in mutually
reinforcing assemblages by addressing the valuation challenges that transfer knowledge from
academia to practice (Mailhot & Langley, 2017).
In another study, Chenhall et al. (2013) draw on the EW framework of organizing dissonance and
develop arguments concerning how compromising accounts can be productive for an organization
under conditions of competing institutional logics and various forms of evaluation. They examine
a case study setting of a private organization, in which some internal stakeholder groups held
diverse opinions concerning the development of the organization and to the ordering of certain
actions. They describe that in order for the compromising accounts to create productive friction,
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the organization’s performance measurement system should include measures and metrics that
fulfill some of the expectations of each conflicting logic. From this perspective, such accounts can
generate simultaneous visibility for competing demands and logics, and thereby create space for
positive debate and dialogue, leading into productive friction that helps in reconciling the demands
set upon the organization by conflicting institutional logics (Chenhall et al., 2013). Chenhall et al.
(2013) also explicate three significant processes that are crucial for compromising accounts to be
productive for an organization. First, the accounts should be deficient when performed in practice.
Such a defect facilitates the creation of productive friction because the organizational actors with
divergent opinions, values, and expectations need to involve in dialogue and dispute about the
accounts. Second, the performance measurement system must give space and perceptibility to the
aspects that are significant to diverse groups. This entails that both in designing and using the
accounts, the diverse evaluative principles are visible, creating unified perceptibility that enhances
the productive use of compromising accounts. However, in this perspective, there is the danger
that any opportunities for dialogue and productive friction could become stuck underneath the
mere number of indicators. Third, the productiveness of compromising accounts also couples on
the extent to which the discussion and debate concentrate on the evaluative principles sustaining
the accounts as exposed to the technical features of the accounting measures (Chenhall et al.,
2013). Similarly, Kraus et al. (2017) recommend that by concentrating more on the principles of
evaluative, the actors can easily engage with covert conflicts and in so doing proceed with
productive friction aiding discussions about how could be integrated the diverse evaluative
principles underling different institutional logics. Thus, the concept of organizing dissonance
provides an analytical approach that views the co-existence of multiple evaluative principles as an
opportunity for productive or unproductive debate, rather than a site of domination or intractable
conflict (see Chenhall et al., 2013).
These studies investigate the role of accounting and profession within practices in different
Western nations by drawing on the EW framework to demonstrate the variety of competing orders
of worth co-existing within societies or organizations as well as for the analysis of conflicts and
tensions between the different values. However, they do not acknowledge the ongoing significance
of historical, cultural and political relations in accounting practices, specifically, the effect of
postcolonial discourses and anti-imperialism in shaping the performance measurement and
management practices, and shifting identities construction and taken-for-granted Western subjects
60
and subjectivities in non-Western countries. In order to address this shortcoming, I will draw on
postcolonial theory in the next section to fill this gap and highlight the significant role of Islam
and anti-imperialist beliefs on the practice of PMS as historical, cultural, and political contexts in
shaping ideology and the enactment of new public management in the Iranian petroleum industry.
3.4 Postcolonial Theory
Postcolonial theory deals with the effects of colonization on cultures and societies and those
societies’ responses. This theory emerged in the late 1970s to describe a range of literature and has
since been used by cultural critics to discuss the various social, political, and cultural engagements
of colonized people with imperial power, as well as the more widespread effects of colonization
(Ashcroft, 2017). The first systematic account of the theoretical issues of postcolonial studies was
provided by Ashcroft, Griffiths and Tiffin (1989) in The Empire Writes Back. This book initiated
the field that became known as “postcolonial theory” and has been extensively used in postcolonial
literature. This theory has subsequently been widened to include an extensive range of analyses of
the political, linguistic, and cultural experience of societies that were former Western colonies,
particularly analyses of resistance, and a general rethinking of dominant Western historiography
that places the ‘West’ at the center of the world (Ashcroft, 2013).
Postcolonial theory is currently becoming extensively applied in historical, sociological, political,
and economic studies, as these disciplines continue to engage with the influence of Western
imperialism upon world societies and also the distinctions of subject construction in colonial
discourse and the resistance of those subjects, and most notably perhaps, the differing responses
to such invasions (Gandhi, 2019). Thus, “postcolonial” is best understood as a reading practice,
which analyzes the continuing resistances, appropriations, and transformations of dominant, (i.e.,
“imperial”) discourses, institutions, and methodologies by colonized and formerly colonized
societies (Ashcroft 2017, p. 3). As critics like Young (1995) have indicated, the crucial task has
been to avoid the assumption that “the reality of the historical conditions of colonialism can be
safely discarded” in favor of “the fantasmatics of colonial discourse” (p. 160). On the other hand,
he claimed that although the totalizing aspects of the postcolonial discourse are of real concern, it
is essential to avoid a return to a simplified form of indigenous materialism that rejects solely to
identify the existence and impact of general discourses of colonialism on individual instances of
colonial practice (Young, 1995). According to Ashcroft (2017, p. 4), the need to strike a proper
balance between the specific cultural and social conditions of colonized and formerly colonized
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peoples and the larger theoretical frameworks in which the cultural practices of those societies are
analyzed became a challenge for many postcolonial critics and theorists. For instance, the ways in
which postcolonial peoples have appropriated and transformed metropolitan languages may differ
in particular instances but the general political processes by which this appropriation occurs show
the continuing value of broader postcolonial frameworks (Ashcroft et al., 2013).
According to Boyne and Rattansi (2017), critical postcolonial studies try to reveal that “the
economic and political domination that formed the key elements of imperialism and colonialism
in the eighteenth and nineteenth centuries was always accompanied by the formation of discourses
in which the ‘otherness’ of the peoples of Asia and Africa was apprehended and culturally
colonized, and in which the cultural and moral superiority of the Western imperial powers was
always affirmed without reservation” (pp. 34-35). This discursively produced cultural superiority
established the ‘right’ of commercially expansive Britain or France or Spain to exercise political
and cultural domination over the ‘Orients’, Africa and elsewhere. Notably, only a minority of
Western scholars have ever seriously attempted to explore the significance of imperialism and
colonialism in the rise of the West and the formation of its self-understanding and its attitudes
toward the rest of the world (Rattansi, 1997). However, amongst the limited number today, is a
growing proportion of studies of ‘hybrid’ origin. Many individual scholars (such as Edward W.
Said, Gayatri Chakravorty Spivak, Homi Bhabha, and Abdul R. Jan Mohamed), who were inspired
by post-structuralism and begun to challenge the varieties of colonial and imperialist discourse,
which have been so crucial in the intellectual formation of modernity, combined Third World3
origins with Western perspectives and ideologies in Western cultural establishments (Boyne &
Rattansi 2017, p. 35). Thus, postcolonial criticism seeks to challenge the Western ideologies such
as racialism, fanaticism, and Westernization of the Orient, which have an impact through Western
cultural production, literature and thought.
One of the significant academic approaches to Western scientific discourse is the study of
“Orientalism”4 and the criticism of Orientalist discourse. Orientalism is a set of beliefs about the
Eastern World published by Edward W. Said in 1979, who defined Orientalism as the West’s
3 During the Cold War, the term Third World referred to the developing countries of Asia, Africa, and Latin America,
the nations not aligned with either the First World or the Second World. This usage has become popular mostly in
Western countries to describe a class of economically inferior nations. 4 Orientalism is a manner of regularized (or Orientalized) writing, vision, and study, dominated by imperatives,
perspectives, and ideological biases ostensibly suited to the Orient. It is the image of the ‘Orient’ expressed as an
entire system of thought and scholarship (see Said, 1979).
62
patronizing representations of “The East”, the societies and peoples who inhabit the places of Asia,
North Africa, and the Middle East (Said, 2003). The scope of Said’s Orientalism became a
foundational text in the field of postcolonial studies, which examines the denotations and
connotations of Orientalism, and the history of a country’s postcolonial period (Groden et al.,
2005). According to Said (2003), in the Middle East, the social, economic, and cultural practices
of the ruling Arab elites indicate that they are imperial satraps who have internalized the
romanticized “Arab Culture” created by French, British and, later, American Orientalists.
However, the critical expansion of Orientalism (the Western scholarship about the Eastern World) and
its influence in academic studies have extended into a distinctive amalgam of cultural critique by
post-structuralism and post-modernism, including Foucauldian approaches to power, engaged
“politics of difference,” and postmodernist emphases on the decentered and the heterogeneous,
and began to be appropriated in a major way for the study of non-European histories and cultures
(O’Hanlon & Washbrook 1992, p. 141). Indeed, the critical application of post-structuralism and
post-modernism in the scholarship of Orientalism influenced the development of literary theory,
cultural criticism, and the field of Middle Eastern studies, especially concerning how academics
practice their intellectual inquiry when examining, describing, and explaining the Middle East
(Howe, 2008). According to Said (1993, p. 8), “Neither imperialism nor colonialism is a simple
act of accumulation and acquisition. Both are supported and perhaps even impelled by impressive
ideological formations which include notions that certain territories and people require and
beseech domination, as well as forms of knowledge affiliated with that domination”. He claims
that the peculiarly ‘Western style for dominating, restructuring, and having authority over the
Orient’ (Said 1979, p. 3) is inextricable from the peculiarly Western style of studying and thinking
about the Orient. Furthermore, Said’s irate critique of overheated nativism5 is predicated upon his
own overarching cosmopolitanism. He holds the view that “...the racial, religious, and political
divisions [are] imposed by imperialism itself. To leave the historical world for the metaphysics of
essences like négritude, Irishness, Islam or Catholicism is to abandon history for essentializations
that have the power to turn human beings against each other” (Said 1993, p. 276).
Despite Michel Foucault’s silence on questions of imperial domination (Spivak 1988, pp. 289-
291), his work has been crucial because of the value of his concepts for the appliances and
5 Nativism is the political policy of promoting the interests of native inhabitants against those of immigrants, including
the support of immigration-restriction measures.
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processes involved in the formation of discourses implicated in the exercise of imperial power
(Boyne & Rattansi 2017). Said’s egotistic Orientalism (1979) is a profound exposition of the
discourses through which the West has constructed and governed the ‘Arabs’ and ‘Islam’, and it
has been a key Foucauldian contribution to challenge the freezing of the ‘Oriental’ into a timeless
‘other’. All of those supposedly uniform characteristics serve only to highlight the Occident’s
difference and superiority in cultural, moral, and technological matters (Boyne & Rattansi 2017,
p. 35). Consequently, it essentializes the Orient in a position of inferiority, which justifies its
supervision and assistance.
Foucault is not the only important influence in postcolonial studies. Derrida’s work on post-
structuralism and postmodernism as well as Spivak’s reflections on female and subaltern ‘others’
in the Indian context, have been significant too. For example, Spivak’s deconstruction for
postcolonial critique is not simply rejecting Marxist thought but modifies and develops the
categories of Marxist thought beyond the narrow terms of class politics by other forms of liberation
struggles, such as the women’s movement, the rights of indigenous minorities, and the peasant
struggles (Young, 2016). Furthermore, Bhabha’s work (1983, 1984) combines post-structuralism
and postmodern, especially Foucauldian, concepts with psychoanalytic themes from Freud, Lacan,
and Fanon to produce effective deconstructions of colonial discourse, which move beyond the
unified image of the ‘other’, as implied in Said’s Orientalism. Bhabha (1994) acknowledged the
importance of postcolonial discourses to the abilities of imperial authorities to govern, arguing that
postcolonial discourse aims to “construe the colonized as the population of degenerate types on
the basis of racial origin, in order to justify conquest and to establish the systems of administration
and instruction” (p. 70).
According to Prakash (1994), postcolonial studies have two aspects: criticism of orientalism and
subaltern studies6. He argues that criticism of subaltern studies has compelled a radical rethinking
of knowledge and social identities authored and authorized by colonialism and Western
domination, especially the inconsistency of Western ideas applied to non-Western societies.
Jackson (2013) asserted that one of the significant characteristics of postcolonial studies is the
emphasis on indigenous science vs. colonial science (the Western ideas, practices, and techniques).
According to Snively and Corsiglia (2016), indigenous science refers to the scientific knowledge
6 Subaltern studies refer to the group of South Asian scholars interested in the postcolonial and post-imperial societies
(see Chibber, 2014).
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of all peoples who, as participants in culture, are affected by the worldview and interests of their
home communities and homelands (p. 89). It has been referred to as one of the most important
methodological tools of postcolonial studies to deconstruct Western colonial science through
indigenous science (Baber, 1996). For example, Creer and Neu (2009) highlighted the positioning
of accounting within the process of colonialism and imperialism by arguing that accounting
discourses and technologies have been used to influence and control indigenous people. Their
study shows how accounting techniques allowed colonial rulers to put specific programs that
attempt to control and govern the activities of indigenous people into practice (p. 470). Qasemi
(2009) argues that “when thought patterns and methods of research and education are
westernized, it becomes impossible to come up with pure indigenous thought” (p. 241) because
every indigenous thought will eventually be interpreted with Western analytical tools, which are
influenced by the modern Western concepts. Therefore, the colonized societies are attempting to
apply different ideologies or indigenous humanities and social sciences to counter Western
influence (Qasemi, 2009). Said (1993) suggests that, despite the formal end of the “age of empire”
after the Second World War (1939 - 45), colonial imperialism left a cultural legacy to the
(previously) colonized peoples, which remains in their contemporary civilizations and that is
cultural imperialism which is very influential in the international systems of power.
Postcolonial theory has the potential to explain how scientific endeavors become sites for
generating and linking local identities (Anderson, 2002; Anderson & Adams, 2008), as well as
sites for disrupting and challenging the distinction between the West and the East (Said 1979,
1993). According to Said and Barsamian (2003), decolonized people develop a postcolonial
identity based on cultural interactions between different identities (such as cultural, national, and
ethnic as well as gender and class-based), which are assigned varying degrees of social power by
the colonial society. The historical experience of imperial and colonial relations appears to provide
valuable insights into the agency of local communities and the cultural production of colonized
countries in a global era (Kennedy, 1996).
Elhariry (2017) states that “the struggle for national liberty [in the Arab World] has been
accompanied by a cultural phenomenon known by the name of awakening Islam” (pp. 95-96).
Fanon’s psychologically and Said’s culturally oriented writings aim at freeing the colonized people
from the inside, so as to enable them to feel and think independently. This “inside independence”
is fully supported by Islam: the religion that refused to be colonized by Western Christianity in the
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past and by western secularism today (Majed, 2013). However, Islamic thought has not received
much attention from postcolonial critics, even though they see “important commonalities between
strands of Islamic political theory and other critiques of imperialism and colonialism” (Kohn &
McBride 2011, p. 37). Therefore, postcolonial studies are limited in the way they deals with issues
related to Islam and need to theorize their own limits and horizons.
According to the aforementioned postcolonial studies, I draw on Homi Bhabha’s work of “hybrid”
to investigate the role of Islam and anti-imperialist beliefs concerning the practice of Western
management technology (i.e., PMS) in the context of Iran. Homi Bhabha’s work (1994) has been
particularly valuable in describing the construction of culture and identity within conditions of
colonial encounters. In contrast to Said (1979), who makes an explicit distinction between the
colonizer and the colonized, Bhabha takes the mutual effects of the colonizer and the colonized
within the colonial encounter into consideration (Bhabha, 1994). His concept of hybrid opens a
‘third space position’7 as a transformative place in which the colonizer and colonized are offered
new possibilities of representing the identity of the Self and the Other in addition to new forms of
political hegemony and subversion (Parry, 1994). He argues that otherness is an ambivalent
narrative construction, which implies an ongoing process of interpretation and reinterpretation
(Bhabha, 1994).
3.4.1 Mimicry
Otherness is not a static, but a dynamic structure. Bhabha (1994) highlights this point by
introducing the concept of colonial mimicry as “the miming and imitation of the colonizer by the
colonized” (Prasad 2003a, p. 21), intended “not only at changing the colonized’s conduct but also
at reconstituting its very identity” (Frenkel 2008, p. 926). For Bhabha (1994), the strategy of
mimicry is ambivalent, which shows both masks and exhibits diversity. Mimicry attempts to
reform the other based on the ethnocentric and narcissistic Western thought by making “the
unfamiliar familiar, thereby controlling it” (Frenkel 2008, p. 926). Thus, mimicry attempts to the
homogenization between two, even if their positions differ. However, the demand for mimicry
indicates the sign of the inappropriate (Bhabha, 1994) between the colonizer and the colonized,
which is represented as “the natural repository of preferred knowledge, and the colonized, who
7 A position that challenges the validity and authenticity of any essentialist view (the idea that people and things have
‘natural’ characteristics that are inherent and unchanging) of cultural identity.
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lacks such knowledge is therefore forced to import it” (Frenkel 2008, p. 926). For example, the
imposed Western management technologies in non-Western countries.
3.4.2 Hybridization
The ambivalence of mimicry signifies power relations between the colonizer and the colonized.
On the one hand, mimicry reinforces the hegemony of the colonizer, such as norms, values, and
beliefs to the colonized. On the other hand, “mimicry repeats rather than represents” (Bhabha 1994,
p. 88). Although the colonized reproduces some aspects of the colonizer, it does not give up its
own identity (Beaudoin, 2013). In this sense, mimicry implies hybrid, which produces new forms
of knowledge within new forms of power (Blanchet, 2013). Postcolonial studies of management
have considered the practice of Western management technologies in developing countries under
the banner of ‘modernization’ to be a process of postcolonialism and imperialism (Alcadipani et
al., 2012; Caldas & Wood, 1997; Frenkel & Shenhav, 2003). These studies have employed the
concept of hybrid by either focusing on the hybridization process of management knowledge or
on the hybridization process of identities (Yousfi, 2014). While acknowledging that the imposition
of Western management technologies and techniques are new forms of postcolonialism, studies
examining processes of local hybridization have revealed that this hegemonic discourse should not
be considered absolute (Alcadipani & Caldas, 2012; Frenkel, 2008, 2006; Kamoche, 2002;
McKenna, 2011; Mignolo, 2000). According to Murphy (2008), the modernity in contributing to
the diffusion of Western management practices has led to a conflict between local values and
modern management thinking in developing countries. Bhabha’s (1994) notion of ambivalence
indicates the contradictory nature of mimicry and the development of the hybridized ‘in-between’
spaces as discursive constructions of identities and cultures. For instance, Murphy (2008)
explained the hybrid of the emerging economies’ managerial class in the context of globalization
in India. He argued that globalization does not cause local values to be replaced with modern ones,
but rather that it creates hybrid relationships of domination in which an emergent global
managerial class is constructed and intertwined with pre-existing class and caste hierarchies.
By considering culture as a largely narrative construction of reality, which influences all aspect of
social life, the emergent framework of hybrid provides a new conceptualization of culture that
could help us to take into account how national culture may shape the way that local managers
resist, adapt or adjust to the practice of transferred Western management technologies (e.g., PMS)
into non-Western countries. I will highlight the ambivalence of the accounts produced by public
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managers in order to explain how they modernized their company through the implementation of
Western management tools (i.e., PMS). Furthermore, I demonstrate the ambivalent nature of
managers’ identity construction through the contextualization of the historical Western powers
domination, the role of Islam and anti-imperialist beliefs coexisting within society and the practice
of performance measurement and management in the context of the Iranian petroleum industry.
Instead of critiquing postcolonialism or the secular postcolonial scholars for neglecting Islam or
marginalizing it, I intend to develop it by highlighting the centrality of Islam as a dominant value
(religious value) in postcolonial practices, specifically the enactment of new public management
within hybridization process in the context of Iran. Moreover, the use of postcolonialism as a
supplement to the orders of worth (EW) theory will help me to explain how the organizational
actors cope with pluralistic values that coexist within organizational complexity in the context of
the Iranian petroleum industry.
3.5 Summary
While studies of institutional logics have mainly tended to focus on identifying the trajectories of
dominant logics, the orders of worth framework focused on a broader set of issues such as the co-
existence of competing orders of worth and the intertwining of multiple orders of worth within
diverse organizational settings. These empirical studies show that the orders of worth framework
is useful to reveal the different competing or conflicting rationalities in organizations. Moving
away from perspectives that ascribe orders of worth to particular social spheres (Walzer, 1983),
Boltanski and Thévenot suggest that actors can, in any situation, invoke different worlds of worth
in order to criticize, justify or reach an agreement. The orders of worth framework and French
pragmatist sociology provide a valuable approach for addressing numerous issues faced by
increasing streams of research in organizational and management theory, and can help
organizational theory move beyond traditional organizational settings (Ahrne et al., 2016). Where
the embedded dynamics of the orders of worth framework is concerned, it is flexible and thus open
to being combined with other theoretical approaches, as it does not claim to be a complete
sociological theory that explains all aspects of social life (Cloutier et al., 2017). Cloutier and
Langley (2007) argue that “the orders of worth framework provides a very rich, descriptive
language for delimiting each world, which has a distinctive advantage, from a heuristic
standpoint, of giving readers a good ‘feel’ for each world, which could facilitate coding and
categorizing of empirical data” (p. 16). Stark (2009) has also extended the framework of Boltanski
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and Thévenot (2006) by focusing on the concept of ‘organizing dissonance’, which provides an
analytical approach recognizing that the co-existence of multiple values is not necessarily a source
of conflict, but it can be an opportunity for productive debate through recombination and
redeployment.
Although the orders of worth framework seems to be a very effective framework for analyzing
how multiple orders of worth co-exist within organizations, it has limitations regarding its
relevance beyond the Western social context in which it is tacitly embedded. According to Cloutier
et al. (2017), such recognition involves an effort to investigate whether the framework applies in
different contexts across time and space. Since then, scholars have tried to expand the notion of
“orders of worth” to investigate whether these ideas apply to different historical and geographical
contexts (see Lamont & Thévenot, 2000). However, such an expansion implies the existence of
other polities not initially identified by Boltanski and Thévenot’s orders of worth framework (see
e.g., Boltanski & Chiapello, 2005; Lafaye & Thévenot, 2017). I will draw on postcolonial theory
(specifically the hybridization processes) as a supplement to the orders of worth theory in order to
highlight the significance of historical, cultural, and political relations in shaping PMS practices
in the context of the Iranian petroleum industry. I will apply these theoretical frameworks in
chapter 8, when discussing my essential empirical findings.
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CHAPTER FOUR: METHODOLOGY
4.1 Introduction
In designing and undertaking a PhD thesis, the research problem, questions, and cultural issues are
important factors that must be considered at the outset, when deciding on an appropriate research
design to employ (Saunders et al., 2009). As this study focuses on the Iranian petroleum industry
as one of the strategic governmental organizations in a unique and complex context, I had to
undertake a thorough and critical review of the literature on research methodologies in order to
determine a fitting methodology for the research questions and the instruments used to collect data.
Saunders et al. (2009) defined research methodology as the theory of how research should be
undertaken, including the theoretical and philosophical assumptions upon which research is based
and the implications of these for the method(s) adopted.
I conducted a qualitative research methodology as its constitution is epistemologically
interpretivism and ontologically constructivism. Patton (2002) argues that a qualitative research
methodology can help researchers approach fieldwork without being constrained by any
predetermined categories of analysis, which “contributes to the depth, openness, and detail of
qualitative inquiry” (p. 14). As relatively little research has explored how PMS is understood,
implemented, and practiced in the context of Islamic societies more broadly and Iran more
specifically, a qualitative approach suited this study because it would provide an in-depth
exploration of how people perceive and enact their social realities in the complex social network.
This point followed Gay et al. (2009), who explain that the qualitative research approach provides
an opportunity for researchers to interact with and gather data directly from their research
participants and to understand a phenomenon from their perspectives. Qualitative field researchers
agree that “social reality is emergent, subjectively created, and objectified through human
interaction” (Chua 1986, p. 615).
The study of the social world, including patterns of social relationships, social interaction, and
culture, requires a selection between varieties of research approaches. Social reality has meaning
for human beings, and accordingly, human action is meaningful. It means human beings make
sense of their subjective reality and attached meaning to it (e.g., Bryman, 2008; Holloway &
Wheeler, 2002; Patton, 2002; Mansourian, 2006). Accordingly, society is both an objective fact
and constituted by activities, which signify subjective meanings (Lukka, 2014). That’s why the
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researcher chooses an interpretive viewpoint to interpret the realities of the people by
understanding, analyzing, and altering their actions and behaviors, especially when the relevant
field of science lacks existing knowledge. According to Andrews (2012, p. 40), “Interpretivism
differentiates between the social and natural sciences and has as its goal the understanding of the
meaning of social phenomena. While interpretivists value the human subjective experience, they
seek to develop an objective science to study and describe it. There is then a tension evident
between objective interpretation of subjective experiences. In other words, they attempt to apply a
logical empiricist methodology to human inquiry.”
This study undertakes a case study to understand complex social phenomena and in-depth
exploration of the context by focusing on the abductive strategy to facilitate systematic data
analysis and theory development. Unlike inductive and deductive reasoning, abductive reasoning
can explain, develop, or change the theoretical framework before, during, or after the research
process by moving back and forth between theory and empirical data (Dubois & Gadde, 2002;
Lukka & Modell, 2010). Another reason for choosing abductive reasoning, was that it has the
potential of contextualizing the research findings, including causal components, to form a
theoretically more encompassing and consistent set of arguments (Lukka, 2014). I found that a
case study approach would be more suited for my research as it would help me answers ‘how’ and
‘why’ questions regarding the nature of the phenomenon based on the participants’ experience and
viewpoints in the context of the Iranian petroleum industry, a topic that has not previously been
studied in-depth.
This chapter begins with a discussion of the qualitative research method. The second part of the
chapter explains the procedures I undertook for data collection, data analysis, and coding process.
The ethical consideration is taken into account in the study, as is the role of the researcher in this
study.
4.2 Characteristics of the Quality Criteria in Qualitative Research
In contrast to quantitative studies, qualitative studies generally do not involve the use of statistical
procedures to describe the social reality under investigation. Qualitative research is the scientific
method used to gain an in-depth understanding of underlying reasons, opinions, and behaviors
from non-numerical data such as interviews, observation and focus groups. As described by Gill
and Johnson (2010), qualitative research provides a different way of explaining why people do the
things they do in various social contexts. The objective of explaining and interpreting behavior is
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usually derived from a methodological commitment which Gill and Johnson (2010) refer to as
understanding. This terminology has been defined as “the assumption that all human action, or
behavior, has an internal logic of its own which must be understood and described in order for
researchers to be able to explain that behavior” (Gill & Johnson 2010, p. 149). Thus, a qualitative
study in management accounting research has the purpose of generating understanding through
making sense of employees’ work behavior (Anderson, 2004). Qualitative studies are therefore
not only expected to explain what people do but also the human subjectivity behind why they do
those things in various socio-cultural contexts (Gill & Johnson, 2010).
Nevertheless, there are generally agreed characteristics of qualitative research including the fact
that most qualitative studies are grounded in a broadly interpretivist philosophical position, they
adopt flexible qualitative data collection methods, and aim to analyze phenomena in such a way
that detailed explanations are provided for the complexity of the social reality being studied
(Mason, 2002; Cassell & Symon, 2004; Bryman & Bell, 2003; Anderson, 2004; Gill & Johnson,
2010). According to Yanow et al., (2009, p. 9), an interpretive methodology holds that there is no
direct, unmediated access to reality (a basic claim in interpretive epistemology), and this, in turn,
means that humans’ interactions with their external worlds are always already mediated by the
historical, political, and cultural contexts in which they find themselves. But more than this,
humans do not simply respond to external stimuli but actively make and remake their
understandings of those stimuli (a constructivist ontology). Thus, whereas quantitative studies
focus on obtaining patterns, causalities, and correlations, qualitative studies aim at finding
meanings, explanations or deeper interpretations of the findings and are sensitive to the social
context that may provide such interpretations (Cassell & Symon, 2004).
The early stages of planning and designing a research project involve deciding what the research
is about specifically, not only in terms of setting the research aim, objectives and research
questions but also in terms of clarifying the essence of the inquiry (Mason, 2002). Clarifying the
essence of one’s research involves outlining the researcher’s philosophical position on ontology
and epistemology. In this regard, it should be mentioned that ontology is the underlying theme of
what am I trying to understand? Two aspects need to be considered here. One is the researcher’s
assumptions about whether a social reality for them to discover exist independently, or whether
‘reality’ is created. A second is the assumption about social action, whether the behavior of the
actor is (or is not) influenced by their understanding of the context in which they operate (Guba &
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Lincoln, 1994). Moreover, the researcher needs to clarify how they can know what does (and does
not) constitute knowledge (Johnson & Duberley, 2000). This involves answering the question of
whether they can (and how they can) obtain knowledge about the chosen phenomenon. Answers
to these questions constitute the epistemological stance of the researcher (Cunliffe, 2011).
Broadly speaking, my position is in agreement with Alvesson and Skoldberg (2017), who argue
that human activity produces things or knowledge about a social phenomenon. In terms of my
ontological position, I expected that people do what they do because of their subjective
interpretation of the environment in which they operate. Laing (1990) argues that there is an
ontological discontinuity between human beings and objects. Human behavior or actions are
therefore meaningful because they can show how different people interpret influences and
experiences from their environment or the social situation in which they are located. Hence, it was
important to get access to the participants’ day-to-day activities to understand how they were
making sense of the influences around them. This research is based on an interpretivist ontological
position which says that humans’ actions and behavior carry the meaning of the subjective
interpretations of their context. Thus, employers’ and employees’ day-to-day actions and behavior
(assumed to be a result of their interpretation of what is going on around them) are meaningful
components of organizational life. This was the basis for questioning how ‘Western’ performance
management concepts are understood, implemented, and practiced in the context of Iranian public
management, since actions and work behaviors may not be the same everywhere. Furthermore, I
assumed that the actions, interactions, and viewpoints of both managers and employees are
influenced by the specific historical, cultural, religious, and political parameters of the Iranian
petroleum industry, such as the Iranian variant of Islamic management, economic sanctions, and
the political role of the industry in the region. The epistemological assumption of this study is to
seek to elicit how actors interpreted organizational processes and external contextual factors.
Research participants use their own words while relating their experiences and beliefs (Rashid et
al., 2019). Epistemologically, it is recommended that legitimate knowledge can be obtained
through methodological triangulation in such cases, which includes the use of multiple data
collection methods (Johnson & Duberley, 2000) to validate the authenticity and plausibility of
qualitative data (Yin, 2009). In doing so, I used multiple data collection methods such as
interviews, observations, and documents for this study, to gain more comprehensive knowledge
and insights into the practice of PMS in the Iranian petroleum industry. Consequently, I adopted a
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qualitative approach to conduct an in-depth exploration of intricate phenomena and access data
that would answer the research questions of this study.
4.3 Research Method
In qualitative research, a case study is one of the most frequently used methods in academia
(Baskarada, 2014; Yazan, 2015), especially for those researchers who intend in-depth exploration
of elaborate phenomena within some specific context (Baxter & Jack, 2008). The most influential
pioneer authors to provide valuable details on case study research includes Magnus Bassey (1999),
Sharan Merriam (2002), Robert E. Stake (1995), and Robert K. Yin (2011). However, there are
philosophical paradigm differences between them in how to implement a case study approach. For
instance, Yin (2011) illustrates a case study approach as etymologically positivist. Whereas other
authors such as Stake (1995), Bassey (1999), and Simons (2009) explain case studies from an
interpretive perspective. McKerchar (2008) asserted that the positivist understands the world as
one objective reality in which the world exists independently of our observations. Epistemology,
in this case, also remains objective as the researcher initiates research with an independent stance
(Crotty, 1998). Consequently, the researcher and phenomenon stay independent of each other.
However, interpretivist does not see the world in an objective realism because this paradigm allows
the researcher to have multiple views for research problems by granting the researcher to see the
world through participants’ experiences and viewpoints (Berger & Luckmann, 1991). The
interpretive view implies that meanings are socially constructed by human beings (Hacking, 1999)
as they engage with the world they are interpreting (Hines, 1988). In the accounting context, Hines
(1988) highlights that the social construction of reality does not begin from nothing; individual
action and interaction are embedded in social structures that predate the individual. This means
that the researcher is not entirely unfamiliar with phenomena before starting research but having
‘consults literature’ for early idea generation to establish a research purpose. I pursued the
interpretive paradigm based on relativist ontology and subjectivist epistemology.
Tsang and Ellsaesser (2011) argue that one of the fortifications of the interpretive approach in a
case study research, the tendency to concentrate on answering the ‘how’ type of questions,
especially addressing those questions concerning how alleged explanatory factors work in
producing outcomes. This approach allows the researcher to investigate and demonstrate the
phenomenon in its social, organizational, political, cultural, and economic context (Appelbaum et
al., 2013). Halinen and Törnroos (2005) define a case study strategy as “an intensive study of one
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or a small number of business networks, where multiple sources of evidence are used to develop a
holistic description of the network” (p. 1286). Similarly, Bassey (1999) assert that conducting a
case study research with qualitative methods helps researchers investigate the nature of the
problem required an in-depth exploration of phenomena by digging deep into participants’
perspectives. Moreover, Creswell and Poth (2016) state that a case study is one of the most
practiced and reliable approaches in social science, especially to investigate the process of
implementation. Accordingly, case study research consists of a detailed investigation through the
multiple sources of data over a period of time to provide an analysis of the context and the
processes associated with the phenomena to identify essential factors.
However, like other research approaches, the case study approach has some strengths and
weaknesses. As I explained above, one of the strengths of the case study is that it often uncovers
rich data and recognizes existing complexities by conducting an in-depth exploration of the
phenomena. Moreover, it is characterized by a high rate of response, specifically as it uses
interviews in data gathering and can explain new trends. It is flexible and accepts various
qualitative techniques, and also allowing researchers to ask new questions during the research
(Ghauri, 2004). The case studies also have some weaknesses, such as the complexity of accessing
data, long time to collect data, and challenges in data analysis. More importantly, this research
approach is criticized for its inability to offer statistical generalizations and validity. Moreover,
using this research approach may increase the researcher’s risk of missing objectivity as
interviewees may not be honest or cooperate fully during the study being conducted due to the
confidence indexes (Vissak, 2010).
I considered these risks in my thesis and tried to minimize them, for example, by getting approval
from high authorities to access the data and using triangulation to improve the validity and allow
for generalization. According to Patton (1987, 2014), triangulation refers to the use of multiple
data sources in the qualitative research strategy to test authenticity and plausibility.
4.3.1 Epistemological Foundations
Induction and deduction are two prevalent research logics used commonly in social sciences
research. Deduction reasoning arises with theory, aimed at testing arguments and examines the
possibilities to reach a specific and logical conclusion (Rashid et al., 2019). Järvensivu and
Törnroos (2010) suggest that researchers with a realist ontological stance use the deductive
research process even if the generalization is not precise. Whereas induction reasoning begins with
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subjective accounts of experiences on which theory is built inductively, including what is learned
from others, are synthesized to come up with a general truth (Johnson, 2004). In other words,
inductive reasoning makes broad generalizations from specific observations or participants’
experiences (Rashid et al., 2019). Consequently, deductive studies focus on empirical testing of
hypotheses derived from extant theories, and inductive studies aim at generating new theoretical
insights from empirical data (Lukka & Modell, 2010). However, there is a third research logic
called abduction, which takes a position in-between (Peirce, 1960). Unlike deduction mode,
abduction reasoning begins from the research findings and not from theory; it does not negate the
role of prior theoretical knowledge in providing a background to the search for the most plausible
explanation. On the other hand, abductive and inductive reasoning have a similar starting point by
focusing on participants’ experiences and observation. But whilst induction is characterized by
theoretical generalizations from data, abduction relies on theory development with the help of
everything that is known empirically and theoretically about the issue under study (Hanson 1985,
2010; Lukka & Modell, 2010).
Dubois and Gadde (2002) consider abduction as a suitable strategy for case studies in management
research. Abductive reasoning is portrayed as an approach through which interpretive researchers
can employ the central resources of causal analysis and integrate the emic with etic to link the
study with the extant body of knowledge on the focal field (Lukka, 2014). Järvensivu and Törnroos
(2010) classified abduction as an approach to produce knowledge, which engages the middle
ground between abduction and deduction to provide a tentative idea of adequate theory. In other
words, the process of abductive research is a “systematic combining” (Dubois & Gadde 2002, p.
554), which includes going back and forth between research findings and theoretical framework
perceived to be relevant and interest (Lukka & Modell, 2010). Indeed, the aim of abduction
strategy is exploration and understanding of a social phenomenon through the lens of social actors
(Lukka, 2014). The abductive mode of reasoning is an appropriate approach for my research as it
helps me to iterative movement between literature, empirical data, and findings and contributes to
making a set of explanations more holistic and theoretically contextualized to generate plausible
explanations in interpretive research.
As already mentioned, I adopted a qualitative research approach beginning with data gathering
from multiple sources and devise an abduction strategy to clarify them and analyze the collected
data.
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4.3.2 Theoretical Sensitivity
Glaser and Holton (2004) explained that the essence of theoretical sensitivity is “the ability to
generate concepts from data and to relate them according to normal models of theory in general,
and theory development in sociology in particular” (p. 43). Developing a theory from data means
that most hypotheses and concepts not only come from the data, but are systematically worked out
in relation to the data during the course of the research. According to Corbin and Strauss (2008),
sensitivity is about having insight, “being tuned in to, being able to pick up on relevant issues,
events, and happening in data” (p. 33). This means the ability to give meaning to data, the capacity
to understand, and the capacity to separate the pertinent from that which is not. Glaser (2004)
explained that theoretical sensitivity requires researchers to enter the research setting with minimal
predetermined ideas. He argues that in adopting this posture, researchers ensure that they remain
sensitive to the data by recording events and detect incidents without pre-existing biases (Glaser,
2004).
Strauss and Corbin (1990) differ from Glaser in that they believe theoretical sensitivity is derived
from multiple sources. One such source is literature which includes the reading of theory, research,
and documents. They emphasized the importance for researchers to be familiar with such
publications in order to have a rich background of information that would sensitize them to what
is happening with the phenomenon of study. Another source of sensitivity rejected by Glaser but
identified by Strauss and Corbin (1990) is the professional experience of researchers. The
professional experience researchers have obtained during years of practice in the field enables
them to have “an understanding of how things work in that field, and why and what will happen
there under certain conditions” (Strauss & Corbin 1990, p. 42). They explained the third source
of theoretical sensitivity as personal experience. For instance, researchers who have had prior
experience with projects would find this useful during their studies. According to Glaser and
Holton (2004), theoretical sensitivity enables the researcher to undertake effective open coding,
because “it allows researchers to take chances on trying to generate codes that may fit and work”
(p. 49). As researchers interact more with the data, they increase their insight and understanding
about the phenomenon of study. All these play an essential role in helping researchers develop
theoretical sensitivity.
My theoretical sensitivity originated from several sources which include the relevant literature.
Prior to entering the field, I had done some extensive reading in areas such as research
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methodology and management accounting, mainly performance management systems, which were
the topic of study. It was imperative for me to be familiar with such literature, in order to have a
rich background of information about what was happing with the phenomenon of study. While I
agree with the need for researchers to adopt a neutral position during data collection, as emphasized
by Glaser (1992, 2004), I disagree with the perception that literature should not be read beforehand
because it would blur the researcher’s ability to maintain open-mindedness to the emergence of
categories from the data. I agree with Strauss and Corbin (1990) who regard reading literature as
an essential way of stimulating theoretical sensitivity “by providing concepts and relationships
that are checked out against actual data” (p. 50). As pointed out by Strauss and Corbin (1998), it
was important that I maintain an analytic distance by keeping back what I knew from my
experience to be able to be objective, impartial, and accurate in my interpretation of data. I had to
constantly remind myself of the need to remain as open as possible in order not to influence the
participants’ perceptions but discover their own beliefs and perspectives.
4.4 Data Collection Methods
Data for this research was collected by means of semi-structured interviews with key actors from
various disciplines, observations of meetings, participation in everyday actions and the analysis of
internal and external documents in the Iranian petroleum industry. I will explain the selection of
data sources and the process of gathering data for each of these three types of data in the following
sections.
4.4.1 Interviews
Interview data is the primary source of data used in this study (Fontana & Frey, 1994). The
researcher needs to record any potentially valuable data thoroughly, accurately, and systematically,
using field notes or audio records during the interview (Seale et al., 2004). I selected the semi-
structured interview over other forms of interviews (e.g., structured and narrative) because it
allows new ideas to be brought up during the interview as a result of what the interviewee says.
In the semi-structured interviews, I had a range of specific topics that I wanted to explore during
the interview process. These topics consist of open-ended questions which shaped during the
interviews, allowing flexibility in the discussion with interviewees to gain a more in-depth
understanding of realities. The aim of these questions was to explore topics such as the
participants’ expectations and understanding of the PMS prior to its implementation, and their
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experience of the PMS during and after implementation (see appendix A). Given the diversity of
the interviewees’ roles, experiences and expertise, and the different attitudes this brings along,
emphases on certain topics could vary significantly. In general, the interview process provided a
situation in which the interviewees were explicitly encouraged to emphasize their own
perspectives.
This study sought to explore how PMS are understood, implemented and practiced in a non-
Western, Islamic context. More specifically, I set out to understand how religion and politics
shaped the practices of performance measurement and management in Iranian public management.
Hence, participants were chosen to represent constituencies likely affected by the new changes and
concurrently involved in the implementation, articulation, and development of the PMS. My
previous work experience and relation with the past key actors provided a unique opportunity to
gain access to the data.
Participants for the formal interviews were selected from a wide variety of functions, hierarchical
levels and duration of organizational affiliation in order to cover a broad range of viewpoints. I
tried to include managers from all levels (e.g., upper-level managers, middle-level managers, and
lower-level managers) with various disciplines and not just the top management, in order to reflect
diversity (i.e., various viewpoints) in the study. The majority of interviews evolved into informal
conversations characterized by a broader reflection and contextualization of the addressed topics
from a more personal or societal point of view. A total of 22 participants were involved in the
study (see appendix B). All of the 22 participants had the relevant qualifications to be in their
positions, bachelor’s degree being the minimum qualification and others having master’s degrees
or Ph.D. degrees, which is the highest qualification (table 4.1). Three participants held bachelor’s
degrees, while the other nineteen were postgraduate’s degree (e.g., master’s and PhDs) holders.
Table 4.1 Participants’ qualification by gender
Qualifications
Bachelor Master Ph.D.
Female 1 3 2
Male 2 5 9
Total 3 8 11
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The experience of the participants in their current position ranged from just over seven months to
five years. However, the majority of the participants had relatively long experience in the Iranian
petroleum industry and had held different positions, having acted in the roles for time spans
between four and twenty-six years. This is reflective of the industry’s policy of transferring staff
from one organization to another or from one region to another. Eighteen of the participants had
seven or more years of experience and had therefore already been in their positions when the PMS
was introduced in the Iranian petroleum industry. This means that at the time of the interviews
some of the participants had less information about the implementation process in their current
department in comparison to other participants who had already been working in their department
during the implementation time. However, it also meant that some of those participants who had
experienced the PMS elsewhere were able to compare experiences from other departments,
organizations, and regions. The participants’ experience as managers in all levels ranged from two
to twenty years. This means that all the participants were involved in the PMS development and
practices in the context of the Iranian petroleum industry.
The literature shows that face-to-face interviews have many advantages when eliciting high-
quality information along with other sources of data collection such as observation and the analysis
of organizational documents for purposes similar to this study. For example, Berends (2006)
explained that interviews provide an opportunity for the researcher to clarify questions that may
be difficult to understand and gather additional elaboration from respondents to help with the in-
depth understanding of the social reality. Interviews can be of a less formal nature, to give the
researcher freedom to change the sequence of questions. In this study, one of the advantages I
found with the interviews was the potential to produce a wide range of ideas and opinions on the
topics under discussion.
I conducted face-to-face interviews in Farsi (the official language of Iran) during the years 2017
and 2018. In these interviews I questioned the participants about their experience and attitudes to
the day-to-day practices that influenced their work behavior. During the interviews, I was able to
probe and ask follow-up questions which often began with “why”, “how”, “tell me more about
that” or “give me an example” when I did not fully understand a response or when I wanted to
obtain more specific or in-depth information. While doing this, I was also conscious of Seale et
al.’s (2004) point that the researcher should be careful when probing, as this may easily lead to
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bias. I see probing as a way of facilitation without running the risk of directing the participants’
answers.
There were two rounds of interview data collection. The first round of interviews started at the
beginning of July 2017 and continued until the end of October 2017. Based on the analysis of the
first round of interviews, I did the second round of interviews at the beginning of August 2018 and
continued until mid-November 2018. Most interviews were followed by an informal discussion in
which the interviewees talked more freely. The majority of the participants agreed to voice
recordings of their interviews based on non-disclosure agreements (see appendix B). Audio
recordings of interviews allowed me to refer back to the interviews and take a fresh look at the
interview data. However, some of the participants did not approve voice recordings due to their
position which is why I had to take notes of those conversations and discussions manually.
In the first round of data collection, the interviews conducted on a one-to-one basis with the key
actors were all held in their offices. Most of the participants ensured that the usual flow of activity
in their offices was suspended or minimized as much as possible during the period of the interview.
This interview setting is thus concordant with Seale et al.’s (2004) perspective about a suitable
place for an interview, in which a researcher and the interview participants should be free from
any interruption coming from other people. However, the interview process with the participants
was not free from challenges. Gaining access to interviewees and getting them to trust me and
speak freely was difficult. It was necessary to make appointments with participants almost 2-3
months in advance. Arrangements were organized through my relationship with key actors who
could use their extensive informal network to connect me with the interviewees. Normally, getting
access to highly positioned people has additional constraints of time, access and control, as
powerful people and public organizations frequently deny access without having some “kinship”
as a reference because they do not wish themselves or their decision-making processes to be
studied. Additionally, I was asked to submit my documents, such as a national ID card, reference
letter, and an example of my research questions to the security department (known as the ‘herasat’
in the context of Iran), before being allowed access to the organization. This procedure is part of
the Iranian public organizations’ bureaucracy for getting access to organizational actors.
Moreover, during the interviews, I sometimes had to stop discussions with participants for a few
minutes due to urgent phone calls.
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The second round of the interviews served two purposes. The first was to seek further clarification
on issues or aspects of using the PMS that had arisen from analyzing data from the first round of
interviews. The second purpose was to conduct interviews with other actors, who were more
involved in the practices of using the PMS. In line with the exploratory nature of the research and
the “recognition that the interview questions must change with the progression of the research”
in order to follow-up effectively on emergent themes (Gioia et al., 2013, p. 20), the interview
guidelines for the semi-structured interviews were consecutively modified and developed further.
Due to the limited time available to me and the participants, it was not possible to interview all
organizational actors involved in performance management practices. Therefore, I contacted a
limited number of key actors who were suggested to me by previous interviewees and seen as the
most appropriate people to participate in the second round of interviews. A second criterion for
the interviewee selection was their availability for an interview during the time of my research stay
in Iran. The shortest interview lasted about forty-five minutes and the longest around two hours
(see appendix B). The combined duration of all 22 interviews was about 29 hours.
I was able to cross-check the transcribed audio records with field notes (see section 4.3.2), which
increased my confidence in the robustness of the process of coding and the analysis of the data. I
transcribed all discussions such as recorded interviews, non-recorded interviews and informal
conversations with participants after I had collected the interviews in Iran, and I found this an
exercise worth doing. One major benefit of transcribing the interviews personally was that by the
time I completed the transcriptions, I knew where to locate the data and had noticed recurrent
themes across different interviews. In this way, the process of transcribing was an opportunity for
me to begin giving thought to the analysis. During this period, I was also able to note down some
of my observations about what was taking place in the data. This experience was in line with
McLellan et al. (2003) who argue that transcribing is an essential process which helps any
“qualitative researcher to make sense of and understanding interviewees’ experiences and
perceptions” (p. 74).
4.4.2 Observations
The ontological position of this study assumed that the participants’ actions, interactions, and
views at work would provide meaningful properties of the specific characteristics and conditions
of using PMS in the Iranian petroleum industry. In other words, the staff’s actions and behavior
are assumed to be strongly linked to their interpretation of what is going on around them and I was
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able to access this interpretation. Furthermore, I assumed that the actions, interactions, and views
of both managers and employees are influenced by internal and external parameters such as the
Iranian variant of Islamic management, economic sanctions and the political role of focal power
players. Epistemologically, the interviews sought to elicit how actors interpreted organizational
processes and external context factors. Another purpose was to capture how the actors’ sense-
making during interviews related to their talk, decisions, and actions in everyday work. I
complemented the interviews with observations of the meetings, seminars and organizational
routines. These observations allowed me to experience how organizational actors interacted with
other organizational members, customers, suppliers, and specialists, how they discussed,
complained or triumphed with colleagues about everyday concerns, how they reflected on
meetings, how they argued on the phone, etc. This method aimed at collecting data that would
facilitate a description and explanation of how the use of the PMS may actually operate in practice.
As Mason (2002) argues, observations allowed me to derive meaning from ordinary activities.
My role during the observations was that of a participant-as-observer (Gill & Johnson, 2010),
forming relationships and participating in activities of the research participants without entice their
attention to my intention. During this period, I worked as an administrative assistant, which helped
me to understand how people interact within an organization, and how communications,
information, and decisions flow through an organization. The purpose of being open was to avoid
ethical issues that could arise through covert participation such as observing participants who may
not be willing to be observed. Therefore, participants were informed of the general purpose of my
participation, although specific themes under observation were not shown to minimize the
possibility of participants adjusting their behavior while under observation. This form of
observation was chosen because it offers the opportunity of providing information about informal
activities which Gill and Johnson (2010) argue would be difficult to obtain from formal interviews.
It was also assumed that adopting a complete observer role rather than participating in daily
organizational routines would make employees more conscious of my presence. This view is also
in line with Cassell and Symon (2004) who argue that the process of observing people especially
affects them when they are aware that they are being observed.
I attended some of the quarterly meetings during summer 2017 (see appendix C). It provided me
with an opportunity to observe the interaction between people during these meetings. Each meeting
lasted about 2 - 3 hours and the discussion on KPIs (Key Performance Indicators) was only one of
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several points on the agenda, given about 20 - 30 minutes of the total meeting time. In total, I spent
an average of 8 hours in the meetings and took field notes on every spontaneous relevant incident.
For example, during one of the meetings in July 2017, the CEO walked out of the meeting after he
received an urgent phone call, while the other people continued their discussion after a few minutes
without him.
The deputy of the research and technology center of the National Iranian Oil Company (NIOC)
facilitated my participation in organizational routines for 29 days in August 2018. Being provided
a desk located within the open space office of the HR department, where those mainly responsible
for staff concerns were located, enabled me to directly observe and engage with the everyday
actions and interactions of employees and managers. I took notes during the observations ranging
from how employees dealt with specific formal rules and procedures to how they informally dealt
with each other in the process of carrying out their work and also how they actually used the PMS,
particularly the process of evaluating individuals’ performance. Besides that, I was fortunate
enough to be able to interact in various ways with members throughout the rest of the organization,
spending lunch breaks and sharing the occasional tea with them. Where necessary, I also asked
some participants to clarify some of the information that they had addressed during the face-to-
face interviews earlier. I tried to take as many notes as possible and continuously updated a
research diary. Patton’s (2002) advice to qualitative researchers is to look over notes taken before
transcripts are done to “make sure the inquiry is unfolding in the hoped-for direction” (p. 383)
because this “can stimulate early insight that may be relevant to pursue in subsequent interviews
while still in the field” (p. 383). The observation notes comprised discussion points, events, stories,
as well as overall impressions and questions raised about the organizational circumstances. The
research diary also helped me to identify areas in which I had to make some improvements during
the interview process. For example, while interviewing participants about their perception of the
implementation of the PMS, I tried to clarify those points which I had observed during meetings
and other organizational interactions. Overall, the information obtained during the observation
period was used to build an in-depth understanding of organizational members’ interpretation and
use of performance management systems within the organization.
4.4.3 Documents
Documents were used in combination with interviews and observations as a means of triangulation
to check and establish validity (Bowen, 2009). Although the documents were primarily expected
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to provide additional information to data gathered from interviews and observation, they were also
expected to be relied upon heavily to provide valuable background information about the research
units and the organization as a whole. The documents have been identified as a source of rich
description for a case study, providing details of how the organizational structure is set up, the
interrelatedness of social and technical aspects of an organization, and its formal procedures (Yin,
2009). Documents also contain data that can no longer be observed, provide details informants
have forgotten, and track change and development.
I accessed the different organizational documents during the years 2017 and 2018 (see appendix
D). Furthermore, I used local media outlets in both political and economic debates, as these offer
a high degree of detailed reporting and reflect contrasting viewpoints within the scope of opinions
to be found within Iran’s ruling elite. I also did historiography by reviewing historical documents
about the Iranian petroleum industry to understand how societal, political, cultural, economic, and
other issues have influenced and shaped the industry over time (see chapter 5 & 6). Berg and Lune
(2012, p. 305) define historiography as “attempts to systematically recapture the complex nuances,
the people, meanings, events, and even ideas of the past that have influenced and shaped the
present”. This is a suitable research data collection method to understand “what actually
happened” in the past that has changed and shaped the present (Becker 1938, p. 27).
The organization’s regulations restricted access to the sensitive information (e.g., confidential,
highly confidential, secret, and top secret) to particular groups of people with the necessary
security permission and officials needed to know the access reason. Intentionally mishandling the
material can incur criminal penalties. However, I was granted access to some of the administrative
circulars confidential information by the R&D manager’s permission.
The permission was given to access a wide range of official internally and externally-oriented
documents for further analysis. The internally-oriented documents included internal official
correspondences, charts, internal reports, staff training courses schedule, journals and I also
obtained a general policy guideline from the HR department about the organization’s staff terms
and conditions of service to explore the parameters used for employee performance evaluation.
The externally-oriented documents comprised websites, newspapers, brochures, newsletters, etc.
Bowen (2009) suggests that a wide array of documents is better, although the question should be
more about the quality of the document rather than quantity. The key information was identified
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while reviewing the documents, which facilitated the process of contextualizing, understanding
and developing empirical knowledge.
4.5 Data Analysis
The first step in data analysis is to understand the nature of the collected data. According to Babbie
(2015, p. 388) “The aim of data analysis is the discovery of patterns among the data, patterns that
point to theoretical understandings of social life”. This section explains the process of data
analysis in this research, for which the qualitative data are organized in a systematic way to
discover patterns and relations for theory development. The fundamental process in the analysis
of qualitative data is coding, classifying, or categorizing (Corbin & Strauss, 2008), which permits
flexibility by allowing issues to emerge (Charmaz, 2003; Jones & Alony, 2011).
The process of data analysis followed the qualitative method guidelines and is presented as it
happened in the field during data collection and then proceeds to a description of the coding
undertaken after data collection. However, the basic guidelines that shaped the initial direction for
data management for this study followed the steps provided by Anderson (2004). These guidelines
are presented below in figure 4.1.
Figure 4.1: The process of qualitative data analysis
Continuously gather and analyze data
Start early
Keep a clear record of what
you have collected
Develop a filing system to store
and from which to sort your
data
Explore patterns and relationships
between themes and dimensions
Generate themes, categories
and codes as you go along
Write/record notes to yourself
about what and how you are
finding out about the situation(s)
or issues you are investigating
Display data, once coded using
charts, tables, matrices, grids,
maps, etc.
Source: Anderson, 2004, p.127
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4.5.1 Data Analysis During Data Collection
According to Anderson (2004), one of the main difficulties that the researcher may struggle with
when using qualitative data is data overload. To minimize this challenge, I started my data analysis
early, while the data was still being collected, to assess responses and situations on an on-going
basis. Anderson (2004) argues that this augmentative process facilitates a closer reflection of the
reality of what is being investigated. The practice of analyzing data on an ongoing basis during
data collection is also assumed to re-shape the focus of data collection as new aspects of the
phenomenon being studied emerge along the way (Mason, 2002). This was a useful technique
which facilitated benefiting from initial impressions of participants to probe more about how the
context in which they worked influenced their behavior, especially the use of PMS in practice.
During my fieldwork, I kept a notebook and recorded daily observations of the process. Potential
sensitizing concepts were developed at the start of the fieldwork and revised where necessary for
more clarification on the issues raised from literature as well as from participants. Attempts were
made to make sense of the data collected by being open-minded with a willingness to embrace
contradiction between the opinions of participants. Answers and different incidences were
compared to look out for patterns, probes were taken to make sense of the initial behavior or actions
of participants, and I stepped back periodically to make sense of the developed quotes. To illustrate
this process, some of the themes of this research that were revised (or emerged) during the process
of data collection are presented in table 4.2.
Cassell and Symon (2004) suggest that researchers should note down their personal assumptions
in writing at the beginning of the study for the purpose of facilitating the process of accounting for
the researcher’s presence and influence on the nature of the process of research and the knowledge
generated. I have also kept record of the differences between what was ‘expected’ and what was
experienced in the field. Even though such a list was constructed at the beginning of my data
collection, it was reconstructed at each stage of the research process, reflecting on my own
experiences. The process of studying and sorting data therefore started in the field during data
collection. This not only helped to understand, clarify and collect more data but also to start the
process of making sense of what was happening. Reflection on the data collection process and
ideas from the reviewed literature had also been noted down at the end of fieldwork, covering
issues including who the familiar participants were, the list of themes emerged (surprises) during
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data collection and participants’ behavior. This process of meaning-making continued with the
assistance of a computer-aided qualitative data analysis software.
Table 4.2: Some revisions on original and emergent themes during the data collection process
Theme Reflection Action
Localization of
the performance
management
system
Some of the key managers mentioned localized
PMS and the principal role of technology
localization in organizational development.
What was the reason to localize Western
performance management tools? What
precisely did this localization involve (e.g.,
changes of language or more than that)?
Note ‘localization’ as an emergent
theme for discussion later. Clarify
what they mean by ‘technology
localization’ and the effects of this
decision on using PMS in practice.
Check literature to see how this
links with culture.
The role of
religion in
performance
evaluation
Some of the participants mentioned the
relevance of “Islamic principles and values” for
employees’ performance evaluation to
nominate good citizen. What do actors
understand as “Islamic principles and values”?
Why do Islamic principles play a key role in
employees’ performance evaluation? In what
way are Islamic principles applied in
performance evaluation?
Note ‘Islamic principles and
values’ as an emergent theme for
discussion later. Review
organizational documents. Clarify
how it is measured and the reason
for doing this. Check literature to
see how this links with culture.
Economic
sanctions
Some of the key managers mentioned the
relevance of economic sanctions on
organizational performance. How do the
sanctions affect performance management
practices and outcomes? Did or do economic
sanctions affect the decision making process?
How do Iranian managers plan to bypass
(evade) international sanctions?
Find this out in observation and
ask other managers. Review
organizational documents. Check
literature concerning the political
role of oil in Iran’s economy and
society, and how to link this with
the history of the Iranian
petroleum industry.
Reward for
performance
The CEO and HR managers mentioned giving
‘incentives’ to employees. How do they
distinguish “good” performance from “poor”
performance (e.g., only in terms of formal
performance measures or also according to
other kinds of values that may not be measured
by formal performance measures)?
Note ‘reward’ as an emergent
theme for discussion later. Clarify
what they mean by ‘incentives’
and specific employee behavior
that is encouraged/targeted with
incentives. Check literature to see
how this links with organizational
culture.
The role of the
security
department in
performance
evaluation
Some of the key managers mentioned that the
security department plays a vital role in the
evaluation of employees’ performance,
especially in the recruitment, promotion,
demotion, and transfer of employees. How does
this department evaluate individuals’
performance? What performance metrics are
used? If they are responsible for evaluating
individuals, then what is the role of HR? To
whom are they accountable?
Find this out in observation, ask
the head of the security
department, HR managers and talk
with employees. Review
organizational documents. Check
literature for information about the
political role of this department
after the Iranian revolution of
1979.
Source: Developed by the author, 2018
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For the coding process, I thematically used NVivo after all the interviews had been collected,
transcribed, and translated from Farsi (Persian) into English. This method did not affect the coding
process or the validity of the result, but it took a long time. The next section explains the process
of data analysis through the coding process that was carried out for this research.
4.5.2 Description of the Coding Process
At this stage of data analysis, I followed Corbin and Strauss (2008) coding procedure by using
NVivo software to capture and store large amounts of data, which enabled me to grab specific
information (major themes) quickly and accurately. The process was conducted in three main
stages:
The first stage of the data analysis comprised transcribing interviews and examining all the
interview transcripts, field notes, and organizational documents. These data sources were analyzed
line by line to develop categories and codes (major themes) as they emerged from the data. This
stage involved what Mason (2002, p. 109) refers to as “reading the data literally” line by line, to
figure out the kind and form of words used for interpretation. During the analysis of the data, the
written notes were checked against the recorded interviews, transcripts, and the codes generated.
I exported the NVivo report to the Microsoft Excel spreadsheet because it was also relatively easy
to modify codes, introduce new coding at different times during the process, recode data with
multiple codes, and sort the spreadsheet by codes or participants. The coding began with one whole
transcript at a time, coding line by line or sentence by sentence depending on the content. In the
literature, Strauss and Corbin (1998) refer to this process as open coding, describing it as “the
analytic processes through which data is fractured, conceptualized, and integrated to form theory”
(p. 3). Data has to be analyzed and coded to generate categories (Glaser, 1978, 1992; Strauss &
Corbin, 1998). Glaser (1992, p. 38) described categories as being “a type of concept, usually used
for a higher level of abstraction,” while Strauss and Corbin (1998, p. 114) described them as a
“concept, derived from data, that stand for phenomena”. In the process of open coding, the
research aims to generate an emergent set of categories and their properties which should fit, work
and are relevant to be integrated into a theory. The researchers are supposed to code for as many
categories as might fit; ensuring that they code different incidences into as many categories
(Glaser, 1978). Table 4.3 is an extract from one of the later spreadsheets in which the open coding
was recorded. The table consisted of more columns than those reproduced here. The second
column, in particular, was the synthesis of several other columns.
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The first column labelled “Identifier” is identified in the interview data in the third column by the
participant’s name and the position the text held in the interview transcript. The three letters of the
code indicate the participant and the two digits show the location of the text in the transcript. After
the spreadsheet has been sorted in various ways, these codes also allow the spreadsheet to be
restored to its original form i.e., with the text pieces in the third column appearing in the same
order as they did in the interview transcript.
The second column named “Code” is illustrated the way the text in the third column was coded.
As can be seen in table 4.3, each code consists of up to three parts. The first part or stem is the
broader idea in which a family of codes that describe different incidents of that stem are nested.
For example, in the first row, the text “the PMS help us to understand staff capabilities by
measuring their performance at work” was coded against skills and competencies: assessment:
understand staff capabilities. In most cases, the data was first coded by the micro-unit, in this case
as “understand staff abilities”. As the data coding progressed from one transcript to the next, it
became evident how these micro-codes clustered into broader codes which eventually were further
aggregated into the stems that appear at the beginning of each complete code. While some of the
words or phrases used in the codes of the open coding process were mine as the researcher, many
of them also came from the participants and were thus “in-vivo” codes.
The third column, as already explained, was the column in which the text from the transcripts was
“fragmented” for coding. Almost all of the text in each transcript was coded. The non-coded text
was the text that was irrelevant to the topic, such as general discussions about the socio-economic
and political situation of the country, which had no relationship to the practices of PMS. The fourth
column “Comments and Memos” was created to record my reflections of the data (see table 4.3).
As ideas emerged from the data, I paused and wrote a memo to myself regarding the codes. During
the open coding, it emerged that there were some issues in the data that were not clearly explained
in the first interview. These I noted in the spreadsheet and followed up on them in the second round
of interviews. Examples of initial codes that emerged from the data included ‘the bureaucratic
organization’, ‘indigenous technology’, ‘Islamic management’, ‘decision-making process’,
‘management commitment’, ‘individual performance evaluation’, ‘competency and skill’,
‘structure reforms’, ‘political perspective’, ‘control through recruitment, mobility, and promotion’,
and ‘international sanctions’. At this stage, I was also interested to consider what each participant
said, what all my field notes implied and all the information provided in the organizational
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documents. The emergence of the stems was a result of a process of clustering of codes that I
undertook right from the beginning of open coding. As a guide to this process of clustering, I asked
and answered questions such as, “What does this coded incident represent in the data?”
Table 4.3 Extract of the open coding spreadsheet from the first round of interview transcripts
Identifier Code Text Comments / Memos Missing info
AKH03a
Skills and
competencies:
Assessment:
Understand staff
capabilities
28-29 The PMS help us to
understand staff capabilities by
evaluating staff performance
The aim of HR is to
improve individuals’
performance but how
do they measure staff
skills?
MPI05a
IT infrastructure
and support:
Contextualize:
Indigenous
technology
41-42 The significant feature of
the organizational policy is the
fostering of indigenous
technology through domestic
companies to reduce
dependence on foreign
technology.
What was the reason
for choosing
indigenous Western
technology? What
precisely did this
localization involve?
PHH03
System design and
integration:
Assessment:
Integrated and
systematic
approach
25-26 We needed an effective
system to provide a clear
approach to manage, assess, and
report the organization’s
performance.
They aim for an
integrated and
systematic approach
to improving
organizational
performance.
YNB07
Effective
information for
decision making:
Assessment:
Feedback
61-62 The performance
management approach by
utilizing accurate and regular
evaluations provides specific
feedback to improve
individuals’ performance.
How well is the unit
meeting the
objectives and is a
feedback system
being developed?
HTI04
Management
commitment and
support:
Contextualize:
Limited
involvement of the
senior management
32-33 We have a shortfall and
gaps in this area, as the
commitment and support in the
form of leadership do not exist.
What is the reason?
Limitation of
management support
can be a reason for
PMS not working
well.
SAI06
Change required:
Contextualize:
Resistance to
change
48-49 To bring in a new idea
such as the PMS and try to
integrate it into the existing
infrastructure is like saying you
want to change the old legacy,
but it is in people’s nature to not
necessarily react well to change.
Limitation of the
cascade approach to
the training plan. It
seems to shape the
culture and changing
people’s
understanding is a
challenge.
Source: Developed by the author, 2018
91
In the process, many changes were made and some stems were dropped since they were found to
be unsuitable, while others were re-worded. This has been encouraged in methodology literature
in order to allow patterns to develop and to eventually select categories that are most dense. The
categories which are not saturated with enough data or not making any connections with the other
categories are dropped (Johnson & Duberley, 2015). The repeated coding and comparison of codes
was also imperative because the process had generated more than hundreds of codes, many of
which were similar. This situation caused me to distinguish what Corbin and Strauss (2008) called
“lower-level explanatory concepts from the extensive ideas or concepts that seem to unite them”
(p. 165) as early as possible in the analytic process. An example of the initial high-level concept
included management commitment. The lower-level concepts that explain some things about
management commitment include: weak leadership skills, senior management commitment and
support, limited visibility of PMS value and targets, and limited involvement of upper-level
managers. To achieve this process, a list of all the codes in NVivo was transferred to the Microsoft
Excel spreadsheet according to their stems. The process of how the stems were developed and their
relationships with codes is presented in table 4.4 below:
Table 4.4 an exemplary integration of stems and codes
Stems of codes Number of references
Management mobility 44
Decision-making 43
IT infrastructure and support 39
Islamic principles and values 49
Management commitment 48
Monitoring and reporting 45
Motivation and linking performance to rewards 50
Skills and competencies 48
Staff involvement 52
Staff training and awareness 60
System design and integration 54
Source: Developed by the author, 2018
Table 4.4 shows a sample list of the semi-final stems of the codes following the process of
integration. This stage involved a further reflection on the concepts that were emerging from core
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categories. Codes developed during the open coding phase described above were not final but
flexible to allow for the creation of sub-codes “in new ways by making connections between a
category and its subcategories” (Strauss & Corbin 1990, p. 97). This process of comparison of the
similarities and differences as well as relationships between codes is theoretically referred to as
axial coding (Charmaz, 2006). I did this task with the help of mind maps, to analyze all the
categories and codes under each one of them. The mind map was used as a strategy to organize
thoughts and in so doing, to allow for making links between categories to determine which ones
became the main categories or subcategories. Indeed, this process involved re-positioning the
categories in such a way as to develop a logical flow between them, merging some sub-categories
that seemed to contain text describing the same concepts. The categories’ relationship with each
other and their systematic linkage was an important guideline to look for appropriate theory and
to develop it.
The third and last stage, referred to as selective coding, involved a further integration and refining
of the categories and subcategories to form an outline for writing the findings chapter. Such
integration is essential for the researcher to decide on central categories, as these represent the
main theme of the study. The central categories should have analytic power, which gives them the
“ability to pull the other categories together to form an explanatory whole” (Strauss & Corbin
1998, p. 146). The categories’ description and linkage were compared to literature and some of the
terminology was revised to match with research objectives in the performance management
context. Linking the categories with literature facilitated the analysis of empirical findings and
helped to detect where the research differs from the existing literature. The process was repeated
several times until the central categories developed satisfactorily and pulled together the categories
from the axial coding. This point followed Goulding’s (2002) suggestion that the central categories
must pull “together all the strands in order to offer an explanation of the behavior under study”
(p. 88).
I employed a constant comparative method when I moved up to the axial and selective coding
levels of the process. During axial coding, I had identified the main categories from a different
range of categories that had emerged at the end of open coding. The process involved making
connections between the different categories to determine those that represented broader ideas. A
similar process of constant comparison applied to the selective coding in which I had to delimit
the theory by reducing the original list of categories to central categories which represent the major
93
explanatory idea coming out of the data. Deciding on the central categories involved a comparison
of all the categories. This was necessary to establish their relationship and in order to be able to
decide on the main ideas and ultimately write the findings. At this level, I used not only the coded
data but also the memos to compare and start writing the main findings. In summary, the coding
process provides a suitable possibility for constant comparison in the final stage of data analysis,
which requires researchers to move back and forth by reviewing coded data for concepts and
finding relations between them.
4.6 Ethical Consideration
Ethical considerations in research are critical. It is a responsibility of the researcher to protect any
person who is involved in an interview and observation. Gay et al. (2009) argue that any research
study is supposed to be “built on trust between the researcher and the participants, and
researchers have a responsibility to behave in a trustworthy manner, just as they expect
participants to behave in the same manner” (p. 19). Interviews are interventions that affect people
because they may be intrusive in their lives. In some cases, interviewees even have to tell the
researcher things they never intended to reveal. For this reason “the interviewer needs to have an
ethical framework for dealing with such issues” (Patton 2002, p. 407). Accordingly, I considered
the following ethical implications as possible issues that could arise from undertaking the research
activities of this study.
Sensitivity. The Iranian petroleum industry has commercially (and politically) sensitive data within
its research units. Data used in this study was strictly taken from interviews conducted, documents
provided and observations made from only those meetings, departments and projects approved by
top management, even though it was possible to observe the way things were done in ‘sensitive
projects’ during the process.
Right to privacy. Some participants may prefer to have their documented performance evaluation
information kept between them and their supervisors. All documents were viewed with informed
consent from the respective heads of department.
Confidentiality. I gave the participants adequate information about what the study would involve,
and an assurance that their consent to participate would be free and voluntary. I also explained to
the participants how their confidentiality would be assured by the non-disclosure agreement. Data
was recorded anonymously to ensure the confidentiality of personal information and is still being
kept securely.
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At the beginning of each interview, I took about five minutes to explain the purpose of the study
and the reason for choosing this particular topic to the best of my ability. I further requested that
the participants express their own views about the practices of PMS as sincerely and freely as
possible, since such information would not only benefit my understanding of the performance
management concepts in the context of Iranian public management with its specific historical,
cultural, and political parameters, but it would also enable the study to provide findings that are
relevant to organizational actors and to the Ministry of Petroleum in Iran.
4.7 Summary
I assumed that the day-to-day activities of managers and employees carried meaning about the
organizational life in the Iranian petroleum industry. So the words, actions, and behaviors of
participants who were involved in this study were relied upon as meaningful components of the
practices of PMS. A variety of qualitative research methods (such as ethnography, historiography,
and case studies) were applied, to analyzing talks, actions, interactions, and behaviors of
employees to explore how PMS is understood, implemented, and practiced in the Iranian
petroleum industry. Semi-structured interviews and participant observations were relied upon as
the core techniques for data collection. Secondary data was obtained from the organization’s
formal documents. This data was analyzed in a systematic manner following Corbin and Strauss
(2008) coding procedure, including open coding, axial coding, and refining the categories to form
an outline of the findings of this study. The analysis process also involved the abductive approach
to facilitate systematic data analysis. Although this process proved to be time-consuming and
complex in terms of having many interrelated categories, it was helpful in facilitating data
interpretation and develop the theoretical framework by moving back and forth. In the next chapter,
I will demonstrate the role of the Iranian petroleum industry in Iran’s economy by focusing on the
historical development of the Iranian petroleum industry before and after the Islamic revolution of
1979, the influence of foreign powers, and the nationalization of the industry.
95
CHAPTER FIVE: THE DEVELOPMENT OF THE IRANIAN
PETROLEUM INDUSTRY
5.1 Introduction
The oil and gas industry plays a significant role in the Iranian economy. It presents the main source
of foreign currency earnings and represents around 80 percent of the total exports (see figure 5.1).
Also, its share of the government budget is substantial, directly affecting public development
projects and social services as well as job opportunities and foreign investment. The estimated
number of employees ranges from 160,000 to 180,0008. Iran ranks second in the world in natural
gas reserves and fourth in proven crude oil reserves (Vahabzadeh, 2016). At the beginning of 2012,
the Iranian petroleum industry exported around 1.5 million barrels of crude oil a day and was the
second-largest exporter among the Organization of the Petroleum Exporting Countries (OPEC). In
the same year, the petroleum executives in Iran predicted that Iran’s annual oil and gas incomes
could reach $250 billion by 2015 (D7-2012). However, the industry was disrupted by an
international embargo from July 2012 until January 2016 and the petroleum authorities did not
achieve their ambitions. Economic activity and government incomes depend on oil and gas
revenues to a large extent and therefore remain volatile.
8 This information is retrieved from Reza Bayegan, “Statistics on the state of manpower in the Iranian petroleum
industry: An Interview with Dr. Parvin Mina,” the international petroleum consultant, a former member of the Board
of Directors and Managing Director of International Affairs of the National Iranian Oil Company. (Online) Available
at : http://bayegan.blogspot.com/2005/08/irans-new-oil-disorder-interview-with.html [Accessed: October, 2018]
0102030405060708090
100
Foreign currencyrevenue
Budget of thegovernment
GDP
Per
cen
tage
Figure 5.1 The significance of oil in Iran’s economy
Source: The World Bank report, 2018
96
Iranian officials have ratified a comprehensive strategy surrounding market-based reforms as
indicated in the government’s 20-year vision document and the sixth five-year development plan
for the 2016-2021 period.9 The sixth five-year development plan is constituted of three pillars,
namely, the extension of a resilient economy program, improvement in science and technology,
and cultural superiority.10 On the economic aspect, the development plan envisages an economic
growth rate of 8 percent annually and structural reforms of public companies, the financial and
banking sector, and the allocation and control of oil and gas resources among the main priorities
of the state during the five years. The Iranian officials argue that much of the equipment required
for the oil and gas industry is being produced by local manufacturers in Iran (D16-2018), which is
keep them among the few countries that have such technology and “know-how” for drilling in the
deep waters (D7-2012).
Since oil was discovered more than a century ago, Iran has turned into one of the major players in
the petroleum industry. During this time, the industry has become more complicated and more
mature. On the supply side, governments in countries where oil reserves have been found have
acquired sufficient confidence in their sovereignty to demand higher shares of the gains from the
production and sale of their oil. On the demand side, the post-war Western market for oil increased
at a dramatic pace, reflecting its substitution for indigenous coal and a greatly expanding
transportation sector (Painter, 2012). Enlarged markets encouraged independent companies to
enter the business, giving the long-term control of the international industry to a handful of major
oil companies. Iran has since been an influential state in the oil market. However, the oil income
and the resultant re-positioning of the economy as an oil economy influenced other sectors and
now play a vital role, seeing as many other sectors are dependent on the oil economy (Luciani,
2005).
Iran’s strong focus on the oil economy proved to be problematic when it declined from a GDP
contribution of 16.9% in 1976 to 5.8% in 1979, 2.6% in 1983, and 1.9% in 1987 due to local and
international political crises.11 Iran’s oil production has largely followed OPEC’s overall
9 Petro Energy Information Network. The oil and gas industries outlook on the horizon of 2025. (Online) available
at: https://www.shana.ir/news/49556 [Accessed: November, 2018] 10 An organization-wide way of thinking and working that engages people in more creative and innovative ways.
The institutionalization of the learning culture is one of the essential purposes of achieving cultural excellence in the
organization. 11 The World Bank. Iran’s Economic Outlook. (Online) Available at:
https://www.worldbank.org/en/country/iran/overview [Accessed: October, 2018]
97
production profile, although it has grown modestly over the last twenty years, compared with some
of the OPEC members, achieving an average growth of around 3% per annum. Iran’s oil capacity
has been constrained by lack of investment mainly due to international sanctions (see chapter 6).
The Ministry of Petroleum has stated publicly that Iran is seeking as much as 200 billion US dollars
worth of investment in its petroleum industry, mainly to revive its aging oilfields and develop its
gas fields (D7-2012). Moreover, Iran has tried to entice major trading partners to evade their
compliance with sanctions by promising attractive oil and gas exploration and other lucrative
commercial deals. However, the more uncertain long-range commercial outlook for prolific
Middle Eastern reserves weakens Iran’s bargaining chips. This situation resulted in Iran’s crude
oil and condensate exports falling from 2.7 million barrels per day (b/d) in the first quarter of the
year 2018 (before the US re-imposed economic sanctions in May 2018) to 1.9 million b/d in
September 2018.12
12 The US energy information administration. Country Analysis Executive Summary: Iran. (Online) Available at:
https://www.eia.gov/beta/international/analysis.php?iso=IRN [Accessed: November, 2018]
Figure 5.2 Iranian oil daily average production (1973-2018)
Source: OPEC annual statistical report, 2018
0
1000
2000
3000
4000
5000
6000
1973 1978 1983 1988 1993 1998 2003 2008 2013 2018
Dai
ly a
vera
ge o
il p
rod
uct
ion
(m
-b)
Years
Iranian Oil Production
98
Figure 5.2 demonstrates that the share of oil in GDP has dramatically changed over time. Iran’s
production rose rapidly during 1973 and reached a peak level of 6.1 million b/d. By 1978, Iran had
become the second-largest oil producer as a dominant member of OPEC and the fourth-largest
producer in the world. After a long period of decline in the 1980s, production of crude oil began
to increase steadily in 1988.
Recently, Iran’s exports have fallen at a faster rate than production. Also, the international shipping
operators have decreased operations with Iran, but the Iranian petroleum industry has continued to
export largely through the state-run National Iranian Tanker Company (NITC) and its shipping
lines. The complicated geopolitical structure of the Middle East has influenced the industry’s
performance. Today, about 40 years after the 1979 Islamic revolution saw the exit of Western oil
companies from Iran, the Iranian petroleum industry faces a costly disruption after a series of
interruptions due to war, sanctions, and diplomatic isolation. The government is under high
pressure to improve the performance of the Iranian petroleum industry or at least to keep a good
position in the highly competitive market because of regional competitors’ progress in the energy
sector. Iranian officials argue that their engineers manufacture 60-70% of their petroleum
industrial equipment domestically, including various turbines, pumps, catalysts, refineries, oil
tankers, drilling rigs, offshore platforms, towers, pipes, and exploration instruments (D7-2012).
The country has the resource base to raise production capacity significantly. Historically, oil
attracted external interference by Western powers under the economic and political domination,
and the sector has suffered over the course of the last several decades.
This chapter begins with the historical development of the Iranian petroleum industry before the
Islamic revolution of 1979, illustrating the influence of foreign powers and the nationalization of
the industry. The second part of the chapter explains the development of the Iranian petroleum
industry during and after the Islamic revolution in 1979.
5.2 The Development of the Iranian Petroleum Industry Before 1979
The development of the Iranian petroleum industry began in 1908, after the discovery of a large
oil field in Iran led to the formation of the Anglo-Persian Oil Company (APOC) which was a
British company. It was the first company using the oil reserves of the Middle East. The APOC
took control of exploration and development in Iran. Shortly before World War I in 1913, APOC
managers negotiated with a new customer, First Lord of Admiralty Winston Churchill, who saw
the world war on the horizon and knew he would need oil to power ships. Accordingly, as part of
99
a three-year expansion program, he endeavored to refurbish Britain’s Royal Navy by discontinuing
the usage of coal-fired steamships and fostering oil as fuel for its ships instead. Furthermore, he
wanted to free Britain from its dependency on the Standard Oil and Royal Dutch-Shell oil
companies (Bamberg, 1994). Hence, the British government invested in the APOC by buying 51%
of the company. From that moment on, the interests of the British government and the APOC
became one and inseparable. By purchasing a majority of the company’s shares in 1914, the British
government increased literal control over the Iranian petroleum industry. In 1935, the APOC was
renamed to the Anglo-Iranian Oil Company (AIOC). In the wake of World War II, the AIOC
rapidly expanded production and investment to meet the increased global demand for oil. Between
1930 and 1950, the company’s pretax profits grew from approximately £6.5 million to nearly £85
million, bringing in large amounts of income, but disproportionately shared, to the British
Treasury, company shareholders, and the Iranian government (Henniker-Major 2013, p. 17). In
1950, the company’s giant Iranian oil fields and the vast Abadan refinery, which is located in the
south of Iran and was the largest refinery in the world, accounted for about three quarters of the
company’s crude production and refining throughputs (Bamberg, 2000).
5.2.1 Foreign Influence
Not only was Iran’s oil controlled by the British government13 but almost all services (such as
banks, post offices, telegraph, customs, etc.) were run by various Western powers. Moreover, The
AIOC was extremely reneged on agreements to train Iranian technicians and engineers. Iranians
were not able to access senior positions and positions of skilled workers. While the company
provided luxurious conditions for its Western employees, specifically British employees, it paid
Iranians considerably less than foreigners and accommodated Iranian workers in sub-standard
housing, often in slums (Bamberg, 1994). The director of Iran’s petroleum institute wrote that
“wages were 50 cents a day. There was no vacation pay, no sick leave, no disability compensation.
The workers lived in a shanty town called Kaghazabad, (Paper city), without running water or
electricity … In winter the earth flooded and became a flat, perspiring lake. The unpaved alleyways
were emporiums for rats” (Kinzer 2003, p. 67). This situation created a great deal of resentment
13 The British influence in Persia (Iran) since the 19th century. The British imperial interests in Persia in the Qajar
period were primarily determined by the concern for the security of colonial India and, secondarily, by trade,
telegraphic communication, and financial or other concessionary agreements. At the beginning of 20th century many
economic resources in Iran were run by Great Britain (e.g. Persian railways) which was competing with Russia over
influence in the Middle East …) (see Clawson & Rubin, 2005).
100
among Iranians (D16-2018). Since industrial development and planning, as well as other
significant structural reforms, were predicated on oil incomes, the government’s loss of control
over the oil industry served to strengthen the Iranian government’s apprehensions regarding how
the AIOC managed its operations in Iran. Such a pervasive atmosphere of dissatisfaction appeared
to propose that a significant revision of the concession terms would be plausible (Bamberg, 2000).
Iran attempted to revise the terms of the oil concession on a more favorable basis (50-50), while
Iran received only 16% net profit of crude oil sold in international markets. Iran also attempted to
become independent from foreign influence regarding the control of Iran’s assets and services,
which led to protracted negotiations between Iran and the board members of the AIOC in different
locations (such as Tehran, Lausanne, London, and Paris) from 1925 to 1932. In these meetings,
Iran requested that the AIOC must register in Tehran as well as London, and the exclusive rights
of transportation of the oil should be returned to the Iranian government. Instead, the AIOC
promised to give workers better pay and more chances for advancement, to build schools,
hospitals, roads, and a telecommunication system, but the AIOC did not fulfill these promises. In
December 1950, the message reached Tehran that the American-owned Arabian American Oil
Company (Aramco) had agreed to share profits with Saudis on a 50-50 basis. Following World
War II, nationalism was on the rise among Iranians, mainly enclosing the natural resources being
exploited by Western companies without adequately compensating Iranian taxpayers. Hence, the
“Iranian nationalism group”14 exerted pressure on the Iranian government to revise the terms and
conditions of concession. However, the idea of any similar agreement with the AIOC was rejected
by the UK Foreign Office (Kinzer, 2003).
5.2.2 Nationalization
In 1951, the Shah (King of Iran) appointed Mossadeq as prime minister after the Parliament of
Iran nominated him by vote. The Shah was aware of Mossadeq’s rising popularity and political
power due to his nationalist ideology especially focused on the Anglo-Iranian Oil Company
(AIOC) and the widespread engagement of foreign actors and influences in Iranian businesses.
The major issue for nationalists was the foreign control of the oil industry, and within this, the
Iranians had concerns about the role and connection of the AIOC to the British government
(Henniker-Major 2013, p. 19). Despite the fact that Iran was never a colony or a protectorate, it
14 The “Iranian nationalism group” refers to political and social movements among people whose sentiments are
prompted by a love for Iranian culture, Iranian languages and history, and a sense of pride in Iran and Iranian people.
101
was still heavily controlled by Western powers beginning with concessions provided by the Qajar
Shahs15, and leading up to the oil agreement signed by Reza Shah in 1933 (Bamberg, 2000).
Mossadeq saw the AIOC as an arm of the British government controlling all of Iran’s oil.
Therefore, he broke off negotiations with the AIOC after it had threatened to “pull out its
employees”, and had told the owners of oil tanker ships that “receipts from the Iranian government
would not be accepted on the world market” (Abrahamian 1982, p. 268). Anglo-Iranian’s
managers in Tehran, advised the home office not to “attach much importance” to the nationalist
movement (Kinzer 2003, p. 77). However, in the next few months, the AIOC withdrew its
management team and technicians from Iran, and organized an effective worldwide embargo of
Iranian oil. This confrontation between Iran and Britain escalated as Mossadeq’s government
refused to allow the British any involvement in Iran’s oil industry, and it caused the formation of
the National Iranian Oil Company (NIOC). In 1951, the Iranian Parliament (Majlis) nationalized
the Iranian oil industry by unanimous vote, and the National Iranian Oil Company (NIOC) was
formed, displacing the AIOC (Bamberg, 2000). The AIOC withdrew its management from Iran,
organized an effective worldwide restriction of Iranian oil in 1954 and renamed the AIOC to
British Petroleum Company (BP). This decision strongly impacted the production of the NIOC
(see figure 5.3). The British government warned legal suit against buyers of oil produced in the
formerly British-controlled refineries and obtained an agreement with its sister international oil
companies16 not to fill in where the AIOC was embargoing Iran (Bamberg, 1994). The United
States also disagreed with the nationalization of the AIOC, because of the fear that the idea of
nationalization would spread to other places (such as Arab states of Persian Gulf). However, the
US believed it would be possible to achieve a face-saving agreement with Mossadeq, under which
actual control and management of the organization would remain under the AIOC. Hence, the US
government claimed that they accepted nationalization and insisted on having “a foreign-owned
company to act as an agent of NIOC in conducting operations in Iran” (Abrahamian 2013, p. 116).
However, this agreement was rejected by the British government. The AIOC production crisis
15 The Qajar dynasty was an Iranian royal dynasty of Turkic origin, specifically from the Qajar tribe, which ruled the
state of Persia from 1794 to 1925 (see Katouzian, 1981). 16 The seven multinational oil companies of the “Consortium for Iran” cartel, which dominated the global petroleum
industry from the 1940s to the 1970s, were known as “seven sisters”: Anglo-Iranian Oil Company (now BP), Gulf Oil
(later part of Chevron), Royal Dutch Shell, Standard Oil Company of California (SoCal, later Chevron), Standard Oil
Company of New Jersey (later ExxonMobil), and Texaco (later merged into Chevron) which controlled around 85%
of the world’s petroleum reserves (see Sampson, 1975).
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reduced Iran’s oil revenue to nearly nothing, placing a severe strain on the implementation of
Mossadeq’s promised domestic structural reforms.
In 1953, the US and the UK agreed to cooperate on Mossadeq’s removal and began to publicly
criticize Mossadeq’s policies for Iranian society as harmful to the country. Accordingly, the US
Central Intelligence Agency (CIA) with the help of bribes to politicians, soldiers, mobs,
newspapers, and information from the British Embassy and Secret Service, organized a riot which
gave the Shah an excuse to dethrone Mossadeq. The Shah used the opportunity to issue an order,
forcibly evicting the immensely popular and democratically elected Mossadeq from power when
General Fazlollah Zahedi led armored vehicles to Mosaddeq’s residence and arrested him. The
shah and his new pro-Western prime minister, Fazlollah Zahedi tried to restore the AIOC (then
already called British Petroleum) to its previous position so that Iranian oil would flow again.
However, public opinion was so opposed that the new government could not permit it (Kinzer,
2003). The US did not want the crisis to affect the production and performance of other oil
producers in the Middle East. Hence, the US put pressure on BP to accept membership in a
consortium of companies which would help to bring Iranian oil back on the international market.
Iran had been the AIOC’s (BP) main training ground, where staff had gained experience before
being repatriated to London to take up senior positions. At the same time, the expatriate community
in Iran had provided a reserve of British managers and technical staff on which the company had
been able to draw to meet requirements elsewhere. Nationalization had forced the loss of this
system of training and promotion on the company, for which there was no immediate substitute
(Bamberg, 2000). The nationalization of the Iranian petroleum industry shows the Iranian anti-
colonial discourse, particularly independence from foreign economic and political domination, as
well as nationalist values among the Iranian people.
The NIOC was given wider power than its predecessor, including overall control over the national
oil production level, in order to reduce the rate of depletion of oil reservoirs. Also, the requests to
access books of accounts worried the British government, as it would have authorized the Iranians
to scrutinize the profit-sharing arrangement and therefore reinforce their claims of underpayment.
The company thus be afraid that an examination of the book of accounts might challenge the
British concessionary control of oil and decrease their profit share. One of the first steps taken by
the NIOC in 1958, was to raise official export prices and increase the tax rate payable by foreign
companies. New participation agreements were concluded, which gave the NIOC a holding of at
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least 50 percent profit share in all concessions, but did not force it “to open its bookkeeping to
Iranian auditors and to allow Iranians onto its board of directors” (Kinzer 2003, p. 195). Some
viewed this agreement as the move to quell the rising tensions of Iranians, since it allowed the
consortium to divert and hide profits easily and effectively control Iran’s share of the profits
(Bamberg, 2000; Kinzer, 2003).
Figure 5.3 demonstrates that Iranian crude oil production decreased rapidly from 349.6 thousand
b/d to approximately 26 thousand b/d during the years 1952 and 1953, due to Britain boycotting
Iranian crude oil. However, after the 1973 oil crisis and the quadrupling of the oil price, Iran began
to earn enormous revenues from its oil production, much of which it funneled into modernization,
industrialization and militarization programs. The NIOC continued to operate and Iranian
production reached an average of just over 5.5 million barrels a day between years 1974 to 1978.
The peak was reached in September 1978, when production rose to 6.1 million b/d. It must be
recalled that Iran’s optimum capacity was estimated to be as high as 6.5 million b/d during that
period. During this same period, the US imported around 800 thousand b/d of Iranian crude oil
and invested almost 457 million dollars in Iran’s oil industry. However, this situation did not last
0
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1913 1918 1923 1928 1933 1938 1943 1948 1953 1958 1963 1968 1973
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Figure 5.3 Iranian oil production fluctuation (1918-1973)
Source: OPEC annual statistical bulletin, 2002
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long, seeing as the Islamic revolution began in 1978 and oil production declined precipitously. The
relationship with the West changed after the monarchy was overthrown. During the revolution, the
country’s oil workers virtually paralyzed its oil industry by a near total strike with the aim of
bringing down the Shah’s regime. This strategic move was a clear acknowledgement of the
significance of the oil strikes to the revolutionary movement’s charismatic leader. Thus, Iran’s oil
production came down 5.5 million b/d in October 1978, 3.4 million b/d in November 1978 and 2.4
million b/d in December 1978 (Mossavar-Rahmani, 2013). The shortage of nearly 5 million b/d of
oil to the world oil market created world-wide crisis and spot prices.
5.3 The Development of the Iranian Petroleum Industry after the Revolution of 1979
The Islamic revolution of 1979 was a series of events developed into a campaign of civil resistance
by both secular and religious groups that involved the overthrow of the last monarch of Iran,
Mohammad Reza Shah Pahlavi (Milani, 2012). The Islamic revolution replaced a pro-Western
authoritarian monarchy with an anti-Western totalitarian theocracy, based on the concept of
Guardianship of the Islamic Jurist, called Velayat-e Faqih (see chapter 6). After the Islamic
revolution of 1979, the NIOC terminated all of the contracts with foreign companies at the Council
of Revolution in January 1979. The taking of power by the Islamic Republic led to the termination
of foreign employees’ contracts in Iran’s oil industry and domestic employees took full control of
its affairs instead. Following the exit of foreign oil companies from Iran, Iranian employees of the
oil industry who had played a major role in the victory of the Islamic revolution, took over the
management and operations of the petroleum industry including exploration, drilling, production,
transportation, and refining (D16-2018). The Iranian petroleum industry went through a significant
structural transformation after the revolution. The experienced and skilled managers in the industry
were replaced with people who were revolutionary and loyal to the regime (Javidan & Carl, 2004).
During this period, world oil prices were approximately doubled to around 40 US dollars per barrel
due to decreased oil output in the wake of the Iranian revolution as well as the worry of Western
powers that the revolution might expand to other neighboring Arab countries. This situation was
marked as an economic shift for both Iran and Western countries. However, the rise in oil price
not just benefit Iran, but also other OPEC members, which made record profits. This situation led
to an even higher dependence of Iran’s economy on oil and the oil pricing policy became of critical
significance for the new Iranian government. In response to the high oil prices, Western countries
took steps to reduce their dependence on OPEC oil. However, when Iran and Iraq went to war in
105
1980, this caused a second oil shock across the economies of the West, because worldwide
production dropped and oil prices became volatile.
The war created an economic crisis, as it disrupted Iranian petroleum production. Iraq attacked
Iranian ports, one of which was the main export terminal for crude oil at Kharg Island (south of
Iran in the Persian Gulf). The heavy damage to refineries, pipelines, factories, and industrial sites
cut oil production. These events produced an economic crisis in Iran and also caused the petroleum
industry to suffer a delay in development and reconstruction. During this period, the Iranian oil
exports were decreased to 1 million b/d, down from an estimated 1.9 million b/d the previous
month (see figure 5.5).
The enormous shortfall in oil production during and after the revolution was made up by increased
oil production in Saudi Arabia. Being the largest OPEC producer with proven reserves of around
165 billion barrels, Saudi Arabia was in a comfortable position to increase its oil production from
6 million b/d to more than 10.5 million b/d. The Saudis flooded the world oil market with their
relatively cheap oil and this put enormous pressure on other oil producers (Colgan, 2014).
However, the revolutionary Iranian government resumed its oil production fairly quickly and set
4 million b/d as its new production target. It was not interested in restoring the pre-revolution level
of oil production of more than 5 million b/d (D7-2012). However, this new target was never
reached, and production averaged at only 3.2 million b/d in 2014. The new Iranian government’s
argument was that Iran did not have to produce such a high quantity of oil for its developmental
needs. The new policy was to produce less oil but to claim a higher price for this limited output.
The Saudis strongly opposed the Iranian demand for higher oil prices (Little, 2008). They instead
favored controlled oil prices and higher oil production. The issue of oil prices between Saudi
Arabia and Iran remained unresolved till the 3rd Ministerial Meeting of the Ministers of Foreign
Affairs, Petroleum, and Finance of OPEC in 1991.17 In 1995, the new Iranian government strived
to soften relations with the West by offering a one billion dollar contract to the US oil company
Conoco, the most lucrative oil deal Iran had ever suggested any Western company. But, the
17 OPEC. Annual statistical bulletin 1999. (Online) Available at:
https://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB1999.pdf [Accessed
December, 2018]
106
ideological conflict and American hostages through the takeover of the US embassy in Tehran
caused the US to block the deal and impose sanctions on Iran.18
5.3.1 Organizational Changes
The revolutionary government established the Ministry of Petroleum a few months after the
revolution to highlight its role in the operational functions of petroleum companies and to manage
the oil industry, including oil activities and petrochemical products. The Ministry of Petroleum
was formed with the aim of applying the principle of Iranian national ownership and national
sovereignty over oil and gas reserves and resources, while separating the authority duties from
management and development of oil and gas industry (D7-2012).
Figure 5.4 Organizational chart of Iranian petroleum industry
18 Glenn (2015). Post-sanctions Iran could be the next booming petro state. The US Institute of Peace. (online)
Available at: https://qz.com/398671/post-sanctions-iran-could-be-the-next-booming-petrostate/ [Accessed January,
2019]
Ministry of Petroleum
NIPC NIOC NIGC NIORDC
NISOC ICOFC KEPCO IOOC OESC POGC
NIDC NITC OILSO NICO PEDEC
Petro Pars
Petro Iran
OIEC
State Energy Companies
Operating Companies
Functional Companies
Affiliated operating
Companies
Source: The Ministry of Petroleum website, 2018
107
Figure 5.4 shows that the Iranian petroleum industry, similarly to other oil-rich countries, has a
complex organizational structure for running its hydrocarbon businesses. The organizational
structure of this ministry consists of central headquarters and four subsidiaries, including the
National Iranian Oil Company (NIOC), the National Iranian Gas Company (NIGC), the National
Iranian Petrochemical Company (NIPC), and the National Iranian Oil Refining and Distribution
Company (NIORDC). The Ministry monitors the operations of exploration, extraction, marketing
and sale of crude oil, natural gas and oil products in the country through its subsidiaries (see figure
5.4). Since the petroleum industry has a special role in the country’s economy as a propellant
industry and plays a key role in achieving the major goals of the national economy, the ministry’s
role in the oil and gas sector’s performance is very important. The Ministry of Petroleum has also
formed an interface to manage the political and economic interests of the state in the petroleum
sector. Under the supervision of the Ministry of Petroleum, state-owned companies dominate the
activities in oil and gas upstream and downstream sectors, along with Iran’s petrochemical industry
(see table 5.1). According to the “Imports and Exports Regulation Act”, issuing import licenses
for such products is also among the duties of the Ministry of Petroleum. (D13-2015).
The Ministry of Petroleum coordinates all industry-related activities including exploration,
engineering, construction, refining, transportation, distribution, services, and research. It took
control over state oil companies, operating companies, functional companies and affiliated
operating companies (see figure 5.4), and reports to the president with oversight of the parliament.
Moreover, it supervises all its affiliated companies and their relevant subsidiaries and represents
Iranian oil and gas in international petroleum associations and global energy markets (D16-2018).
The Ministry of Petroleum is following a top-down theocratic decision-making structure.
According to the head of strategic planning and energy management, “all decrees are dictated by
the ‘high-level’ authorities and we are solely responsible for executing them without making any
changes” (P18-NT-Aug18).
Since 1981, the Ministry of Petroleum has been responsible for all upstream oil and gas projects
in Iran, encompassing both production and export infrastructure which previously had been
controlled by the NIOC entirely. However, the NIOC still plays a vital role in the Iranian petroleum
industry, as it is exclusively responsible for the exploration, drilling, production, distribution, and
export of crude oil, as well as the exploration, extraction, and sales of natural gas and liquefied
natural gas. In addition, the NIOC became the parent of new subsidiary ‘national’ companies (see
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figure 5.4) formed as a result of the expropriation of assets of pre-revolutionary contracting
companies.
Table 5.1 Main Iran’s state-owned petroleum companies
Company Responsibility
NIOC The NIOC controls oil and natural gas upstream activities through its
subsidiary companies.
NIGC The NIGC controls natural gas downstream activities. The company’s
objective is to process, deliver and distributes natural gas for domestic use. It
also operates through several subsidiaries.
NIORDC
The NIORDC is responsible for all refining and distribution activities related
to crude oil and petroleum products, including the construction of refining and
storage facilities, oil pipelines, and operation of the gasoline stations. It
conducts these operations through its subsidiaries.
NIPC The NIPC manages Iran’s petrochemical industry, including operations of
several petrochemical complexes, through its subsidiaries.
Source: The Ministry of Petroleum website, 2018
These included the National Iranian South Oil Company (NISOC) as an important subsidiary of
NIOC, which assumed control over the assets of the departing consortium, and the National Iranian
Drilling Company (NIDC), which inherited drilling rigs left behind by the pre-revolutionary
service provider. In practice, the official powers of the Ministry of Petroleum did not automatically
assure its efficient jurisdiction over the NIOC as an oversight body. While the Islamic revolution
constitution obliged all vital industries to be publicly managed and controlled by the state, and also
the revision Oil Law of 1981 allowed the power of oversight to the Ministry of Petroleum, these
reforms did not result in a concomitant decrease in the power of the NIOC (D13-2015). During
my visit, I was always confused about the exact position and affiliation of the NIOC’s CEO whom
I was interviewing. Whenever I arrived a bit late to meet him, his secretaries told me that I could
find him in a ministry building, and a ministry official would be working in a NIOC building.
Despite the fact that policy-making responsibilities and governance functions were reassigned
from state-owned industries to the ministries and government departments, according to the
Ministry of Petroleum, this process has not yet occurred with respect to the NIOC which still
governs itself (D13-2015). Hence, the NIOC retains the responsibilities of ‘ownership,
sovereignty, and management’ in the upstream oil and gas sector with regards to its own activities
(Yong, 2013). The NIOC’s current production capacities include over 4 million barrels of crude
oil and in excess of 750 million cubic meters of natural gas per day (D13-2015).
109
In 2005, the Islamic Revolutionary Guard Corps’ (IRGC)19 influence grew within the NIOC, as
well as in the service sector (see chapter 6). In 2006, IRGC won a contract to develop South Pars
Phases 15 and 16, a natural-gas condensate field located in the Persian Gulf. They adopted a fully
coordinated approach to the expansion of the South Pars mega projects. South Pars is the world’s
largest gas field shared by Iran and Qatar in the Persian Gulf. Per day, Iran is now drawing around
500 million cubic meters of natural gas from the joint field, with Qatar’s output reportedly ranging
from 650 to 700 million cubic meters per day. While the Revolutionary Guards’ profile is growing
and expanding its influence in Iran’s economy, it also faces financing difficulties due to the
international sanctions (D7-2012).
5.3.2 Oil Production and Reserves
Proven oil reserves are those that have a reasonable certainty of being recoverable under existing
economic and political conditions, with existing technology. The Ministry of Petroleum argues
that Iran has sufficient reserves to produce oil and gas for the next 100 years, while oil reserves of
other Middle Eastern countries will be exhausted in the next 60 years (D7-2012). At the beginning
of 2001, Iran’s oil reserves were reported to be about 99 billion barrels, however in 2006, the NIOC
reported Iran crude oil reserves of 132.5 billion barrels, estimating for about 15 percent of the
OPEC’s proven reserves and about 11.4 percent of the world’s proven reserves (D16-2018). In
2006, the estimate of Iran’s oil reserves increased by around 5 percent, when new fields were
discovered in the south of Iran (see table 5.2).
Table 5.2 Iran proven crude oil reserves (1998-2018)
Year 1998 1999 2000 2001 2002 2003 2004
Proven oil reserves (million barrels)
93.70 93.10 99.53 99.08 130.96 133.25 132.46
Year 2005 2006 2007 2008 2009 2010 2011
Proven oil reserves (million barrels)
136.27 138.40 136.15 137.62 137.01 151.17 154.58
Year 2012 2013 2014 2015 2016 2017 2018
Proven oil reserves (million barrels)
157.30 157.80 157.53 158.40 157.20 157.80 158.40
Source: OPEC annual statistical bulletin, 2018
19 This is a branch of Iran’s Armed Forces, founded after the Iranian revolution on 22 April 1979 by decree of
Ayatollah Khomeini. According to the Iranian constitution, the IRGC is intended to protect the country’s Islamic
republic system (see chapter 6).
110
Table 5.2 shows that despite the imposition of US sanctions on Iran since 1997, Iran continues to
explore and discover new oil reserves and now ranks fourth in the world in terms of crude oil
reserves.20 In addition to the large reserves, Iran still has enormous potential for new significant
oil and gas discoveries. According to the NIOC’s CEO, “there are still many areas like the Caspian
Sea, Central Kavir, South of Iran and Central Persian Gulf as part of undiscovered oil and gas
resources in Iran” (M1-2017). The NIOC’s business planning manager argues that “based on our
development plan, we have had good achievements in our exploration of oil and gas reservoirs so
that we now rank first in terms of gas and third in terms of crude oil reserves in the world”. He
also added that “much of the equipment needed for the oil industry is being produced by local
manufacturers in Iran” (M1-2017). However, Iran’s older oil fields require intensified oil recovery
techniques such as gas-injection to persevere production, which is failing at an annual rate of
approximately 8 percent onshore and 10 percent offshore.21
5.3.2.1 Oil Exports
Since 1981, Iran has exported about 52 to 62 percent of its total crude oil production. Initially,
Iran’s revolutionary oil export policy was decided based on foreign currency requirements and the
need for long-term preservation of the natural resource. However, the method of oil exports
changed after the US trade embargo on Iran, considerably when it targeted the Iranian petroleum
industry. While the shares of Europe, Japan, and the United States decreased from an average of
87 percent of oil exports before the Islamic revolution to 42 percent in the early 2000s, the share
of exports to East Asia (excluding Japan) increased dramatically (D7-2012).
The Iranian government expanded oil trade with other developing countries to substitute the
previous trade with the West. Since 2001, the principal countries importing Iranian oil have
included China, South Korea, Taiwan, Sri Lanka, India, Turkey, South Africa and some of the
European countries such as Spain, Italy, and Greece. Although Iran has abundant oil reserves,
crude oil production stagnated and even declined between 2012 and 2016, due to the international
sanctions that targeted Iran’s oil exports and hindered progress across Iran’s energy sectors, which
affected upstream investment in both oil and natural gas projects.
20 British Petroleum Company. BP statistical review of world energy. (Online) Available at:
https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-
review/bp-stats-review-2018-full-report.pdf [Accessed: December, 2018] 21 The US energy information administration. Annual Energy Outlook 2015. (Online) Available at:
https://www.nrc.gov/docs/ML1617/ML16172A121.pdf [Accessed: December, 2018]
111
Figure 5.4 shows that Iran, on average, exported two-thirds of its daily output from 1980 to 2018.
However, the US sanctions mainly targeted the Iranian energy sector and impeded Iran’s ability to
sell oil, causing in an about 1 million b/d decline in crude oil and condensate exports in 2012, in
comparison to previous years. As a result of the sanction, such as lack of foreign investment,
advanced technology, and skilled labor, production growth has been slower than expected.
5.3.2.2 Oil Refinery
The Iranian petroleum law of 1957 had made a provision for refinery development in Article 21,
by giving any concession-holder who discovered petroleum the right to construct and operate a
refinery in Iran. Article 21 further stipulates that if refineries were established, the producing
concession-holders might be required to contribute the crude oil required by the refinery pro rata,
to meet domestic consumption. This crude oil would be made available at ‘field storage’ and a
concession-holder would not be required to finish or build additional handling or transportation
facilities for this purpose. However, the revolution of 1979 ended all previously awarded
concessions, production sharing contracts, and service contracts. The 1987 Petroleum Act repealed
all previous petroleum legislation and it has remained the principal piece of legislation regulating
the industry (Palmer, 2017). In 1991, the NIORDC was established and began performing all
0
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1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Mill
ion
b/d
Exports Total production
Figure 5.5 Iranian crude oil daily average exports (1980-2018)
Source: BP statistical review of world energy, 2018
112
operations related to refining and the distribution of oil products (D13-2015). Pursuing a strategy
of diversification and vertical integration of production, refining and distribution activities, Iran
long ago built up a substantial domestic refining capacity and has since gone on to develop
downstream activities. The government’s medium-term strategy remains to secure outlets for
Iranian oil through the entire downstream chain, with emphasis on the country’s export market in
developing countries.
Since 1995, Iran has adopted a risk-service buyback contract model, to encourage foreign
investment in its upstream petroleum sector. The use of a risk-service model effectively
circumvents the prohibition in the Iranian constitution on granting mineral concessions to foreign
entities (Palmer, 2017). Therefore, officials from Iran’s oil refining company were holding talks
with international services firms to clinch projects to repair Iran’s derelict refining and
petrochemical sector.22 According to the officials, there were projects worth around 100 billion
dollars for repair and modernization plans (D11-2014). But they cannot be conducted due to the
sanctions.
Nonetheless, years of limited access to advanced technology have left Iran’s refineries limping
and lagging into the 21st century, driving them to produce low quality and polluting fuels and
creating safety hazards. In an observed meeting in October 2017, the business development
manager of the NIOC claimed that “the whole industry is in a mess”. He added, “Iran only has 2
million barrels per day of refining capacity, and is heavily dependent on Western technology to
expand this sector capacity” (M3-2017). However, the Iranian petroleum officials argue that
between 2007 and 2012, oil refining capacity for crude oil and gas condensate was increased from
1.6 million barrels per day to 3.1 million barrels per day.23 Oil refining produces a wide range of
oil products, such as liquefied petroleum gas, gasoline, kerosene, fuel oil, gas oil and lubricants.
But, it cannot meet the domestic demand for lighter distillates such as gasoline (D7-2012). The
NIOC’s head of controls on petroleum exports argues that “Iran has become an exporter of oil
byproducts after years of import” (M1-2017). The below table shows that refinery throughput has
risen steadily every year since 1998, having averaged at 1,999,000 barrels a day in 2013. This
22 George and Bousso (2015). Foreign firms scramble to fix Iran’s refineries once sanctions end. (Online) available
at: https://www.reuters.com/article/us-iran-refineries-idUSKCN0QM1BT20150817 [Accessed: February, 2020] 23 The Ministry of Petroleum. The achievements of the petroleum industry four decades after the Islamic revolution.
(Online) Available at: http://mop.ir/portal/home/?news/32165/36405/302184 [Accessed: January, 2019]
113
number stands in comparison to 1,932,000 barrels a day in 2012 and 1,873,000 barrels a day in
2011.
Table 5.3 Iranian oil refinery capacity (1998-2018)
Year 1998 1999 2000 2001 2002 2003 2004
Refinery throughput (thousand barrels)
1.539 1.619 1.604 1.598 1.576 1.577 1.585
Year 2005 2006 2007 2008 2009 2010 2011
Refinery throughput (thousand barrels)
1.624 1.674 1.719 1.779 1.826 1.829 1.873
Year 2012 2013 2014 2015 2016 2017 2018
Refinery throughput (thousand barrels)
1.932 1.999 1.932 1.867 1.882 1.968 1.992
Source: OPEC annual statistical bulletin, 2018
Although refinery throughput has increased rapidly, its composition does not correspond to the
structure of demand, since the Iranian refinery industry suffers from a serious shortage of
conversion capacity and is unable to produce environment-friendly products such as unleaded
gasoline, reformulated gasoline and very low sulfur gas oil. Iran has many projects to improve oil
refinery capacity but most of these projects have been delayed or reconsidered owing to financing
or disagreements over pricing. Moreover, international oil companies are not interested in
investing in the Iranian petroleum industry as long as the US sanctions remain unchanged.
Iran’s initial energy consumption was quickly grown over the past 15 years and continued to rise
even when economic growth was depressed because of international sanctions. Indeed, Iran’s
energy consumption increased by about 40 percent between the years 2006 and 2016. Therefore,
the Iranian government executed an energy subsidy reform, which resulted in raising domestic
prices for domestic petroleum, natural gas, and electricity between the years 2010 and 2014 to
better control domestic demand and reduce the budgetary exposure to high subsidy costs (D16-
2018). According to a report published in local newspaper in 2014, Iran is one of the most energy
inefficient countries of the world, its energy intensity being three times higher than the global
average and 2.5 times the Middle Eastern average.24 The growth in consumption of domestically
produced oil caused the government to import 1.8 million barrels of gasoline per day in 2007,
24 Mehr News Agency. Iran domestic energy consumption equivalent to EU industries. (Online) Available at:
http://en.mehrnews.com/news/102219/Iran-domestic-energy-consumption-equivalent-to-EU-industries [Accessed:
August, 2018]
114
which costed around 4 billion dollars for the years of 2007/2008. Hence, Iran is highly dependent
on Western technology and huge foreign investment, to expand its oil refinery industry to
correspond to domestic demands.
5.3.3 Gas Production and Development
Iran started developing its gas resources in the mid-1965 by establishing the National Iranian Gas
Company (NIGC) for the treatment, transmission, and delivery of natural gas to the domestic,
industrial, and commercial sectors and power plants. After 1979, the NIGC continued the
expansion of gas production, processing, and transport capacity as a high priority for Iran, both to
meet the rising domestic demand and to increase the volume of exports. However, the NIGC does
not execute in granting any upstream gas projects and hold this task in the hands of the NIOC.
Infrastructure investment by Iranian and international oil firms between 1979 and 2003, developed
the pipeline capacity to transport natural gas to refineries and domestic consumers. During this
period, the natural gas distribution pipelines increased from 2,000 kilometers to 45,000 kilometers
in response to growing domestic consumption. In the 1980s, Iran began to replace oil, coal,
charcoal, and other fossil fuel energy sources with natural gas, which is environmentally safer.
Since 2015, the Iranian government has planned to expand its natural gas sector (D17-2018).
However, the international sanctions have caused delays to these projects and lowered Iran’s gas
production.25
5.3.3.1 Gas Reserves
Iran holds 17 percent of the world’s proved natural gas and more than one-third of the OPEC’s
reserves. Iran has proven natural gas reserves that were estimated at 26.4 trillion cubic meters in
2006. Slightly below the previous year’s figure of 27.2 trillion cu/m but still higher than at the
beginning of 1998, when it was estimated at 23.7 trillion cu/m. See table 5.4 for Iran’s natural gas
reserves. Although the current figure takes account of new accumulations of natural gas discovered
in recent years, including Ahvaz, Golshan, Kangan, North Pars and South Pars field, the country’s
actual gas reserves are thought to have considerably increased due to new South Pars project
25 Ministry of Road and Urban Development News Agency. Interview with Mr. Pedram Soltani, Vice President of
the Iranian Chamber of Commerce, discussed the issue of investing in the oil industry and ways to develop it.
(Online) Available at: https://www.pmo.ir/fa/news/21751 [Accessed: January, 2019]
115
phases in 2017 and 2018. The largest natural gas field, South Pars, is estimated to hold almost 40
percent of Iran’s natural gas reserves.
Table 5.4 Iranian natural gas reserves (1998-2018)
Year 1998 1999 2000 2001 2002 2003 2004
Natural gas reserves (trillion cubic meters)
23.7 24.6 25.6 25.7 26.3 27.2 27.1
Year 2005 2006 2007 2008 2009 2010 2011
Natural gas reserves (trillion cubic meters)
27.2 26.4 27.7 29.2 29.2 32.6 33.1
Year 2012 2013 2014 2015 2016 2017 2018
Natural gas reserves (trillion cubic meters)
33.3 33.5 33.5 34 34 33.2 33.7
Source: OPEC annual statistical bulletin, 2018
Figures indicate that Iran has a success rate of natural gas exploration after the revolution of 1979,
which is predicted at 79 percent compared to the global average success rate of 35 percent.
Discovering new natural gas reserves is not a high priority for the Iranian government because the
officials argue that the country holds enormous amounts of undeveloped known gas reserves that
need renovation. In 2006, the Iranian government executed a distinct set of contracts that allow
international oil companies to engage in all phases of Iranian petroleum upstream projects.
According to the organizational document, the purpose of this new strategy is to attract
international oil and gas companies to invest in and bring advanced technology to help the
expansion of upstream oil and natural gas projects (D17-2018).
5.3.3.2 Gas Production
Iran’s natural gas prospects have improved with the commencement of production in the South
Pars field, with additional phases expected to become active in the coming years. Iran’s gross
natural gas production totaled nearly 223.9 billion cu/m in 2017, of which 183 billion cu/m was
dry natural gas, having risenalmost 23 percent compared with 2014. Iranian gas production has
increased steadily since the mid-1998, from 46.4 billion cu/m to 240.5 billion cu/m in 2018. In
2007, annual production reached 123.1 billion cu/m, with the fastest growth occurring over the
previous 15 years. Roughly 156 billion cu/m of the total was reinjected into oil wells to enhance
oil recovery. Iran’s use of natural gas in enhanced oil recovery (EOR) increased by 56 percent
between 2007 and 2018. As natural gas production increases, the use of natural gas for EOR is
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expected to continue to rise. Since associated gas currently accounts for the bulk of Iran’s gas
production, the output is tied largely to the rate of crude oil production.
Table 5.5 Iranian natural gas production (1998-2018)
Year 1998 1999 2000 2001 2002 2003 2004
Natural gas production (billion cubic meters)
46.4 55.3 58.8 65.3 77.6 81.4 94.9
Year 2005 2006 2007 2008 2009 2010 2011
Natural gas production (billion cubic meters)
100.8 109.8 123.1 128.9 141.6 150.1 157.5
Year 2012 2013 2014 2015 2016 2017 2018
Natural gas production (billion cubic meters)
163.7 164.3 183.1 191.4 203.2 223.9 240.5
Source: OPEC annual statistical bulletin, 2018
However, non-associated gas output will receive a boost in the coming years due to the
development of several new fields, mostly offshore, giving Iran greater flexibility to adjust the
volume of output to demand. Moreover, as Iran replaced crude oil and fuel oil with natural gas for
electricity generation, natural gas usage for electric power generation has increased in recent years.
The biggest offshore structure being developed is the South Pars, which is ranked the largest
natural gas oil field located in the Persian Gulf. Iran and Qatar share ownership of the field. It is
estimated to contain 51 trillion cu/m of natural gas. On the list of natural gas fields, it has almost
as much recoverable reserves than all the other fields combined. As of 2004, the NIOC planned to
develop the field’s new phases with the help of local and international companies. During 2005,
the Iranian natural gas sector received significant support from international oil companies such
as Total, Eni, Petronas, Gazprom, and Statoil to develop natural gas projects in the South Pars
phases. However, the majority of these companies left Iranian oil and gas projects due to the US
sanctions in 2006. Hence, Iran had to focus on localization of Western technology to be able to
develop oil and gas projects with its local companies and to stabilize oil and gas production (D17-
2018). Financing of natural gas development is expected to come from a variety of sources
including the Ministry of petroleum, withdrawals from the National Development Fund, the
issuance of bonds both domestically and also internationally, and from domestic banks (D16-
2018). Unfortunately, they were not able to achieve their ambitions in developing the joint gas
fields with neighboring countries until now.
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5.4 Summary
In 1908, Iran was the first country that discovered oil in the Middle East. Since then, the Iranian
petroleum industry has experienced several political transformations due to the internal and
external parameters. The discovery of oil attracted Western powers’ interference in the economy
and politics of the country. Therefore, the Iranian petroleum industry has undergone various
alterations over the past 100 years, especially by nationalization, workers’ strikes, the Iran-Iraq
War, sanctions, and diplomatic isolation. The nationalization of the Iranian petroleum industry
shows Iranian anti-colonial discourse and anti-imperialism. In other words, Western domination
as part of cultural and political influence has caused the rise of nationalist values among Iranians.
Despite the achievements in the oil and gas industry after 1979, Iran faces a significant challenge
related to production and exports. The most fundamental challenge facing the petroleum
authorities is to increase oil and gas production capacity. The historical data shows that the
government has struggled to maintain oil production above 3.5 million barrels per day since 1979.
Political upheaval and short-term oil policies have caused a great deal of difficulties. The political
environment makes it hard to initiate change in Iran’s oil and gas management, and poses high
risks to the effective use of the oil and gas industry for the government. The most acute problem
faced by the Iranian petroleum authorities since the Islamic revolution has been the oil market
price volatility, unreliability of oil revenues, and lack of foreign investment and technology.
The Ministry of Petroleum was established a few months after the revolution to highlight
government control over operational functions of petroleum companies. It reports to the president
with oversight from the parliament. But the dividing line between the ministry and Iranian
petroleum companies, especially the NIOC, is often indistinct. In reality, as a vestige of the past,
the two institutions (i.e. the ministry and NIOC) still share personnel and offices.
Since 2005, oil exports generated over 500 billion dollars in government revenues, but the
government failed to translate this into economic gains. Misuse of oil revenues has also caused
long term-economic problems. Despite Iran’s attempts to diversify the economy, the oil and gas
industry is still the critical engine of economic growth. It represents more than 50% of government
revenues and has contributed 18.7% to the GDP. Also, the oil and gas sectors account for more
than 25% of the total Iranian employment. The Iranian government is heavily dependent on oil
and gas revenue to satisfy social demands such as national projects and public social services. The
government is currently under high pressure to improve the performance of the Iranian petroleum
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companies or at least to maintain a good position in the highly competitive market to stabilize its
source of revenue. Thus, there is a significant need to improve management systems, increase
investment, especially foreign investment and technology in this sector, which will lead to a rise
in oil and gas production. However, the enormous oil revenue has placed energy policy at the
center of the power struggle and competition among various groups. The conditions that caused
the involvement of power centers in the political and economic arena, especially the process of
decision-making in the Iranian petroleum industry. A concept that I address in more detail in the
next chapter.
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CHAPTER SIX: THE IMPACT OF INTERNAL AND INTERNATIONAL
POLITICS ON THE IRANIAN PETROLEUM INDUSTRY
6.1 Introduction
The history of the Iranian petroleum industry cannot be written without reference to political-
bureaucratic networks and their power to determine outcomes in the energy sector. Iranian society
has gone through several major upheavals since oil was discovered in the country. These include
the oil nationalization and foreign-sponsored coup, the economic collapse caused by the oil boom
of the early 1970s, the Islamic revolution, which mainly had an effect through the workers strike
of the Iranian petroleum industry, the hostage crisis, the prolonged and costly Iran-Iraq war, and
finally, tensions with the West and economic sanctions. The Iranians have had to come to terms
with fundamental political, social, and economic transformations regularly and routinely.
Western powers such as the US and the UK have played a large role in exploiting Iran’s
dependence on oil. Since 1915, the US and the UK’s policies regarding Iran have sought to take
advantage of Iran’s oil-rich markets. For example, in 1915, the British government invested in the
AIOC by buying 51% of the company shares in 1915. In 1950, Great Britain imposed a worldwide
embargo on the purchase of Iranian oil, and in 1953, the US backed the coup that restored the Shah
to power and, more importantly, restored oil security in its favor. While the US imposed sanctions
against Iran shortly after the victory of the Islamic revolution, specifically ten days after hostage
crisis on November 14, 1979, new economic sanctions were introduced after the discovery of
Iran’s nuclear program in 2006. Although Iran emphasized that its nuclear program is for civilian
purposes, including generating electricity and medical purposes, the Western countries cited it as
a reason to enforce stronger economic sanctions on Iran (Dehghani et al., 2010).
In December 2006, the US, the United Nations (UN), and the European Union (EU) imposed
multiple sanctions on Iran with a specific focus on the Iranian petroleum industry, to put an
economic vise on the Iranian government and to compel it to end its nuclear program. These
sanctions included a ban on financial transactions with Iranian banks, a ban on the transfer of
technology, a ban on exports and sales of Iranian oil and natural gas in the international market,
prohibiting the transfer of dual-use items, and restricting trade and investment with Iran’s energy
and transport sectors. Within the country, these sanctions have reinforced the role of the Iranian
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Revolutionary Guards Corps (IRGC), which benefited from Iran’s international isolation and
gained significant control over Iran’s trade due to access to the country’s borders and airports. In
other words, less competition, which derives from international sanctions, helped the IRGC to sign
new contracts with Iranian oil and gas companies through its subsidiary companies. Therefore, the
IRGC became a key player in the Iranian petroleum industry. The Iranian supreme leader argued
that these sanctions helped Iranian experts to focus on the local development of technology, in
order to develop the petroleum industry domestically without dependence on abroad actors.26
As discussed in chapter 5, the Iranian foreign policy and economic activities are inextricably tied
to the oil and gas sector. The majority of the government’s budget came from oil and natural gas
export revenues and the remaining budget stemmed from other sources such as selling
petrochemical products, taxes, and fees. The annual government’s budget is calculated based on
estimated oil and gas prices in the international market. The Iranian government dependence on
oil and gas revenues has made this industry highly strategic in the political structure of the country.
Iranian politics take place in a framework of theocracy, a political format that is guided by Islamic
ideology. The 1979 constitution and its 1989 amendment define the political, economic, and social
order of Iran as the Islamic Republic, declaring that Shia Islam is Iran’s official religion (Ostovar,
2016). Since 1979, the Islamic government has taken control of more than two-thirds of the
economy, almost all key managers in public organizations, including oil and gas companies,
commerce, transport, telecommunications, etc., are government appointees. Their positions are
often based on loyalty to the regime or close blood relations (nepotism) with the ruling elite.
Managers are usually appointed or expelled not based on performance but based on political and
personal attitudes (Javidan & Dastmalchian, 2003).
For analytical purposes, I will concentrate on the interaction of political, historical, and cultural
contexts in Iran in this chapter. The first is derived from the pre-Islamic Iranian past; its Zoroastrian
heritage. The second regards the post-Islamic political transmission through three major events
including monarchism, liberal nationalism, and Shi’ism, which is closely associated with Islamic
tradition as the country’s dominant value and has a profound impact on Iranian politics. Third, I
will focus on the political structure of the Iranian petroleum industry. At the end of the chapter, I
26 News agency of the Supreme Leader’s Office. The need to change the outlook of the country and Iranian
authorities towards oil as a source for Iran’s progress and authority. Translated from Persian by the author. (Online)
Available at: http://www.leader.ir/fa/content/9236 [Accessed: October, 2018]
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will explain the impact of economic sanctions on the Iran oil and gas sector as a strategic
commodity for Iran’s economy. During each of these periods, Iranian society, economy, and
politics experienced notable transformations. These changes were also intensified by the fact that
Iran has historically held a significant geopolitical position in international politics, being a pledge
in and an irritant to the Western powers at the center of the oil-rich Middle East.
6.2 The Political Culture of Iran
I describe the relationship between politics and culture in Iran by focusing on the context of the
cultural tradition and contemporary political realities, the interplay between culture and politics in
Iranian history, and the role of religion as a political tool in contemporary Iranian society. The
traditional Iranian worldview goes back to ancient historical sources which are rooted in
mythological beliefs. The most prominent feature of this worldview is bound to religious precepts
and ruled by religious concepts, as part of the general culture, which is going back to Islam (Yu,
2002). Political action in Iranian society takes place in a cultural milieu that is rich, varied, and
eclectic (Kazemi, 1995). Culture provides the underpinning for Iranian politics and social behavior
(Milani & Diamond, 2015). It is learned and transmitted through several important events. Iranian
society has had to deal with two major political and cultural themes emanating from the pre-Islamic
political perspective, such as the Zoroastrian heritage and the post-Islamic political perspective.
Religion plays a significant role in both of these traditions. However, the main focus of this chapter
lies on the Islamic revolution as a specific event which interfered with cultural legacies from pre-
Islamic Iran.
The political tendency of the Islamic clergy did not begin with the Iranian Islamic revolution of
1979. It had political value in Iranian society long before the formation of the Islamic Republic.
Five centuries ago, the Safavid dynasty established Islam Shi’ism as the government’s official
ideology. This was a historical turning point for the Shi’ism clergy establishment, which benefited
from new political, social, and economic opportunities in Iran (Khalaji, 2011). This political
transformation continued during the Afsharid and Zand (1736–1796), Qajar (1789–1925), and
Pahlavi (1925–1979) dynasties. During the Pahlavi periods, Iranian politics has been made in
coordination with the clergy, especially during the ruling of three key leaders such as the Reza
Shah Pahlavi (1941-79), Prime Minister Mohammad Mosaddeq (1951-53), and later supreme
religious leader Khomeini (1979-89), who needed to give the impression that Islam Shi’ism was
the government’s official religion in order to gain legitimacy. Their legacies also include the
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emphasis on various politics, dependence on family and group ties, and a continuing tradition of
patrimonialism (Kazemi, 1988). These three key leaders presented three different traditions which
also depend on a vast array of cultural symbols derived from Iranian Shi’ism. These symbols have
been used to mobilize political upheaval and are also a partly recurrent pattern of the liberal-
clerical alliance in Iranian politics. The Islamic revolution of 1979 is the most recent example that
underlines the close relationship between politics and culture in Iran (Fazeli, 2006).
6.2.1 Pre-Islamic Political Perspectives
In Iranian epic literature, kings had both political and religious power at the same time. They
attributed their power and authority to their connection to god. Religion was synonymous with the
social system and with justice (i.e., everyone stays in their place), which was interpreted as an
observation of class function. The class function required that each class had to fulfill its duty and
not interrupt in the work of other classes. Zoroastrianism, the religion of the ancient Achaemenian
kings (550-330 BC) and later the official religion during the rule of the Sassanid Empire (the last
pre-Islamic dynasty of Iran, lasting from 224 to 651 AD), serves as the basis of shared values and
assumptions on what constitutes Iran. In Zoroastrianism, according to the doctrine which was
developed under Sassanid rule, religion and government were connected, with the king, who was
the head of both government and religion, as the symbol of their connections (Kazemi, 1988).
The king in the Iranian religious system is different from the king in other religious systems, such
as the kings of Egypt and Mesopotamia. In those two religious systems, there is no mentioning of
an evil king. Apparently, the king could not be evil. The Pharaoh was God and the Mesopotamian
kings were representatives of the Gods. In contrast, the Iranian king just fulfilled God’s will and
did not have a metaphysical aspect, so he could, in fact, be evil. In Zoroastrian ideology, when the
good king rules over the people, the world will flourish, and the state and society will harmonize.
In this ideology, the king plays a constructive role in society. However, if any evil king rules over
the people, drought and famine will take over everywhere. Hence, in Zoroastrian thought, not all
kings are charismatic. In a similar vein, the Sassanid ideology also stated that when religion and
kingship are joint in a person, they create a strong foundation which evil cannot harm. All Iranian
kings, divine light or not, always acted to protect the kinship system, throughout Iran’s ancient
history (Yu, 2002). The idea that if the leader is good, the country will flourish, and everyone will
achieve happiness, still permeates the Iranian people’s view towards governments and constitutes
a part of the political culture (Fazeli, 2006).
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6.2.2 Post-Islamic Political Perspectives
In this section, the basic elements of Islamic political thought, which is compared with the pre-
Islamic period, is explained. Since 1501, the political perspective of Islam has been shifted and
emphasized the entanglement of religion and government, which is one of the manifestations of
the culture, and has remained the basis of political authority and legitimacy in Iran (Bill, 1982).
Also, Shi’ism as an Iranian version of Islam has developed since its origins in the seventh century,
where political and social life were one and inseparable. The subjects of power and legal authority
in the society are the main differences between the Islamic and the Christian world. In Islam, there
is no difference between legal authority and power, and Islamic law only recognizes one high
position, which is the Imam (leader). The concept of holy and unholy, which existed in the Western
world of the Middle Ages, has been an important fact in Western political culture until today, but
has never existed in the Islamic political culture, where the religious system and the governmental
system are strongly intertwined. In this respect, politics have not been separate from religion and
morality, and thus could not develop as an independent field (Fischer, 2003). Separation of religion
and government rarely occurred in Iranian history, and when it did, it always caused some political
crisis (e.g., the Qajar and the Pahlavi dynasties) because religion, historically and culturally, has
been an integral part of the policy of Iranian leaders (Milani, 2011). Tension, conflict, co-existence,
and reconciliation of religion and government have frequently played important roles in Iranian
political culture.
After World War II, the politics of Iran vividly demonstrated the interplay of cultural forces by
religious and secular leaders and were presented to the masses in a highly symbolic fashion. Each
of the leaders had to respond to the cultural thrust of Islamic Shia religion and the forces of Iranian
nationalism in his own way after World War II. The Pahlavi monarchy, founded in 1925 by Reza
Khan, attempted to integrate the pre-Islamic Iranian traditions into modern politics more forcefully
and as the basis for Iranian nationalism. For example, he encouraged Iranians to adopt European
dress by banning Islamic veils forcefully known as Kashf-e hijab in January 1936 and has
increased women’s participation in society. Under the next ruler Mohammad Reza Shah, official
measures relaxed slightly, as women could choose whether or not to wear a veil. However, he
accelerated Westernization in Iranian society (Milani, 2012). Prime Minister Mossadeq was an
independent, charismatic, and secular nationalist leader who recognized the political importance
of the more religious segments of the population. Khomeini, another charismatic figure, used
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Islamic Shia religious institutions to topple the monarchy and to establish his version of a
theocratic government in Iran based on Islamic nationalist ideology (Kazemi, 1988). Religion
values and nationalist values played an essential role in these three leaders’ authority in order to
gain legitimacy in Iran’s society.
6.2.2.1 The Tradition of Monarchism
In 1925, Reza Khan, an officer in the Cossack Brigade27, founded the Pahlavi dynasty after having
become Iran’s monarch following his coup of 1921. Reza Khan’s effectiveness in bringing diverse
forces under control and contacting the system of tribal lordships was a significant factor in his
initial success (Kazemi 1988; Afshar, 1985). However, Reza Khan was forced to abdicate by the
Allies in 1941, and his son Mohammad Reza Shah took his father’s place, relying on pre-Islamic
Iranian symbols and practices to give focus and identity to his regime. This encompassed a wide
array of subjects from the architectural style of government buildings to emphasis on pre-Islamic
Iranian cultural themes such as the principal cohesive force of the new social order. However, the
Shah ultimately failed to achieve his goals because the challenges from the Islamic Shi’a clerics
eventually resulted in his downfall.
The Shah’s personal ambitions and his desire to achieve regional superpower status for Iran was
fully supported by the US. Moreover, the availability of vast oil revenues provided the Shah with
the necessary support and freedom to try to realize his personal and national dreams (Banuazizi,
1976). However, his rule lacked legitimacy in Iran’s society. In 1953, after having fled the country,
he was brought back to the power in a British and CIA sponsored coup. This was done at the
expense of the popular and charismatic Prime Minister Mossadeq, whose agenda was to wrest
control of the oil industry from the British government. In the popular mind, the Shah appeared to
be doing the bidding of the foreign powers. His supporters banded together and eventually
overthrew him from the throne during the Iranian Islamic revolution. Neither the monarchical
institution nor the military were suitable matches for the combined forces of religious and
nationalist elements (Kazemi, 1988). The most important factors that led the Shah to collapse were
the pronounced critiques of Islamic religious clerics, including Khomeini (Kazemi, 1995), of the
direct involvement of Western powers in the strategic industries of the country such as the oil and
gas sector as well as concerns over democracy and human rights, unemployment, etc.
27 The Iranian Cossack Brigade was a Cossack-style cavalry unit formed in 1879 in Persia (see Kazemzadeh, 1956).
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6.2.2.2 The Liberal Nationalism
The Shah’s greatest adversary before the emergence of Khomeini was Mossadeq, Iran’s prime
minister from 1951-53. Mossadeq came from an aristocratic, landowning family related to the
Qajar dynasty. He expounded a doctrine that called for a policy of neutralism in Iran’s dealings
with the three traditional imperialist powers, Great Britain, the United States, and the Soviet Union.
He denounced the granting of concessions to these powers which he believed allowed them to
control Iran’s natural resources. He specifically aimed to take control over the Iranian petroleum
industry from the British through nationalization (Zabih, 1986; Abrahamian, 1982). Mossadeq’s
institutional base of support was bolstered by the creation of the national front, a loose coalition
of diverse groups that had come together for the parliamentary elections of 1949, ideologically
ranging from the social democratic left to the religious right. Its principal support came primarily
from the traditional middle class of society, guild leaders and Islamic clerics. These divergent
forces came together in the national front because of two common bonds: the struggle against the
British-owned AIOC and Mossadeq’s the political perspective and charismatic personality
(Abrahamian, 1982).
The oil nationalization bill was passed by the Iranian parliament, and the Shah, seeing no other
alternatives, named Mossadeq prime minister in the spring of 1951. Mossadeq’s government
proceeded to implement the nationalization measures, which were highly popular throughout the
country with active support coming from both religious and secular circles. One of the important
elements that increased the domestic popularity of Mossadeq’s government was his struggle
against the British government. He was adept in using actions and symbols that particularly
appealed to the politically conscious Iranian urban middle class elements. He was a charismatic
leader who became the symbol of the Iranian nationalists by nationalizing Iran’s natural resources
such as the oil and gas sector. However, he failed to create a viable political institution that would
legitimate his position and keep his coalition of religious and secular elements together. Finally,
he was overthrown due to complex domestic and international factors. The national front, as a
loose coalition of diverse groups and organizations, could not perform nationalism aspirations.
Losing the support of major religious allies and organizations was a severe blow to his tenure. The
Shah military with the support of foreign governments succeeded in toppling his regime (Kazemi,
1988).
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In 1954, the Shah arranged an agreement by which the NIOC, as owner and manager of Iran’s
hydrocarbon resources, would join into contractual relationships with a new consortium of
international oil companies (IOCs) that included American and French companies besides British
Petroleum. The British domination over the Iranian petroleum industry was over, though, in
essential respect, the status of the NIOC concerning the involvement of Western oil companies
outlined the limits of the nationalization effort which had headed in the Mossadeq era. The NIOC
applied formal ownership of Iran’s resources but did not have control over them. The NIOC’s
rights were restricted to sovereignty over Iran’s hydrocarbon reserves, while the exploration,
production and development of Iranian oil fields were the sole preserve of the consortium partners
(Yong, 2013). The liberal nationalist ideology of Mossadeq has certain important implications
(such as the nationalization of the Iranian petroleum industry and resistance to Western powers’
domination) for understanding how politics and culture interact in Iran and also shows the strategic
role of the Iranian petroleum industry in the political structure of Iran.
6.2.2.3 The Religious Tradition Shi’ism
As with the Mossadeq coalition, the “grand alliance” of 1978-79 was also spearheaded by a highly
popular charismatic figure who directed his rage at foreign states’, specifically the United States’,
presence in Iran and held the Shah responsible for the state of affairs. In contrast to Mossadeq, the
leader of the Islamic revolution, Ayatollah Khomeini, came from the clerical institution. He
advocated a potent message that called for a radical reconstruction of society on the basis of Shia
Islamic religious dogmas and institutions. This tradition had received occasional forceful
expression in the past but had never become dominant among the majority of clerics (Keddie,
1982; Keddie & Richard, 2006). The national strike of the oil company workers, resulting from
the repression of workers and violence against protesters, helped Khomeini to reduce the Shah’s
revenues and create an economic exclusion in the country. He blamed the Shah for colluding with
foreign powers and facilitating the country’s economic impoverishment and cultural decline
(Bayandor, 2019).
In some ways, the Islamic revolution can be seen as the ultimate clash of two cultures, the Shah’s
imported Western inspired culture and Mossadeq’s liberal nationalism. Khomeini’s family
background, theological education, and austere lifestyle contrast sharply with the Shah’s Western
education and orientation, palace opulence, and the insatiable materialism of his followers
(Kazemi, 1988). Khomeini’s life was fundamentally confined to teaching at the theological center
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until 1961, when the larger public took notice of him for the first time. He was also recognized as
a bold figure who clearly saw the intimate connection between religion and politics in Iran. Indeed,
he gained prominence in 1963 when he led a series of major riots (e.g., opposition to the Shah and
his White Revolution), directed primarily by the religious factions, against the Shah’s government.
Although Khomeini was arrested after the events of 1963, he was released after eight months of
exile and continued his agitation (Khomeini & Algar, 1981).
The 1979 Islamic revolution had five distinct mobilization stages which began with the non-violent
mobilization in the latter part of 1977, continued through cyclical urban riots, mass
demonstrations, and mass strikes, and ended with the demise of the period of dual sovereignty and
dramatic victory of the Islamic Republic in 1979. Khomeini’s grand coalition united disparate
elements, including diverse religious groups with views that ranged from a radical to a
conservative traditional Islam (Afshar & Banuazizi, 1985). The institutional base of the clerics’
power has its roots in the beliefs and practices of Shia Islam. One interpretation of the Shia belief
system, which did not become the dominant tradition among the clerics, maintains that the clergy
have the collective right to rule in the absence of the twelfth and last Shia Imam until his final
reappearance at the Day of Judgment (Kazemi, 1988). Khomeini and later Khamenei used the
concept of rule by the jurisprudence, namely Velayat-e faqih, by promoting Islamic nationalist
ideology, which was an innovation in Shi’ism Islamic government. Although the nationalist value
has been developed further since the time of Mossadeq with the nationalization of the Iranian
petroleum industry as a value which opposes any foreign domination over Iran, the Islamic regime
has strived to indicate its ideology based on Islamic nationalism in Iran’s society. In other words,
the Islamic regime has co-opted some aspects of nationalist values such as the anti-imperialist
discourse and has intersected with Islamic ideology. Islamic and nationalist values are
fundamentally in tension and competition, seeing as they only overlap in some respects (such as
patriotism and independence from Western and Eastern powers).
Clerics used this belief system in their right to rule to rally the faithful behind their causes and
against unpopular monarchs. The Shia clergy’s more sustained impact on Iranian politics is related
to their ability to gain control over several principal institutions such as waqf. Waqf is a pious
foundation or endowment that was established to support religious institutions, public works, and
poor people. It is a very significant and cherished Islamic philanthropic institution with a long
history of economic and social activity. The cumulative impact of basic control of these institutions
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has given the Shia establishment in Iran a certain degree of financial health and more importantly
independence from the central government that is normally found among religious groups in other
parts of the Islamic world (Kuran, 2013). This economic independence is reinforced by an
elaborate institutional mechanism that ties a large number of mosques and thousands of clerics to
the religious network (Bazzi, Koehler-Derrick, & Marx, 2018). This network strengthened the
clergy in terms of financial independence and increased their popularity in the low and middle
class of Iran’s society.
Khomeini’s treatise on Islam and politics puts forth in a fairly systematic way the fundamental
principles of an Islamic government. He succeeded in creating a modern version of Shia theocracy
in Iran in the 20th century. Furthermore, he presented an ideologically fashioned embrace of beliefs,
values, and symbolic structures that are deemed essential to the preservation of the integrity and
coherence of a culture (Fazeli, 2006; Kazemi, 1988; Arjomand, 1984). The ideological
“factionalism and polarization of politics within the Islamic government” is as much, if not more,
about the allocation of socio-economic and political resources as “it is about whose proper vision
of Islam can better address problems facing the country” (Abootalebi 2000, p. 43). Moreover,
personalized patrimonial leadership is a key feature of the Islamic government despite the
elaborate paraphernalia of the government bureaucracy and its various ministries. It views the
government as an emanation of religious authority.
Patrimonial authority patterns are also present in the various forms of patron-client relationships
that have always marked Iranian politics. These informal hierarchical relationships connect the
more powerful patron to the weaker client. Inequality in status is tempered by expectations of
reciprocity and mutual obligations. The patron will help and assist the client with his
socioeconomic needs in return for political support and loyalty (Cottam, 1979). There are both
religious and secular forms of patron-client relationships in Iran. The non-religious form of
clientelism in Iran is similar to that found in many other societies. The authorities use extensive
informal networks through their political power, to help their clients solve problems with
government bureaucracies and in other areas. Economic assistance in form of loans, or even
outright gifts, is also extended on many occasions. The religious form of clientelism centers on
mosques, religious seminaries, and the large network of relationships that clerics maintain with
different segments of the population. The vast resources at the disposal of the top clerics allow
them to assist their clients and sustain the relationships over an extended period of time. The
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clerics’ personal ties with their followers are further augmented by the concept of imitation of the
Shia belief system (Kazemi, 1988). Such a system perpetuates a client list network that recognizes
hierarchy in religious matters on the basis of certain elements in the Shia belief system.
Family ties have traditionally been of great importance in Iranian politics. Under the Pahlavi
monarchy, the term “thousand families” was frequently used to refer to the top elite families of
Iran. Even though the term may have been misleading, since not all these families maintained elite
status over time, it is an accurate indication of how important family and familial ties were in
Iranian society (Wright 2001, p. 32). Intermarriage among these families, reinforced by similar
class and status positions, was the norm and served as one of the ways to expand and maintain
political power. The elite of post-revolutionary Iran finds itself in the same situation. The Islamic
revolution dismantled the power of the old elite families of the Pahlavi era and replaced it with a
new elite grouping of clerical families. The players have changed but the pattern continues
unchanged (Bill, 1982).
Since the Islamic revolution, Iranian domestic politics have been strongly influenced by the
Islamic nationalist ideology. This ideology espoused the belief in the supremacy of Shia law and
an ethical system based on the fundamental precepts of Islam and nationalist values. It is a belief
system that emphasizes the activist elements of the Islamic religion and nationalism. After the
Islamic revolution, the clerics established control over the key organizations and institutionalized
power, the elite circle became increasingly smaller. The clerics came to dominate the top decision-
making apparatus in the executive, judicial, and legislative branches of the government. Then, the
regime attempted to Islamize the workplace as thoroughly as possible. The clerics viewed the
IRGC as a vital force in the Islamization of the society and the defense of the Islamic ideology in
the post-revolutionary period (Gasiorowski, 2000). Indeed, the IRGC was created through a decree
of Khomeini in 1979. The radical clerical group was seen as a counterweight to the army and as a
way for the clerics to have their own organized armed forces in parallel to the Iranian military
force. The IRGC members had major experiences in the Iran-Iraq war, intense involvement in
everyday politics, and an Islamic nationalist ideological orientation (Bakhash, 1984). The post-
war reconstruction effort provided opportunities for the IRGC to rise as an economic power
through involvement in the construction industry (Rizvi, 2012). Since then, they have been playing
a vital role in the economic and political structure of Iran.
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6.3 The Political Structure of the Iranian Petroleum Industry
The concern for national control of economic resources has been a persistent theme in Iranian
politics through a varied set of cultural symbols, to mobilize popular forces against Western
powers domination. The oil strikes provided an important opportunity for the proponents of the
Islamic revolution to pursue their political objectives. The oil strikes also showed the interrelation
between the economics and politics of oil in the Iranian context.
The petroleum industry strikes were central to the emergence of the dual power structure in early
1979 (as will be explained in the following section) and highlighted the political rule of the
supreme leader rather than his religious credentials in Iran’s society. The petroleum workers’ strike
had different demands, which instantly substituted from economic to political ones due to the
extensive revolutionary climate and the fact that they were confronted with the government as their
employer (Jafari, 2019). During this period, oil production dropped considerably, reducing the
Shah government’s revenues and causing an economic recession in the country. As the strikes
extended, military vehicles and ministries were frequently faced with fuel deficits. Consequently,
oil was a major conductor of revolutionary consciousness, as it injected from the sites of production
and refining into places of consumption in the urban, suburban, and rural.
After the victory of the Islamic revolution 1979, the Islamic government took control over strategic
industries such as the oil and gas industry, which was previously managed by Western powers.
The Revolutionary Council terminated all concessions and contracts the NIOC signed with foreign
companies through a decree Khomeini issued. Following the exit of foreign oil companies from
Iran, Iranian employees of the petroleum industry that had played a major role in the victory of the
Islamic revolution, took over the management and operations of the industry (Brumberg & Ahram,
2007).
In 1979, the Islamic government emphasized the political Islamization of every administrative
organization. Since then, the ideology of the political Islamization of Iran has taken on the agenda
to make deep transformations within the cultural, scientific, and political structure of Iran’s
society. Within the Iranian petroleum companies, the previous managers were replaced with
revolutionary managers, most of whom had promised fealty to the post-revolutionary regime and
had close blood relations with the ruling elite, even those that had few managerial skills and less
experience (Karbassian, 2000). Moreover, domestic and foreign trade was dominated by a small
number of public and private monopolies in the hands of a few clerics, the IRGC, and other
131
influential families (Amuzegar, 2009). The most significant aspect of the politico-ideological
Islamization has been an attempt to institutionalize the principle of velayat-e faqih, the
Guardianship of the Jurisprudent, overseeing the country’s political structure that is based on three
pillars of power: the executive, judicial, and legislative branches (Kadivar, 2017). The supreme
leader at the top of the country’s political hierarchy sets general state policy, has the control over
strategic public organizations and has the final decision-making authority.
The political economy of post-revolutionary Iran derives from the monopolized structure of the
Islamic state, which is dual. Indeed, Iran’s regime implemented a dual structure of power, the
official structure, namely the elected parliament and the executive, coexists with unelected core
structure controlled by the clergy and headed by the supreme leader, namely Vali-e faqih. The
essence clerical structure, apart from having control over essential public organizations such as the
judiciary, legislative, and the armed forces, also screens candidates before they can be nominated
in parliamentary and presidential elections, and has influence over affairs of the Islamic
government through various ways such as official and unofficial ways (Karshenas & Hakimian,
2005). This duality of the state structure caused difficulty in my analysis of how essential decisions
concerning the extraction and management of natural resources (such as oil and gas) are made in
Iran. Moreover, this duality structure renders into a multiplicity of power centers, depicting various
coalitions of social, political, and economic interests. For example, a conservative vetting body
known as the Guardian Council ensures the consistency of parliamentary laws with the Islamic
injunctions. Any possible conflicts arising between the Guardian Council and parliament are
mediated by another institution of the core state, the Expediency Council. Moreover, there are
many institutions such as the Executive Headquarters of Imam’s Directive (Setade Ejraiye
Farmane Imam), and the Mostazafan Foundations include Bonyad-e Mostazafan and Bonyad-e
Shahid (these charitable organizations also known as bonyads), which are directly controlled by
the supreme leader. The aim of bonyads, which were established as para-governmental entities,
was to support disadvantaged segments of the society in line with the socio-economic goals of
redistributive justice, which was advocated in the lead-up to the Islamic revolution (Mihret et al.,
2020). However, they play a significant role in the political, economic, and social structure of Iran
by inculcating the ideology of the Islamic revolution through education, research, publications,
and other cultural activities (Alizadeh, 2003; Saeidi, 2004). Interestingly, these entities are also
tax-exempted (Rizvi, 2012). In 2013, the Reuters News Agency reported that Iran’s supreme leader
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controls a business empire worth around 95 billion US dollars - a sum exceeding the value of this
oil-rich nation’s current annual petroleum exports.28 These little-known institutions and
organizations are key players to the Iranian leader’s enduring power and now hold stakes in nearly
every sector of Iranian industry, including finance, oil and gas, telecommunications, etc. Unlike in
Western systems of governance, religion and politics are inexorably linked in the Iranian state
structure, which is dominated by a small cadre of religious clerics and revolutionary guardians.
The distinct structure of the regime, in turn, has a determining influence on how hydrocarbon
revenues are channeled to the society. Furthermore, the analysis of organizational documents
reveals that although the petroleum minister is at the center of decision-making, there are some
other influential power centers (such as the Supreme Leader, the President, the Expediency
Council, the Parliament, The IRGC, and the Guardian Council) which are responsible for energy
policy (D12-2015; D13-2015). Moreover, the supreme leader has an indirect influence on the
decision-making process in the Iranian petroleum industry through the majority of these clerical
institutions and organizations (see figure 6.1).
Figure 6.1 shows that different political bodies in Iran’s power structure are under the supreme
leader’s supervision in the decision-making process of the Iranian petroleum industry from
28 Stacklow, S. et al. (2013). Reuters investigates Business Empire of Iran’s supreme leader. Reuters News. (Online)
Available at: https://www.reuters.com/article/us-iran-setad-news/exclusive-reuters-investigates-business-empire-of-
irans-supreme-leader-idUSBRE9AA0CY20131111 [Accessed: November, 2018]
Government
Ministry of Petroleum
General Assembly
Board of Directors
Managers
Supervisors
Supreme
Leader Revolutionary
Guards
Guardian Council
Expediency
Council
Figure 6.1 The decision-making process in the Iranian petroleum industry
Source: Developed by the author, 2018
Parliament
133
exploration, extraction, exportation to development of oil and gas fields. The head of public
relations argued that “these influences need to be channeled through the political apparatuses of
Iran’s power structure, which identify, decide, and implement the policy” (P20-VR-Aug18).
Among those external institutions and councils that have direct and indirect impact on the
organizational routines and decision-making processes of the Iranian petroleum industry, there are
other internal parties that have direct impacts on decisions of the petroleum companies. For
example, the head of international relations said, the NIOC has a general assembly (consisting of
the President, Vice President, Minister of Petroleum, Director General of the Management and
Planning Organization, Ministers of Energy, Industries and Mines, Labor and Social Affairs,
Economy and Finance) as its highest decision-making body. He added that the board of directors
has the authority and main responsibilities to approve operational schemes within the general
framework ratified by the general assembly. The board of directors approve transactions and
contracts and prepare budgets and reports for presentation to the general assembly (P4-VR-
Aug17). Similarly, the NIOC’s business planning manager said, “The NIOC’s general assembly is
the highest decision-making body which determines the company’s general policy guidelines, and
approves annual budgets, operations, financial statements, and balance sheets. However, the other
political players at Iran’s power structure also affect the decision-making process” (P2-VR-
Aug17).
Additionally, the Supreme Economic Coordination Council must approve most of the development
contracts in oil and gas fields, especially foreign direct investments. Its agreement is essential for
large-scale state investment projects (D7-2012). The involvement of many parastatal entities in the
structure of the Iranian petroleum industry makes this sector extremely political and complicated.
6.3.1 The Role of the Islamic Revolutionary Guard in the Petroleum Industry
Since 1990, the IRGC has been transformed from its modest post-war reconstruction activities into
a business conglomerate independent of state regulation as a dominant player in large
infrastructure projects. The IRGC operates in part through Iran’s bonyads29, ostensibly charitable
foundations that operate as huge holding companies. As important as its political influence is, the
IRGC also has become an economic influence in Iran’s society. The IRGC also extended its
influence into the lucrative oil and gas sector by establishing several companies such as Khatam
29 Bonyads are charitable trusts in Iran that play a major role in Iran’s socio-economic sector, controlling an estimated
20% of Iran’s GDP, and channeling revenues to groups supporting the Islamic Republic (see Thaler at al., 2010).
134
al-Anbia. Khatam al-Anbia has become one of Iran’s largest contractors in industrial and
development projects, and is considered the IRGC’s major engineering arm today (Wehrey et al.,
2009).
In 2006, the NIOC gave Khatam al-Anbia a no-bid contract to develop the fifteenth and sixteenth
phases of South Pars gas field, one of Iran’s most valuable gas development projects. According
to the Islamic Consultative Assembly News Agency, several members of parliament demanded an
inquiry into how the grant was awarded but the government defended the project, and no inquiry
occurred.30 Moreover, a few months later, the National Iranian Gas Company awarded Khatam al-
Anbia a contract to build a 600-mile “peace pipeline” from Iran to Pakistan and India. The supreme
audit court criticized extensive irregularities in oil and gas contracts of the country, but the head
of IRGC defended the Khatam al-Anbia activity. The head of the IRGC said the IRGC had a corps
of young specialists with the required technical knowledge and full engineering support who could
be involved in every project, wherever other contractors were not ready to work (D10-2013). The
IRGC repeatedly declared that the involvement of foreigners posed a security risk because of an
alleged link to Israel, but it was clear that the foreign consortium’s biggest mistake was to try to
cut the IRGC out of its business model. This resulted in the IRGC winning lucrative energy
development contracts as a direct result of diminished foreign investment (Alfoneh, 2012).
In July 2011, Iranian President Mahmoud Ahmadinejad appointed a member of the IRGC as
petroleum minister, raising the number of former IRGC officers in his cabinet to twelve out of
eighteen. He also urged the new Petroleum Minister Mr. Rostam Qassemi to work for “the
creatures of God” and the “material and spiritual progress” of Iran.31 Iran’s petroleum ministry has
signed a number of no-bid contracts with the IRGC worth billions of US dollars. The officials
argue that these contracts were granted because of the lower cost offered by the IRGC, its skilled
and experienced corps of engineers, its expertise with large projects, and its access to heavy
machinery and sizable assets (D10-2013). However, the Petroleum Minister faced criticism from
those who fear the IRGC’s growing involvement in Iran’s economy. For example, at the
parliamentary session debating his appointment, Ali Motahari politely objected:
30 Islamic Consultative Assembly News Agency. The 2 billion US dollar contract for the South Pars phases 15 and
16 was signed. (Online) Available at: http://www.icana.ir/Fa/News/75464 [Accessed: July, 2017] 31 Petro Energy News. President’s letter for Rostam Ghasemi as the new Petroleum Minister. (Online) Available at:
https://www.shana.ir/news/174984 [Accessed: July, 2017]
135
“Opposition to the appointment of Mr. Rostam Qassemi as Petroleum Minister is not opposition
to his person … I distinguish between his person and his legal position since his person is
commendable… The main issue … is that the IRGC as a military force should not be connected
with the political and economic power. In other words, the IRGC should not be [a part of the]
cabinet … The IRGC is the symbol of the unity of society, just like the clergy. The Guards belong
to all classes of society … Now, the IRGC is - rightly or wrongly - accused of seizing development
projects in unequal competition with the private sector … the great oil infrastructure being added
to it will not do away with such accusations”.32
However, in his defense, the Petroleum Minister said that Khatam al-Anbia had “filled the
vacuum” left by the withdrawal of Western companies from Iran’s oil and gas sectors as a result
of the international sanctions.33 According to the Khatam al-Anbia website, since 2018, the
company has been awarded more than 750 contracts in different construction fields including
transportation, telecommunication, offshore construction, gas pipelines, and oil and gas
infrastructure development.34
The oil and gas industry plays a vital role in the political power structure of the Iranian regime.
The Iranian petroleum industry continues to serve as a source for the state-oriented and
redistributive political economy (Brumberg & Ahram, 2007). First of all, it directly present a
significant program subsidizing domestic consumption of fuel for the entire country. Secondly, it
provides generous wages and benefits to its thousands of employees and their families. Nearly all
government spending, from the military to education to food subsidies, is ultimately derived from
money that the Iranian petroleum industry remits to the national treasury. The Petroleum Minister
and his deputies submit recommendations to various decision-making bodies on things such as
optimal production levels (D13-2015). However, Iranian petroleum authorities have been more of
a consistent servant and agent of the state that remains institutionally embedded and attached
because of the need to stabilize the entire system of the Islamic regime. These ‘revolutionary’
bodies straddle the boundary between state and non-state in the pursuit of both political and
32 Alfoneh, A. (2012). Iran’s Revolutionary Guards Strike Oil. (Online) available at:
https://www.meforum.org/3153/iran-revolutionary-guards-strike-oil [Accessed: August, 2018] 33 Donya-e Eqtesad. All the Iranian officials acknowledge the role of Khatam’s headquarters in the country.
Newspaper no. 2427. (Published: 8 August, 2011) 34 Retrieved in August, 2018 from the Khatam al-Anbia website at: https://khatam.com/
136
economic advantage, sometimes taking on state-like powers while simultaneously expanding their
economic interests into the private sector (Yong 2013, pp. 24-25).
6.3.2 Structural Reforms of the Iranian Petroleum Industry
In 1979, the post-revolutionary government did not dismantle and replace all of the organizations
that had existed in the pre-revolutionary period, instead established new entities to sit beside the
pre-existing bodies of government. An example of this political transformation was the
establishment of the Ministry of Petroleum by the post-revolutionary government to increase its
controls over oil and gas companies’ activities. The NIOC itself remained largely intact, despite
the loss of numerous experienced staff through purges and resignations. However, this political
transformation of government in the petroleum industry did not routinely ensure its actual authority
over the NIOC as an oversight body. In practice therefore, the NIOC retained many of the powers
and responsibilities that had been within its remit under the Shah (Yong, 2013). According to one
of the Parliament members who was vocal during the decision about structural reforms of the
NIOC, “even though the Ministry of Petroleum was established in 1979, it has never really taken
shape”.35 Moreover, a business development manager of the NIOC argued that “since 1973, the
NIOC structure has not been changed although it is required to be reformed with the new changes
in this sector after 1979” (P2-VR-Aug17).
Despite constitutional reforms in 2006, which dictated that policy-making duties and governance
functions be reassigned from public industries to ministries and government agencies, the Ministry
of Petroleum reported that “this process has not yet occurred with respect to the NIOC which still
governs itself”.36 Hence, the NIOC retains the responsibilities of ownership, sovereignty, and
management in the upstream oil sector, which is to say that the company exercises oversight with
regard to its own activities. One member of the Parliament who has been mobilized to back a new
oil law in 2012, complained that “under current conditions, true power is held by the NIOC and
there is no possibility of effective oversight”.37 The continuation of this institutional form may be
intelligible, reflecting the inadequate motives for disrupting the status quo. In 1979, legislators
35 Fars News Agency. The end of 30 years dominance of NIOC. (Online) Available at:
https://www.farsnews.com/news/13901019001415 [Accessed: August, 2018] 36 Petro Energy News. NIOC contracting rights will increase. (Online) Available at:
https://www.shana.ir/news/184324 [Accessed: August, 2018] 37 Farda News. The end of 33 years dominance of NIOC and presidential oil rights. (Online) Available at:
https://www.fardanews.com/fa/print/192755 [Accessed: August, 2018]
137
asked that the ministry’s budget be kept until a new NIOC structure be given for parliamentary
approval, but neither this demand nor the menace was ever carried through.38 Successive petroleum
ministers have reassured legislators with promises to formulate a new structural reform for the
NIOC and its subsidiaries, but this has been perceived by some as a perpetual delaying tactic.
According to the organizational document, the structural reforms of the Iranian petroleum
companies have been in the legislative circles of the petroleum authorities for many years (D13-
2015). The essential aim of this reform includes the segregation of government duties from
business, determining the scope of the Ministry of Petroleum’s activities, transparency, and
accountability of the petroleum companies. The Deputy of the Center for Energy Studies made the
following statement about the political conflicts between petroleum authorities for structural
reforms of the Iranian petroleum industry:
“The NIOC has the oldest ‘undeveloped’ structure in modern Iranian bureaucracy which needs to
be reformed in order to fulfill its obligations to improve efficiency and effectiveness of this strategic
company in Iran’s economy. In 2003, the structural reform of the Iranian petroleum industry was
issued through a decree by the Petroleum Minister. In 2004, we prepared a draft in three phases,
which we created with the cooperation of a foreign management consulting company (i.e., Bain &
Company) and local experts. In total, 250 people such as technical experts, managers … have
been involved and 33 meetings were held to implement the first and second phases of this project.
However, in 2007, the Petroleum Minister changed, and the new Minister was not interested in
implementing the final phase of this project. He even boycotted the structural reform. All the
research invested in and the budget spent on this project were wasted because of his decision and
none of the other Petroleum Ministers have shown interest in continuing it until now either” (P19-
NT-Aug18).
Today, a much larger segment of the economy is controlled by a number of revolutionary, religious
and military foundations, rendering a semi-state sector that is both more complex and more
damaging to the economy as a whole.39 The political-bureaucratic coalition has controlled the oil
and natural gas sector until recently and is still largely able to repulse encroachment by
38 ISNA. 23 years of NIOC without charter. (Online) Available at: https://www.isna.ir/news/90122203400
[Accessed: August, 2018] 39 Khajehpour, B. (2019). Revolution at 40: Same old structural problems still plague Iran. Al-Monitor the pulse of
the Middle East. (Online) available at: https://www.al-monitor.com/pulse/originals/2019/02/iran-revolution-40th-
anniversary-economic-goals-republic.html [Accessed: March, 2019]
138
competitors. This has enabled the NIOC to engage in business strategies that strike a balance
between the commercial enterprises and the economic and political ambitions of successive
administrations. The officials and other political bodies correlated with the presidency joined in
alliances with the NIOC to form and expand parastatal entities to pursue common aims within the
oil and gas sector (Yong, 2013). Political sponsorship from “the elected executive enabled elements
within the state oil company to use the special dispensation granted to these quasi-private
subsidiaries” to enhance and to guard their institutional interests (Yong 2013, p. 20). A large share
of oil and gas revenues has gone to the bonyads and the IRGC. Associated political bodies were
placed in the entities themselves or at bottlenecks within the institutional structure of petroleum
industry decision-making, securing the highest autonomy with the tiniest external oversight.
Moreover, the lack of transparency makes it practically impossible to follow oil and gas revenues.
The government’s regular practice is to present its budget to parliament without details and not to
release data to the public. Such pervasive secrecy prevents public scrutiny of how the government
manages Iran’s public assets and may undermine the effective use of money for the public good
(Heuty, 2012). More importantly, the lack of transparency is argued to be facilitated corruption
and misuse of funds such as “allegations over the large-scale corruption by the president’s
allies”.40
6.4 The Impact of International Sanctions
The discovery of vast oil reserves catalyzed the rapid creation of wealth and transformation of
politics in the oil-rich countries, particularly in the Middle East. Since then, the Middle Eastern
oil-exporting economies and political structures are significantly tied to the price of oil itself. This
situation is the reason for these countries’ heavy dependence on oil exportation. Therefore,
Western powers such as the US and UK have used this opportunity and put political pressures on
these countries to achieve their goals.
Since the early 1950s, Western powers have employed sanctions on other nations more than 500
times, seeking to assert their influence on the global stage without resorting to military
interventions. From nuclear non-proliferation to the promotion of fundamental human rights, the
political goals behind such sanctions are diverse and ambitious (Eland, 2018). Hence, the range of
sanctions and the intensity with which they are imposed also vary considerably. Examples include
40 Heuty, A. (2012). Iran’s oil and Gas Management. Revenue Watch Institute Briefing. (Online) available at:
https://resourcegovernance.org/sites/default/files/rwi_bp_iran2.pdf [Accessed: March, 2019]
139
the League of Nations’ sanctions against Italy in 1935, the British government embargo on Iranian
oil export in 1950, United States’ sanctions against Cuba in 1958, British sanctions against
Rhodesia in 1965, and the UN and European Union’s sanctions on Libya in 1992 (see Dashti-
Gibson et al., 1997; Doxey, 1980; Barber, 1979; Mack & Khan, 2000). In these examples,
economic sanctions were used as a policy instrument for a variety of reasons, revealing a mixture
of aims on the part of those governments seeking to impose them, ranging from international and
domestic considerations to differences of view within various sections of the governments.
However, the majority of these economic sanctions ultimately proved ineffective due to limited
international participation in the measures. This means that the targeted nation was able to simply
shift its economic focus to new markets and trading partners, bypassing the sanctions and
maintaining a healthy level of trade. The economic sanctions policy was a new structural reform
against Iran, as the United States continued to pursue a containment strategy for encouraging
several countries to impose international sanctions. Since 1979, the United States has led
international tries to employ sanctions to impact Iran’s policies. The imposition of international
sanctions has profoundly affected Iran’s petroleum sector, prompting cancellations or delays of oil
and gas projects, as well as a shortage of capital and foreign technical expertise. As a consequence,
Iran is reportedly eleven years behind in getting its share for the South Pars natural gas reserves
jointly owned with Qatar in the Persian Gulf, and seven years behind in the Salman natural gas
field with the United Arab Emirates. Moreover, Iran has no share of the oil and gas exploited in
the Caspian Sea by the other littoral states.41 The sanctions hit Iran’s economy strongly, especially
the Iranian exchange rate, which has dropped rapidly against foreign currency due to the shortage
of foreign exchange earnings. The exchange rate is one of the key variables in the economy that
affects many of its sectors. It plays an important role in determining international competitiveness
and any significant change in it could affect the trade balance of the country (Bahmani-Oskooee
& Kandil, 2010). Although Iran’s exchange rate decision makers have always used the fixed
exchange rate system, historically there were two rates: one determined by the Central Bank of
Iran (Official rate) and the free market rate determined based on market supply and demand
(Mustafa Pour & Sakhaei, 2011). The official rate is always lower than the free market rate and
41 Dokhani, V. (2009). Qatar operation status from a shared gas field “South Pars”. NIOC portal. (Online) Available
at: http://www.nioc.ir/portal/File/ShowFile.aspx?ID=db4f62de-9a73-4ff3-916a-fdbff0123c4d [Accessed: October,
2018]
140
used for government transactions. One of the main reasons for the dual foreign exchange rates in
Iran is the government’s dominance over foreign exchange earnings of the country, especially
foreign exchange earnings from the sale of petroleum products on the global market which, on the
other hand, leads to an increase in government revenues from selling foreign currency on the free
market. For years, the government has been working to gradually increase the official exchange
rate and bring it closer to the free market rate. Thus, the government has been shrinking the list of
imported items eligible to receive foreign currencies at official rates (Behdad, 1988). The dual
exchange rates became an integral policy instrument of the government for extra earnings from
the existing supply of foreign currency in the face of a widening foreign exchange gap. According
to a member of the planning and budget committee of the parliament, economic stability begins
with the stability of the foreign exchange market. The foreign exchange market is affected by
factors including exports, imports, production, budget, investment, and the level of prices and
business practices. The government should not use foreign currencies as a policy tool for
government funding. He also stressed that “the dual exchange rate is causing corruption”.42
42 Iran labor news agency. The dual exchange rate process is damaging the country. (Online) available at:
https://www.ilna.ir/fa/tiny/news-37950 [Accessed: May, 2019]
Figure 6.2 Free market rate vs. Official rate of IRR per US dollar
Source: The Central Bank of Iran, 2019
1000
51000
101000
151000
201000
251000
Iran
ian
Ria
l Rat
e (
IRR
)
USD
Official rate Free market rate
141
Figure 6.2 shows that the Iranian rial value has fallen dramatically against the US dollar since
1979. From 1988 to 2000, the official exchange rate fell from 72 rials per US dollar to 1,755 rials
per US dollar. On the free market, the price of the dollar increased about fourfold in the same
period from 1,192 rials to 4,750 rials. Moreover, during the years 2000 to 2008, the currency
depreciated more than 80 percent on the official market. During the same time span, the dollar
price on the free market reached over 9,500 rials from a previous exchange rate of 4,730 rials. In
April 2018, the Iranian rial rate experienced the sharpest drop in value in comparison with the last
forty years, expressing a significant depreciation of the national currency. The Iranian rial has lost
more than 70 percent of its value against the US dollar on the free market since January 2008,
mostly due to the United States’ economic sanctions. Although Iran’s central bank has intervened
to support the rial, the currency has lost over two-thirds of its value on the free market.43
The Iranian officials rhetorically disproved the effects of the United States’ sanctions on the Iranian
economy especially concerning the problems facing Iran’s aging oil industry as a result of
international sanctions.44 Arguably, the sanctions inflicted overwhelming financial and
technological restrictions on Iran’s ability to increase production in oil and gas fields, mainly those
shared with neighboring countries such as Qatar and the UAE (M3-2017). These problems are not
only likely to affect Iran’s economy but could increase political tensions between Iran and its
neighbors, which are free to extract ever greater amounts of oil and gas along their borders with
Iran.45 The majority of foreign companies have left the Iranian market or foregone new
investments, unwilling to risk losing access to the United States market and being excluded from
the dollar-based financial system. For example, France’s Total company which had become the
first supermajor to return to Iran after the previous sanctions, did not continue the South Pars 11
gas project and unwound all related operations in November 2018.46
43 The national. Explainer: the collapse of the Iranian rial. (Online) available at:
https://www.thenational.ae/business/economy/explainer-the-collapse-of-the-iranian-rial-1.754707 [Accessed:
February, 2019] 44 Iranian students’ news agency. Vice president: We do not want to worry people about the sanctions/ we should
minimize the impact of the sanctions. (Online) available at: https://www.isna.ir/news/97081507275 [Accessed:
February, 2019] 45 Cummins, C. and Hafidh, H. (2009). Iranian Troops Occupy Oil Field in Iraq, Stoking Tension. The Wall Street
Journal. (Online) Available at: https://www.wsj.com/articles/SB126114921937697207 [Accessed: October, 2018] 46 France’s Total Company. US withdrawal from the JCPOA: Total’s position related to the South Pars 11 project in
Iran. (Online) available at: https://www.total.com/en/media/news/press-releases/us-withdrawal-jcpoa-totals-position-
related-south-pars-11-project-iran [Accessed: April, 2019]
142
Since the United States imposed sanctions on Iran, Iranian oil exports have fallen from a peak of
3.2 million b/d in June 2006 to 1.7 - 1.9 million b/d in September 2018, and this number is already
declined further in 2019 and 2020. Over the years, sanctions have taken a serious toll on Iran’s
economy and society. In April 2013, the United States national security adviser claimed that the
United States government had imposed the most severe economic sanctions against Iran, which
had never been imposed on any other country before.47 My personal observation of Iranian society
shows that these sanctions have crippled the lives of the Iranian people, as exports and investment
inflows reduced, national currency value dropped sharply, and rising inflation and high
unemployment decreased consumption. By barring banks doing business with Iran from operating
in the US or from even using dollars, the restrictions effectively severely limit imports of food and
medicine. However, the Iranian officials argue that Iran has reached self-sufficiency in all areas,
stressing that the nation will overcome the sanctions imposed by the United States.48 This rhetoric
is also adopted within the NIOC. For instance, the NIOC’s operation manager argued that “the
United States’ sanctions have had no impact on exploration operations which continue as usual”.
He also added that “the sanctions have made Iran self-sufficient in producing equipment for oil
and gas exploration” (P12-NT-Feb18).
6.4.1 International Sanctions Since 1979
Throughout anarchy in Iran in 1978, the US kept supporting the Shah with military assistant and
equipment to maintain him in power. The US opposed Khomeini for many different reasons. First
of all, if Khomeini came to power, he would restrict or abolish Western domination in Iran's
economy (mainly in oil and natural gas) and policies because this promise was one of his primary
objects. The US has also feared an ideological shift in Iran and an expansion of revolutionism
among Arab counties.49 However, their support did not prevent the revolutionaries’ approach. In
fact, when Khomeini announced his return to Iran, a senior diplomat from America was beaten by
47 Ganji, A. (2013). Crippling economic sanctions; systematic violations of the fundamental rights of the people of
Iran. Radio Zamaneh. (Online) Available at: https://www.radiozamaneh.com/91099 [Accessed: October, 2018] 48 PressTV News, ‘Self-sufficient Iran will overcome US sanctions: President Rouhani’, published: February, 2019.
(Online) Available at: https://www.presstv.com/Detail/2019/02/18/588864/Iran-President-Rouhani-US-sanctions-
selfsufficient [Accessed: March, 2019] 49 Markham, J. (1979). Khomeini’s forces rule Iran; He urges an end to violence; US consulting with regime. The
New York Times. (Online) Available at: https://www.nytimes.com/1979/02/13/archives/khomeinis-forces-rule-iran-
he-urges-an-end-to-violence-us.html [Accessed: February, 2019]
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a mob of revolutionaries. As a result, the United States leaders urged their citizens in Iran to leave
the country or remain in safety zones.50
Khomeini and revolutionary leaders identified the United States as a nation with selfish motives.
Thus, after the conclusion of the 1979 Islamic revolution, American-Iranian relations went
downhill. He claimed that because of the United States’ exploitation, Iranians were forced to
engage in a revolution where Iranian blood was shed. He was willing to take economic risks in
order to destroy Western influence in Iran. According to Khomeini, “All the problems of the
Eastern countries stem from the influence of Western powers, mainly the [US]. Indeed, all our
problems come from America”.51 As a result of the Islamic revolution, the US not only worried
about the spread of communist supporters but also its impact on the Iranian petroleum industry.
However, the Iranian oil cutoff strained the oil market quickly. The Western media started
speculating on how oil prices would increase because of Iran’s policies. In 1978, the US was one
of the most significant oil importers from Iran, having bought approximately 200 million barrels
of Iranian oil during this period (Murray, 2009). The oil policy of the revolutionary regime has
made oil price double on the international market, approximately ten times the price that was paid
in 1970. These new oil policies noticeable an economic change for both Iran and the US. Iran
began earning more profits from its oil industry; the US was required to pay more for foreign oil.
Consequently, American leaders endeavored to reduce reliance on foreign oil and to conserve
energy more efficiently.52
Over the last 40 years, during several periods of conflict between Iran and Western powers, several
sanctions were imposed on Iran, causing serious losses for Iran’s economy. The United States first
imposed sanctions against the Iranian regime in November 1979, after a group of radical students
seized the American Embassy in Tehran and took the people inside hostage. The United States
broke diplomatic relations with the revolutionary government of Iran and blocked the Iranian
government’s assets of around 12 billion US dollars including bank deposits, gold and other
properties in the United States. Moreover, the United States government banned the import of
50 Branigin, W. (2019). We were covering the Iranian revolution. A single gunshot still haunts me. The Washington
Post. (Online) Available at: https://www.washingtonpost.com/history/2019/02/10/we-were-covering-iranian-
revolution-then-single-gunshot-changed-everything/?utm_term=.f0da4d891f17 [Accessed: March, 2019] 51 Mosleh Zade, M. (2018). Imam Khomeini’s strategies in the contemporary international system. Imam
Khomeini’s portal. (Online) Available at: http://www.imam-khomeini.ir/fa/n131934 [Accessed: February, 2019] 52 The United States Congress, 1980 Economic Report, published: February, 1980. (Online) Available at: https://fraser.stlouisfed.org/title/1250/item/536798 [Accessed: October, 2018]
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Iranian oil to the United States and all trades within Iran’s energy industry such as investment,
technology transfer, financial transaction, and virtually all interaction between Iran and the United
States. Against the American leaders’ decisions, the Iranian government ordered any foreign
experts, especially those within the Iranian petroleum industry, to leave the country. Hence, all the
exploration data about the oil reserves and infrastructure development details of Iranian oil and
natural gas fields were withdrawn by the Western petroleum companies that used to operate in
Iran. During the period from 1994 to 2001, the United States government officially prohibited
American companies from investing in Iranian petroleum projects and those who violated the law
could face a fine of up to 1 million US dollars and 20 years of imprisonment. The American
officials argue that they imposed a new embargo on Iranian goods and services because of Iran’s
support of international terrorism and its aggressive actions against non-belligerent shipping in the
Persian Gulf.53
In 2001, the United States government increased the economic sanctions against Iran under the
pretext of Iran’s engagement in the development of nuclear weapons. Therefore, Iran’s access to
the peaceful nuclear technology program was violated. However, Iranian officials emphasized that
the nuclear program was for civilian purposes such as generating electricity and medical
purposes.54 In 2006, the UN Security Council passed Resolution 1696, which demanded that Iran
halted its uranium enrichment program, and after a few months it passed Resolution 1737 to
impose sanctions after Iran refused to comply. The United States has led international efforts to
use sanctions to influence Iran’s policies, including Iran’s uranium enrichment program, which
Western powers worry is intended for developing the ability to produce nuclear weapons. The
United States government used this opportunity to tighten economic sanctions against Iran and
especially targeted investments in oil, gas and petrochemicals, exports of refined petroleum
products to reduced Iranian government revenues, and prevent business dealings with the IRGC.
The US blocked the properties of Iranian banks, financial institutes, individuals, and companies
including shipping, telecommunication, technology, education, web hosting services and software
for supposedly having ties with Iran’s nuclear technology program.55
53 Levs, J. (2012). A summary of sanctions against Iran. Cable News Network (CNN). (Online) Available at:
https://edition.cnn.com/2012/01/23/world/meast/iran-sanctions-facts/index.html [Accessed: February, 2019] 54 Cabinet office of Iran. Iran's nuclear activities are peaceful. (Online) Available at:
http://cabinetoffice.ir/fa/news/3541 [Accessed: October, 2018] 55 Legal information institute. The US Federal Regulations on Iran. (Online) Available at:
https://www.law.cornell.edu/cfr/text [Accessed: October, 2018]
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In 2008, the dimension of economic sanctions increased dramatically, as the UN Security Council
imposed new sanctions against Iran. The EU governments also adopted a further set of restrictive
measures against Iran in 2012, including a ban on the financial transaction with Iranian banks, the
freezing of Iranian Central Bank assets in the EU, and the prohibition of investment, of insurance
for Iranian oil tankers, of import of Iranian petroleum products, of transfer of technology, of dual-
use items, and of the supply of equipment for the Iranian energy industry. The major element of
these sanctions was forbidding the EU investment in the Iranian petroleum industry and the
provision of ‘key’ equipment, technology, financing, and assistance for use in refining, liquefied
natural gas (LNG), exploration, production, and development. These measures were accompanied
by the repeated expansion of the EU’s blacklist of sanctioned Iranian individuals and companies
subject to measures such as asset freezes and travel bans.56 In the face of expanded economic
pressure from the Western countries, Iran is attempting to build a resistive economy. The Iranian
government has advocated a “resistive economy” in response to sanctions, which means, for
example, using more oil internally as export markets dry up. This strategy also involves developing
industries independent of the oil business in order to import substitution industrialization of Iran
to circumvent international sanctions. One Iranian politician argued: “If we had not faced
sanctions, we would never have thought of reducing our dependence on oil... sanctions are
dragging us in that direction”.57 However, as I have shown in the previous chapter (see figure 5.4)
Iranian oil export dropped sharply between the years 2010 and 2012, from 2.4 million b/d in 2011
to 1.4 million b/d in 2012 and declined to less than 1 million b/d in 2013, which caused the Iranian
government revenue to reduce. Additionally, Iranian oil production declined due to limited access
to technologies needed to improve their efficiency. This situation forced the Iranian government
to come to the negotiating table with the Western powers, especially the United States. In 2013,
formal negotiations toward the Joint Comprehensive Plan of Action (JCPA) on Iran’s nuclear
program began with six world power countries including China, Russia, France, Germany, the UK,
and the US (the P5+1). In April 2015, they finally reached a provisional agreement on a framework
in which these countries committed to lifting the international sanctions step by step based on
Iran’s performance. In October 2015, the final agreement was adopted between Iran and P5+1. As
56 Patterson, R. (2017). EU Sanctions on Iran: The European Political Context. Middle East Policy Council. (Online)
Available at: https://www.mepc.org/eu-sanctions-iran-european-political-context [Accessed: December, 2018] 57 Financial Times. Iran develops ‘economy of resistance’. (Online) Available at:
https://www.ft.com/content/27ec70a6-f911-11e1-8d92-00144feabdc0 [Accessed: January, 2019]
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a result, UN sanctions were lifted on January 2016. The Iranian petroleum industry gained access
and could sell its products on the international market again, and tried to increase its production to
offset the decline in oil exports in previous years. The Iranian president tweeted that “the legs of
Iran’s economy are now free of the chains of sanctions, and it’s time to build and grow”, a day
after the world powers lifted sanctions on Iran in exchange for curbs on its nuclear program. He
also told the parliament that “Iranian government policies in the post-sanctions era will focus on
attracting foreign investment, expanding non-oil exports, and making the best use of financial
assets”.58 The measure lifted restrictions on Iran’s oil, gas, and petrochemicals exports, which rose
by more than 1 million b/d within a year and returned to their pre-sanctions level. Many foreign
companies remained wary of investing in Iran because of the concern that the sanctions could
“snap back” if the Iranian government were later found not to be complying with the nuclear
agreement (D17-2018). However, in 2017, Iran signed a 5 billion US dollars deal with a foreign
energy company (i.e., France’s Total SA) to develop the South Pars offshore field, one of the
world’s largest natural gas fields. This agreement was the first energy deal between a foreign
company and Iran since sanctions were lifted. Iran’s petroleum minister said that “the country
needs 200 billion US dollars in investments to make up for time lost during the sanctions”. Thus,
he invited United States companies to make offers.59 This was the first time that Iranian officials
requested United States companies to invest in Iran since Iran’s revolution in 1979.
The post-sanction path to economic recovery was, however, not without any pitfalls for Iran, as
the financial regulatory environment made the re-connection difficult and time intensive.
Moreover, in 2017, Donald Trump became president of the United States, and he withdrew from
the agreement with Iran. He threatened to impose penalties on any foreign companies doing
business with Iran. International banks and foreign companies did not want to face the
consequences of breaching United States rules. As a result, the “bonanza” that both international
investors and the Iranians expected to see in the country’s oil business did not materialize.60 In
2018, the United States administration re-imposed the sanctions against Iran which had been lifted
58 Torchia, A. (2016). Airbus plan heralds Iran boom after sanctions lifted. Reuters. (Online) Available at:
https://www.reuters.com/article/us-iran-nuclear-economy/airbus-plan-heralds-iran-boom-after-sanctions-lifted-
idUSKCN0UV0GB [Accessed: January, 2019] 59 Weston Phippen, J. (2017). Iran Signs a $5 Billion Energy Deal with France’s Total. The Atlantic News. (Online)
Available at: https://www.theatlantic.com/news/archive/2017/07/iran-total/532560/ [Accessed: January, 2019] 60 Nakhle, C. (2018). The return of US sanctions on Iran: consequences for the oil market. Geopolitical Intelligence
Service. (Online) Available at: https://www.gisreportsonline.com/the-return-of-us-sanctions-on-iran-consequences-
for-the-oil-market,energy,2591.html [Accessed: Febuary, 2019]
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based on JCPA agreement in two phases (August and November) in 2015. In consequence,
France’s Total announced that it withdraws from Iranian gas field projects after certifying that it
was highly vulnerable to the threat of the United States’ penalties against those doing business
with Iran. The CEO of France’s Total Company said that “Total has notified the Iranian authorities
of its withdrawal from the contract following the 60 days deadline for obtaining a potential waiver
from the United States authorities”. He added, “Despite the backing of the French and European
authorities such a waiver could not have been obtained”.61 The United States officials argue that
these sanctions targeted the country’s vital oil and gas sector, intending to apply maximum
pressure on Iran’s economy by imposing vigorously punitive measures on the Iranian petroleum
industry. While the US has warned rigorous sanctions on Western companies operating in Iran,
the nuclear agreement’s other parties such as Great Britain, France, Germany, China, and Russia
have promised to stay true to the deal and urged businesses to follow their lead. However, the re-
imposed sanctions by the US have exacerbated Iran’s economic woes. Iranian rial currency has
lost almost two-thirds of its value since April 2018 (see figure 6.2), leading to financing difficulties
at local banks. The United States administration has told Iranian officials that its only chance of
avoiding sanctions would be to accept the offer to renegotiate a tougher nuclear deal. Iranian
officials have repeatedly rebuffed that offer. The Iranian Minister of Foreign Affair spoke during
a session of the Doha Forum 2018 in Qatar: “We have survived against the United States, against
the will of the United States for the last 40 years, and I believe we will survive for the next 40
years”.62 In November 2018, the United States announced the imposition of the toughest sanctions
ever against Iran’s banking and energy sectors with the aim of cutting off the country’s oil sales
and crucial exports. The United States has been lobbying frantically with major international crude
oil buyers to have them stop their purchases (D17-2018). The NIOC’s CEO stated: “We know that,
in fact, the difference, this time, is that previous countries are not ready to comply with the United
States’ request. So, we have enough leverage to continue our exports”. He added, “We have lots
of alternatives because we have had some experiences in the past. The importance thing here are
the psychological impacts rather than very practical [effects] on the ground. So, they started a
61 DW News. French energy giant Total officially pulls out of Iran. (Online) Available at:
https://www.dw.com/en/french-energy-giant-total-officially-pulls-out-of-iran/a-45150849 [Accessed: February,
2019] 62 PressTV News. US sanctions will fail to change Iran policies. (Online) Available at:
https://www.presstv.com/Detail/2018/12/15/583031/Zarif-Doha-US-sanctions-Yemen-Houthi-Saudi-Arabia
[Accessed: January, 2019]
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kind of psychological warfare to frighten our people and to sabotage our economy. But gradually
we were able to, in fact,…find ways and means to guarantee that we can continue to export oil”
(P1-NT-Aug17). Iran previously could not provide enough fuel for domestic needs because of a
lack of infrastructure and international sanctions which limited the supply of modern equipment
and technology for plant maintenance. However, at the beginning of 2018, the Deputy Minister of
Petroleum said on local media, that the country would be self-sufficient in the production of
gasoline by the end of the year. Additionally, at the inauguration of the second phase of the Persian
Gulf Star Refinery the Iranian President said: “Fortunately, we do not need to import gasoline
anymore. We have reached self-sufficiency…We can export our produced gasoline but have no
export plans”. In contrast, the Petroleum Minister argued on local media that “due to the high
consumption of gasoline in the country and the necessity of refineries to the foreign equipment and
technology, self-sufficiency in gasoline production is not possible”. “If the refinery becomes fully
operational, we will have no concerns over sanctions”, he added.63 After a few days, the Iranian
President said the following in a televised speech: “When under threat of sanctions by our enemy,
if we control and reduce our domestic consumption of gasoline ... we can say that we are self-
sufficient in fuel production”.64 However, the business development manager of the NIOC asserted
that “Iran has struggled to meet its domestic fuel needs for years. This was due to a lack of refining
capacity and economic sanctions that limited the supply of spare parts for plant maintenance”
(P8-VR-Sep17). In spite of the severity of the sanctions regime, the Iranian officials asserted that
they have taken positive steps to develop the required technologies for their energy sector by
relying on domestic private companies to improve technological capabilities. The operation
manager of the NIOC argued that “a few years ago, we were begging foreign countries such as
Chinese companies to be able to purchase some drilling equipment, but we have now become self-
sufficient for them” (P12-NT-Feb18). In 2019, at the inauguration of the third phase of the Persian
Gulf Star Refinery the Iranian President said: “at the moment, we are facing the challenges of an
economic war and sanctions, since the US and its mercenaries in the region are attempting to
increase daily pressure on the Iranian nation, but we are neutralizing their goals by relying on
63 Mashreq News. Rouhani: We became self-sufficient in gasoline production / Zanganeh: They lied that we were
self-sufficient. (Online) Available at: https://www.mashreghnews.ir/news/835273 [Accessed: February, 2019] 64 The Ministry of Petroleum. The inaugurating the second phase of the Persian Gulf Star Refinery. (Online)
Available at: http://www.mop.ir/Portal/Home/ShowPage.aspx?Object=NEWS&ID=d5e5c47d-6bb5-4a67-9cca-
86d9725e8136&LayoutID=b6ed4ed2-35c1-4143-8c79-10b895bff86b&CategoryID=b37c877a-1ec5-4ae5-90a0-
a36ed666ca3c [Accessed: February, 2019]
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domestic capabilities”. He also added, “The era in which they could rule over the people through
pressure and sanctions has ended, it is time to hold a dialogue and constructive interaction
between governments based on respect and mutual interest”.65 These narratives show that the
Iranian authorities have a rhetorically controversial view about the influence of sanctions on the
Iranian economy, specifically on the energy sector as the principal source of government revenues.
Furthermore, France, Germany and Great Britain launched the Instrument in Support of Trade
Exchanges (INSTEX) in January 2019, a financial mechanism to protect Tehran-Europe trade ties
against the United States bans.66 However, details about how the mechanism will function are not
yet clear. Nevertheless, it appears that due to the political pressure of the United States in an
intensification of sanctions against Iran, this tool is not practiced and has only a propaganda aspect.
Hence, it is almost impossible to quantify the geopolitical risk in the Middle East especially the
effects of the United States sanctions on the crude oil price in the international market.
In an unintended consequence, the US sanctions have actually strengthened the IRGC’s economic
power, as few foreign firms risk investing in the country. The IRGC marginalized the domestic
private sectors especially in the oil and gas sector. Currently, Khatam al Anbia, the engineering
arm of the IRGC, is one of the main contractors of the Iranian oil and gas projects which helped
its access to Iran’s foreign exchange reserve. The IRGC has also established its several banks,
including Ansar Bank, and Mehr Finance and Credit Institution (D16-2018).
6.4.2 The Impact of Sanctions on Technology Development for the Iranian Petroleum
Industry
Iran’s petroleum industry is currently (2020) facing challenges including the maturity of
hydrocarbon fields, the growing population of the nation that strains additional revenues from
petroleum exports, and economic sanctions that have limited access to ‘key’ technologies.
Importantly, these restrictions have led to obstacles in the acquisition of the technology and
technical knowledge needed for development. For example, the development of the South Pars gas
condensate field faced severe problems. While Iran has been able to provide the costs of the gas
field which is shared with Qatar, lack of advanced technology, technical knowledge, and the
65 Mehr News. The opening of the third phase of the Gulf refinery means a failure of sanctions. (Online) Available
at: https://www.mehrnews.com/news/4545429 [Accessed: February, 2019] 66 Germany’s international broadcaster (Deutsche Welle). INSTEX: Europe sets up transactions channel with Iran.
(Online) Available at: https://www.dw.com/en/instex-europe-sets-up-transactions-channel-with-iran/a-47303580
[Accessed: February, 2019]
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interest of international companies to cooperate with the Iranian petroleum industry due to the US
restrictions have made it nearly impossible to progress fitly. Restrictions from international
technology providers have led managers of the energy industry to try to develop the technologies
they needed inside the country (D7-2012). However, for the past years the development of the
Iranian petroleum industry depended on the transfer of technology, skilled manpower, machinery,
equipment, and managerial and administrative expertise from the IOCs. Planners and political
analysts alike are aware that a prolonged slump in oil price and production would threaten national
revenues, increase unemployment, and create political instability (D14-2017).
As explained previously, before the Islamic revolution in 1979, the discovery and extraction of oil
were entirely performed by foreign companies. Moreover, all Iranian oil fields were still at the
beginning of their lifecycles, and it was easy and inexpensive to exploit them. After the Islamic
revolution in 1979 and reforms in the constitution, transferring oil reserves to foreign companies
in the form of a divestiture or joint venture production was banned. However, the restrictions
shifted post-1989 as the Iran regime tried to join the free market by adjusting legislation to be more
adopt to norms of transnational regulation in alignment with the interplay of the state ideologies
(Mihret et al., 2020). The Iranian Ministry of Petroleum, functioning as an Iranian government
representative, was placed in the stewardship of the oil reservoirs and put in charge of managing
the resources. Since then, contracts with foreign companies in the petroleum industry have been
in one of these three different forms of contracts: (1) engineering, procurement, and construction
(EPC), (2) engineering, procurement, construction and management (EPCM) and (3) engineering,
procurement, construction and financing (EPCF), and buy back contracts (Hoshdar et al., 2017).
However, these contracts did not provide any incentive mechanism for foreign companies to apply
advanced technologies and sustainable reservoir extraction strategies. Moreover, over the last few
years, with the severity of the US sanctions over Iran, even these types of contracts have become
much more problematic and have challenged the sector’s development. Additionally, Iranian
politicians only paid attention to the increase in oil production and accordingly the generated
income during this time. They did not prioritize the allocation of the petroleum industry resources
to the areas of research, technology development, and innovation. All of these challenges and the
causes of failure in the industry have led the petroleum policymakers to conclude that the Iranian
petroleum industry needs a comprehensive plan to incorporate technology development and
innovation. The majority of planning actions for technological development have been taken with
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respect to the intensification of sanctions since 2009. According to Iran’s twenty-year national
outlook, as well as the petroleum industry’s vision, the technological acquisition is among the
fundamental priorities, which are set to cope with the sanctions (D14-2017). However, the main
problem with all development plans is that they do not suggest how, or at what pace, these
objectives can be met. These plans are also missing the essential capital information, the structure
and characteristics of the economy, important development data, and designation of
responsibilities. So far none of these objectives have been achieved (Hoshdar et al., 2017). Perhaps
the lack of transparency, responsibility, commitment, credibility, the absence of feasibility studies
and many other reasons account for the poor performance of any development initiatives. Iran’s
progress in some major petroleum development areas, which the government plans encourage, has
not been very impressive. Vital oil and gas projects such as South Pars phases, predicted to create
many job opportunities, have been postponed or delayed due to the sanctions, affecting future
employment patterns. Unemployment has also increased to reach more than 20 percent since 2006,
and is prevalent throughout the country.67
A slump in Iran’s energy sector will critically undermine the country’s overall economic
development, not only because of this sector’s position in making currency earnings but also its
activity as an engine for technological and industrial development. Hence, the industry would have
required new technologies to achieve its objectives. This means that the Ministry of Petroleum will
have to rely on its own domestic companies such as Khatam al Anbia, Petropars, etc. which have
emerged as prime contractors. These companies rely on indigenous technology, their learnings
from previous joint ventures with the IOCs and the available pool of small and medium-sized
technology partners that may be prepared to work in Iran despite the sanctions. Although the
domestic companies have limited financial resources to invest and the government may have to
provide its financial resources by issuing domestic bonds, the Iranian petroleum industry has
developed and its needs were stilled by domestic technologies, especially with regard to the
development of the natural gas sector (D16-2018). For example, the country produced more than
223 billion cu/m of natural gas in 2017, a capacity that has further increased to around 240 billion
cu/m in 2018 (see table 5.4). Although the re-imposed of sanctions has absent the access of Iranian
petroleum companies to the advanced technology that was expecting to get from Western IOCs,
67 Young Journalist Club. The unemployment rate in Iran is 5% less than Saudi Arabia. (Online) Available at:
https://www.yjc.ir/fa/news/6595777 [Accessed: February, 2019]
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the Iranian petroleum companies will progress. But, at a more leisurely pace and with a lower level
of technology. In some instances, the required technology will be challenging to source on the
international market, which will undermine progress, but not hamper it.
Since 2009, the structure of the industry’s Research and Development (R&D) system has
undergone substantial changes to cope with strategic planning. The important strategy of the
Ministry of Petroleum has mainly focused on indigenous technologies by domestic contractors
relying on smaller foreign companies as technology partners (D7-2012). The Deputy of the Center
for Energy Studies asserts that “industrial innovation is the key to implementing long-term oil and
gas projects”. He added, “Fortunately, over the past years we have been able to indigenize Western
technology needed in the petroleum industry by relying on domestic firms. Nevertheless, the
required more complex technologies are shelved for the time being” (P19-NT-Aug18). However,
the head of controls on petroleum exports at the NIOC asserted that “technology-wise, Iran’s state
oil companies such as the NIOC, are drastically lagging behind international and national oil
companies, and that is our biggest issue”. Furthermore, “domestic companies operating in the oil
and gas sector are pursuing standards and practices that belong to the era before the Islamic
revolution” (P16-NT-Aug18). The head of international relations at the NIOC argued that “foreign
companies that seek a place in Iran’s energy projects must now work alongside Iranian firms and
transfer their know-how” (P4-NT-Sep18). Fluctuations in Iran’s crude oil production and export
over the past four decades mirror the plight of an economy that was once the world’s fourth-largest
oil producer.
After 100 years of experience in oil exploration, production, refining, and transportation, private
and public Iranian companies are not fully proficient in undertaking main upstream or downstream
projects without relying on the foreign assistant. Moreover, the structure of the industry has
restricted the local banks and private capital from involving in the oil and gas business.68 However,
the government at the beginning of 2020 announced to modify some of the terms in legislation so
that the local entities can also engage in oil and gas business in order to fulfill the absence of
foreign companies. The Iranian Minister of Petroleum believes that the local firms are capable of
enhanced recovery at nine of the country’s aging oil fields through domestic technology. He also
68 Ghorban, N. (2009). Potentials and Challenges in the Iranian Oil and Gas Industry. The Middle East Institute.
(Online) Available at: https://www.mei.edu/publications/potentials-and-challenges-iranian-oil-and-gas-industry
[Accessed: January, 2019]
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stated that developing advanced technology and investing in modern research methods has been
the Petroleum Ministry’s strategic approach to revive the aging oil fields since 2004.69 Although
the majority of the Iranian officials believe that Iranian petroleum companies were able to receive
indigenous technologies needed for developing and expanding the energy sectors by relying on
domestic firms, still a large part of the energy sector is heavily dependent on foreign investment
and their advanced technologies.
6.5 Summary
This chapter reveals that how the development of the Iranian petroleum industry has always been
carried out within a form of political interests and forces, whether initialed by the influence of
Western powers under concessionary agreements, under the unambiguous rule of the Shah, or
political elites in the revolution and post-revolution periods. However, changes to oil and gas
sector management in Iran since the fall of the Shah in 1979 have revealed complexity and
contestation in the operation of the Iranian petroleum industry. Since then, Iranian petroleum
companies have existed in a steady negotiation relationship and conflict with the Iranian
government.
The developmental path of the Iranian petroleum industry, as embedded within the nation’s
political structure, has given a complex and fluid set of organizations, interests, and tensions which
are rooted in the historical, political, and economic role of oil and gas in the context of Iran. Iran’s
increasing international isolation has helped the government to use constructed crisis as an
opportunity in its own favor such as creating dual exchange rates (e.g., the allocation of official
rates to government transactions from the oil, gas and petrochemical earnings). It has also made it
possible to disobey the country’s rules and regulations regarding accountability and transparency
of oil and gas incomes and expenditures. As the government exploits external threats to justify
secrecy about those revenues, the IRGC and the bonyads are tightening their control over the oil
and gas sector.
Furthermore, the imposition of economic sanctions as well as the withdrawal of the IOCs from
Iran’s oil and gas sector led to the involvement of the military and clerical organizations in this
sector. This makes the energy sector’s structure more complex and highly political. Indeed, the
69 PressTV News. Iran firms defy sanctions by signing $1 billion in oil deals. (Online) Available at:
https://www.presstv.com/DetailFr/2019/01/23/586560/Iran-oil-contracts-US-sanctions-investment-China [Accessed:
February, 2019]
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Islamic regime by linking its Islamic ideology with some elements of the nationalist movement,
such as anti-imperialism discourse, which was headed by Mossadeq, has tried to justify its political
debate over strategic industries.
The current political environment makes it hard to imagine immediate change in Iran’s oil and gas
management. But dependency on oil and gas revenues makes Iranian economic development
vulnerable to oil price volatility. Although the majority of Iranian officials rhetorically disproved
the effects of sanctions on Iran’s economy, Iranian citizens perceived the impact of the economic
sanctions in their daily life through high inflation, high unemployment rates, and a sharp decline
in the value of the national currency. Iranian petroleum authorities have frequently talked on the
national media about the localization of a variety of equipment and commodities used in principal
projects of the oil and gas industry. However, the evidence shows that the development of Iran’s
oil and gas projects have slowed down, and Iran cannot reap profits from shared oil and gas fields
in the same way as its Arab neighbors. Disputes over resources and territorial boundaries have
escalated tensions between Iran and its Arab neighbors, especially concerning Iran’s shared oil
and gas fields.
All these points caused the future of Iran’s oil and gas development unpredictable and volatile.
The sanctions led to a suspension of the country’s ambitious plans concerning gradual capacity-
building and more dynamic energy stability in the medium to long term. Although this trend has
deprived the vital role of the Iranian petroleum industry in Iran's economy, it most likely will not
lead to a downfall of the sector or a collapse of the economy as a whole. In the next chapter, I will
explain the practices of PMS in the Iranian petroleum industry, especially the factors that have
shaped the uses of PMS, such as the Iranian variant of Islamic management, as well as
discrepancies between the aspirations of the change program and the actual PMS practices.
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CHAPTER SEVEN: THE PERFORMANCE MEASUREMENT AND
MANAGEMENT SYSTEMS IN PRACTICE
7.1 Introduction
As explained in previous chapters, Iran has enormous oil and natural gas reserves and plays a
crucial role in the required energy in the world. In consequence, the oil and gas industry also plays
a significant role in the Iranian economy. It presents the main source for foreign currency earnings
as well as the government’s annual budget and the main financial source for government projects.
Given the key and critical role of the petroleum industry for Iran’s economy, it is not surprising
that Iranian authorities have an interest in measuring and managing the performance of petroleum
producing companies.
Iranian authorities have adopted a comprehensive strategy encompassing reforms as reflected in
the government’s 20-year vision document (2005-2025) as well as the fifth and sixth development
plans in the petroleum industry. According to the country’s fifth and sixth development plans
(2010-2020), the Ministry of Petroleum became responsible for measuring and evaluating the
performance of petroleum producing companies in all areas such as exploration, production,
transportation, export, and development of oil and gas fields (D7-2012). The Ministry of
Petroleum’s performance-oriented strategy invites managers and employees to change their
existing mindset (see section 7.2.2) by providing training for managers and employees to acquire
new knowledge and skills and replace the old culture with one that encourages creativity,
innovation, dedication and productivity (D5-2012). According to the Deputy Director of Human
Resources Development in the Ministry of Petroleum, the main spurs to developing this strategy
are the dimension and speed of transformational technologies that have dominated the international
arena during the past years, coupled with the slow pace at which many international oil companies
have responded to this change. Subsequently, the strategic alignment of the petroleum producing
companies with the government strategy and the development of human resources in the oil and
gas companies were combined in the Ministry of Petroleum’s agenda (D2-2011).
The Ministry of Petroleum’s strategy stresses the need to synergize organizational planning and
set clear and transparent assessment indicators to help monitor the performance of petroleum
producing companies. According to the CEO of the NIOC, one of the main principles of the fifth
and sixth strategic development plans is “to increase the efficiency of the Iranian petroleum
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companies and improve the level of services. It was expected that using PMS plays an essential
role in the achievement of these goals” (P1-NT-Aug17). Similarly, one of the NIOC’s board
members stated that they are intensively seeking to improve their services and transform the
approach of the organization’s managers and employees through the implementation of
performance measurement and management technologies. He added that executives in various
disciplines should focus their efforts on “institutionalization” in order to change the existing
mindset (e.g., beliefs, norms, assumptions, values, etc.) within their organization (D12-2015). This
principle is underpinned by developing, building and implementing PMS in the Iranian petroleum
companies. Therefore, Iranian authorities assumed that there is a need to take real, solid and
sustainable steps towards implementing a PMS that supports the strategic initiatives and measures
the effectiveness and efficiency of the organization’s processes (D4-2012). The performance
management technologies should be aligned with the petroleum companies’ objectives (such as
the fifth and sixth development plan) as well as the government’s strategy (20 years’ vision plan
in the oil and gas sector). The pressure was on the managers to encourage employees to enhance
their activities with the aim of achieving organizational objectives (D2-2011).
As in the chapters five and six, the findings in chapter seven are a result of the axial coding process,
which is described in the methodology section of this thesis (see chapter 4). In this chapter, I
address three main research questions:
1. How are performance measurement and management systems understood and practiced in
a non-Western context?
2. How has Islamic ideology shaped the practices of performance measurement and
management?
3. How do managers cope with conflicting values (such as religious value and industrial
value) in the practices of performance measurement and management?
I will address these questions through document analysis, observations, and interviewees’
reflections on their past and current experience with and perception of the practices of PMS.
First, I will describe the aspirations and the background of the recent PMS change program,
illustrating how documents and interviewee statements expressed ideals of how performance
measurement and management systems should be used in the Iranian petroleum industry. I will
then illustrate the study’s findings on how performance measurement and management systems
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were actually put to use and how these practices are partly in conflict with the ideals described
before. In order to explain these discrepancies, I will then move on to discuss important cultural
and political context factors which shape performance measurement and management practices in
the Iranian petroleum industry.
7.2 Aspirations of Performance Measurement and Management
The lack of transparency, accountability, and mismanagement of Iranian petroleum companies
such as the NIOC has been criticized by the society, social media and local experts during the past
years.70 Critics argue that Iranian petroleum authorities have failed to invest in economic
development and have veiled their management in secrecy. Moreover, they assert that the
government has violated its own rules for oversight of the oil and gas revenues (Semnani, 2018).
Similarly, the Petroleum Minister claimed that “the problem we are facing now in the petroleum
industry is not finance, but management problems”.71 Thus, the government prioritized reforming
poor management in the oil and gas sector in 2010 (D2-2011). According to the Deputy Director
of Human Resources Development in the Ministry of Petroleum, the main spurs to implement and
develop the change program are keeping pace with globalization as well as the speed of
transformational technologies that have dominated the international arena. Moreover, this
organizational change is also essential, as the majority of the organization’s goals and objectives
are not being met by the previous strategic development plans (D11-2014).
In 2012, the change program called Strategic Transformation in the Iranian Petroleum Companies
(STIPEC) was introduced by the Ministry of Petroleum, allowing negotiation with the research
and technology development of the four major Iranian petroleum-producing companies. The
Ministry of Petroleum has set targets for all petroleum-producing companies to align their strategic
efforts with the government’s vision for 2025 and the fifth and sixth development plans (D12-
2015).
7.2.1 Iran’s 20-year National Vision and the Fifth and Sixth Development Plans
One of the most significant subjects in the Iranian petroleum industry is the formulation of the
country’s fifth and sixth development plans for oil, gas, and petrochemicals in line with Iran’s 20-
70 Tabnak agency news. Review of six decades of oil revenues in the Iran. Translated from Persian by the author.
(Online) Available at: https://www.tabnak.ir/fa/news/864209 [Accessed: January, 2019] 71 Mohamedi, F. (2010). The oil and gas industry. The United State Institute of Peace. (Online) Available at:
https://iranprimer.usip.org/resource/oil-and-gas-industry [Accessed: January, 2019]
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year national vision goals, the Ministry of Petroleum’s mission and the general policies of the oil
and gas sector (D7-2012). In 2004, the Expediency Council72 convened a special commission to
draft a 20-year vision document (2005 - 2025) with the cooperation of the management and
planning organization. This document was approved after some amendments were made by the
Supreme Leader, and the legislative, executive and judicial branches of the Islamic Republic of
Iran were notified of its implementation in March 2005 (D10-2013). This vision document was
called Iran’s 20-year national perspective in the horizon of 2025 (serving as the basis for
formulating four five-year development plans (fourth - seventh)), outlining a road map for the
country’s economic, political, social and cultural developments during the next two decades (D16-
2018). One of the main objectives of this 20-year perspective is achieving the first rank in the areas
economy, science, and technology in the region of southwest Asia (including central Asia,
Caucasus, Middle East, and other neighboring countries). This ranking emphasizes technological
development, knowledge production, continuous economic growth, relative promotion of the per
capita income level, and the achievement of full employment.73 In another part of this national
vision, it also compels public organizations to use selection criteria for recruiting people who
should be active, responsible, self-sacrificing, devout, conscientious, committed to the goals of the
Islamic revolution, and proud to be Iranian (D11-2014).
The national vision 2025 in the petroleum industry emphasizes the oil and gas sector’s strategy for
long-term development, which includes supporting the establishment and development of the
private sectors, producing, transferring and upgrading new technologies, development of oil and
gas fields, increasing production capacity of crude oil to 5.2 million barrels per day and natural
gas to 900 million cubic meters per day, attracting foreign investment, etc. (D7-2012). According
to this perspective, Iran must first maintain the position of second-largest crude oil producer in the
OPEC by covering 7% of the share of world petroleum supply. Secondly, the country must also
achieve first place in the region in terms of refining capacity and value in producing petrochemicals
72 The Expediency Council is an administrative assembly appointed by the Supreme Leader and was created upon the
revision to the Constitution of the Islamic Republic of Iran on 6 February 1988. It was originally set up to resolve
differences or conflicts between the Parliament and the Guardian Council, but “its true power lies more in its advisory
role to the Supreme Leader”. The Expediency Council has supervisory powers over all branches of the government.
Members of the council are generally ayatollahs (powerful clerics), who are chosen by the Supreme Leader every five
years. (see http://english.khamenei.ir/news/5072/What-are-statuses-and-duties-of-the-Expediency-Council-in-the) 73 The Ministry of Economic Affairs and Finance. The 20-year national vision of the Islamic Republic of Iran in
2025 Horizon. Translated from Persian by author. (Online) available at:
http://asl44.mefa.gov.ir/Portal/Home/Default.aspx?CategoryID=c08d0272-f684-4d5b-9836-bc13a45d04bb
[Accessed : June, 2019]
159
and materials in order to create the highest added value from its hydrocarbon resources.
Furthermore, Iran needs to achieve first place in the region’s oil and gas technology (D4-2017),
which requires the improvement of services, technologies, customers satisfaction, internal
processes, and so on. All of these conditions must be fulfilled to keep proper distance from other
competitors for this position in terms of creating production capacity. According to the NIOC’s
administrative circular about the national vision in Iran’s 2025 Horizon, general policies
announced by the supreme leadership in the energy sector include:
Adopting appropriate measures and strategies for expanding oil and gas exploration
and awareness of the country’s resources.
Increasing oil production capacity in proportion to existing reserves and using the
country’s economic, political, and security power.
Increasing natural gas production capacity appropriate to the country’s reserves to meet
domestic consumption and maximize replacement of oil products.
Expanding fundamental research, developing and training of human resources, and
technology development in various fields of oil, gas, and petrochemical.
Striving to create the right structure to attract the required funds through internal and
external investors.
Exploiting the country’s geopolitical position in the region to buy, sell, process, refine,
trade and transfer oil and gas to domestic, regional, and global markets (D10-2013).
The fifth and sixth development plans emphasize utilizing the maximum capacity of the petroleum-
producing companies for increasing production, developing oil and gas fields and those objectives
which were not achieved in the previous plan (i.e., the fourth development plan) such as
exploration and development of new oil and gas fields, localization of technologies, expanding
refineries’ capacity, etc. (D17-2018).
Each of these development plans (e.g., fourth, fifth, and sixth) have almost 20 main objectives
each, which have an average of 10 articles, and each of these articles have around 5 clauses. For
example, according to the sixth five-year development plan (2015 - 2020), article 48 states “...to
increase and enhance the potential of science, technology, and innovation in the petroleum
industry, an amount equal to 1% of the fund allocation of the annual development plans of the
subsidiary companies is required during the implementation of the planning act. The planning act
was allocated these funds to increase capacity, develop technologies in oil, gas, petrochemical,
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and renewable energies and apply them in related industries. Furthermore, existing technologies
are to be upgraded and localized, and domestic energy consumption shall be reduced, while
agreements with the organizations shall be exchanged and annual performance reports shall be
submitted to the research center of the Islamic Consultative Assembly”.74 According to clause (C)
of article 48, the Ministry of Petroleum is obliged to make arrangements to use the capacities and
abilities of private and cooperative companies as well as semi-governmental entities to invest in
the exploration, production, and exploitation (not ownership) of oil and gas fields, particularly in
the shared fields with neighboring countries. This obligation was enacted within the framework of
the general policies of article 44 of the constitution.
Furthermore, article 51 states that the petroleum-producing companies should be developing
human capital with regard to health, skill, competence, and motivation (modified according to the
notion of the Deputy of Human Resources of the Ministry of Petroleum). According to clause (D)
of article 51, the Ministry of Petroleum is required to create a competitive environment among
petroleum companies by transforming the management structure (e.g., improving skills,
competences, and abilities of managers) in compliance with international management standards.
Furthermore, he is also required to establish gender equality and create equal opportunities by
enabling and enhancing the skills and competencies of all employees, and integrating performance
measurement and management systems in petroleum-producing companies (D17-2018).
Moreover, to implement the overall policies of the sixth development plan and the resilience
economy program, the government is obligated to enhance the “jihadist culture”75 of creating
value-added, wealth, productivity, entrepreneurship, and investment. Granting “Resilience
Economics badges” to individuals for their valuable service in the field and promoting the
dimensions of resilience economics and its discourse, especially in the scientific, educational and
media contexts and their transformation into a widespread national discourse, is also part of the
program.
74 The National Iranian Oil Co. Oil in the Sixth Development Plan Act. Translated from Persian by author. (Online)
available at: http://www.nioc.ir/portal/home/?generaltext/97296/96775/21742/ [Accessed: July, 2019] 75 Jihadi culture is also known as struggle culture, a combination of thought and value capitals (such as overcoming
obstacles, striving with Divine Will, self-esteem and confidence, etc.) which affect human behavior. The jihadist
culture and values are based on the religious thoughts and beliefs of the revolutionary people, inspired by the founding
of the Islamic Republic of Iran in 1979. Jihadist culture is an institution that is governed by dedicated management
with a definite identity and mission to serve the individual effort of its participants. There are two basic orientations
for jihadist culture, one based on cultural and religious beliefs of Islam, and the other on true independence (i.e.,
independence from the Western and Eastern countries). By contrast, this terminology refers to “jihadism” as a 21st
century neologism found in a Western language to describe Islamist militant movements (see Hegghammer, 2017).
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However, a multitude of serious ideological, political, economic, managerial, technological, socio-
cultural, and external obstacles have threatened the achievement of these goals during the past
years. The performance report of the Iranian petroleum industry based on the fourth development
plan for the years 2005-2010 published by the research center of the Islamic Consultative
Assembly in 2014, shows that the imposed sanctions led to Iran moving from the third position as
crude oil producer to the fifth position in the OPEC. The statistical report shows that the production
level has not increased in line with the fourth development plan but rather decreased compared to
the previous level of production. This report also notes that achieving the objectives of the national
vision in the 2025 Horizon for increasing production capacity of crude oil to 5.2 million barrels
per day and that of natural gas to 900 million cubic meters per day would require an investment of
at least 20 billion US dollars. Furthermore, another part of the report mentioned that the analysis
of petrochemical statistics shows that the implementation of projects was delayed due to the
decline in investment. Although the petrochemical medium-term objectives were achieved by the
end of 2014, it had not met its target regarding production capacity and ranking in the Middle East
(D15-2018).
At the end of the report, it is also mentioned that given the available financial resources from the
predicted profits and savings of the petroleum-producing companies, it would be possible to cover
around 25 percent of required investment in the energy sector. The remaining 75 percent should
then be obtained from other financial sources including the domestic private sector, cooperative
companies, and foreign direct investment (D15-2018).
7.2.2 The Change Program (STIPEC) Proposal of Performance Measurement and Reporting
In this section, I explain the background of how performance was measured and reported before
the implementation of the change program. The NIOC, a principal player in the Iranian petroleum
industry with a long historical background and experience in the oil and gas sector, initiated the
decision on the change program based on the fifth and sixth development plans in line with Iran’s
20-year national vision in the petroleum industry. The Ministry of Petroleum first introduced the
change program to its four major subsidiary companies in 2012 and the NIOC officially
implemented it in 2014. The NIOC has set up a project (the change program) called STIPEC with
the aim to completely transform their business into a more efficient, customer-focused,
performance-oriented organization. The STIPEC is in line with the delivery of the national vision
for 2025, the Ministry of Petroleum’s mission and the general policies of the oil and gas sector
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(D12-2015). In seeking to achieve the most suitable practice, the NIOC’s Board of Directors
decided to implement the BSC, the management program which was already used as a program
for performance management and strategy implementation by some of the Iranian public
companies in different industry sectors such as the energy industry (e.g., the Ministry of Energy),
the steel industry (e.g., the Khuzestan Steel Company), the automotive industry (e.g., Iran Khodro),
and international oil companies such as Statoil and Petrobras.
The NIOC stated that the aim of using PMS (such as the BSC) was persuading subsidiary
companies to report their performance in principal areas (e.g., financial, customers, human
resource, etc.) including strategic planning by setting targets, monitoring units’ performance based
on assigned indicators, implementing performance-based rewards, improving staff productivity
and staff awareness of organizational objectives, and controlling and ensuring the achievement of
goals (D12-2015). The BSC was viewed as a strategic tool for achieving a balance between risk,
cost, and performance in the short and long term (D8-2013). According to the NIOC’s document
about the performance management model (D12-2015), the BSC’s generic strategy map describes
and communicates the organization’s strategies as tangible goals and actions (see figure 7.1).
Therefore, the aspiration of this program was to align the subsidiary companies with the NIOC’s
strategy. STIPEC is designed to establish a strategy execution framework comprising specific
priorities, key performance indicators, and initiatives to measure an organization’s performance,
with the ultimate aim of boosting performance and enhancing alignment, interaction, and
collaboration between the NIOC and its subsidiary companies (D12-2015). However, its outcome
at a basic level is to facilitate the translation of the strategy into operational terms and enable its
implementation by allowing the organization to monitor its level of execution (D8-2013).
The CFO of NIOC argued that performance assessment was previously based exclusively on
financial aspects. The previous assessment method used accounting systems and fundamental
financial tools (such as budgeting and forecasting sales, productions, costs, etc.) to become aware
of financial resources, to present petroleum-producing companies’ responsibility for the resources
received, and also to gain legitimacy vis-à-vis its stakeholders and external organizations.
Performance assessment did previously not comprise a comprehensive measurement system (such
as the BSC) to evaluate both financial and non-financial performance. “The aim of the change
program is transforming NIOC’s strategies into actions, and linking strategy to budgeting is part
of this program. Indeed, the BSC as a strategic road map, showing how the organization should
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move from its current level of performance to the desired level of performance, based on the
perceived economic environment,” he added (P3-VR-Aug17).
Figure 7.1 The NIOC’s Balanced Scorecard generic strategy map
Financial
perspective: Stable
profitability
Customer
perspective:
Customer-oriented
management
Improving shareholder’s value
Revenue growth rate Productivity growth
New investment for
development Maintaining present
customers Attracting new
customers
Risk reduction
Cost reduction
Efficient use of
assets
Flexibility towards
changes in
customers’ demands
Production
continuity
Product quality
durability
Internal process
perspective:
Improving
processes
Reduction of environmental
pollution
Incident reduction
Staff health promotion
Development of undertaking
social responsibility
Promotion of
management and
R&D processes
Employee
productivity
Improving services
Using facilities of
domestic companies
Energy
efficiency
Efficient use
of chemicals
Improving network of
production and distribution
Efficient use of production
capacity
Improve performance of repair
and maintenance
Reinforcement of project
management system
Growth and
learning
perspective:
developing
scientific
management
Information capitals Human capital Organizational capital
- Continuity of
information system - Development of ICT
networks and
infrastructures
- Increasing motivation
- Improving skills and competences
- Institutionalizing the system of training
- Institutionalizing the jihadist
culture
- Creating stability in organization - Institutionalizing the teamwork
culture
- Institutionalizing organizational learning
- Promoting human dignity
Source: The NIOC’s Balance Scorecard hierarchy structure (D8-2013), translated from Persian by
the author
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The NIOC’s accounting department (see figure 7.2) is explicitly using diverse KPIs (e.g., operating
profit growth (OPG), economic value added (EVA), cash value added (CVA), profit margin, return
on assets (ROA), etc.) to measure the financial position of the organization annually (D12-2015).
This information is obtained through three financial statements: the balance sheet, the income
statement, and the cash flow statement.
Figure 7.2 The organizational hierarchy of the accounting department in the NIOC
According to the CFO, “…the accounting system and reporting practices represent the Iranian
petroleum companies’ obligations to internally and externally report on its activities, performance
in alignment with strategic objectives, and financial position to its stakeholders, principally
through the annual financial reports. Our internal auditor’s responsibility is to monitor financial
statements, to detect shortcomings, and to assure the financial health and productivity
performance of the organization according to the Ministry of Petroleum and government rules and
regulations” (P3-VR-Aug17). This statement indicates that the NIOC’s accounting systems and
the financial information they generate are used for internal and external purposes, especially for
external parties such as the investors, auditors, the Ministry of Petroleum and the government to
evaluate its performance.
The NIOC’s document about employee performance appraisal (D6-2012) indicates that the
previous perspective of the Iranian petroleum authorities was mainly focused on financial
Financial management
Central accounting Budgeting and
controlling current
expenses
Formulating methods and
coordinating financial
regulations
Financing
Financial management
information Financial accounting
Staff accounting
Auditing
Treasury
Consolidated budget
Allocation of financial
resources
Control the budget
and costs
Financial methods
Coordinating financial
regulations
Source: D10-2013
165
performance. Although they have conducted individual performance evaluations in the past, this
process was based on paper forms which, according to the NIOC’s HR manager, were not able to
accurately assess individual performance in alignment with management expectations. As the HR
manager explained, “Previously, the staff performance was evaluated based on four-page forms
that had satisfying questions, but these questions had not changed over the years, and people were
assessed based on managers’ personal perceptions (of the assessed person). These forms did not
accurately assess the duties of the individuals and their performance based on job descriptions
and the manager’s expectations” (P5-VR-Sep17), and “we faced difficulties in legitimizing our
decisions” (P5-NT-Sep18). According to an interviewee statement, this situation caused staff
dissatisfaction and reduced organizational efficiency (P5-NT-Sep18). She further added:
“According to the change program, the performance appraisal period is determined by the
agreement made between the manager and the employee to perform tasks based on expectations
and job descriptions in alignment with organizational objectives. Consequently, the level of
individuals’ skills, competencies, and training needs will determine the employee’s performance,
and that will have an impact on employees’ productivity” (P5-VR-Sep17). The HR development
officer also highlighted that “these evaluations and measurements of employee performance help
determine the extent to which the organization’s goals are achieved at the macro level, and have
the ability to rank subsidiary companies” (P7-VR-Sep17).
The NIOC’s CEO argued that “the real challenge is changing the existing mindsets of managers
[changing from traditional management perspective to modern management] toward different
aspects of performance management”. He further continues: “I believe that using a PMS can help
to improve the mindset of managers and employees through constructive feedback on skill and
competency ratings as well as providing learning and training opportunities”. He also added,
“The managers must adapt their style with a new competitor environment by changing the
perspective of short-term management over long-term management, focus on inspiring and
developing knowledge, skills, problem-solving, and using management tools to reduce human
errors. The period of believing that managers are thinkers and employees are doers is over” (P1-
NT-Aug17). For example, the underlying assumption in the old mindset was that if the product is
produced in high quality, it is done by the manager. But if the product is not high quality, it is the
fault of employees who did not carry out their duties as prescribed. The change program is
evaluating people’s performance in the workplace equally (P7-VR-Sep17). Thus, the priority was
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mainly given to individual performance evaluation for personal value creation. “An organization’s
success depends on how its people interact, function and how they perform in day-to-day activities
at the workplace” (P1-NT-Aug17). Moreover, I received an interesting comment during a lunch
break with one of the key members of the NIOC in October 2018, who said, “When you see the
head office, it is full of people. But how many of them have the right skills and the motivation? I
am sure very few of them do. The majority of them are just physically attending daily organization
activities to receive their salaries at the end of the month and do not care about skills and
competencies”. He went on to say that “…finally, the Iranian petroleum authorities have created
a change program to change people’s behavior [existing mindset] in the NIOC…I hope they fully
implement it because the key managers are making decisions arbitrarily”.
Figure 7.3 A design blueprint of the Staff Performance Management System
Staff Performance Management System
Planning Target setting process
Determine target eligibility
Key results areas
Eligibility of key result areas
Area of authority (domain tasks)
Edit domain tasks
Moving domain tasks
Eligibility of domain tasks
Key performance indicators
Organizing
Personnel allocation to unit
Jobs in similar units
Job determination
Jobs in the favorite categories
New job
Second job
Remove Jobs
Duties
Assign duties
Remove assigned duties
Modify duties
Notify diverse duties
Monitoring
Reporting by employee
Reporting by manager
Review report by manager
Guidance
Reports
Training
X Exit
Source: Screenshot from the NIOC’s Staff Performance Management System (2018), redesigned and
translated from Persian by the author
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The NIOC’s document about employee performance appraisal indicates that the staff performance
management (see figure 7.3) was implemented in three phases: (1) replacing paper forms with
automation systems, (2) staff training along with identifying staff KPIs (e.g., engagement,
turnover, and performance), (3) implementing and integrating with other human resource systems,
which is linked to the BSC. The implementation of the staff performance management system
(SPMS) indicates that the NIOC decided to increase ongoing human resource development and
make a transformational change in organizational culture by evaluating employees’ contributions
in day-to-day activities in alignment with organizational objectives and institutionalize this among
subsidiary companies. According to the Iranian petroleum authorities, the change program was
entirely designed domestically and customized for the Iranian petroleum industry, reducing
dependency on foreign actors in the field of strategic software (an integrated system similar to
SAP).76 The Iranian petroleum authorities mentioned that the main reasons for the decision to
localize the strategic software include the lack of interest by foreign companies to provide services
due to the international sanctions, improving network security and preventing foreign actors to
access petroleum companies’ data (D4-2012).
7.2.3 Interviewees’ Statements on What the New PMS Should Ideally Look Like
The majority of the interviewees confirmed the importance of using PMS for performance
evaluation as a significant factor to evaluate the level of competencies and skills of staff in
alignment with their duties. Furthermore, the analysis of the NIOC’s document about employees’
performance appraisal (D6-2012) shows that the NIOC is using various KPIs to evaluate managers
at different levels (e.g., office secretaries, project managers, general managers, etc.). The HR
development officer emphasized the importance of human resources in the NIOC when she
explained: “… human resource is a very important issue which is often forgotten within the
organizations … I mean this is not the case in the Iranian petroleum companies … the human
factor lays at the heart of the organizational performance … people play a great role in the success
of the organization. Therefore, using a mechanism to evaluate people’s performance is beneficial
for an organization’s success” (P7-VR-Sep17). Similarly, the HR administrative officer also
explained: “PMS plays an essential role in staff training, planning, development, mobility, job
promotion, and recruitment at the moment” (P6-VR-Sep17). Moreover, the ICT manager argued
76 Mehr news. Localization of all software applications in the oil and gas industry. Translated from Persian by author.
(Online) Available at: https://www.mehrnews.com/news/4159602 [Accessed: March, 2019]
168
that the board members firmly believe in using PMS to evaluate staff competencies, which enables
an organization to successfully align its staff’s skills, capabilities, and knowledge with
organizational priorities, resulting in business improvement and efficiencies (P9-VR-Sep17).
However, the head of international relations argued that the organization had implemented the
PMS to change people’s behavior, not just by evaluating employees’ performance but also by
means of a screening process of managers to make sure that all the managers meet the required
criteria to perform their job (P4-VR-Aug17).
The majority of the interviewees also highlighted that PMS should have an impact on staff
motivation by means of linking performance results with rewards. For example, the CEO said,
“there is a need to give rewards to staff for increased performance” (P1-NT-Aug17). Similarly,
the CFO stated, “If the staff is recognized truthfully in its performance and gets rewards based on
that performance, the PMS will be successful” (P3-VR-Aug17). The business planning manager
also emphasized using reward and recognition systems to motivate staff to engage stronger with
PMS: “Linking performance to incentives is the key success element for the PMS as a sign of
benefit to engaging staff” (P2-VR-Aug17). A similar argument was received from the head of
international relations, who stated that “it is not enough to develop the PMS and implement it
without properly linking performance to the reward strategy” (P4-VR-Aug17).
Furthermore, some of the interviewees also explained that the PMS should be combined with
existing accounting data and practices. According to the CFO, the financial planning, budgeting,
and forecasting processes are a fundamental demand by both the NIOC and its stakeholders, which
are also difficult processes because of the complex structure of the NIOC. However, he believed
that the implementation of PMS simplified these processes as, “the financial targets within the
BSC often become the annual budget targets. This means that the long-term strategic plan is
subsequently broken down into annual plans that can be routinely monitored via the BSC to ensure
that the NIOC’s activities are on target. Moreover, by clarifying the role of the accounting
function, and establishing a strategy, a dashboard can be used to monitor all the key activities, in
conjunction with a scorecard”. He further continues, “a measure of performance should provide
a balanced perspective instead of only focusing on traditional accounting practices by using
effectively intangible resources, to quickly adapt to constantly changing conditions in the
environment. Although accounting data historically play a key role in measuring organization
profitability (shareholders value), these data do not provide a good insight into the basic factors
169
of the achieved financial result, including the understanding of which aspects of the business
should be improved and how to influence individuals’ performance” (P3-VR-Aug17). The R&D
manager also highlighted that “the ability to combine the change program with accounting data
is reflected primarily in the use of indicators in the financial perspective of the PMS model. This
means integrating the existing accounting data and practices into the BSC model in order to
identify the cause-effect relationships between certain categories of the company as well as the
connection of the accounting data and goals in the other three perspectives [customer, internal
process, and growth and learning]” (P22-NT-Oct18). Similarly, the business development
manager stated that “accounting-based outcome measures may have little relationship to the
amount of effort required by people to accomplish preliminary tasks. This means that a common
accounting measure such as an efficiency variance may not be very informative about all of the
activities required to get tasks done. The accounting system, on the other hand, may not be
measuring the effort differential between the settings. For example, planning, investigating,
coordinating, supervising, negotiating, etc. are indirectly related activities that may poorly be
measured by accounting systems, thus if the NIOC’s compensation depends only on accounting
data (e.g., product cost data), any information concerning indirectly related activities may have
no motivational effect, and hence, would not be useful”. He further continued, “By linking non-
financial measures to financial measures, the change program could fill these gaps” (P8-VR-
Sep17). According to the NIOC’s document about the performance management model (D12-
2015), accounting data are frequently used for performance evaluation of upstream, middle and
downstream activities because they are typically the main source of formal information in the oil
and gas industry (see figure 7.4). However, by implementing the change program the NIOC
attaches great importance to formulating measurable policy objectives and tries to enforce a
detailed connection between objectives, measured results, and its financial estimates (D12-2015).
The interviewees’ statements above indicate that the aspiration of the change program was to link
organization strategies to day-to-day actions by using various KPIs for evaluating the overall
performance and connecting performance results with rewards. Furthermore, they agreed that
although accounting data and practices are the central sources of information in the oil and gas
industry, this information cannot accurately measure indirect activities undertaken to get tasks
done in order to evaluate staff performance. Therefore, the change program should fill those gaps
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by linking the organization strategies to actions (financial perspectives to non-financial
perspectives).
Figure 7.4 The profit center structure of the NIOC
2015 Earnings ($ billion) ROC (%) ROE (%) Operating profit margin (%) Net profit margin (%)
Upstream 30.2 22.3 20.1 3.2 6.4
Mid and Downstream 3.4 19.2 5.3 1.1 4.3
Source: The NIOC’s internal reports (D15-2018)
In the next section, I will present the study’s findings concerning the ways in which the PMS were
actually practiced in the NIOC. In the following section, I will also report on how the practices of
performance measurement and management were shaped by the specific historical and cultural
context of the Iranian petroleum industry (such as the Iranian variant of “Islamic management”,
economic sanctions, and the political role of the petroleum industry in the Middle East).
7.3 Actual Practices of Performance Measurement and Evaluation
This chapter presents my observations and the views held by interviewees on how performance
measurement and evaluation systems are actually used within the NIOC and how these practices
are in conflict with aspirations of the change program. I will describe the actual design of the
performance measurement and evaluation systems in the NIOC, the ways in which the
performance indicators are used for various purposes such as measuring the whole organization’s
performance, departmental performance, and individual performance, and how these indicators are
combined with other performance evaluation practices (e.g., with individual evaluation based on
Profit Centers
Upstream - Exploration
- Development
- Production
- Gas Marketing
- Research
Chemicals - Specialty chemicals
- Commodities
Mid and Downstream - Petroleum Marketing
- Lubricants /
Petrochemicals
- Refining / Supply
- Distributing &
Transporting
- Research & Engineering Upstream Activities: Reserves and resources, depletion and depreciation of
upstream assets, exploration and evaluation,
development expenditures, borrowing costs, revenue
recognition, disclosure of resources, etc.
Mid and Downstream activities: Product valuation issues, revenue recognition issues,
emission trading schemes, depreciation of downstream
assets, disclosure of sales, marketing risk evaluation,
etc.
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religious practices). My observations and the interviewees’ statements indicate that a combination
of internal and external factors has considerably affected the implementation and practice of PMS.
7.3.1 The Actual Design of the Performance Measurement and Evaluation Systems
The operational manager explained that the NIOC follows a prescribed methodology for creating
business scorecards and managing the cascaded scorecards. He said, “We start with the
organization’s ambition [e.g., sixth development plan in line with Iran’s 20-year national vision,
the Ministry of Petroleum’s mission and the general policies of the NIOC], as that provides the
strategic objectives. Then we create the KPIs and targets. Finally, we decide upon the action plans
and initiatives” (see figure 7.5). He further continued, “The PMS is an efficient, accurate and
user-friendly tool that has been selected to help the organization track its progress toward its
scorecard goals and, ultimately, its ambition. However, there are some challenges, in particular
around the metric selection. It is always difficult to find and define the KPIs that reflect the main
drivers of success” (P12-NT-Feb18).
Figure 7.5 The Strategic and comprehensive planning hierarchy of the NIOC
Similarly, the ICT manager explained that “each department has its strategy roadmap for linking
strategy with executive operations in alignment with organizational objectives. Accordingly, each
department has designed and defined KPIs for measuring both financial and non-financial metrics
in order to track progress toward its scorecard goals and reduce the risk of not implementing
Values
Vision
Targets
Strategies
Strategy map
BSC
Action Plans (Tactics)
Business Process Management
Business Performance Management System (BPMS)
Mission
Master Plan
KP
Is &
CS
Fs
KM
, LL
& B
I
Source: D8-2013, translated from Persian by the author
Kn
ow
led
ge M
anag
eme
nt,
Les
son
s Le
arn
ed
and
Bu
sin
ess
Inte
llige
nce
172
strategies”. He further continued, “The ICT strategy roadmap [see figure 7.6] mediates between
strategy and execution, by understanding which of the organization’s capabilities, gaps, and
priorities must be addressed...By this I mean it articulates what must change, and why the changes
are required, in order to achieve the strategic targets. It also allows people to see how their jobs
affect the organization’s strategic objectives.” (P9-VR-Sep17). Thus, each department produced
its own strategic roadmap, with the objective to align their departmental targets with the
organization’s mission, values, and strategic targets, which were integrated in order to track the
entire organizational performance. Indeed, there was a general strategic roadmap for the entire
organization, which was developed before the departments produced their specific strategy maps
(see figure 7.1.). However, some of the interviewees highlighted that they found it difficult to find
and define the KPIs that reflected the main drivers of success. The majority stressed that these
challenges arose because of the staff’s limited skills with using the PMS in practice. For example,
the R&D manager asserted the importance of staff competencies being aligned with PMS
requirements to give the desired performance. He said, “We do have experienced people and we
do not have a doubt about it. But, there is a change in organizational behavior and the people’s
skills need to improve in alignment with these changes”. He further added, “KPIs are powerful
tools if they are used as indicators to measure the delivery of goals. However, if the KPIs become
the goals, then they turn into harmful material that will hinder performance improvement. For
example, we focus on ‘how many hours people work’ as an activity-based measure to evaluate
tasks rather than measuring the ‘number of people engaged’ as results we wish to achieve. We
need to keep people involved in determining not just the measures but also the desired results of
the organization” (P22-NT-Oct18).
Similarly, the head of public relations said that “our staff is capable of implementing and
developing the PMS, but needs to get some training in using the PMS” (P20-VR-Aug18).
Moreover, the business development manager suggested involving external experts to build the
process and the system, and to plan how to train the staff would be useful for implementing the
PMS successfully. “We have enough experience to depend on ourselves, but we still have some
gaps [people’s skills and knowledge in the proper use of the PMS]. In my opinion, it is better to
employ somebody who is an expert in this area”, he said (P8-VR-Sep17). Also, the supply chain
manager said that “when it comes to performance management, we do have a weakness [target
173
setting and defining KPIs] in terms of the level of skills among staff throughout the NIOC and its
subsidiary companies” (P15-NT-Feb18).
Figure 7.6 The NIOC’s ICT strategy roadmap
A similar point was explained by the deputy of IT planning and control, who said that there is a
weak linkage between chosen KPIs and strategic target-setting, which is a big challenge. “When
KPIs are not properly linked to our strategy, we waste huge amounts of time and money collecting
information that is not going to benefit the business. First, we need to know what we are trying to
achieve in our department, then we should use those objectives to help us select the relevant KPIs”
(P11-VR-Oct17).
According to these interviewees’ statements, the PMS is currently not applied “correctly”, due to
the weak linkage between selected KPIs and strategic goals and a lack of skills and motivation
amongst managers and staff members to define and use KPIs. The interviewees suggested that
conducting training classes could have an essential impact on the correct implementation of the
change program. Furthermore, the HR administrative officer, the head of international relations,
the procurement manager, the project manager, and the marking manager highlighted that the
successful implementation of PMS required upper-level managers to seriously commit to the plan,
in order to support the system by improving staff skills and competencies. For example, the HR
Learning
and growth
Create integrated
information
systems
Improve personnel
capability by
upgrading
technology
Improve staff
satisfaction and
increase
productivity
Continuous technical and
non-technical training,
and communication with
research centers
Knowledge
management
Internal
process
Reduce software
production and
development time along
with improving quality
Improve internal
efficiency
Modify the petroleum
industry processes by
improving data
management
Support domestic
production
Improve network
security and data
quality
Financial
Customer
Reduce costs
Increase benefits and
values by implementing
IT projects
Increase benefits and
values by implementing
IT infrastructures
Invest in new
technologies
Create a trusting
atmosphere and
work with service
users
Increase the
speed of action in
service delivery
Increase
customer
satisfaction
Increase
flexibility vs
customer
requests
Reduce delivery
time and
responsiveness to
customers
Source: D12-2015, translated from Persian by the author
174
administrative officer said, “It has to be a full team approach to fundamentally drive the required
changes. For example, assessing staff skills on all levels and taking on decisions down to the
individual level are significant elements necessary for success” (P6-VR-Sep17).
These statements propose that continuous development and training are required in order to
improve staff skills in using PMS. Moreover, the managers of the organization need the know-
how to use a PMS (i.e., selecting the right KPIs and linking KPIs to strategy) and to drive the
business towards efficiency and effective results. For example, the deputy of the center for energy
studies asserted that strategic visions are difficult to communicate, but breaking top level
objectives down into smaller concrete targets will make it easier to manage the process of
delivering them. In this way, targets form a crucial link between strategy and day-to-day
operations. He further continues, “We should learn how to set targets which are specific,
measurable, achievable, relevant and time-based. The challenge lies in finding out which specific
measure (or measures) will enable us to improve performance. With this I mean selecting the right
KPIs which are quantifiable (i.e., we must be able to reduce it to a number) and which directly
capture a key business driver” (P19-NT-Aug18). Although proper training can help staff to
understand the value of a PMS, the quality of training (i.e., theoretical and practical) is also
essential, according to the interviewees.
The majority of the interviewees highlighted the importance of upper-level managers’ commitment
and engagement in PMS development and implementation. For instance, the R&D manager said
that “people don’t see strong leadership in this area”. He added, “Unfortunately, the nominated
upper-level managers have a close political connection to the government and any political
transformation in the executive branch of the country will affect our organizational process. I hope
these changes will be minimized so that they can strongly support the implementation and
development of the management systems” (P21-NT-Sep18). Also, the operational manager stated
that “the upper-level management support is extremely important to make the change program
work” (P12-NT-Feb18). The importance of upper-level management commitment and
participation in all stages of the system’s implementation and development was also confirmed by
other interviewees (the deputy of IT planning and control, the marketing manager, the head of
strategic planning and energy management, and the head of public relations).
Interviewees specified that commitment would not be effective unless the upper-level managers
participated in target setting and defining objectives, reviewing business plans, ensuring
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appropriate resource allocation for projects, communicating the mission to all levels, monitoring
and controlling the system progress and being involved in the implementation to the end. Indeed,
as the business planning manager confirmed, the low level of commitment from the upper-level
managers influenced the staff’s commitment to the system (P2-VR-Aug17). Similarly, the CFO
said, “The petroleum authorities need to be engaged, they need to act as role models, they need to
meet people, discuss with them and see what issues they are facing and then provide the necessary
resources and support”. He further continued, “If they do not ask for performance results and
follow it up, do you expect people to ask about performance?” (P3-VR-Aug17). The HR
development officer also said, “We have shortfalls and gaps in this area, as the commitment and
support do not exist in this form of leadership” (P7-VR-Sep17). In some other cases, the upper-
level managers initiated the project and showed keen interest at the beginning but their interest
declined later because of the management mobility/relocation at the top of the organizational
hierarchy due to political transformation. My personal observation indicates that with the change
of President, the Petroleum Minister changes. As a result, the new Minister will normally replace
all upper-level managers to have his team on board. For example, during the first five months of
2016, more than 50 senior executives were replaced or relocated within the Ministry of Petroleum.
The majority of local media also cited these widespread changes in the Ministry of Petroleum as
changing the arrangement of executives for the presidential election of 2017, stressing that all of
these sweeping changes have a political and electoral approach. However, the Petroleum Minister
and his allies at the Ministry of Petroleum responded to the widespread criticism: “Although the
petroleum companies need professional and hard-working managers, the Petroleum Ministry has
only acted upon government approval to withdraw the retired managers [referring to those
managers who must stop working permanently due to their age, but are still working in the public
organizations] without any political and electoral approach”.77 Similarly, the deputy of IT
planning and control expressed that “top management was heavily involved at the beginning of the
change program but they withdrew later on due to the political transformation in the Ministry of
Petroleum” (P11-VR-Oct17). This issue was also explained previously in chapter 6, showing that
the political connection of the petroleum authorities to the government and other political
77 Tasnim agency news. What is the reason for the mobility of managers in the Ministry of Petroleum? Translated
from Persian by the author. (Online) available at: https://www.tasnimnews.com/fa/news/1395/05/26/1159256
[Accessed: July, 2019]
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institutions play a crucial role in implementing and developing projects in the Iranian petroleum
industry. Similarly, the HR administrative officer said that “their involvement is seasonal. When
there is a meeting, they remember, but I don’t think they see it as a part of their daily work because
they don’t know how long they will stay in this position” (P6-VR-Sep17). Therefore, they cannot
engage with people by reviewing the design elements, agreeing on all the KPIs and ensuring that
the progress of the system is in the right direction and in line with the organizational strategy.
According to the HR manager, the staff must have a clear understanding of the advantages of using
PMS. Otherwise, they will not be motivated to use it, and the risk of its failure will increase. She
asserted that the engagement of the upper-level management with all levels is very important, but
added, “We have missed it in our organization, as they are busy with other things and they do not
have time for close follow-ups” (P5-VR-Sep17). However, the security manager argued that the
petroleum authorities are facing challenges by some other external parameters which influenced
day-to-day organizational activities and the decision-making processes. He said that “we are in an
economic war with the United States, which has put maximum pressure on the Iranian petroleum
industry as a central source of revenue for the country. Therefore, the petroleum authorities hardly
attempt to keep a certain level of organizational performance, as we are facing so many issues in
our day-to-day activities to keep the organization alive”. In this statement he is referring to
difficulties such as supply equipment and technology, lack of investment, the ban on the
international transactions, difficulties in the export of crude oil and in attracting new customers,
oil market volatility, economic exclusion, political conflicts, etc. He further added, “Personally I
don’t think support from the upper-level management is effective. A lot more drive from them is
needed to actually link strategies into day-to-day actions” (P21-NT-Sep18).
Although some of the interviews reveal that external parameters influenced the organization’s day-
to-day activities and decision-making processes, the majority of interviewees emphasized the lack
of management commitment and engagement with the PMS, and more generally a weak
engagement of the upper-level managers with all levels in the organization.
According to the interviewees, regular monitoring of business performance by upper-level
managers motivates employees to get involved with the system. For example, the CEO said that
“this [PMS] is a useful tool for effective communication throughout the organization”. He also
added, “We receive quarterly reports. The results are interpreted by middle-level managers who
put individual reports together to be evaluated by the upper-level managers. Consolidated reports
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are assessed by the upper-level managers to understand company performance and to see how the
system is working” (P1-NT-Aug17). Similarly, the HR development officer argued that they
regularly have an executive meeting that is specific to the actual quarterly performance report,
which is generated for the upper-level managers (P7-VR-Sep17). Additional evidence about
regular reporting was explained by the project manager, who said that “we have regular reports
including monthly and annually reports to monitor project performance” (P14-NT-Feb18). These
statements were also confirmed by the business development manager:
“As a manager, I receive quarterly consolidated reports and I attend quarterly meetings with other
managers where we discuss the measured results”. He added, “During the quarterly meeting, the
results are discussed at length and actions are taken to move the business in the correct direction…
I mean monitoring the allocated resources and spendings based on assigned objectives and
performance results” (P2-VR-Aug17).
However, according to my observation of a meeting in July 2017 (see figure 7.7), the discussion
of KPIs was only one of several points on the agenda, and took about 20 – 30 minutes of the total
meetings time, in which the third-quarter reports of a project were reviewed. During this meeting,
they discussed the progress of South Pars phases with a focus on the measured results such as
capital spent, lease operating expenses, average employee tenure, required skilled workers, etc.
Figure 7.7 The discussion of change program results in the NIOC’s project meeting
Source: This photo was taken by the author
178
They compared actual KPI results with budgeted KPIs, and project progress with expected
objectives in the third quarter of the year. During this meeting, the head of strategic planning and
energy management said the budgeted KPIs showed that “we require new investment to be able to
cover the expenses to develop the South Pars phases”. Moreover, the project manager said to the
HR manager, “We also need to hire skilled workers to achieve strategic objectives based on the
program schedule and measured results”. He further emphasized the crucial importance of the
issue of the future need for skills and training of workers, as the project phases are completed (M1-
2017). Furthermore, the HSE manager stressed the importance of occupational safety and health
(OSH) training to promote a preventative safety and health culture, which is based on the tripartite
social dialogue78. Then, the HR manager emphasized the need for a longer-term perspective in the
industry that recognized the skills and training of the workforce as the key to meeting challenges
in the future. She also added that the measured results indicated that, from the starting of the project
until now, there has been an improvement in staff skills and training, however, they were still
behind the set goals (M1-2017).
This statement provides evidence of the presence of regular performance monitoring and a
reporting process within the organization. However, the observation and interview data indicate
that one of the driving forces for monitoring activity is pressure from the board members, the
Ministry of Petroleum, and parliament to receive regular reports on the organization’s
performance. For instance, the head of controls on petroleum exports said that they report
performance to the board members regularly (P16-NT-Aug18). Similarly, the CEO said that “since
2016, we need to send our overall performance results with a detailed report to the parliament’s
research center annually” (P15-NT-Feb18).
Although the majority of the interviewees were satisfied with the performance monitoring and
reporting process, some of the interviewees indicated a few weaknesses in the process. For
example, the marketing manager stressed the need to establish an effective monitoring system. He
said, “Reporting and feedback are a very important part of the PMS, we have weaknesses in these
areas. By this I mean we are weak in providing honest and meaningful feedback to employees and
also in receiving feedback from employees”. He further continues, “The evaluation of individual
78 This refers to all types of negotiation, simply an exchange of information between, or among, representatives of
government, employers and workers, on issues of common interest relating to economic and social policy includes
the development of work-related issues, and labor safety, labor market policy, etc. (see Baccaro & Simoni, 2008).
179
performance is not accurate, as personal attitude/judgement still plays a principal role in staff
rating. Until this day, I have not received any feedback telling me that … something needs to
change” (P17-VR-Aug18). Similarly, the CFO said, “Still, there is a weak linkage between
performance indicators and managers’ expectations because we do not spend enough time on
reviewing and modifying KPIs in order to meet objectives”. He added, “If you asked me what the
quality of our reporting is, I would have to say that I think the way we analyze things, the way we
identify the challenges and take actions on them - for all of these things, we still have a long way
to go before we reach the desired level. I mean the required experience and time to set up,
maintain, and review the reports to ease decision-making” (P3-VR-Aug17). In this regard, the
ICT manager argues that the implemented PMS has a high capacity to develop well, but the upper-
level managers often only take pieces from the system and do not utilize the system effectively.
He further explained: “…In my point of view, the performance measures are used as a means of
bureaucratic reporting with not much effect on the everyday conversation and interaction among
senior managers” (P9-VR-Sep18).
The analysis of interviews shows that there is a monitoring and reporting process, and interviewees
voiced overall satisfaction with this process. At the same time, several interviewees perceived the
monitoring process to be problematic with regard to data analysis and its link to decision-making.
Some interviewees perceived the PMS as a tool for strategic planning and emphasized the
importance of linking the strategy with the PMS. Regarding establishing strategy, the head of
strategic planning and energy management explained: “…The NIOC set their targets in alignment
with the development plans of the petroleum industry, which are issued by the Ministry of
Petroleum for a period of 5 years such as the fifth and sixth development plans in the petroleum
industry. These plans are discussed and reviewed by the board of directors and general assembly
of the NIOC every year. But unfortunately it is not paid serious attention, as executives’
commitment and support is weak concerning its implementation and continuous monitoring and
measurement, which would be necessary to achieve the objectives in the development plan…to
address this issue, senior authorities need to report their practical strategies and the actions they
take. In my opinion, the success of any system depends on how it is integrated into the organization
at a strategic level and the effective dialogue between all the departments involved in the process
at the operational level…” (P18-NT-Aug18). Similarly, the business planning manager explained:
“…There is a lack of strategic alignment among the different divisions within the NIOC…I am
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referring to the mission, strategy, and performance measurement elements in different
departments which should be aligned with each other and in line with the NIOC’s overall
direction. The majority of missions and strategic objectives outlined in the development plans are
not achievable due to the current political tensions and market fluctuations. For example, we were
unable to attract new customers, be competitive, maintain credibility, and make new investments
during the past years. Misalignment has been causing inefficiency and ineffectiveness in the use
of the NIOC’s resources. Although we have implemented the PMS to align activities in the same
direction and improve performance, failure to set strategic goals rationally [based on the
prevailing conditions of the country] has caused a weak linkage between assigned strategic goals
and day-to-day activities…” (P2-VR-Aug17).
Another important response was received from the head of international relations, who said: “The
NIOC does have a strategic plan, I mean a strategic roadmap in line with a five year development
plan…but unfortunately it is only on paper and is not implemented in practice…” (P4-NT-Sep18).
During the observation phase, it became evident that the NIOC’s activities were not based on a
well-developed plan. The previous statement was also highlighted during the meeting in August
2017, when the R&D manager said, the organization was still finding its way and developing its
capacity for managing performance in alignment with strategic goals (M2-2017). According to the
STIPEC design, linkage starts top-down (D12-2015), by establishing KPIs for the organization, its
divisions, departments, and individuals (see figure 7.8). Accordingly, each KPI should be linked
to objectives and goals.
Figure 7.8 The KPIs linkage at the organizational levels
Organizational
Departmental
Team
Employee
Overall
organizational
objectives
Departmental (operational) or sub-
departmental (team) processes, aligned
with the organizational strategy
Performance expectations
aligned with departmental
and organizational objectives
Source: (D12-2015)
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However, some of the interviewees stated that the current system did not adequately link an
individual’s performance to organizational strategy. Another comment that emphasized the
importance of visibility of the link with strategy was received from the head of controls on
petroleum exports, who said, “We need to have a clear vision and use the right KPIs” (P16-NT-
Aug18). These statements show that there is a general agreement about the importance of having
a solid link between PMS and strategy, while the interviewees did not perceive such a link in the
current PM practices.
However, the CEO argued that there is a strong link between PMS and strategy in the NIOC, as
he explained: “…The IT department has designed comprehensive performance management
systems (such as BSC) in such a way that strategy formulation is tied directly to the way we
measure our performance. You cannot achieve any performance improvement unless you have
clear strategy. We have designed a system that really links strategy to what we do on a daily basis”
(P1-NT-Aug17). While he emphasized that the PMS is aligned with the strategy and the outlined
objectives, he did not provide any clear evidence or example of this strong link. It should be noted
that he is the head of the NIOC, who is responsible for the whole organization including workflow,
executive structure, approved programs, organizational performance, etc. These responsibilities
may have caused him to take a defensive stance, whereas not many of the other respondents
described the system in this way. Furthermore, the CFO explained, “…The financial data
produced by our accounting systems are rarely used to set up the strategy (or to make strategic
decisions)…There is a weak relationship between accounting and strategy in our
organization…we don’t have a stable and committed strategy…By this I mean there is
inconsistency in the actions we take…” (P3-VR-Aug17).
Another interesting response that I received from the head of international relations, was “…well,
one of the most challenging areas of management is a comprehensive policy for the energy sector,
because none of the strategic plans of the petroleum industry are designed based on industry
realities such as capacity and ability… If the organizational goals are not accurately set up,
without paying attention to the political, economic and social conditions of the country…it will
affect all activities of the organization, even the implementation of any functional management
system will not be effective…unfortunately, achieving strategic goals is tied to the country’s
political interaction” (P4-VR-Aug17). These statements indicate that although interviewees
complained about the weak link between strategic objectives and performance measures, the
182
strategic objectives are also not accurately defined to begin with. So the problem is not just one of
an inadequate translation of strategic targets to performance measures, but one of defining strategic
objectives in the first place.
Similarly, the operation manager asserted that there is a link between PMS and strategy, but in
practice the link is weak and immature at certain levels. He mentioned that “the link is weak at the
moment because our strategy does not have clear target setting. There are desires [the ideal goals
of the organization on the horizon of 2025], not necessarily strategies” (P12-NT-Feb18).
Additionally, the HR manager explained,” Although the managers should strive to complete the
target setting as early as possible, it is a very difficult job to achieve due to the fact that there are
other things that need to be finished before the target setting can even start and some of these
things don’t directly depend on the NIOC’s managers”. She further continues “…hmmm, the
internal and external factors such as high energy consumptions, lack of investment, oil market
volatility, political tensions, international sanctions, etc. these are the facts that affect the strategic
planning of the organization” (P5-NT-Sep18). These pieces of evidence indicate that the strategic
plans are regarded as under-developed, not clearly linked to the KPIs, and generally difficult to set
up and agree upon due to a number of uncertainties facing the Iranian petroleum industry.
The majority of interviewees also agreed that PMS should have an impact on staff motivation by
means of linking performance results with rewards. For example, the deputy of IT design and
development and an operational manager believe that staff will tend to be committed and
motivated and support the PMS if they see that they are being appreciated and recognized when
they make improvements in organizational performance (P10-VR-Oct17; P11-VR-Oct17).
The HR manager argued that the NIOC linked the incentives to the change program’s performance
indicators. She added: “Every year on the employee day, we appreciate and reward those staff that
had high performance, to motivate others” (P5-VR-Sep17). The type of rewards used for
motivating staff to engage with the PMS and to improve performance include pay rises, bonus
payments, job promotions, etc. (D1-2011). However, some of the interviewees had different
opinions about using the PMS for rewarding and improving staff motivation. For instance, the
security manager asserted that “some people have a personal interest [to show their ability and
that they have improved their performance compared to the target value], they are eager to
implement the system without any additional incentives because these people view their durability
in improving the performance of the organization” (P21-NT-Sep18). Similarly, the head of public
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relations said: “I believe that the PMS helps staff in their work, and they don’t need any further
motivation” (P20-VR-Aug18). The above discussion, with some exceptions, indicates that there is
a strong belief among managers that linking the PMS with rewards would improve staff
motivation. Also, the majority of interviewees support linking performance measures with rewards
and recognition in order to incentivize staff to engage more with the PMS.
However, the head of controls on petroleum exports confirmed that “the organization is paying an
annual bonus to staff, but it is not linked to performance”. He further added, “The debate on the
payment of rewards at the end of the year is annually approved by the cabinet and public
organizations are notified about the payment, but that has nothing to do with the performance of
individuals” (P16-NT-Aug18). Similarly, the supply chain manager explained why employees are
not motivated to engage with the PMS. He said that there is no linkage between PMS results and
incentives: “…No one receives any bonus as a result of performance improvement” (P15-NT-
Feb18). Also, the business development manager said that there is no real bonus based on the
results of the change program in the organization. The upper-level managers always talked about
the linkage between performance and rewards, but this does not exist yet. He explained that “there
are yearly recognitions and appreciations for a few people, but they are not chosen based on their
performance, but based on the level of participation in religious and cultural activities, work
experience, kinship relationship, entrepreneurship, etc.” (P8-VR-Sep17).
Overall, it can be concluded that there is a strong belief among managers that the successful
implementation of the PMS system requires linking performance results with individual rewards.
However, the interviewees’ statements indicate that employees are currently not being
compensated based on their performance, but based on other criteria such as regular participation
in religious activities, work experience, nepotism, etc. This also indicates that individual
performance evaluation based on other criteria is not linked to indicators like economic value
added (EVA) (i.e., criteria which are not linked to the KPIs of the BSC that are reported to external
stakeholders).
7.3.2 The Use of KPIs for Performance Evaluation and Budgeting
Interviewees referred to the new KPIs mostly with regard to their use in individual performance
evaluation and with regard to resource allocation by means of the budgeting process. According
to the NIOC’s competency model, includes is a competency framework (including BSC KPIs) by
which the NIOC communicate which behaviors are required, valued, recognized and rewarded
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with respect to specific occupational roles. It should ensure that staff, in general, have a common
understanding of the organization’s values and expected acceptable performance behaviors (D9-
2013). My observations and the interviewees’ statements indicate that the Iranian petroleum
companies are using two types of performance evaluation systems in parallel. One is used by the
HR department and another one is used by the security department. These systems are used for
evaluating employees’ current and past performance, especially for the purposes of staff
recruitment, mobility/relocating, contract renewal, and job promotion. While the HR department’s
evaluation is linked to the KPIs, the security department’s evaluation is mainly based on religious
practices. The security department’s evaluation always overrules other performance assessments
in the Iranian petroleum companies. Furthermore, all interviewees viewed budgeting as a very
significant accounting practice in the change program, which links resource allocation with
performance results. However, they argued that budgeting is a complicated procedure due to the
organizational bureaucracy which includes collaboration not only for budget preparation,
negotiation, and approval processes but also for the spending approval after the whole budget
allocation is finalized. In the following section, I will explain how the NIOC used KPIs and
combined them with other practices for the purposes of performance evaluation and budgeting.
7.3.2.1 Individual Performance Evaluation
The Iranian petroleum companies’ recruitment policy requires that the head of each department
informs their respective secretary about staff requirements. The secretaries then prepare a list of
required staff and send it to the HR department. The HR department is required to obtain approval
from the board members and general assembly, advertise the vacancies in the national media, and
select, interview and hire employees on behalf of the head of each department. This procedure is
applied to all staff apart from engineers and technicians, who are selected and evaluated by a
management committee based on their current and past records (e.g., supervisor satisfaction,
certificates, education, proficiency, age, physical and mental conditions, etc.). However, the final
evaluation (also known as a core selection criteria) of all staff proceeds through the security
department, who use diverse selection criteria (D1-2011) which mainly focus on religion, Islamic
values and the political perspectives of the chosen candidates.
There are three types of employment in the Iranian petroleum industry: permanent employment
contracts, temporary employment contracts, and contractual employment.
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Permanent employment:
This type of recruitment applies to higher and middle-level staff based on the relevant accredited
academic and empirical background, and the national employment legislation. However,
performance evaluations are conducted based on the Ministry of Petroleum’s and its subsidiary
companies’ rules and regulations. According to the NIOC’s administrative rules, the work period
required before a person can become a permanent employee is five years for staff who have a
Diploma or an Associate degree79, three years for staff who hold Bachelor’s or Master’s degrees,
and one year for staff with Ph.D. degrees. The NIOC conducts the formal systematic evaluation
(i.e., the staff performance management system) of all permanent staff quarterly and provides
feedback at the end of the fiscal year. This is usually prepared during the first months of the
following year. The head of each department (i.e., manager or supervisor) completes the
performance review forms (which allow managers to reinforce individual accountability to meet
their goals and to use their own criteria to evaluate employees’ performance). They fill in a rating
of criteria based on assigned KPIs (e.g., time, quality, interaction, engagement, skill, etc.) which
is linked to the BSC, and at the end confirms the evaluation form through the staff performance
management system (see figure 7.3). According to the administrative and employment regulations
of the petroleum industry, the Ministry of Petroleum and its subsidiary companies are allowed to
change the permanent employment status of those who do not earn the required points in their
performance appraisal outcomes for three consecutive years.
Temporary employment:
This type of recruitment applies to middle and lower-level staff and is based on the national
employment legislation for a specific period, which is usually between one and two years.
According to the petroleum industry’s employment legislation, the petroleum companies have no
obligation to extend this type of contract (D1-2011). However, this type of recruitment can be
promoted to permanent employment based on employee performance evaluation results at work.
The terms and conditions applied to temporary staff when evaluating their performance at the end
of the fiscal year are the same as for permanent staff.
79 An associate degree is an undergraduate degree awarded after a course of post-secondary study lasting two or three
years. It is a level of qualification between a high school diploma and a Bachelor’s degree.
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Contractual staff:
The third type of evaluation concerns contractual staff who are not in direct relationship with the
Iranian petroleum companies. Accordingly, the national employment legislation does not apply to
them. This type of recruitment is used for public support jobs, which are set to last for a specific
period of time, based on the requirement of petroleum companies. These staff members are not
directly recruited by petroleum companies. They are usually employed for 12 months (one-year-
contract) by a recruiting company (third party) at the petroleum companies’ request. At the end of
their contract, if the petroleum companies still need their services or in case of satisfactory
performance, their contract can be renewed. Their performance is not evaluated individually but
as a team. Although prescribed structured performance measurement criteria for contractual staff
do not exist in the Iranian petroleum companies, usually the general evaluation is based on team
performance criteria such as quality of work, professional development, expected duties,
adherence to overall policies, etc. (D1-2011). According to chapter (6), article 21 of the
administrative and employment regulations of the petroleum industry published in December
2013, in order to achieve the organizational goals and to develop human resources, the petroleum
industry is required to design, implement, and integrate the evaluation systems for evaluating the
skills, competences, and performance of employees. Also, classifying and grouping of positions
and employment (based on competency, ability, and skill) should be proceeded by performance
evaluation management to develop professional competencies, training, and empower managers
and employees of the petroleum industry. Furthermore, in article 22 of the same chapter it is
mentioned that the petroleum industry is obliged to nominate, promote, and change staff toward
organizational positions using a meritocratic approach based on the performance evaluation
outcomes. This evidence indicates that there are several performance evaluation systems used for
staff at different levels and with varied contracts. Moreover, the petroleum industry’s general
policy and legislation obliges the petroleum-producing companies to evaluate staff skills and
competencies by means of performance management systems.
The main indicators used for evaluating general managers of the Iranian petroleum industry are
shown in table 7.1. The general managers referred to are the upper-level managers in the four main
Iranian petroleum companies that are managing the technical, operational and service areas (D1-
2012). The CEO argued that one of the main reasons for using the PMS was the screening process
of the managers. The CEO explained: “... well, the screening process helps us to make sure that
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all managers meet the eligibility requirements for the job such as knowledge, skills, experiences,
and competencies” (P1-NT-Aug17). Similarly, the HR manager said that “we have defined specific
metrics and indicators with the help of consultants to evaluate staff competencies and skills
required for their duties in alignment with organizational objectives”. She further continues,
“Since the beginning of 2015, promotion and rating of employees and managers are subject to
relevant training courses” (P5-VR-Sep17).
My observations in summer 2017 and 2018 revealed that the Iranian petroleum companies use two
types of performance evaluation systems in parallel for nominating what they call the “good
citizen”, especially at the time of staff recruitment, mobility, contract renewal, compensation
(reward), and job promotion. Interestingly, the organization uses the broad concept of “citizen” for
employees and managers (particularly for top managers), who are nominated by means of
evaluation practices, as permanent residents of the organization who are supposed to play a key
role in managing people and in the development of the workplace.
Table 7.1 The evaluation sheet for general managers
Indicators Rating 0-4 (very weak – very good)
English language proficiency 3
Computer skill level 4
Competencies Writing and communication skills: Persian grammar and
literature, ability to prepare an official letter, reporting, note
taking ability, ability to convert verbal speech to official written
text, etc.
Behavioral skills: communication skill, responding,
adaptability and flexibility, reliability, cooperation, and
coordination, awareness of organization rules and regulations,
etc.
4
Experience
At least 3 years of management experience 3
Level of mental ability
Intelligence quotient (IQ): physical, intellectual, emotional,
and spiritual (ethics).
3
Knowledge management Knowledge management: Nurturing and facilitating a
knowledge sharing culture, identifying and classifying sources of
information, evaluating and retrieving information, organizing
and contextualizing information into knowledge, etc.
4
Average 3.5
Source: The Ministry of Petroleum, the center of development management, 2018
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According to my personal experience of Iranian state apparatus, a good citizen in the context of
Islamic management is chosen based on religion, attributes (e.g., docile), faith, gender, belief, and
political participation and attitudes (i.e., voting, state marches, allegiance to the Islamic regime’s
ideals, etc.). Indeed, the “good citizen” is characterized as a person (typically a male person) who
is an active member of the organization and exerts effort, is responsible, honest and loyal, obeys
the rules and regulations, is obedient to the supreme orders, believes in the principles of Velayat-
e Faqih80 and Islam, participates in religious activities, and has an allegiance to the Islamic regime
(i.e., attends state marches, supports the state’s ideology and political attitude). However, higher
education was recently highlighted as a prerequisite for being a good citizen within Iranian public
organizations. Higher education has been emphasized as one factor that enables citizens (i.e.,
employees and employers) make strategic decisions in dealing with obstacles such as economic
sanctions. This political and socio-cultural approach reflects the historical, political, cultural, and
social life of Iranian people which significantly changed after the victory of the Islamic revolution
in 1979 (Tavana, 2017).
The Islamic Republic of Iran’s (IRI) constitution, which was passed in 1979 and amended in 1989,
indicates that Iranian socio-cultural, political, and economic institutions have been established
based on Islamic principles and values. Interestingly, in the IRI constitution, the clauses regarding
“Independence from abroad actors” and “Islamic Rules” were introduced as additional elements
underlying citizenship identity in Iran. In this sense, Islam is the basic element of the underlying
structure of citizenship identity in Iran. More than anything, this element (Islam) is representative
of the domination of Islamic (Shi’ism) culture within the religious, historical, and political
structure of Iranian society (see chapter 6). Moreover, the NIOC’s document as part of the change
program highlights that organizational citizenship behavior is one of the essential features that can
improve employees’ performance and drive the organization toward its strategic goals (D12-2015).
Thus, the NIOC as a state-owned organization is using elements of citizenship as described in the
80 Velayat-e faqih is a post-Occultation theory in Shia Islam according to which there is a faqih (Islamic jurist) who
has custodianship over people. Accordingly, in his role as ruler (Guardian), he has the responsibility to make decisions
regarding all issues, including the governance of the country with absolute power. The idea of Guardianship of the
Islamic Jurist (Velayat-e faqih), as a rule, was introduced by Ayatollah Khomeini in a series of lectures in 1970 and
now forms the basis of the Constitution of the Islamic Republic of Iran. According to Iran’s constitution, the Islamic
republic is defined as a state ruled by Islamic jurists (Fuqaha). By verse 21/105 of the Quran (the holy book of the
Muslims) and based on two principles of the trusteeship and the permanent Imamate, the fuqaha are seen as having
the function of jurists. Guardianship of the Islamic Jurist. (2020, March 10). In Wikipedia.
https://en.wikipedia.org/wiki/Guardianship_of_the_Islamic_Jurist
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IRI constitution for nominating “good citizens” in the workplace as part of performance appraisals.
This is somehow similar to Gordon’s (1964) civic assimilation policies, according to which the
requirements for citizenship of external people in the host culture (i.e., organization) are based on
accepting the dominant culture.
As already stated earlier in this section, two evaluation systems are used in parallel for nominating
the “good citizens” and improving citizens’ performance in the NIOC. The first type of
performance evaluation system is the general biannual evaluation process of staff performance by
managers or supervisors with the involvement of the HR department. An individual’s work
performance is assessed based on skills and competences (including a self-assessment) by
employees and managers or supervisors every six months and feedback is provided once a year
using a standard appraisal form which is accessible through the NIOC’s system online (see figure
7.9). This performance evaluation is linked to the learning and growth dimension of the BSC.
Second, staff performance is evaluated by the security department,81 which applies different
evaluation criteria compared to those of the HR system. This second type of evaluation is often
performed during staff recruitment, mobility, contract renewal, and job promotion, especially in
the key positions. With this method, staff performance is mainly evaluated based on Islamic
principles (the most fundamental expression of Islamic beliefs) as well as past performance. Past
performance includes factors such as local affirmation82 of social life, ethical corruption (e.g.,
harassment, discrimination, etc.), record of organizational affiliation, support for parties,
organizations and groups that are illegal, record of a criminal conviction, drug addiction,
participation in political and religious activities, compliance with religious values, etc.
I also found that there were some people which had been accepted by the HR department but later
were rejected by the security department. The security department plays an essential role in
nominating people in public organizations and also monitoring individual performance at work,
especially with regard to staff in high-level positions. Indeed, the security’s evaluation outcome
always overrules other performance assessments in the Iranian petroleum companies. The security
manager said that “we have a close relationship with the HR department in nominating the good
81 Portal of the security department of the National Iranian Oil Company. (Online) available at: http://www.nioc.ir/portal/home/?generaltext/97296/96775/21804/ 82 Local affirmation is performed by means of an official sheet in which witnesses (e.g., neighbors of the person to be
evaluated) write testimonies on the subject or person being evaluated. The testimony of a witness (i.e., neighbor) is
also necessary to complete the verification process by the security department, who check the social life of a person
being considered for a position in a public organizations.
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citizens”. He further continues, “…well we also work closely with external organizations such as
prosecuting attorneys, police, the Ministry of Intelligence, and other institutions in order to
evaluate the individual’s past performance” (P22-NT-Oct18).
Figure 7.9 Feedback sample of the Staff Performance Management System
The HR manager asserted that the security department (herasat) is an independent department at
the top of the organizational hierarchy, with its own procedures for evaluating individuals’
performance and only accountable to the board members of the organization (P5-NT-Sep18).
Similarly, the HR development officer said:
“The security department [herasat] has its own evaluation criteria which mainly focus on Islamic
principles” (P7-VR-Sep17). She added that religious affiliation, ideological sympathies and
political opinions play an essential role in the selection criteria (known as Gozinesh in the Iranian
context)83 used by the security department when determining the candidates’ competencies (P7-
83 The Gozinesh law from 1985 prohibits some religions and ethnic minorities from fully participating in civil life.
E.g., it made access to employment and education conditional upon ideological screening. http://hmg.mop.ir/portal/home/# [Accessed: August, 2019]
Performance management evaluation reports
Performance appraisal report Competencies evaluation report Final performance evaluation report
Performance evaluation report
User ID Name Family name Position Supervisor / Manager Department Report year
152XXX Saeed XXX Mechanical Engineer - Operations & Maintenance 2017
Description Weight of
competencies
Competencies
evaluation
(Employee)
Competencies
evaluation
(Manager)
Weight of
competencies
(Employee)
Weight of
Competencies
(Manager)
Safety and health 0.20 3 3 0.60 0.60
Change management 0.00 0 0 0.00 0.00
Knowledge level 0.22 2 4 0.44 0.88
Creativity and innovation 0.00 0 0 0.00 0.00
Problem solving 0.15 3 3 0.45 0.45
Engagement 0.13 4 3 0.52 0.39
Perception and cognition 0.00 0 0 0.00 0.00
Computer knowledge 0.00 0 0 0.00 0.00
Team work 0.11 4 3 0.44 0.33
Mental ability 0.10 3 3 0.30 0.30
Communication skill 0.09 3 4 0.27 0.36
Final evaluation outcome 1 3.1 3.3 3.02 3.31
Source: The NIOC’s EPMS report (2018), redesigned and translated from Persian by the author
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VR-Sep18). The security manager said that “the various indicators used in selection criteria
[Gozinesh] of people includes belief in Islam, Islamic principles and norms [such as Islamic
clothing (dress codes for men and women), daily praying, fasting, faith, and pilgrimage to
religious places (e.g., Mecca and Karbala)], believing in the principle of Velayat-e faqih and the
Islamic Republic of Iran, criminal records, morality, records of any connections with illegal
parties or anti-Islamic organizations, drug addiction, independence from foreign organizations
and displaying regular religious activities”. He further continued that “the process of evaluating
an individual’s performance usually takes between one and two months” (P21-NT-Sep18).
According to the NIOC’s general policy guideline about the organization’s staff terms and
conditions of service, the recruiting policies based on the selection criteria ‘Gozinesh’ was
introduced after the victory of the Islamic Republic of Iran in order to nominate committed and
specialized staff in the ministries and governmental organizations (D1-2011). According to my
personal observation, although the policy of Gozinesh is used for all people who intend to work in
public organizations, those people who have a kinship relationship with focal political actors or
the clerical circles of the country are sometimes faced with less scrutiny in the Gozinesh process.
Furthermore, the Gozinesh is not just used for the people in the process of recruitment, but it is
also used for staff mobility or relocating, contract renewal and job promotion processes.
This evidence shows that religion, political perspective and kinship relationship with focal power
players are essential parameters in nominating “good citizens” for public organizations. The
process of evaluation allows the security department to physically eliminate not only political
adversaries, but entire categories of people who for some reason cannot be integrated into the
organizational network. Moreover, various formal mechanisms were also put in place to inform
managers or supervisors about what employees actually did (or did not do) on a day-to-day basis.
For example, I observed a time-recording system in most departments for employees to indicate,
on a daily basis, the time that they arrived and left work. In some departments I also observed that
the employees had personal activity notebooks where they were expected to note down the
activities they carry out on a daily basis.
7.3.2.2 The Budgeting Process
The second organizational practice that was affected by the new PMS was the budgeting process.
According to the NIOC reports, upstream and downstream processes are the two main business
segments of the NIOC (see chapter 5). A wide range of KPIs is used to meet the NIOC’s strategic
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priorities by an explicit “causal” business model (strategy map) describing how value drives are
linked to strategy (see figure 7.1). The CFO argued that “the NIOC activities are a set of value
chains. I mean every non-financial performance has a direct effect on financial performance, for
example, getting better employees (e.g., employees’ turnover) can add more value (e.g., retention
bonus) and improve productivity which leads to profitability. The change program links all these
measures” (P3-VR-Aug17). However, my observation indicates that the NIOC’s main aims of
using performance measurement systems are to analyze financial information to allocate its
resources, and also to gain legitimacy in front of its stakeholders, and external investors and
organizations. Although some of these indicators (i.e., financial and non-financial metrics) appear
in the NIOC’s strategic performance dashboard for monitoring the overall performance of the
organization, the BSC is not used as a performance assessment tool for the Ministry of Petroleum
and the government.
With regard to the resource allocation, the NIOC’s budgeting process begins with the accounting
departments and its subsidiary companies upon the request from the headquarters’ financial
department at the Ministry of Petroleum. The headquarters is responsible for issuing guidelines on
the preparation of budgets based on the organization’s policies and priorities. The accounting
department of each petroleum company asks all departments and deputies to submit their
requirements for the following year. When all the required information is received, the accounting
departments of each petroleum company consolidate reports, prepare a budget, and submit it to the
headquarters.
At the headquarters, the annual plan and budget for the Iranian petroleum companies are prepared,
taking into consideration the priorities as well as guidelines from the Ministry of Petroleum.
Overall, the annual plan and the budget of the NIOC and its subsidiary companies are discussed
by the board members and the general assembly. In this meeting, the budget proposals for the
various activities of the organization (such as human resources, training, research, equipment,
development, etc.) are discussed in detail. The main issue with respect to the budget of the NIOC
is ensuring that it complies with the national and government priorities and policies which are
represented in the BSC (e.g., 20 percent of oil and gas export revenue must be deposited into the
National Development Fund (NDF), 3 percent must be allocated to the development of
underprivileged areas, and 14.5 percent shall be returned to oil and gas production facilities for
development and maintenance). Moreover, the figures need to be realistic and the budget proposal
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is compared with actual results to analyze variances. The CEO argues that “…approximately 62
percent of the Iranian petroleum industry revenues are allocated for the government budget every
year and the remaining percentage is allocated for industry budget” (P1-NT-Aug17). This
evidence shows that a combination of top-down and bottom-up planning and budgeting approaches
are used in practice. Moreover, revenues from the sale of oil, gas, and petrochemicals provide a
large part of the state budget. As a result, the financial performance of the NIOC and how the
organization prepares its own budget are particularly important.
According to the CFO, the headquarters usually cuts the requested budget down mainly through
the operating costs (P3-VR-Aug17). Some of the participants also highlighted that the headquarters
usually did not pay attention to the submitted budget details and amended it without giving notice
to the Iranian petroleum companies. The R&D manager mentioned: “…In budget allocation, the
importance of market research has not yet been institutionalized among the petroleum
authorities…the final budget is therefore not seen by the NIOC’s managers as reflecting reality
and soon will be overtaken by the economic crisis such as inflation, devaluation of the national
currency, and the oil market volatility…” (P22-NT-Oct18). Similarly, the CFO explained the
budgeting process as follows: “…the Ministry of Petroleum views budgeting as a mechanism for
monitoring the financial discipline of the Iranian petroleum companies. The Ministry also uses
budget information to evaluate the [financial] overall performance of the Iranian petroleum
companies…the audited annual financial reports that are submitted by the NIOC to the board
members comprise budget and actual performance information for the preceding two years”. He
further continues, “…previously, the NIOC set targets using budgeting practices to improve its
performance, particularly in financial areas and with regards to cost reduction practices. Now,
they are based on the BSC” (P3-VR-Aug17). According to administrative circulars of the Ministry
of Petroleum, the NIOC’s accounting department is also accountable to external organizations
such as the Audit Organization, the Supreme Audit Court, and the General Inspection Organization
(D10-2013). The external auditors use budgeting information to examine the financial discipline
of the NIOC and its subsidiary companies. According to the business planning manager, the
change program helped them to integrate the accounting systems with the PMS in order to properly
plan and control the departments’ resources and costs. It was especially helpful in the management
of funds allocated to subsidiary companies, as it made it possible to precisely determine the budgets
received and spending based on the departments’ overall performance results and goals. He further
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continues, “…In the budgeting process, the current year’s sales figures and revenues are
compared to previous years’, along with monitoring the changes in the current year such as
performance results, policies, objectives and also the influence of external factors such as market
volatility in sales and pricing. Therefore, according to the results based on a prediction that the
conditions remain constant, the budget for the following year is prepared and assigned to each
department. It is a way to allocate resources and to achieve specific objectives based on program
goals and measured results” (P2-VR-Aug17).
Overall, although interviewees viewed budgeting as a very important accounting practice in the
change program by linking resources with results, it is also a very complicated procedure because
the NIOC needs to go through many processes before moving into the budget execution phase and
post-execution analyses. According to the marketing manager, “The reasons for this complexity
are the bureaucracy, uncertainty, and volatility of the oil market”. He further added, “One of the
most complex processes in budgeting is predicting sales, which depend on extensive marketing
research techniques, reviewing the company’s past sales trends, competitors’ sales status, the
government’s conservative plans and policies, and political interaction” (P17-VR-Aug18).
Moreover, the entire process involves the collaboration of different bodies throughout the
government. This collaboration is not only necessary for budget preparation, negotiation, and
approval processes but also for the spending approval after the whole budget allocation is finalized.
Furthermore, the external auditors and other audit organizations, who are not involved in the
budgeting process, utilize BSC-related budget information extensively.
Some participants described how using PMS in budgeting had an impact on their accountability in
performing their respective functions efficiently. The CFO argued that “the budgeting process is
the most important accounting practice for accountability…to allocate resources to achieve
strategic objectives based on measured results and to explain why the money is being spent”. He
further continues, “At the annual general meetings of the NIOC’s board of directors with the
general assembly, the audited financial statements along with the related measured results are
examined to allocate resources based on program goals” (P3-VR-Aug17). The BSC measures are
actually considered as a means to discharge accountability to the stakeholders and legitimate the
NIOC’s performance. Similarly, the HR manager mentioned: “The budgeting is an accountability
tool to provide transparent information about spending and the results achieved” (P5-NT-Sep18).
The marketing manager asserted that “the adoption of the change program has shifted our focus
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of budgeting, away from the management of inputs towards a focus on the result of spending and
the achievement of policy objectives” (P17-VR-Aug18). Furthermore, according to the CEO, “The
new budgeting process helped them to improve their internal decision-making [the allocation of
funds], and to make a stronger case to stakeholders and the government in support of their budget
proposals. It also helped program managers to track performance as well as spending” (P1-NT-
Aug17).
The NIOC’s administrative circulars indicate that the parliament has recently played a significant
role in holding the NIOC accountable for the results of spending, reviewing, and discussing
performance-based budget and financial reports. For example, clause (b) of article 121 of the sixth
five-year development plan indicates that each public organization is obliged to define a
comprehensive system of operational oversight, and submit a quarterly, a six-month and an annual
report based on the budget law approved in February 2015 to the Islamic Consultative Assembly
(parliament). These reports must include the organizational performance and performance-based
budgeting reports.
The above statements express the interviewees’ view that the adoption of the change program has
changed the management approach to the allocation of resources, thereby achieving strategic
objectives based on program goals and measured results, and improving decision-making.
However, the interviewee statements and my observation show that due to the “complicated
procedure” other criteria and principles of resource allocation (other than the ideally performance-
based ones) actually become prominent during this procedure. For example, the marketing
manager argued that the bureaucracy, uncertainty, and volatility of the market are the relevant
criteria that complicated the budgeting process. Furthermore, the NIOC’s budgeted performance
measures are used in order to explain to its stakeholders, investors and the government “why” and
“how” the money is being spent, i.e. to render the NIOC accountable vis-à-vis those groups of
actors.
7.4 Factors Which Shape the Use of PMS
This chapter will now present the views held by interviewees on how political, cultural and
economic factors impacted/shaped the PMS practices in the Iranian petroleum companies,
especially regarding target setting, policy-making, and decision-making processes. The
interviewees’ statements and my observations indicate that Islamic culture as the pre-dominant
approach of Islamic management plays an essential role in nominating people as “good citizens”
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at the workplace and has shaped the way in which the PMS is used in the NIOC. The majority of
interviewees agreed that, in principle, Islamic management would be compatible with the new
PMS. However, they also argued that there is a contradiction between the main definition of
Islamic management in the literature and the actual practice of Islamic management in the NIOC,
which mainly emphasizes Islamic principles and values rather than skills, justice, equality, and
satisfaction. Furthermore, all the interviewees associated governance with the issue of involvement
of different political bodies such as the government, the general assembly, and other focal power
players in the Iranian petroleum companies’ activities and the way in which the PMS is used by
interfering in target setting, policy-making, and decision-making. The majority of interviewees
also highlighted the uncertainty among managers stemming from both domestic and international
factors such as management mobility, political conflicts, economic exclusion, and market volatility
on performance management practices and decision-making processes.
7.4.1 Islamic Management
The victory of the Islamic revolution in 1979 initiated a fundamental transformation in the Iranian
management context. Managerial issues were seen to be best dealt with using the principles of
Islamic management (Javidan & Carl, 2004). This approach led to massive purges within
managerial ranks and the presence of clerics as the bearers of spiritual values for public and semi-
public organizations. Indeed, the previous approach to Western management concepts (e.g., the
dominance of Western powers in Iranian administrative systems) was replaced with the new
managerial approach based on Islamic principles and values (D11-2014).
Many interviewees explained that Islamic management is the governance of moral and spiritual
values in an organization based on Islamic thought, which also has a symbolic aspect. For example,
the marketing manager mentioned: “…Islamic management has a different meaning in Iranian
public organizations. I mean different in practice…The managers must be involved in religious
activities such as regular praying, attending the Islamic cultural services, meetings and
conferences, fasting, attending masses, etc. Indeed, the Islamic management perspective
emphasizes the way an organization is managing its staff based on Islamic values”. He further
continues, “…Attending religious activities has a positive effect on individual performance
evaluation” (P17-VR-Aug18). Another interesting response was received from the security
manager, who said “the Islamic management approach emphasizes the cultivation of managers’
relationships with Islamic principles and values in public organizations…A kind of pact with the
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orders of Velayat-e-Faqih…Islamic principles are valuable sources for teaching morality, ethics,
and social behavior. In this approach, the managers are nominated based on Islamic indicators
such as being faithful, revolutionary, trustworthy, loyal, productive, etc.” He further continues,
“…being revolutionary means to obey orders of the supreme leader [Ayatollah Khamenei] and
his concepts such as jihadi management84 and resilience economy85” (P21-NT-Sep18). The
resilience economy is defined as “an inspiring pattern of the Islamic economic system and a good
chance to make an economy epic” by the Supreme Leader of Iran.86 He further interpreted the
policy of resilience economy as a domestic and research-based paradigm, which originates in
revolutionary and Islamic culture (D14-2017). The resilience economy is primarily a way to
circumvent sanctions. This policy is illustrated as an economic roadmap to the country’s long-term
measures, which set the standards for achieving economic goals and solving current issues in this
area. Furthermore, the government’s 20-year vision plan mentions that managers should be
revolutionary, preserve Islamic values and indigenous identity for achieving the country’s
objectives in various areas such as economy, science, and technological knowledge (D11-2014).
Thus, this notion shows an interaction between international politics, domestic politics, and Islamic
management in the context of Iran.
Similarly, the deputy of the center for energy studies underlined that Islamic management is
compatible with PMS. He explained: “The BSC is a strategic planning and management system
that we use to align the day-to-day work that everyone is doing with a strategy based on core
values (what we believe in). Islamic management similarly puts the person at the center of
84 Jihadi management is understood in the Iranian context as a branch of Islamic management. It describes a strategy
inspired by Islamic faith and the belief in the principle of “we can do it”, self-belief and self-confidence for achieving
dignity and progress in various areas. While many Muslims understand jihad to focus on the internal struggle to make
themselves better individuals, jihadi management in the Iranian context also comprises the ideal conduct of citizens
that follow the revolutionary regime, suggesting that the ideal revolutionary fully embraces the idea of clerical rule
put forward by Ayatollah Ruhollah Khomeini and seeks to export it to other countries beyond Iran’s borders. This
concept is thus more complicated and multifaceted than the Western term “jihadism” as a 21st century neologism
found in Western languages to describe Islamist militant movements. [Written from the book Jihadi Management in
Persian see https://bookroom.ir/book/52584] 85 “Resilience economy” denotes ways to circumvent sanctions over a country or region experiencing sanctions. This
can involve increasing resilience by substituting local inputs for imported inputs, the smuggling of goods and an
increase in barter trade. The term was coined in Iran by supreme leader Khamenei, and in the context of the Iranian
petroleum industry it refers e.g., to practices of selling oil in the “gray market” (see e.g.,
https://www.bloomberg.com/opinion/articles/2019-05-13/as-sanctions-bite-iran-s-resistance-economy-is-kicking-in
[Accessed: February 2020]. 86 The information center for the preservation and publication of the Supreme Leader’s orders. Leader’s speech on
the Economy of Resistance in Meeting with Officials and Business Community. (Online) available at:
http://english.khamenei.ir/news/1882/Leader-s-Speech-on-the-Economy-of-Resistance-in-Meeting-with [Accessed:
March, 2019]
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attention, with forces for change battling against individual resistances to change such as habits
and practices, and improve the behavior of individuals through a set of values and beliefs in the
organization”. He further added, “…Islamic management means being a revolutionary and
jihadi...A set of values and beliefs intertwined with the scientific managerial structure and
revolutionary as well as Velayati values [having a practical commitment to the principle of
guardianship of the jurist] in dealing with the crisis. In this perspective, the managers’ behavior
is scrutinized based on jihadi traits such as meritocracy, trustworthy, morality, patriotism, loyalty,
piety, commitment, etc., and through people’s attitude [the local affirmation of individuals]. These
are the factors used in evaluating managers’ performance, which have a positive impact on their
performance at the workplace” (P19-NT-Aug18). The local affirmation is an essential part of
selection criteria (Gozinesh) used by security departments of public organizations for evaluating
individuals’ social behavior where they live and at work by conducting surveys. In this evaluation
process, people’s responses, opinions, and attitudes are rated from 0-4 (very weak - very good) to
measure their behavior. For example, to evaluate individuals’ Islamic revolutionary behavior,
factors such as participating in religious rituals and ceremonies (e.g., Friday prayers, visiting the
mosque, etc.), member of the Basij87 or being Basiji, dress code, having voting stamps on the birth
certificate (known as shenasnameh in the context of Iran)88, participating in the Islamic regime’s
political ceremonies (e.g., Al-Quds Day march89, the anniversary of the Islamic revolution, the
demise anniversary of the late founder of the Islamic revolution, and so on) are measured (see
figure 7.10). However, individuals do not receive conventional feedback through the security
performance evaluation system, and the outcome informs the HR department as accepted or
rejected.
87 The Basij or “Mobilisation Resistance Force” (also known as the Niru-ye Moghavemat-e Basij in the context of
Iran) refers to one of the five forces of the Islamic Revolutionary Guard Corps. It is a volunteer military established
in Iran in 1979 by order of Ayatollah Khomeini, originally consisted of civilian volunteers who were urged to fight in
the Iran–Iraq War. Today, Basij serve as an auxiliary force engaged in activities such as internal security, enforcing
state control over society, law enforcement auxiliary, providing social services, organizing public religious
ceremonies, policing morals, and suppression of dissident gatherings. Basij. (2020, November 26). In Wikipedia.
https://en.wikipedia.org/wiki/Basij 88 The birth certificate is one of the identity documents in Iran. Its last page is dedicated to the elections. In Europe,
birth certificates are also important identity documents but have nothing to do with elections. (Online) available at:
https://www.refworld.org/docid/550fd108adb.html [Accessed: November, 2020] 89 Each year on the last Friday of the holy month of Ramadan, Muslims worldwide unite in solidarity against Israel’s
domination and in support of the Palestinians. Quds Day. (2020, February 25). In Wikipedia.
https://en.wikipedia.org/wiki/Quds_Day
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I received another important response from the head of public relations, who highlighted the
symbolic approach of Islamic management. He explained, “...Measuring the people’s involvement
in religious activities does not help to increase productivity and efficiency or even the performance
of the organization. But this is a belief system based on Islamic values and principles which we all
are bound to implement…”, he further continues, “…In my opinion, there is no conflict between
Islamic management and PMS, but there is a contradiction between the interpretation of Islamic
management and the actual practice of Islamic management in our organization. I understand the
main definition of Islamic management to be the management’s ability to utilize both material and
human resources optimally based on Islamic rules (Sharia law)90, in order to achieve
organizational objectives in the short-term or the long-term” (P20-VR-Aug18).
Figure 7.10 A sample of the security department’s evaluation form
In the same way, the HR development officer explained that “Islamic management principles are
compatible with PMS because they emphasize justice in evaluating people... By this I mean equal
opportunities and no discrimination in the workplace”. He further continued, “However, only
90 Sharia law is a religious law forming part of the Islamic tradition. It is derived from the religious precepts of Islam,
particularly the Quran and the Hadith Nabavi (Esposito, 1998).
Source: Redesigned and translated from Persian by the author, 2019
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some of these Islamic laws are applied, not just in our organization, in all public organizations,
since the basis of the country’s policy is focused only on some of these Islamic laws…There is
more emphasis on religious aspects than on establishing equality and working against
discrimination at the workplace” (P7-VR-Sep18).
In the Quran (the holy book of the Muslims), a lot of verses emphasize testing people in order to
assess their performance (verse 155 of the Surah of Al-Baqarah and the beginning of the Surah of
Al-Ankabut). For example, verses 52 and 53 of Surah of Al-Omran mention that “all the major
and minor deeds of human beings are written line by line in special notebooks and the preciseness
of the letter of performance causes the people to be surprised on the Day of Judgment” (Moghimi
2019, p. 213). Therefore, according to the Quran, people should be evaluated precisely, accurately,
and equitably based on evidence without any personal orientation. Furthermore, verses seven and
eight of the Surah of Al-Zalzal also mention that in order to assess the peoples’ performance and
give feedback about the assessment results, we should first emphasize the individuals’ strong
points and then the negative ones. The verses also say that people are worthy of taking the material
and spiritual reward because of their performance. According to Moghimi’s (2019) description of
Islamic management, Islamic verses and narration emphasize the importance of skill, trust, and
satisfaction in performing work and in the process of customer orientation (Moghimi, 2019).
Therefore, Islamic management is about the relationship between science and religion,
implementing the aspects of religious science (also known as theistic science91) based on the main
elements of scientific management (Moghimi, 2019). In Moghimi’s opinion, Islamic management
is not limited to one or more organizations but emphasizes the management of Islamic society by
intervention in politics, economics, and culture, so as to govern the social life of the people.
According to this description, Islamic management based on Islamic Sharia law is compatible with
PMS. However, the NIOC has implemented only part of these divine rules (i.e., relying on the
symbolic aspects of Islam such as prayer, fasting, worship, etc., without paying attention to its
principles, beliefs, and practices in order to bring justice to the organization) in their framework
of Islamic management.
91 Religious science or theistic science is a science that deals with the topics of empirical science and uses religion in
its core studies. It is also referred to as theistic realism, which is the pseudoscientific proposal that the central scientific
method of requiring testability, known as methodological naturalism, should be replaced by a philosophy of science
that allows occasional supernatural explanations, which are inherently untestable (Moghimi, 2019)
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Furthermore, during my participation in the company’s organizational routines in August 2018, I
realized that there is an Islamic cultural center92 in the Ministry of Petroleum with many offices
aiming to promote Islamic beliefs and values in the Iranian petroleum companies. These offices
encourage staff to participate in the religious activities of the organizations. Additionally, the
performance of the Islamic cultural center and its offices are evaluated by external clerical
institutions, which are controlled by the Supreme Leader of Iran.93 According to their annual
performance reports, the performance of the Islamic cultural center and its offices is assessed based
on the number of meetings, the number of religious ceremonies, the number of religious
workshops, seminars, and conferences, the amount of integration into the Quranic activities, the
number and names of participants, and the length of participation in these activities. The measured
results are linked to the Islamic principle indicators, which are used as one of the fundamental
metrics in nominating a good citizen in the NIOC. Moreover, the results of these reports are used
when the security department assesses individuals, especially for job mobility, relocation,
promotion, and even when individuals want to move to another public organization. Furthermore,
my observation indicates that the majority of people are constrained to behaving hypocritically
(the conscious use of a mask) in order to gain legitimacy at the workplace (e.g., good performance
in the public organizations) and to obtain the social benefit, even if their behavior leads to states
of dissonance in their social life. According to the head of public relations, “As we are living in
Islamic country, respecting the Islamic principles and belief system is a value. Therefore, many
people may show themselves religious in order to gain legitimacy in society, by which I mean
enjoying citizenship rights and economic benefits that may result from their religious appearance.
It so happens, that even those people who have no faith in religious matters stand in
congregational prayer (e.g., Friday-prayer) to appear religious and thus gain legitimacy at the
workplace” (P20-VR-Aug18). This interviewee’s statement and my observation indicate that
although people are participating in religious activities or show allegiance to the organizational
culture, as is required from good citizens, this does not mean that everyone is genuinely interested
92 Cultural council and prayer headquarters of the Ministry of Petroleum. (Online) available at:
http://namaz.mop.ir/portal/home/?148820 [Accessed: March, 2020] 93 Islamic cultural center of the Ministry of Petroleum. The annual performance report. Translated from Persian by
the author. (Online) available at: http://www.mop.ir/portal/home/?generaltext/148820/148873/149035 [Accessed:
March, 2019]
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in obeying the ideological approach of public organizations. However, some of them try to adapt
to the systems by behaving hypocritically at the workplace.
These statements indicate that Islamic management has different meanings. In the NIOC, it
primarily means obeying Islamic principles and values, and having a commitment to the principles
of the supreme leader. This management approach is mostly emphasized in the governance of
moral and spiritual values, and is also a symbolic form of Islam in order to pursue political interest
in the Iranian petroleum companies. Islamic management principles described in the literature
(e.g., Moghami, 2019) are in principle compatible with the use of performance measurement and
management systems for performance evaluation. However, the way in which the NIOC applies
Islamic management principles has led to the use of two parallel performance evaluation systems
that are often in conflict. It has shaped the use of PMS in practice by measuring and managing
staff performance based on Islamic principles and values in the organization.
7.4.2 Domestic Factors
The majority of the participants highlighted the roles played by the government and political power
actors or bodies as the main issue in governance, particularly their ability to influence activities,
strategic objectives, policy-making, and decision-making processes. For example, the CEO
mentioned, “…The role of political power players [e.g., Parliament, Guardian Council,
Revolutionary Guards] is a central issue…We have to find a balance between conformance and
performance… I mean a balance between expectations, strategic goals, and day-to-day actions.
Although, our primary issue is to ensure conformity of operation based on government
expectations, such duality of tasks has downgraded the principal role of board members in
managing the current programs, accountability, monitoring and supervising the activities…”. He
further continued: “…Unfortunately, we do not have enough autonomy, otherwise our role would
be primarily performance-related and getting involved in strategy setting, policy-making and
critical decision-making to drive the NIOC forward and improve activities” (P1-NT-Aug17). This
statement shows that the political power players are seen to have a direct role in the day-to-day
activity of the NIOC (such as policy-making, goal setting, etc.), but the interviewee did not provide
an example of how such “conformance” was in conflict with what he perceived to be
“performance”. However, my understanding is that there needs to be a balance between political
bodies’ involvement and expectations (meaning the benefits which are earned by selling oil), and
conformance with their day-to-day activities and performance. Similarly, the head of controls on
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petroleum exports remarked that there is a weak delegation of tasks and decision-making rights by
managers: “We do not feel as though we have the freedom to do something, as all strategic
decisions are centralized”. He further continues, “The government expectations [the fifth and sixth
development plans’ objectives] are not compatible with the NIOC’s infrastructures and
capabilities” (P16-NT-Aug18). Similarly, the marketing manager argues that “the majority of the
assigned strategic goals are incompatible with the overall performance outcomes of the
organization, especially in allocating the budget”. He also added, “…Every day we have a new
challenge in the NIOC, by which I mean dealing with authorities’ expectations on the one hand
and market performance management on the other hand” (P17-VR-Aug18).
The business planning manager explained: “The NIOC’s general assembly is the highest decision-
making body which determines the company’s general policy guidelines and approves annual
budgets, operations, financial statements, and balance sheets” (P2-VR-Aug17). According to the
Statute of the NIOC, the general assembly normally consists of the President, the Vice President,
the Minister of Petroleum, the Director General of the Management and Planning Organization,
the Director General of Inspection Organization, as well as the Ministers of Energy, Industries and
Mines, Labor and Social Affairs, and Economy and Finance (see figure 7.11). The NIOC’s board
of directors has the authority to approve operational schemes within the general framework ratified
by the general assembly.
Figure 7.11 The general assembly of the NIOC
Source: http://naftema.com/news/60934
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Although the members of the general assembly are comprised of several external political power
actors, the NIOC’s board members are the NIOC’s members who hold high and strategic positions
within the NIOC (such as the CEO, the head of international relations, the deputy of development
and engineering, the legal and international advisor of the Petroleum Minister, the CFO, etc.).
According to the constitution of the NIOC, the NIOC’s board of directors is responsible for
managing, controlling and administrating the NIOC and its subsidiary companies (article 28 of
constitution). The members are comprised of seven main members with two alternate members
which are nominated by the Petroleum Minister and the general assembly for a period of four
years.94
The business development manager explained the influence of domestic political bodies in the
decision-making process as follows: “…The parliament has always put pressure on the NIOC to
expand gas fields projects because of the economic advantage of the utilization of gas for domestic
consumption [i.e., gas replacement with the consumption of petroleum products to reduce air
pollution, which is cheaper than other petroleum products, the generation of electricity from gas,
or extensive gas reserves in the country]”. He further continued: “…Even the Supreme Economic
Coordination Council must approve the development contracts in oil and gas fields, especially
where foreign investments are involved…it is too bureaucratic” (P8-VR-Sep17). Similarly, the
head of strategic planning and energy management explained: “...In 2011, the Guardian Council
rejected our proposal to reform the petroleum constitution which could help us to improve
organizational performance. They argued that our proposed bill is contradicting with the
constitution of the country” (P18-NT-Aug18). The proposed amendment of the petroleum
constitution included the non-interference of political bodies in the policy-making and supervision
of petroleum companies’ performance, adding the CEO of the NIOC as a member of the
Supervisory Board of Petroleum Resources, instructions on how to set up and hold meetings of the
Oil Resources Supervisory Board, the allocation of separate budgets for the four new deputies
(including production, investment and support, engineering and development, and international
affairs), etc. (D17-2018). He also added: “…They [the Guardian Council] can interpret articles
in whatever way they want similar to a constitutional court but they do not conduct a court hearing
94 Iranian students’ news agency. New members of the board of directors of the National Iranian Oil Company were
selected. Translated from Persian by the author. (Online) available at: https://www.isna.ir/news/95031713659
[Accessed: April, 2019]
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where opposing sides can bring forward their arguments” (P18-NT-Aug18). According to the
spokesman of the Guardian Council in April 2011, the NIOC did not yet have a clear statute
(memorandum of association). Therefore, the petroleum authorities’ proposal for reforming the
petroleum constitution was rejected.95 These statements show that there is a tension between
Iranian authorities (i.e., three pillars of power including the executive, judicial, and legislative
branches) regarding the management of the oil and gas sector of the country, through interference
in goals setting, policy-making, decision-making and so on.
Another interesting response was received from the supply chain manager, who asserted that
almost all the activities in Iran’s society - especially those of public organizations - become so
politicized that even the most basic issues are linked or viewed from a political perspective. He
further argued that the political polarization (i.e., by Iranian conservatives (also known as the
Right-wing) and the Iranian reformists (also known as the Left-wing))96 and the political
fragmentation not just in the society but within the organization, have affected decisions: “…Any
changes in the executive branch of the country influenced the high-level management positions at
the Iranian petroleum companies. The managers’ mobility due to the political change in
government [he refers to the Presidential Election of 2016 after which more than 50 upper-level
managers were replaced or relocated within the NIOC and the Ministry of Petroleum] has caused
instability in implementing the current programs, accountability, monitoring and supervising the
activities” (P15-NT-Feb18). This became evident in most of the interviews and also during
meetings I observed. The political perspective was seen to be influencing the Iranian petroleum
companies, causing people to behave with caution and be careful not to voice any conflicting
opinion or make any challenging decision. For example, the CEO talked about the immediate
launch of one of the phases of South Pars by the end of 2018 at the meeting held in summer 2017.
Suddenly, the business development manager in responded that the measured results showed that
they still needed time to complete this phase of project and that the CEO was well aware of that.
The others also agreed with the business development manager. Then the CEO said that the order
95 Iran analytical news agency. 8 objections of the Guardian Council about reform of petroleum constitution.
Translated by the author from Persian. (Online) available at: https://www.khabaronline.ir/news/150708 [Accessed:
April, 2019] 96 The Iranian conservatives are one of two main political poles inside post-revolutionary Iran which are more
religiously oriented and more closely affiliated with clerical institutions, supporters of the Supreme Leader of Iran and
advocates for protecting the ideological ‘principles’ of the Islamic revolution. However, the Iranian reformists are the
second main political pole in Iran, which promotes plans to change the Iranian political system to include more
freedom, modernity, human rights, and democracy (Kazemzadeh, 2008).
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was issued from the top [the Petroleum Minister], and after that everyone kept quiet. The CEO
further continued that everyone should do their best to complete this phase of the project by the
newly assigned date because launching this phase was politically, economically and socially
essential for the Minister and the President (M1-2017).
According to the head of the state management training center, the managers’ mobility at the
different levels of the public organizations due to the political changes in the government had
caused a lot of damages and instability which should be prevented as much as possible. He also
explained that the change program for public organizations such as the implementation of PMS
was one of the significant plans to create management stability in the public organizations by
evaluating managers’ competencies, training managers and developing talented people.97
The above statements indicate that the enormous oil and gas revenues as a strategic commodity
have placed energy policy at the center of power struggle and competition among economic
conservatives in the Parliament and the Guardian Council. Thus, the upper-level managers have
become reluctant to take decisions, knowing they would be scrutinized and targeted by
parliamentary investigations. Furthermore, the lack of an explicit petroleum law allows the
government to interpret laws in their favor which leads to lack of transparency and corruption in
the Iranian petroleum companies. Accordingly, the role and interference of political power centers
have been important in the process of petroleum policy decision-making, which also shaped how
the PMS were used in decision-making processes.
7.4.3 International Factors
The majority of interviewees explained that international factors such as sanctions, high market
volatility, and economic exclusion have affected the performance outcomes, and in consequence
performance measurement and management practices. Furthermore, many interviewees also
pointed out that the crisis (from November 2018 to 2020) caused by the US sanctions has led to
uncertainty and hence made it difficult to plan and set performance objectives.
The project manager explained that the crisis of the Iranian petroleum industry could not be solved
in isolation from the political issue of the country: “…So as long as the political tension with the
United States is not solved…I mean until the country returns to a normal situation such as the
97 The Islamic republic news agency. The managers’ mobility due to the political change in government is causing
damage to our country. Translated by the author from Persian. (Online) available at: www.irna.ir/news/80515842/
[Accessed: May, 2019]
207
situation before the sanctions, our challenges in production, development, and export will
continue” (P14-NT-Feb18). Similarly, the CFO said: “…The international sanctions have affected
our financial performance as the average profitability decreased. We cannot make directs
transactions with international banks. Our revenues have reduced which caused a delay in paying
salaries. This situation has a direct impact on staff performance as well”. He further continues,
“… Normally, whenever you sell your products in the market you receive money in payment for
sold products into your bank account, however, this is not possible during financial sanctions…
these conditions have affected our productivity, efficiency, and competitiveness…these are the
challenging issues which have impacted our organizational performance” (P3-VR-Aug17).
Oil as a strategic commodity plays a crucial role in Iran’s economy. It also has the highest degree
of cohesion (i.e., balancing the global market price) and solidarity with the outside world of Iran’s
economy. Therefore, any business interruption in production, development, and export of this
industry will directly affect Iran’s economy. The main issue in this regard is the increasing inflation
and instability of the economy, which created serious challenges for the Iranian petroleum
companies. The CFO said: “…We prepared the annual budget a year ago and the prices have
increased by at least 50% in the current year”. He further continued, “This situation has disrupted
all our calculations in budgeting” (P3-VR-Aug17). Similarly, the R&D manager argued that the
budget had reduced in comparison with the previous year due to the shortage of the organization’s
income. He further continued: “…The economic sanctions have influenced business, investment,
development of oil and gas fields, and employment of Iranian petroleum industry” (P22-NT-
Oct18). The head of controls on petroleum export explained: “...Although the international
sanctions affected oil export revenues, we have tried to adapt to the sanctions through various
means, including using alternative payment mechanisms such as barter agreements98 and
changing our trading partners”. He further continued: “…The petroleum authorities have tried to
keep a certain level of performance at any costs, even selling the crude oil at as much as a 10%
discount from its official market price or selling in the black market” (P16-NT-Aug18). Revenue
from oil exports is an essential component of government revenue in Iran. The project manager
argued that “the enactment of recent US sanctions have downgraded the forecast for developing
oil and gas fields and initiated a deterioration in the Iranian petroleum industry’s expected
performance” (P14-NT-Feb18). This statement shows that although the Iranian petroleum industry
98 A barter agreement is a contract in which goods or services are exchanged in lieu of cash (see Răvaş, 2011).
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had previously had to cope with sanctions for a long time and this situation was not completely
new to them, the interviewees talked about it as if it were a novel and “abnormal” situation.
According to the International Monetary Fund (IMF) in 2018, economists predicted poorer
performance on key macroeconomic indicators, such as GDP, inflation, and unemployment,
between 2019 and 2020 than previously expected. Additionally, Iran was predicted to continue to
face declining oil output, plunging exports, surging prices, and a sharply weaker national currency
after 2018.99 Furthermore, according to IHS Global Insight, the imposed international sanctions
that targeted the Iranian petroleum industry were likely to push Iran’s economy into recession.100
These reports from the IMF and the IHS show how Iran’s economy is tied to the revenues of the
petroleum industry, and how any poor performance of this industry has a direct impact on the
economy.
The marketing manager highlighted that the economic sanctions increased concerns about the
future of the economy: “…Although the majority of the petroleum authorities rhetorically refused
the effect of economic sanctions on the Iranian petroleum industry [he is referring to the Ministry
of Petroleum’s deputy of international affairs’ interview with Mashreq newspaper in July 2013]101,
the sanctions created an uncertain situation making it difficult to set strategic goals and make
strategic decisions…We are using various metrics to measure sales rate, customer satisfaction,
competitiveness, credibility, effectiveness, etc. So, we feel the impact of sanctions much better than
them”. He further continued: “The exchange rate crisis stems from financial constraints and rising
transaction costs, and investment risk as well as lack of technology, shortage of oil export
revenues, and limitation of foreign trade...all in all, [these factors] are primarily driven by the
sanctions on Iran’s economy” (P17-VR-Aug18). Similarly, the head of strategic planning and
energy management explained: “There is a certain complexity and uncertainty due to the current
situation [2018]…at the moment, if you ask people almost nobody knows what will happen in the
near future, even tomorrow…how we can plan or manage the performance of the organization as
a whole? Let alone the performance of individuals in the organization?” (P18-NT-Aug18). The
99 International Monetary Fund. Islamic Republic of Iran: Selected Issues; IMF Country Report No. 18/94. (Online)
available at: https://www.imf.org/en/Publications/CR/Issues/2018/03/29/Islamic-Republic-of-Iran-Selected-Issues-
45768 [Accessed: March, 2019] 100 IHS Global Insight. Low oil prices, Iran and Middle East stability. (Online) available at:
https://ihsmarkit.com/research-analysis/low-oil-prices-iran-and-middle-east-stability.html [Accessed: May, 2019] 101 Mashreq news agency. How does Iran bypass the “crippling” Western sanctions?. Translated from Persian by
author. (online) available at: https://www.mashreghnews.ir/news/216642 [Accessed: June, 2019]
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concept of uncertainty was explicitly mentioned by the interviewees. Thus, it can be concluded
that uncertainty was a very important issue the NIOC’s managers were facing in strategic target
setting and decision-making. Uncertainty mainly rises from external parameters such as political
conflicts, economic exclusion, and market volatility.
During my participation in day-to-day activities in the organization in August 2018, I also learned
that, petroleum authorities and managers of departments did not know how to contribute to
achieving strategic objectives at the different levels of the organization due to the volatility of the
political situation most of the time. It appeared to me that they just focused on their routine
activities without paying attention to conformity between performance and strategy. Instability and
uncertainty were obvious among managers at the NIOC. For instance, the operational manager
said, “…We have had two types of management in the NIOC so far, one long-term and future-
oriented and one volcanic and sudden management. The critical circumstances of the sanctions
have shifted us from long-term goals to short-term goals… meaning volcanic and sudden
management” (P12-NT-Feb18). Moreover, I observed that the organizational performance was
primarily measured and managed for accountability purposes and not to change activities in order
to increase the effectiveness and efficiency of resource utilization. This observation was also
confirmed by the R&D manager, who stated: “Performance evaluation and measurement as well
as its development require the cultivation and improvement of the organizational culture. But we
do not see that among petroleum policymakers, not even the training courses include this required
quality... The only purpose of the change program is to be accountable to regulatory agencies
[e.g., Parliament, Guardian Council, etc.] without a solid effort of changing activities [people’s
behavior]” (P22-NT-Oct18). However, the procurement manager believed that the reason for the
unwillingness of petroleum officials and policymakers to set a comprehensive plan for improving
organizational culture is due to the uncertainty about the future, as he said: “…There is uncertainty
about the future of the oil market and increasing political tension among petroleum authorities.
Thus, they are not able to set a comprehensive strategic target for changing people’s behavior
among the Iranian petroleum companies in order to improve organizational culture”. He further
continues, “…In this situation, all efforts of managers are to reduce costs and to secure financing
for exploration and the development of oil and gas field projects by domestic capabilities to keep
a certain level of production as well as finding a way to sell to trading allies” (P13-NT-Feb18).
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Another response was received from the deputy of the center for energy studies, who noted, “…The
managers are aware of difficulties due to the economic sanctions. Therefore, they have to be
flexible about the performance results. For example, oil and gas production plays an essential role
in Iran’s economy and its export revenues covering the central part of government expenses.
Therefore, production costs such as operating costs, gathering and transportation costs, taxes, etc.
are one of the most important metrics in measuring upstream oil and gas performance... Operating
costs are associated with operating and maintaining the wells, related production equipment and
facilities such as labor, materials, utilities, supplies, and fuel consumed during operations along
with repair and maintenance costs. International sanctions have increased all these costs,
decreased production and delayed the development of projects due to the lack of investment,
technology, and so on.” It can be concluded that since the oil and gas sector requires continuous
investment and transfer of Western technology, the sector’s performance was negatively definitely
affected.
The responses received from interviewees show that the domestic and international factors such
as political conflicts, management mobility, lack of investment and technology, lack of access to
the global market, lack of financial transaction with international banks, oil market volatility,
economic exclusion and so on, have directly influenced the performance of Iranian petroleum
companies and their performance management practices, as managers were unable to set clear
strategic objectives and link them to day-to-day actions. Furthermore, the diverse political
upheaval has shaped the way in which the PMS is used in the NIOC by intervening in target setting,
policy-making, and decision-making processes. This situation has also created uncertainty among
the managers about the future of the oil market and the political tensions in the Middle East.
Additionally, Islamic nationalist ideology as a predominant element of government has impacted
the NIOC’s management approach and shaped the practices of performance management by
nominating people based on Islamic principles and values. This approach has led the majority of
people to behave hypocritically to gain legitimacy (i.e., to be nominated as a “good citizen”) at the
workplace and to gain social benefits in society, even if this behavior leads to states of dissonance
in their social life.
7.5 Summary
This chapter presented the empirical results of the aspirations attached to performance
management systems and the ways in which these systems were actually practiced in the NIOC
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during my observation period there. It outlined the interviewees’ experiences and views of the
implementation of performance measurement and evaluation systems in the Iranian petroleum
industry. This chapter also sought to understand how practices of the PMS are shaped by the
specific historical, cultural, and political contexts of the Iranian petroleum industry. My
observations and the interviewees’ views indicate that a combination of internal and external
factors shaped the implementation and the practices of PMS, and led to specific discrepancies
between the aspirations of the change program and the actual PM practices in the Iranian petroleum
industry. For example, the interviewees confirmed that the engagement of upper-level managers
with people at the workplace is weak due to the organization’s political approach to individuals
(e.g., management mobility or relocation) that results from the political transformation in the
government. They specified that commitment and engagement would not be effective unless the
upper-level managers participated in setting targets and defining objectives, reviewing business
plans, selecting relevant KPIs, ensuring appropriate resources the allocation of projects,
communicating the mission to all levels, monitoring and controlling the system progress and were
involved in the implementation until the end. Moreover, the problems with lack of training and
expertise or the low quality of training were mentioned by interviewees, which were seen to
hamper the managers in selecting appropriate KPIs as the main drivers of success. The
interviewees also highlighted that they did not have enough autonomy in managing and controlling
performance, as all decisions are centralized by the Ministry of Petroleum and government.
The interviewees’ statements indicate that managers strongly believe in linking the PMS with
rewards in order to improve staff motivation. However, employees are currently not compensated
based on their performance, but based on other criteria (such as Islamic nationalist ideology,
nepotism, etc.). This also indicates that individual performance evaluation based on other criteria
is not linked to indicators like EVA (i.e., criteria which are not linked to the KPIs of the BSC that
are reported to external stakeholders). Moreover, my observations suggest that the NIOC used two
performance evaluation systems in parallel for assessing staff at different levels with varied
contracts. One emphasizes the Islamic nationalist ideology and the other focuses on skills,
competence, and meritocracy. However, the performance evaluation outcomes from the security
department which mainly emphasizes Islamic nationalist ideology always overrule the other
performance evaluation practices. Thus, according to interviewees, religious affiliation,
ideological sympathies, and political opinions play an essential role in determining the security
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department’s selection criteria for candidates. This ideological approach in nominating people as
a “good citizen” at the workplace causes the majority of people to behave hypocritically in order
to justify their positions and gain legitimacy at the workplace, even if this behavior leads to states
of dissonance in their social life. The influence of politics on the oil and gas sector was seen as an
influential matter which caused people to behave with discretion and avoid any challenging
discussion or decision. Indeed, the enormous oil revenue as a strategic commodity has placed
energy policy at the center of power struggles and competition among various political groups.
These factors have limited the practices of PMS and led to discrepancies with the aspirations of
the change program. Said change program was envisaged to make the NIOC business more
efficient, customer-orientated, and performance-oriented, as well as to transform organizational
culture and integrate performance management systems among its subsidiary companies.
Furthermore, I elicited how actors interpreted organizational processes, and the impact of internal
and external contextual factors such as the influence of local ideology, political power centers,
political conflicts, market volatility, economy exclusion, etc.
This chapter also revealed that the value regimes operating within a society can also influence the
principles that govern modern management within an organization. For example, the interviewees’
statements indicate that Islamic management has different meanings. In the NIOC, it primarily
means obeying Islamic nationalist ideology and having a commitment to the principles of the
supreme leader. Islamic management principles described in the literature (e.g., Moghami, 2019)
are compatible with the use of performance measurement systems for performance evaluation in
principle. However, the way in which the NIOC applies Islamic management principles has led to
the use of two parallel performance evaluation systems that are often in conflict. This management
approach is mostly emphasized in the governance of religious values as well as a symbolic form
of Islam to pursue a political interest in the Iranian petroleum companies.
Finally, the participants revealed that domestic and international factors such as the interference
of political power centers, management mobility, political conflicts, economic sanctions, market
volatility, and economic exclusions have directly influenced the performance and performance
management practices of Iranian petroleum companies. This was caused by managers being unable
to reach the desired financial and non-financial objectives and also to set clear strategic objectives
and link them to day-to-day actions. Furthermore, the interference of diverse political bodies in
target setting, policy-making, and decision-making processes, shaped the way in which the PMS
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was used in the NIOC. The interviewees asserted that the internal and external parameters also
created complexity and uncertainty among managers and the instability interfered with the
implementation of PMS in the Iranian petroleum industry. My findings indicate that the
organizational performance was primarily measured and managed for accountability purposes and
not to implement measures in order to increase the effectiveness and efficiency of its resource
utilization. In the following chapter, I will interpret the findings of this chapter through a
theoretical lens.
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CHAPTER EIGHT: DISCUSSION OF FINDINGS
8.1 Introduction
As explained in the previous chapters, it has now been more than a hundred years since oil and gas
were discovered in Iran. Since then, oil and gas revenues have played a crucial role in the Iranian
economy as the central source to fund the government’s public projects and social services. Iran
has played an essential role in controlling the oil market and prices as a permanent member of the
OPEC in coordination with other member countries since 1960. However, during this period, the
Iranian petroleum industry has constantly been affected by political and social upheaval, which
has directly influenced the development and reformation of the industry.
Given the significant role of the petroleum industry for Iran’s economy, it is not surprising that
Iranian authorities have an interest in measuring and managing the performance of petroleum-
producing companies and also in policy-making to deal with the large swings in oil and gas
revenues. Moreover, the Iranian petroleum companies such as the NIOC have increasingly come
under pressure from the public to improve organizational performance.
In response to these pressures, the Iranian petroleum-producing companies took responsibility for
measuring and evaluating the performance of their activities by implementing a comprehensive
performance measurement and management system (i.e., Balanced Scorecard). Another main spur
leading to the implementation of the PMS, is the dimension and speed of transformational
technologies that have dominated the global economy during the past years, coupled with
international oil and gas companies that have responded to this transformation. Therefore, Iranian
authorities assumed that there was a need to take real, solid and sustainable steps towards
implementing a PMS that supports the strategic initiatives and measures the effectiveness and
efficiency of the organization’s processes (see chapter 7). However, my findings reveal that a
combination of internal and external factors has shaped the implementation and the use of PMS in
practice, leading to specific discrepancies between the aspirations of the change program and the
actual PMS practices.
The last three chapters (chapter 5, 6 & 7) each provide partial responses to the following three
research questions that guided this study:
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1. How are performance measurement and management systems understood and practiced in
a non-Western context?
2. How has Islamic ideology shaped the practices of performance measurement and
management?
3. How do managers cope with conflicting values (such as religious value and industrial
value) in the practices of performance measurement and management?
Within accounting research, there are certain empirical gaps in practices of performance
measurement and management in Islamic societies, specifically with regard to the role of Islam in
practices of performance evaluation. Accordingly, this chapter seeks to interpret the findings of
this study by drawing on the existing literature about debates in certain areas where research has
been sparse such as the interaction between cultural, political, and economic parameters in social
and organizational contexts of Islamic societies. In this chapter, I will first discuss my findings
through the post-colonial lens, which enables me to explain the interrelationship between
accounting and religion, specifically the role of Islam and anti-imperialist beliefs in the practice of
performance measurement and management, by investigating the enactment of new public
management in the context of the Iranian petroleum industry. Then, I will interpret my findings in
terms of the theoretical framework of economies of worth (EW) in combination with post-
colonialist theory in order to theorize the specific historical, cultural, and political contexts and
hence the co-existence of multiple value regimes in Iranian public management.
In the same vein, I will show how the organizational actors cope with the multiplicity of value
regimes and justify their positions, by drawing on the notion of a test, to indicate the form of
conflict among the actors with a variable degree of legitimacy in the context of the Iranian
petroleum industry.
8.2 Post-colonialism and the Ambivalent Practice of Performance Management
Systems
Iran has always been a central focus of Western powers’ attention due to its rich natural resources
(e.g., oil and natural gas) and its geopolitical position in the Middle East. Although Iranian society
was never colonized by Western countries directly, domination by Western powers (as part of
cultural, and political influence), particularly Britain, led to an opposition to Western imperialism
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and modernization in Iran’s society. For example, as a result of the British colonial influence from
1908 to 1951 on the Iranian petroleum industry, the training of staff, the organization of the
management structure, the legal regulation, disclosure standards, and the financial reporting
practices were based on those used in the UK (Bamberg 1994, 2000). Nevertheless, after 1951
Britain’s domination over the Iranian petroleum industry diminished due to the nationalization
process, and later in the course of the Islamic revolution of 1979 (see chapter 5). The Islamic
revolution of 1979 was the culmination of a long struggle between the modern secularist trends
that had engulfed Muslim societies for many decades and Islamic revivalist movements (Warren,
2010). The latter had contended that in order to save Muslim societies from socio-cultural and
political degeneration, and Western domination, one would have to eschew Western secularist
values and return to those of the early period of Islam by emphasizing on Islamic principles and
values (see chapter 6). According to Kamla (2007, p. 115), after gaining their independence, many
countries that were under the colonial influence of Western powers moved to nationalism and a
centrally planned economy, departing significantly from the Western economic and political
systems.
The Islamic revolution is an example of the significant role of the clergy who used Islamic ideology
in generating anti-imperialist debates and movements. This perspective significantly influenced
the development of “Islamic management” concepts and practices in dealing with managerial
issues in the Iranian public management context after 1979 (Javidan & Carl, 2004). They are often
presented as the only alternative to the Western ideology and its imposed imperialistic practices
(Ghaderi, 2018). Post-colonial studies have paid much attention to the particular historical,
cultural, and political contexts of colonial and post-colonial societies by means of which they
analyze the continuing resistances, appropriations, and transformations of dominant (i.e.,
“imperial”) discourses, institutions, and methodologies of colonized societies (e.g., Ashcroft 2013,
2017; Bhabha 1983, 1984; Gandhi, 2019; Said 1979, 1993, 2003; Spivak, 1987). However, Islamic
thought (e.g., Islamic management) has not received much attention in post-colonial studies and
is limited in the way it deals with issues related to Islam. For example, Fanon’s studies A dying
colonialism (1994), Toward the African revolution (1988), and Black skin, white masks (1970) and
also Said’s Orientalism (1979, 1993) (influential critique of Western constructions of the Orient),
which aim at freeing the colonized people from the inside so as to enable them to feel and think
independently, do not focus on Islamic thought. The “inside independence” is fully supported by
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Islam: the religion that has refused to be colonized by Western Christianity in the past and by
Western secularism today (Majed 2013, p. 87). Indeed, without post-colonialism, Islam would lack
an essential cultural theory that was created to help the colonized people to free themselves from
the colonial “stereotypical images” that justify colonialism (Majed 2013, p. 70).
The emphasis on the Islamic nationalist ideology in dealing with social issues after the Islamic
revolution of 1979 shows resistance and a general rethinking of dominant Western historiography
that places the ‘West’ at the center of the world. However, while some authors have described
Islamic management practices (e.g., Gallhofer, Haslam & Kamla, 2011; Hidayah, Lowe & Woods,
2019; Kamla & Haque, 2019; Mihret et al., 2020; Napier, 2009; Napier & Haniffa, 2011), there is
a lack of in-depth studies on the role of Islam and anti-imperialist beliefs, movements, and
discourses on the adoption of Western management technology in the context of Islamic societies.
Postcolonial studies and theory, in this regard, by taking a meaningful position against imperialism
and Eurocentrism (Bahri, 2001), contribute a useful basis for the extension of the critical
accounting school’s debates (see Kamla, 2007; Omar, 2012), to accommodate insights from a non-
Western perspective.
The long history of contact between Islam and the West has given Muslims their own perception
of the colonial experience, which needs to be explored explicitly within the post-colonial
discourse. Islam is not just a religion, it is a set of norms and values that govern various aspects of
behavior, a cultural system, a way of life, and a civilization rather than just a faith (Kamla, 2007;
Maznil, 1997). It has a vital effect on economic and political organizations as well as human
relationships in Muslim societies (Metcalfe, 2007). However, there is tension between Islam and
Western philosophies in all aspects of social life. According to Ahmed (2004), the clash between
Islam and the West “is more than a clash of cultures, more than a confrontation of races: it is a
straight fight between two approaches to the world, two opposed philosophies. […] One is based
in secular materialism, the other in faith; one has rejected belief altogether, the other has placed
it at the center of its world-view. It is, therefore, not simply between Islam and the West” (p. 264).
The Western colonial powers followed a similar “one and only truth” way of thinking, which
contributed to the justification of their colonialism’s superiority over the others (Majed 2012, p.
57). The colonial powers are still influencing and controlling the non-Western societies indirectly
in various ways, especially by the practice of management tools and techniques. Researchers have
documented the centrality of accounting language and technologies in the discourses and practices
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of imperialism and colonialism by showing accounting as a technology that helped enable and
legitimize colonial conquest (see Annisette & Neu 2004; Davie 2000, 2005a, 2005b; Gibson 2000;
Kamla, 2007; Neu 1999, 2000a, 2000b; Neu & Graham, 2006). Similarly, Alatas (2003, p. 602)
illustrates how “the contemporary social science powers” (including the United States, Great
Britain, and France) have the ability to influence and control the Third World. Muslim intellectuals
suggest that Islamic societies should utilize the Islamic perspective on management as an
alternative to Western management theories in managing organizations (Moghimi, 2019; Sulaiman
et al., 2014), while still benefiting from the transfer of relevant Western management technologies
and techniques (Branine & Pollard, 2014). In the context of Islam, management as a function is a
process of coordinating activities according to a set of Islamic principles derived from the Holy
Quran (which contains the words of God) and the Hadith (which contains words of the Prophet
Mohammed). Islamic management is, therefore, described by some authors as a moral, spiritual,
and physical function that is not only driven by material objectives in contrast to Western
management thinking, in which individualistic, technical and material objectives are often the most
important (Ali, 2005; 2010; Moghimi, 2019).
My findings reveal that the formation of ideology and practice of Islamic management principles
in the Iranian public management context is proposed as an alternative discourse102 to Western
management approaches and imperialism in dealing with managerial issues. Nevertheless, the way
Islamic management is practiced in the Iranian public management context is far from what they
understand as “proper” Islamic management ideals. More precisely, the Islamic management
practices in Iranian public organizations such as the NIOC do not merely apply Islamic principles
derived from the Quran and the Hadith (e.g., presented by Moghimi, 2019) to the use of PMS, but
rather they are shaped by the specific historical, political, and economic development of Iran’s
society. This finding is in line with Prakash’s (1994) research, who discusses the inconsistency of
Western management thought with non-Western societies and is also in line with Branine and
Pollard (2010), who argue that heritage of colonization (as part of historical and cultural influence),
ideological differences, and political conflict with the West are factors that might lead to the
formation and practice of Islamic management in Islamic countries.
102 It refers to Islamic management principles as a valuable alternative to neoliberal, capitalist management
approaches. In this perspective, dimensions of Islam religion such as ethics, the spirituality, and the sacred displace
with the relentless pursuit of efficiency and profit maximization (see Kamla, 2015).
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As I explained previously, the value of being religious is rooted in the historical and cultural
context of Iran, and has remained the basis of political authority and legitimacy in Iran’s society.
The rise and popularity of the Islamic perspective in managing Iran’s society became a reality by
articulating an alternative discourse to Western-centric projects (imperialism and Eurocentrism)
of modernization and domination. This happened in a way that enabled Iran to accommodate
modernity to its own historical and cultural experiences and gain control over resources (see
chapter 6). In other words, the Islamic perspective became unfolded as a dominant value and has
represented an Islamic nationalist ideological response to colonialist thought in managing society
due to the historical influence and control of the Western powers and also the anti-imperialism
perspective of the Islamic regime. This ideology was also enshrined in the state constitutions after
the victory of the Islamic revolution of 1979. Mirsepassi (2000) refers to this ideology as “local”
politics based on local “identities” in the “Third World” - the invention of resistance against
Western power domination (p. 11). The political perspective of religion (Islam) has shifted,
emphasizing the entanglement of religion and government as a dominant value in managing the
country, and it has been transported into the organizational rules and regulations by measuring and
managing staff’s performance based on Islamic principles and values in the public organizations
(see chapter 7). Therefore, while the central political and business influence in the so-called
“Middle East” came from the US and the UK, the principal social and cultural influence remained
to be Islam (Samuels & Oliga, 1982). However, this cultural confrontation has led to a conflict
between local values and to some extent also locally promoted “modern” management practices.
The Iranian regime, by emphasizing that the Western rulers are unreliable and seek to invade the
country’s culture, economy, and politics, has created the security state and extended these
exceptional conditions103 in the country by continuing its tensions with the West in order to justify
its Islamic nationalist ideology and legitimize its political actions. Agamben (2005, p. 14) indicates
that “the declaration of the state of exception has gradually been replaced by an unprecedented
generalization of the paradigm of security as the normal technique of government”. Indeed,
concepts such as jihadi management and resilience economy, which are interpreted by the Iranian
supreme leader as an integral part of Islamic management principles, are examples of possessing
103 This refers to the work of Agamben (2005), who stressed the concept of a “state of exception” as a specific situation
in which juridical order is suspended due to an emergency or a crisis threatening the state [or organization]. Under
such conditions, the sovereign, i.e., the executive power, prevails over the others, and the primary laws and norms can
be violated by the state in the name of the public good while facing the crisis (see also Aradau & Van Munster, 2009).
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the authority to suspend the modern management and declare a state of exception by the dominance
of a specific value system over other values in society, due to the crisis caused by political tensions
with the West (e.g., ideological differences, economic sanctions, etc.). Moreover, the Islamic
regime, by emphasizing the concept of “Esteghlal” and indigenization processes (such as
localization of Western technologies) on one hand, and Iran’s slight ideological shift to
accommodate transnational capitalism post-1989 on the other hand, has engendered a paradoxical
neoliberal and anti-Western ideology (see Mihret et al., 2020). However, this kind of neoliberal
strategy is not unique to the Islamic regime of Iran, rather other regimes such as authoritarian,
democratic, or communist also have alternative views on how to align with neoliberalism. For
example, Ong (2006) indicates how the East and the Southeast Asian states have selectively made
neoliberal discourse to their typical practices of governing to position themselves in alignment
with the global economy. Accordingly, such value systems require a kind of management control
system that is compatible with the state’s ideology. For instance, in the context of Iran, this is a
management control system with the Iranian-Islamic interface in order to support Iran’s Islamic
nationalist ideology, namely Velayat-e Faqih, and strengthen the security over public
organizations. This social transformation has formed Iranian identity and the Iranian culture to
become the Iranian-Islamic identity and culture (Moshe-hay et al., 2015), which was produced by
the clerical leader (i.e., Ayatollah Khomeini) and aimed to save Iranian Muslim society from the
West’s influence and ‘imperialist domination’ (Rakel, 2009). According to Mohammadpur,
Karimi and Mahmoodi (2014), Iranian identity construction revolves around a relationship
between Islamism, Persianism (pre-Islamic culture), and historical relations with the West
(Western hegemony). As a result, ensuring Iran’s esteghlal was one of the essential policy
priorities throughout the post-revolution hegemony under Velayat-e faqih (Vakil, 2011). The
paradigm shift thus became a precondition for implementing Islamic management in public
organizations.
While Iranian authorities openly emphasize Islamic management principles which are in
opposition to Western influences and colonialist thought, Western management technologies and
approaches are not completely disregarded in the face of the need for international cooperation,
investment, and globalization. For example, the cooperation of the US based management
consulting company (i.e., Bain & Company) in the structural reform of the Iranian petroleum
industry, as well as the implementation of Western management tools (i.e., PMS), were aimed at
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linking organization strategies to day-to-day actions including the evaluation of the overall
performance and connecting performance results with rewards in order to improve productivity
and increase profitability. These decisions confirm Iran’s slight ideological shift to accommodate
institutional norms of transnational capitalism along with Islamic nationalist ideology in the
globalization era, whereby ideology-based consent (e.g., consent between neoliberal policy and
the nation state ideology) is used as a primary means of power without completely disregarding
coercive mechanisms (Mihret et al., 2020). Accordingly, although the colonized people celebrated
their independence through the process of nationalization, the neo-colonialism in the guise of
modernization and development in the age of globalization has continued to linger in a new style
of Western imperialism (Bahri, 2001).
This evidence indicates the ambivalent Iranian elites’ approach to the West after the revolution of
1979. One approach emphasizes anti-Western imperialism by claiming that the West intended to
invade the country’s culture, economy, and politics. Consequently, all facts of social life need to
be Islamized, which means continuing to resist Western notions of international order, politics,
and culture. Another approach emphasizes Western modernization, development, and
technological superiority, which should comply with the local culture, precisely the Islamic
principles, and values. The Roman god Janus can be used as a metaphor to explain this ambivalent
approach in Iranian petroleum companies: Janus is the god of gates and bridges and he is depicted
as having two faces: one is turned to look at the past and the east, the other is turned to look at the
future and the west. Thus, Janus symbolizes the interface between two contradictory worlds
(Blanchet, 2011). This metaphor enables me to focus on the encounter between Western and local
culture in the practice of PMS by mimicry of and resistance to it, by emphasizing local culture and
social values in Iranian petroleum companies. The encounter of local culture and Western
management approaches in these paradoxical situations generates a hybrid variant. I use these
paradoxes to produce a more comprehensive theory of post-colonialism between the East (esp.
Islamic societies) and the West in the practices of PMS.
My findings reveal that the implementation of PMS is characterized by mimicry of Western
management approaches, which is justified by the ideology of modernization and development.
On the one hand, this mimicry contributes to masking the difference between Islamic nationalist
ideology and Western management approaches. On the other hand, it manifests differences
between these approaches in the practice of PMS in the Iranian petroleum industry. Documents
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such as the fifth and sixth development plans (2010-2020) of the country, which call for the use of
comprehensive performance measurement and management systems, as well as the NIOC’s recent
strategic change initiative that comprises the introduction of PMS such as the BSC, are illustrative
of attempts to integrate Islamic nationalist ideology with Western management approaches (see
chapter 7). Such integration in the postcolonial discourse is defined as “hybridity” by Homi
Bhabha (1994). Hybridity is a condition that most substantively challenges the ideological validity
of colonialism (Bhabha, 1994, p. 113). By drawing on the straddling of both cultures
(transcultural), the postcolonial discourse provides “the consequent ability to negotiate the
difference” (Hoogvelt 1997, p. 158) and mediate affinity and difference within a dynamic of
exchange and inclusion (Wolf, 2000). For example, my findings reveal that the practice of PMS is
illustrative of attempts to integrate Islamic nationalist ideology with Western management
approaches based on the negotiation between the HR department and the security (herasat)
department concerning how to evaluate individuals’ performance in the Iranian petroleum
industry.
In the postcolonial study of management, hybridity is a common occurrence when Western
management technology is confronted with local realities (Alcadipani & Rosa, 2011; Frenkel,
2005). In particular, Bhabha’s notion of ambivalence highlights the contradictory nature of
mimicry and the development of the hybridized ‘in-between’ spaces as discursive constructions of
identities and cultures. In this respect, the Iranian public managers’ attitude in nominating people
as “good citizens” is defined as a “Third Space” which is formed by the cultural encounters
between the Islamic nationalist ideology and Western management approaches. For instance, the
case of the NIOC reveals both the seeming domination of Western management approaches and
the resistance of Iranian public managers to Western management approaches in the practice of
PMS. The domination of Western performance management practices is visible in official
documents and statements that indicate that people’s performance is evaluated based on skills,
experiences, and competencies. Resistance to Western approaches is visible when people’s
performance is evaluated based on Islamic principles and values to control and secure the Iranian
petroleum companies from foreign influence. Indeed, the confrontation of two cultures with
different ideologies that are in competing with each other has created a third space in which the
individuals’ performance is evaluated based on two evaluation systems, which are influential in
nominating good citizens (see table 8.1).
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My findings extend a claim that has been formulated in post-colonial literature, which holds that
when the imposition of Western management practices in developing countries is combined with
an indigenous ‘local ideology’, a hybrid version may be produced (Frenkel, 2008; Nkomo, 2011).
Table 8.1 The ambivalence of the colonial process in the practice of PMS
Colonial Process Evaluators Mimicry Hybridity Colonial relation
PMS
ambivalence - Performance
Evaluation Systems
HR
Department
Western
modernity and
development
Western
management
approaches
Domination
Security
Department
(herasat)
Islamic nationalist
ideology
Islamic
management
approach as an
alternative to the
Western
neocolonialism
Resistance
Source: Developed by the author, 2020
Table 8.1 shows an ambivalent version of hybridity in the practices of PMS as a compromise
between the dominating force and resistance to it. For example, the case of the NIOC shows that
although the implementation of the PMS in the Iranian petroleum industry displays the integration
of the Western management approaches with Islamic management, the way in which they apply
Islamic management principles has led to the practice of two parallel performance evaluation
systems that are in conflict (see chapter 7, section 7.3.2.1). The way the security department is
using a performance management system to evaluate people’s performance is similar to the
boundary control systems proposed by Simons (1995), who indicates how managers set limits on
people’s behaviors by delineating the acceptable domain of activity at the workplace. In this
system, individuals’ performance is evaluated based on the set of values and norms as a
prerequisite of organizational culture that indicates what people in public organizations should or
should not do without providing conventional feedback. Meanwhile, the way the HR department
is using a performance management system is similar to the interactive control systems proposed
by Simons (1995), who explains how managers stimulate organizational learning by providing
conventional feedback and linking people’s performance with organization strategies. Indeed,
although the HR and security systems are constantly exchanging information with each other,
neither of them accepts each other’s evaluation system alone. This refers to the interplay between
justifications and compromises in an organizational setting (Boltanski & Thévenot 2006, 1991).
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For example, while the HR department justifies the evaluation of individuals’ performance based
on their skills, experiences, and meritocracy, the security department justifies the evaluation of
individuals’ performance based on Islamic nationalist values. This dispute includes distinct
culturally-rooted grammars of legitimate behavior; one insists on the Islamic nationalist ideology
and the other on mimicry of Western management thought. However, such imitation produces a
new cultural identity, the postcolonial hybrid as a compromise between two cultures that poses as
the same (though not quite) (see Bhabha, 1994). This is a space intrinsically critical of essentialist
positions of identity and conceptualization of original culture as Bhabha (1990, p. 112) argues that
“for me, the importance of hybridity is not to be able to trace two original moments from which
the third emerges, rather hybridity to me is the ‘Third Space’, which enables other positions to
emerge [such as] new structures of authority, new political initiatives…”. It refers to the interstices
between colliding cultures, a liminal space “which gives rise to something different, something
new and unrecognizable, a new area of negotiation of meaning and representation” (Rutherford
1990, p. 211). The hybrid identity is placed within this Third Space, as ‘lubricant’ (Papastergiadis,
1997) in the combination of cultures. Indeed, this identity construction takes place in an alternative
ambivalent site, a Third Space, where there is ongoing [re]vision, negotiation, and if necessary,
renewal of those cultural practices, norms, values and identities inscribed and enunciated through
the production of bicultural ‘meaning and representation’ (Bhabha, 1994). Cultural identity is
constructed with varied and often contradictory systems of meaning, which “blurs categorical
distinctions and creates continuity and a permanent ambivalence” (Frenkel & Shenhav 2006, p.
858). Accordingly, the integration of Western management approaches with Islamic nationalist
ideology has generated a Third Space in PMS practices in which people are nominated as “good
citizens” in public organizations. In the Third Space, people’s performance is evaluated based on
the hybridization of their religious values, the industrial values (skills, experiences, meritocracy,
and efficiency), and the aspects of nationalist values (such as being Iranian, patriotism, and
independence from Western and Eastern powers) in Iranian petroleum companies. Shared by the
members of a community, social norms are enforced through “social control” and not simply
institutional control (Thévenot, 2019, p. 2). Soroush (2000) argues for individual construction of
cultural identity by adopting valuable aspects of each culture (i.e., nationalist traditions, Islamic
proliferation, and Western hegemony) in the context of Iran while rejecting their drawbacks (p.
169).
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The evidence shows the set of these values used in evaluating people’s performance for
recruitment, mobility, job promotion, compensation, and rewards in Iranian public organizations.
It also represents the inevitable contradictions and overlaps between cultural and social values that
are negotiated through rules and regulations by actors in a network of relations (Callon, 1999), and
attempts to legitimately justify their positions. Therefore, the Third Space as a new identity
construction is identified by ambiguity and contradictions, and the ambivalence of the colonial
encounter.
8.3 Orders of Worth and the Role of Performance Management System
In the book On Justification: Economies of Worth, Boltanski and Thévenot (2006) also highlight
an ambivalent or contradictory situation by developing the system of evaluation in analyzing the
complex processes involved in justification, critique, and attempts for a better understanding of
the co-existence of multiple orders competing or conflicting within society. This perspective
includes the significant competencies that human beings bring to such a setting and the role that
objects and a diversity of evaluative principles play in organizing stable agreements in a social
world with unlimited potential for conflict (Annisette, Vesty, & Amslem, 2017).
My findings reveal the ambivalent practice of PMS in Iranian petroleum companies. Instead of
implementing a single principle of individuals’ performance evaluation as the only adequate
framework in the Iranian petroleum companies, it is legitimate for actors to articulate alternative
conceptions of what is valuable. This means that multiple value regimes co-exist within an
organization. For example, the Iranian petroleum companies practice two performance evaluation
systems in parallel due to the hybridization of Islamic nationalist ideology with Western
management approaches for assessing staff’s performance at the workplace. As depicted in chapter
7, the HR department uses a performance evaluation system based on an industrial world of worth,
within which the single standard by which worth is assigned is efficiency. An industrial world of
worth constructed on this basis is populated by experts and professionals (Boltanski & Thévenot,
1999), who have the necessary skills, experiences, and competencies (see chapter 7, table 7.1) to
deploy methods, tools, and graphs in pursuit of the common good. The relative worthiness of being
in this world is determined by conducting a ‘test’ (Boltanski & Thévenot 2006, 1999) that measures
job performance based on meritocracy, efficiency, and productivity of both the employee and the
employer at the workplace in relation to certain pre-established criteria and organizational
objectives. By contrast, the security department uses a performance evaluation system based on a
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religious world of worth, in which worthiness is linked to being religious. Consequently, the
worthiness of being in this world is determined by conducting a ‘test’ that measures staff’s
performance based on Islamic principles and values (such as being a member of the Basij,
sincerity, dedication, cooperation, good conduct, gratitude, responsibility, trustworthiness, loyalty,
active participation in religious events (e.g., praying, fasting, etc.), belief in the principles of
Velayat-e Faqih and Islam, obedience to the leader’s [supreme] orders and an allegiance to the
Islamic regime (i.e., attendance of state marches, support of the state’s ideology and political
attitude)). As is confirmed by Simons’ (1994) study that various levers of control drive
organization strategies based on conducting different tests. Accordingly, each test is suitable for
particular orders of worth. For instance, the HR department uses an interactive control test to alter
the patterns by ranking people based on their skills and competencies in the industrial order of
worth. Meanwhile, the security department uses a boundary control test to frame prerequisite
behavior in public organizations by rating people based on Islamic principles and values
(comparing people to an absolute) and comparing people with each other or to relative dimensions
in the religious order of worth (absolute order of worth).
However, my evidence shows that the religious value is used in terms of symbolic Islamic acts,
disregarding other aspects of Islamic principles such as equality, fairness, and consultation. This
is illustrative of using PMS as controlling tools to pursue political goals and socio-cultural
approaches within public organizations. According to Ali (2005), Islamic principles to the world
of work are not standardized, and the country of origin has a significant effect on their
implementation and interpretation. Hanafi (1981) also highlights that in Islamic societies, the
religious structures have reflected the political structures and helped the elites in expanding control
over people. Nevertheless, such practices are not necessarily specific to Islamic societies. For
instance, Williams and Demerath (1991) by investigating the historical roles of religion in the US,
argue that American political rhetoric is laced with a religious-based moralism that interprets
citizens’ roles in social institutions and the nation’s place in the world in terms of a sacred or at
least a moral order. They also explain that there is an ethos in American political culture in which
being a good citizen includes being religious, although the particular religion is less important
(William & Demerath, 1991).
Furthermore, religious values and some elements of Iranian nationalist worth (e.g., anti-
imperialism discourse) are bound together in the context of Iran by the perceived universalism of
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the 1979 revolution, as these values intersect and are never entirely separated from one another.
However, each also has its idealized ‘pure’ form (Akbarzadeh & Barry, 2016), and they are in
constant competition, tension and overlapping with each other (Hunter, 2014). For example, the
slogan for resilience economy and jihadi management refers to the integration of religious values
and nationalist values, which contains an anti-imperialist perspective that is also evoked when
nominating people as good citizens in the course of using performance appraisals in Iranian
petroleum companies. Such a perspective is similar to civic assimilation policies (Gordon, 1964),
in which the requirement for citizenship of external people in a host culture is based on accepting
the dominant culture. It can also be framed in terms of civic worth (Boltanski & Thévenot, 2006),
which evaluates its object according to its conduciveness to the good citizenry, to universalism,
and the common good (Dromi & Illouz, 2010). What stands out in the context of my study,
however, is the open and explicit way in which citizenship is assessed by an organizational
department which uses quantifiable data to assess an individual’s performance in terms of “good
citizenship”.
Subsequently, the term good citizen is referred to as a civic value, which is viewed in the
organization as a combination of controversial values such as the religious values, nationalist
values, and industrial values. It can be argued that in order to be a good citizen, the people need to
be religious and nationalist (accepted by herasat), worthy according to all the religious and
nationalist orders of worth, which are intertwined with the industrial world of worth through the
hybridization process. The ideology of Islamic nationalists has provided a political ability for the
government as head of public organizations to negotiate between these values and, where
necessary, emphasize one over the others (Akbarzadeh & Barry, 2016).
According to Boltanski and Thévenot (1999, 2006), such interaction reflects conflict and
distinction between different notions of what is right, which they describe as a kind of dispute in
which the protagonists each mobilize their sense of justice. The conflict arises in the situation
involving incompatible principles deriving from different orders of worth (such as the value of
being religious, the value of being nationalist, and the value of being experts or professionals),
where organizations are responding to hybridization of two cultures. In this regard, a disagreement
over organizing principles is discernible, and may develop into disputatious moves in regards to
which organizing principle ought to apply. Moments of controversy or dispute such as these are
defined by Boltanski and Thévenot (2006) as “situations”, key moments for understanding the
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micro-processes, rationales, and practices that come into play when human actors seek to reach an
agreement to settle contradictions by means of justification (see also Jagd, 2007). Accordingly,
Boltanski and Thévenot (2006) introduce the concept of the reality of test or ‘test of worth’ based
on the agreed principle of worth, by enabling the judgment process to reach a justifiable agreement
(convention). In this case, competing or conflicting value regimes are “put to the test” in the
organization, as each constitutes a systematic construction that rests on a commonly valued higher
principle (Thévenot, 2019). It allows the evaluation of people’s actions based on multiple value
regimes in the organizational setting. By qualifying individuals concerning their principles of
worth, a reality test serves to order or rank different people and objects according to their worth
and to minimize inaccuracy, ambiguity, and improve security in cooperation (Dequech, 2008). I
argue that the PMS is enacted as the test of worth by evaluating people’s performance based on
multiple value regimes that co-exist within the organizations and ranking different people
according to their worth. Furthermore, by converting the qualitative values (e.g., Islamic principles
and values) into quantifiable measures, the PMS has created the power of qualification, in which
a new order of worth (including factors such as religious values) becomes visible. Thus, the staff
is empowered to act and be evaluated in different worlds of worth within day-to-day action
(Cloutier et al., 2017). This finding is in line with Cloutier et al. (2017) as well as Mailhot and
Langley (2017), who show how individuals can navigate through pluralist environments, directing
attention to interpretation, justification, decisions, and potential compromise by the practice of
accounting systems. Accordingly, organizational actors need to justify their positions by
emphasizing higher-order principles that enabled them to convince others of what they think is the
appropriate belief or action to maintain the legitimacy in the organization in a given situation
(Mailhot & Langley, 2017; Stark, 2009). For example, my findings reveal that, in order to be
nominated as good citizens, the individuals should justify their positions with religious value along
with the coexistence of other value regimes such as nationalist values, domestic values, industrial
values, and market values in the Iranian petroleum companies. However, people can justify their
positions through hypocritical behavior in managing conflicts and maintaining legitimacy (see
Brunsson, 1989). Thévenot (2006a) explains:“[The actor] is confronted by a plurality of models,
not ones defined by social theorists, but by those that laypersons use to apprehend events in the
course of every day action, in order to understand what others do, and adapt their own behavior.
For [the actor], plurality is not a classification issue, but is something that is important in her
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relation to the world. Her personal integrity as well as her integration into a community will
depend on her capacity to cope with this diversity” (p. 6). In the case of the NIOC, the evidence
shows that organizational actors needed to adjust their positions between the multiple orders of
worth in day-to-day actions to maintain their legitimacy in the organization. As argued by
Boltanski and Thévenot (2006, p. 219), “individuals are in no way attached to orders of worth,
they can be acquainted with more than one world,” and have the ability to adjust their behavior to
the situation they face. However, they highlight that a situation can be fragile when privileging
any of the orders of worth that are in conflict. They suggest that one way of solidifying a
compromise in such an instance is “to place objects composed of elements stemming from different
worlds at the service of the common good and endow them with their own identity in such a way
that their form will no longer be recognizable if one of the disparate elements of which they are
formed is removed” (Boltanski & Thévenot, 2006, p. 283). In this regard, the compromise is
materialized in devices, objects, or tools that turn the conflict or tension into a solidified
compromise (Smith et al., 2017). Accordingly, I argue that the PMS can act as a composite object
to solidify a compromise by hybridizing multiple value regimes which co-exist within the Iranian
petroleum companies, helping actors to measure values (such as religious values, nationalist
values, and industrial values), and mobilizing the plurality of rationalities in the organization.
However, my findings reveal that the way in which the Iranian petroleum companies apply Islamic
management principles has led to the use of two parallel performance evaluation systems that are
promoting various values. Nonetheless, the practice of PMS has helped “hold things together” in
compromise arrangements, serving as a stabilizing device and thus facilitating coordination (see
Annisette et al., 2017). For example, this influences how competing values such as religious values
and industrial values are afforded in individual performance evaluation, and by so doing, become
influential in decision making in the Iranian petroleum companies. This argument is in line with
Smith and Lewis (2011), who argue that management control systems (MCS) as composite objects
can help unpack multiple tests of worth that are inscribed within formal processes in the
organization. Such discursive development has provided a basis for changing the practice of
accounting tools through the roles that they can play in organizations and society (Burchell et al.,
1980).
Furthermore, my findings highlight an interconnection between religious values, nationalist values
and industrial values with other values such as market values and domestic values in the Iranian
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petroleum companies. Market values are argued to be in need of religious values, nationalist
values, and industrial values because they would help in achieving a higher worth in the market
orders. In the market order, the higher common principle is competition and active market
relationships, human dignity is built on consumption and self-interest, and people invest based on
opportunism (Boltanski & Thévenot 2006, 1991). Worthy subjects are clients, sellers, and
competitors, while worthy objects are goods, services, and wealth (Thévenot, 2002). The relative
worthiness of being in this world is evaluated by conducting a ‘test’ that measures sales rate,
customer satisfaction, competitiveness, credibility, effectiveness, etc. by aligning people,
processes and systems towards common predetermined goals. However, the case of the NIOC
shows that the market value may also be influenced by internal policy (see chapter 7).
The connection with market values was made directly by being worthy of the religious values,
nationalist values, and industrial values in order to overcome the problems in the market (e.g.,
sanctions) and to achieve market goals such as maximizing revenues as well as competing with
other firms. As the market is unpredictable and volatile, it is challenging to achieve predetermined
goals as well as the highest worth of industrial order, i.e. increasing efficiency. Therefore, the need
for nationalist values along with religious values was constructed to overcome market volatility
and imposed sanctions by practicing jihadi management and resilience economy as an integral part
of Islamic management, which is manifested in religious and nationalist values. The official
authorities’ argument is that the petroleum companies will only survive in the market if the
managers are religious and nationalist enough, and have the ability to circumvent sanctions and
sell products (see chapter 7, section 7.4.1). This is an example of how the market order of worth
is mobilized in order to defend the religious and nationalist orders of worth as complementary
measures of performance: Individuals need to be worthy in other orders if they want to be worthy
in the market order. It indicates that there is a similar understanding among the petroleum
authorities that the nationalist values and religious values, together with the industrial values, are
needed in order to be able to overcome difficulties in selling products and dealing with clients in
the market. However, without market values, it becomes intricate to achieve the most crucial
factors of industrial worth, such as efficiency and productivity. Accordingly, Boltanski and
Thévenot (2006) argue that compromise between the industrial and market orders of worth “lies
at the very heart of a business enterprise” (p. 332). Such a construction of a cause-and-effect chain
can be understood as mobilization of the industrial, nationalist and religious orders of worth with
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market values in the context of the Iranian petroleum industry. Believing that the relationship
between these values is what delivers market success and mobilizing this chain of causality to
defend the need for an increase in barter trade (e.g., the practices of selling oil in the gray market)
while under sanctions, is a manifestation of how the religious and nationalist orders of worth are
defended by drawing on factors of worth from the industrial and market orders.
Another connection between the industrial, religious, and market values was through the domestic
order of worth. The domestic order of worth is a function of the position one occupies (a hierarchy
of trust) in chains of personal dependences, where human dignity is built on comfort and ease, and
worth is based on kinship, face-to-face relationships, and respect for tradition (Boltanski &
Thévenot 1999, 2006). The NIOC’s managers argued that the compensation (rewards) system is
not just based on performance outcomes, but there are some other influential factors such as
kinship, nepotism, face-to-face relationships, and religious activities (see chapter 7). Furthermore,
the evidence shows that domestic values also play a role in recruitment, mobility and promotion
in public organizations. The domestic values are mobilized together with religious, nationalist,
industrial, and market values. Although the aim of linking performance with the compensation
system is to motivate employees at the workplace as a “cover for the intensification of
exploitation” (Walker 2011, p. 373), it is manifested by other values in the context of Iranian
petroleum companies. The arguments reveal that the multiple value regimes are mobilized by
achieving worth in the market order, specifically how key actors link such economic success to
religious, nationalist, and domestic values. The religious, nationalist, and industrial values were
mobilized in order to achieve market values, but also to achieve market values through the
domestic values. Each order of worth not only corresponds to, but also seems to be synonymous
with, a principle or mode of justification (Boltanski & Thévenot 1999, 2006; Thevenot 2001).
These findings highlight the organizational actors in the process of justification and how actors
engage with a plurality of orders of worth to maintain legitimacy, specifying their capacity to
strategically mobilize orders of worth within their political interest in order to strengthen their
discourse. This finding is in line with Burchell et al. (1980), who presented the role of management
tools as a “justification machine” to justify and legitimize actions to organizational order under
conditions of uncertainty (see also Courtney et al., 2009; Mouritsen & Kreiner, 2016), and also
support hegemonic political ideology (Wright & Nyberg, 2017). This has also been shown in a
study by Oldenhof et al. (2014), where managers had to deal with conflicting values
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simultaneously and justify their work with a plurality of values in order to achieve many varieties
of goods by adapting behavior and material objects.
My findings indicate an aspect that has not yet been adequately addressed in the literature: the
significance of using a contextualized approach to hybridization processes in the Muslim societies
that take into account how former colonial experiences as well as local cultural context can
interfere with the practice of Western management technologies. I argue that, in terms of hybridity,
(e.g., Homi Bhabha 1994) the post-colonial studies fail to consider the fact that local cultures may
not fully be hybridized with imposed or transferred Western culture, but rather produce their own
forms of domination, transgression, and resistance that are underpinned by a more stable cultural
framework of meaning. Such a notion of hybridity, modernity and possibilities of exchange and
dialogue allowed Iranian managers to reconcile and develop Islamic national ideology with
modern Western management thought and techniques. It highlights how local managers interpret
and reconstruct corporate aspirations and techniques to fit local concerns and pressures, managing
globalization through localizing management and measurement technologies (Cooper & Ezzamel
2013; Ezzamel & Xiao, 2015; Efferin & Hopper, 2007). In the same vein, Ezzamel et al. (2007)
examine the impact of two different ideologies on the practices of accounting in the context of
China, focusing on the transition from Maoism to Dengism. In particular, they show how dominant
political and intellectual elites in China produced and disseminated performative ideological
discourses that influenced the practices of accounting (Ezzamel et al., 2007). The terms they
defined in their study are similar to the way the Iranian managers prevail and coexist with Western
management concepts in practices of PMS in the Iranian petroleum companies.
Following Said’s (1975, 2012) and Cooper and Ezzamel’s (2013) arguments on the globalization
discourses, my study contributes to interdisciplinary perspectives on accounting by articulating
how accounting technologies (such as PMS) infuse the Western management approaches with the
local ideology to produce a hybrid version and the way in which local managers mobilized the
global discourses to formulate their own space of discursive expressions wherein they reimagine
their managerial circumstances and identities. Moreover, I argue that hybridity is understood as an
interweaving of two elements (the transformation of practices and cultural continuity) in which
identity construction, local power dynamics, and cultural framework of meaning have
simultaneously shaped the Western management practices in the Iranian petroleum industry. The
ambivalent nature of management identity construction shows that transformational technologies
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in the international oil companies and the modernization framework were essential and that, to
some extent, they were taken for granted (only on the surface)104 by Iranian public managers. They
used them to evaluate organizational performance and align organizations’ strategists with day-to-
day actions, to achieve better decision-making by implementing PMS in Iranian petroleum
companies. While the NIOC’s managers emphasized the importance and primacy of Western
management technology (i.e., PMS) and stressed how they are using it to overcome the previous
dysfunctional organizational system, and how the local culture (the role of Islam and anti-
imperialist beliefs) influenced the public managers’ patterns of thinking and acting by measuring
and evaluating staff’s performance based on religious and nationalist values. They view Islamic
management practice as providing cultural independence from the domination of imperialist
practices. Therefore, the integration of Islamic nationalist ideology with Western management
practices presents a hybrid form of management identity construction (the Iranian variant of
“Islamic management”) and has also triggered a transformation of PMS in practice. Iranian public
managers have engaged with the PMS adoption process and its emancipative potential without
taking on a subaltern105 position. This analysis encourages us to move beyond binary
conceptualizations that consider elites’ identity construction in Muslim societies in terms of either
an acceptance or a rejection of modernity. It also questions the limits of casting the diffusion of
Western ideology as a unique and absolute hegemonic phenomenon by highlighting the
significance of the historical experience of Western powers’ domination as well as the role of Islam
and an anti-imperialist perspective on local knowledge management in the new public
management’s identity construction. This finding is in line with Nørreklit (2003), who asserts that
management methods that do not match the ruling ideology of a society are not necessarily
rejected, but they may also shape or in turn be shaped by dominant ideology. In this respect,
ideology plays a central role in achieving consent, because it is formed as a mental framework
consisting of a particular set of ideas, dominates social thinking in a society, and influences how
individuals construct their subjectivity in social networks (Hall, 1986; Li & Soobaroyen, 2020;
Yee, 2009).
104 Official documents state that they use these managerial frameworks, but they are not much important in day-to-
day practices (see chapter 7). 105 In postcolonial studies and critical theory, the term subaltern designates the colonial populations who are socially,
politically, and geographically outside the hierarchy of power of a colony, and the empire’s metropolitan homeland
(see David Ludden, 2003).
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Moreover, the practice of PMS shows local power dynamics (adherence to the value regimes that
co-exist within society) between the HR department and the security department as a dominant
and resistant approach to evaluating individuals’ performance as “good citizens”. This study also
confirms that the practice of PMS differs across countries and industries because of cultural issues
(Salk & Brannen, 2000), governmental regulations or policies (Morishima, 1995; O’Connor et al.,
2006), competitive priorities (Boxall & Steeneveld, 1999), and diverse adoption of managerial
practices (Snell & Dean, 1992). Although some of the interviewed managers regarded Islamic
management principles as described in the literature (e.g., Ali, 2010; Moghami, 2019) as
compatible with the use of Western performance management tools, the way in which the NIOC
applies Islamic management principles has led to the use of two parallel performance evaluation
systems that are often in conflict. The emergent of the two appraisal performance systems in
parallel shows the outcome of a process driven by power dynamics through the hybridization
process (contradiction and overlapping) between two cultures and social values that are implicitly
negotiated and interpreted based on the local culture.
Furthermore, my findings reveal that the Iranian variant of Islamic management is intertwined with
the state’s political interest and the state has legitimized its actions. In other words, the ideological
dispute and political tension with the West provided an opportunity for the Iranian regime to use
Islamic management ideology as a tool to pursue its political goals. This conceptualization further
implies that Islamic management ideology is a purposefully tailored formation through which to
achieve political ends. Therefore, the practice of management tools can be shaped by the dominant
ideology of society, and can be purposefully organized as a malleable object in order to reflect and
enable different political interests (Cooper, 1995; Ezzamel et al., 2007). For example, in the NIOC,
Islamic management primarily means checking organizational actors’ symbolic obedience of
Islamic religious procedures in their everyday conduct, and their commitment to the orders given
by the supreme leader. This management approach mostly combines a symbolic form of Islam
with loyalty to the political regime, in order to pursue political interests in the Iranian petroleum
companies. This finding is in line with Beyers (2015), who argues that political actors use religion
as an effective instrument to attain political aims in a society receptive to religious allusions. This
finding is also in line with Williams and Demerath (1991, p. 421), who use the term “civic” religion
and view it as a set of cultural resources used differentially by political groups to interpret and
legitimate their places or agendas within the community. Islam has frequently been linked with
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repression rather than emancipation (see Dawkins, 2006; Grayling, 2006; Hichens, 2007), but as
Kamla (2009) argues, this is not due primarily to the religion’s repressive nature, but more to
political forces mobilizing religion for their political intentions. Thus, the socio-cultural setting of
each country in which Islam is incorporated and interpreted makes for significant shifts, so that, in
some instances, modern management practices conflict with the teachings of Islam (Branine &
Pollard 2010, p. 723).
The evidence shows the practice of PMS is shaped not only by the interplay of Islamic nationalist
ideology and Western management approaches but also by domestic political dynamics. The way
in which the NIOC practices PMS to pursue political interests of the government refers to the role
of management tools as a “political machine” (Burchell et al., 1980; Cepiku et al., 2017).
The predominant management style within a country can be defined as the overall set or pattern of
behavioral characteristics (e.g., cultural values, expectations, norms, and beliefs) that distinguish
the country’s general approach to management (Pascale & Athos, 1981) and have implications
both for the design and practice of performance measurement and performance evaluation systems
(Fletcher, 2001). In other words, the value regimes operating within a society can influence the
principles that govern modern management within the organization and shape the way in which
PMS is practiced. Thus, the role of Islam and anti-imperialist beliefs have influenced the enactment
of the new public management in the context of the Iranian petroleum industry.
The hybridization process indicated the fact that the cultural framework of meaning within the
transformation took on significance by compromising between two various ideologies (e.g.,
Islamic nationalist ideology and Western management ideology), enabling the Third Space to
emerge without being replaced themselves. Accordingly, the hybridization process is an alternative
way of organizing that is coherent with the local socio-cultural context (Szkudlarek et al., 2020).
The relation between Islamic management and post-colonialism shows the significance of the
Islamic regime’s politics in shifting local identities’ construction (i.e., the domination of Islamic
nationalist value in public organizations) to resist mimicking Western management practices. This
study also extended Halliday and Carruthers’s (2009) and Mihret et al.’s (2020) work on the
interplay of national and transnational norms and added a new dimension to the hegemonic
correlation of the ideologies of the colonized societies with imperialist aspects in the globalization
era.
236
In sum, the combination of the orders of worth or EW theoretical framework with the post-
colonialism theory has helped me to theorize the specific historical, political, and cultural contexts
and hence the co-existence of multiple value regimes in the Iranian public management, especially
the impact of socio-cultural aspects and systems of values that shape the use of PMS in the Iranian
petroleum industry. Following Boltanski and Thévenot’s orders of worth framework (1999, 2006),
my study has contributed to the co-existence of other values or polities (such as religious value
and nationalist value) beyond the Western social context in which it is tacitly embedded.
Furthermore, my study has extended sociological approaches to accounting technologies
(Annisette et al., 2017; Baker et al., 2011) that can act as mediating tools between multiple value
regimes coexist within society and organization setting. This contribution sheds light on the
significance of accounting technologies (e.g., PMS) for supporting a compromise between
multiple value regimes within the organization setting, in ways that facilitated dialogue between
two ambivalent ideologies through the notion of test, such as in the case of Iranian petroleum
companies (as discussed in section 8.3). It also confirms the processes of justification that are
fundamental to the symbolically mediated construction of social life (Stark, 2000; Susen, 2017),
especially how individuals justified their position with the co-existence of multiple value regimes
to maintain legitimacy in the context of Iran. Indeed, Iranian managers have to perform constant
justification work that involves not only the use of rhetoric but also behavior hypocritically in
order to be able to deal with conflicting values and to minimize legitimacy threats in Iran’s
petroleum industry.
This study applied interdisciplinary perspectives on accounting and its role in society and
organizations (Burchell et al., 1980; Gallhofer & Haslam, 2004; Sikka, 2012), which required
accounting be studied in its organizational and social context. Thereby, this study confirmed the
previous arguments that PMS can play various roles in organizations and society: it can both reflect
and enable the construction of society with institutional forms as well as modes of social actions
being intertwined with its emergence and development (Burchell et al., 1980; Chenhall & Moers,
2015; Mouritsen & Kreiner, 2016). This will allow researchers and practitioners to interpret,
understand, and even develop the interrelationships between accounting and society and the
structural conflicts embedded in accounting interdisciplinary discourse (Morgan, 1983; Chua,
1986; Dillard, 1991, Hiebl, 2018). In the next chapter, I will highlight how the research findings
237
contribute to extant research and describe the study’s limitations and potential directions for future
research.
238
CHAPTER NINE: CONCLUSION
9.1 Introduction
This chapter briefly outlines the research background and gaps in the existing literature to make
justifications for this study. The research aims were emphasized when introducing relevant
findings, mainly to explain how the specific interaction between historical, cultural, religious, and
political context of Iran affects Iranian public management and has shaped the application of
‘Western’ performance management concepts in the Iranian petroleum companies. This study
shows how its findings develop our knowledge in the field of interdisciplinary accounting and
contribute to our understanding of the co-existence of other values beyond the Western social
context in which it is tacitly embedded. In addition, the study also illustrates the significance of
accounting technologies (e.g., PMS) in supporting a compromise between multiple value regimes
within the organizational setting in ways that facilitate dialogue between two ambivalent
ideologies through the notion of hybridity in the case of Iranian petroleum companies.
Furthermore, this study highlights the limits of casting the diffusion of Western management
approaches as a unique and absolute hegemonic phenomenon by indicating the significance of the
historical experience of Western powers’ domination as well as the role of Islam and an anti-
imperialist belief on local knowledge management as a new identity construction in the context of
Iranian public management. In doing so, this study draws on the blending of two theoretical
frameworks (post-colonialism and orders of worth) by explaining and interpreting empirical
findings.
The study adopted an interpretivist and constructivist approach to the investigation of the practices
of performance management in Iranian petroleum companies as a social phenomenon. Guided by
these philosophical considerations, this study undertook a qualitative research method, allowing
an in-depth exploration of how heterogeneous actors in the Iranian petroleum companies perceive
and enact their social realities in the practices of performance management. In doing so, I used the
triangulation technique to improve the validity and allow for generalization by consulting multiple
data sources such as interviews, observations, and analyzing documents.
This chapter initially presents a general synopsis of this study, followed by its most significant
findings. Then, I will explain how this study contributes to both the theories and extant accounting
239
literature. Moreover, the following sections disclose this study’s limitations and challenges as well
as potential directions for future research.
9.2 General Synopsis and Findings
Since oil was discovered more than a century ago, Iran has turned into one of the major players in
the petroleum industry. Since then, the oil and gas industry has played a significant role in Iran’s
economy as a central source of revenue for the country’s budget, directly affecting public
development projects and social services. However, during this period, the Iranian petroleum
industry has constantly been affected by political, social, and economic upheaval, which has
directly influenced the development, reformation, and performance of the industry. Although the
Iranian society was never colonized by Western powers directly, the historical domination of
Western powers (mainly the UK and the US) who had cultural and political influence, led to an
opposition to Western imperialism and modernization in Iran’s society. For example, Britain’s
direct influence on the Iranian petroleum industry from 1908 to 1951, or the US’s support f Reza
Pahlavi’s reign over Iran. However, the nationalization of the Anglo-Iranian Oil Company (AIOC)
in 1951 and later the victory of the Islamic revolution in 1979, have considerably diminished the
domination of Western powers. The Islamic revolution of 1979 was the culmination of a long
struggle between the modern secularist trends that had overwhelmed Iranian society for many
decades and Islamic revivalist movements striving to save Iranians from socio-cultural and
political degeneration and Western domination by emphasizing Islamic nationalist ideology. This
perspective significantly influenced the development of “Islamic management” concepts and
practices in dealing with managerial issues and the entanglement of religion and government as a
dominant value in managing the country.
While Iranian authorities rhetorically emphasize Islamic management principles in opposition to
Western influences and colonialist thought, Western management technologies and approaches are
not completely ignored in the face of the need for international cooperation, investment, and
globalization. For example, the implementation of a comprehensive PMS in the NIOC in 2014,
aimed at linking organization strategies to day-to-day actions included evaluating the overall
performance and connecting performance results with rewards in order to improve productivity,
proficiency, and increase profitability. According to Gruman and Saks (2011), globalization and
economic challenges have led many organizations to try to improve their outcomes by practicing
performance measurement and management. However, the successful application of a
240
comprehensive PMS in different countries became very challenging due to work-related
backgrounds and culture (Salk & Brannen, 2000), especially when it transferred from Western to
non-Western countries (Chen, 2017; Firth, 1996; Pucik, 1985; Vance et al., 1992). As part of
control practices and organizational activities, the use of PMS and the diversity of performance
measurement and management criteria are also influenced by culture (Bhimani, 2003). For
example, Miller and O’Leary (1990) argue that “the analysis of internal accounting change needs
to take seriously the complex network of political and cultural debates within which accounting is
enmeshed, rather than assuming it away” (p. 481). Thus, the attributes of PMS reflect aspects of
organizational values that are influenced by the cultural and political contexts (Henri, 2006).
This study aimed to investigate how the specific interaction between historical, cultural, religious,
and political contexts impact the practices of PMS in the Iranian petroleum companies. Although
accounting studies have analyzed the influence of culture on the practices of PMS, they have
mainly focused on Western countries and rarely taken non-Western countries such as China into
consideration. Moreover, the extant studies on management accounting practices in Islamic
societies are often based on questionnaires and tend to draw on Hofstede’s (1980, 1984) relatively
static and simplistic cultural dimensions (see Baskerville, 2003; Ahrens & Chapman, 2006)
without going into much detail. More importantly, these studies did not investigate how
organizational actors themselves use and promote the concept of “Islamic management” in day-
to-day actions. Therefore, there are empirical gaps regarding the practices of performance
measurement and management in Islamic societies, specifically concerning the interaction
between historical, cultural, and political parameters in the social and organizational contexts.
Furthermore, this study examines how the hybridity of Islamic management with Western
management approaches influences the practices of PMS in Iranian petroleum companies. In doing
so, I interpret my findings by combining two theoretical frameworks, those of Post-colonialism
and Orders of Worth, in order to theorize the co-existence of multiple value regimes in the context
of the Iranian public management.
My findings reveal that the historical domination of Western powers (mainly the UK and the US)
as part of cultural and political influence, led to the formation of Islamic ideology and practice of
“Islamic management” principles in dealing with managerial issues in the context of Iran after
1979. This ideology emphasizes the solidarity of religion and government as a dominant value,
which has officially been incorporated into the legislation of public organizations. For example,
241
the evaluation of individuals’ performance based on Islamic nationalist ideology in the Iranian
petroleum companies. However, the ambivalent Iranian elites’ approach to the West post-1989
caused the coexistence of conflicting multiple value regimes. One approach emphasizes anti-
Western imperialism by claiming that the West intended to invade the country’s culture, economy,
and politics. Consequently, all factors of social life need to be Islamized, which means continuing
to resist Western notions of international order, politics, and culture. Another approach emphasizes
Western modernization, development, and technological superiority in dealing with managerial
issues. This ambivalent approach to the West has also shaped the encounter between Western and
local culture in the practice of PMS by mimicry of and resistance to it, and by insisting on local
culture and social values in Iranian petroleum companies. In other words, the hybridization of
Islamic management with Western management approaches has produced an ambivalent version
of practices of PMS in the Iranian petroleum companies. One is characterized by mimicry of
Western management approaches, which is justified by the ideology of modernization and
development. Another is characterized by resisting Western management approaches, which is
justified by applying Islamic nationalist ideology to control the Iranian petroleum companies and
secure them from foreign influence. The case of the NIOC reveals both the seeming domination
of Western management approaches by evaluating individuals’ performance based on skills,
competencies, and experiences as well as the resistance of Iranian public managers to Western
management approaches by evaluating individuals’ performance based on Islamic nationalist
ideology in the practices of PMS. As is explained by Simons’ (1994) study on various levers of
control, the NIOC’s HR department is using a performance management system similar to the
interactive control systems, whereas its security department is using a performance management
system to evaluate people’s performance comparable to the boundary control systems.
Furthermore, the hybridization of Islamic nationalist ideology with Western management ideology
has created a Third Space, in which individuals are measured and nominated as “good citizens”
based on multiple competing value regimes such as religious values, nationalist values, and
industrial values. It represents the inevitable contradictions and overlaps between cultural and
social values that are negotiated through rules and regulations by actors in a network of relations
(Callon, 1999), and attempts to legitimately justify their positions (Boltanski & Thévenot, 2006).
Such a notion of hybridity, modernity and possibilities of exchange and dialogue has allowed
Iranian managers to reconcile and develop Islamic national ideology with modern Western
242
management thought and science as a new identity construction. Therefore, in the case of the
NIOC, hybridity is understood as an interweaving of the transformation of practices and cultural
continuity in which identity construction, local power dynamics, and the cultural framework of
meaning have shaped the Western management practices in the Iranian petroleum industry.
The evidence shows that the religious values are used in terms of symbolic Islamic acts,
disregarding other aspects of Islamic principles and values such as equality, fairness, dedication,
and consultation. Hanafi (1981) highlights that in Muslim societies, the religious structures have
reflected the political constructions and assisted the elites in expanding control over people.
However, such practices are not necessarily specific to Islamic societies. For example, after
reviewing the historical roles of religion in the US. Williams and Demerath (1991) argue that in
American political culture being a good citizen includes being religious, although the particular
religion is less important. According to Akbarzadeh and Barry (2016), the ideology of Islamic
nationalists has provided a political ability for the government as head of public organizations to
negotiate between these values and when necessary to emphasize one over the others. This study
highlights the practices of PMS as controlling tools in the pursuit of political goals and socio-
cultural approaches within public organizations. In other words, the practice of PMS is shaped not
only by the interplay of Islamic nationalist ideology and Western management approaches but also
by domestic political dynamics. This conceptualization further implies that Islamic nationalist
ideology is a purposefully tailored formation through which it is possible achieve a political end.
Therefore, the practice of management tools can be shaped by the dominant political ideology of
society and purposefully organized as a malleable object in order to reflect and enable different
political interests (Cooper, 1995; Ezzamel et al., 2007).
My findings also reveal that the PMS can act as a composite object through hybridization of
multiple competing value regimes coexisting within the organization and provides a compromise
between the various test of worth by evaluating people’s performance and ranking different people
according to their worth. In other words, it helps “hold things together” in a compromise
arrangement, serving as a stabilizing device by facilitating coordination (Annisette et al., 2017).
Accordingly, organizational actors need to justify their positions by emphasizing higher-order
principles in their discourse that enabled them to convince others of what they think is the
appropriate belief or action in a given situation to maintain the legitimacy in the organization
(Mailhot & Langley, 2017; Stark, 2009). For example, in order to be nominated as good citizens
243
the individuals should justify their positions with religious values as well as the coexistence of
other value regimes such as nationalist values, domestic values, industrial values, and market
values in the Iranian petroleum companies. These findings highlight the role of organizational
actors in the process of justification and how they engage with a plurality of orders of worth to
maintain legitimacy, specifying their capacity to strategically mobilize orders of worth within their
political interest in order to strengthen their discourse in the context of Iranian public
organizations. This finding is in line with Burchell et al. (1980), who indicated the role of
management tools as a “justification machine” to justify and legitimize actions based on
organization order under conditions of uncertainty.
Furthermore, this study shows that the value regimes operating within a society can influence the
principles that govern modern management within an organization and shape the way in which
PMS is practiced. Thus, the role of Islam and anti-imperialist beliefs have led to the enactment of
new public management in the context of the Iranian petroleum companies.
9.3 Contributions to Knowledge
This study contributes to our understanding of the development of the Western management
approach and its link with national state ideology in practices of performance management in the
non-Western contexts. It makes an empirical contribution that allows us to make sense of how the
dynamic interplay of local and Western management ideologies impacts the practices of
performance management systems in Iran. Furthermore, it shows how the state’s Islamic
nationalist ideology and political visibility among elite groups tied to the public organizations
drove practicing Western performance management tools based on the state’s ideological
viewpoints.
Moreover, this study indicates an aspect that has not yet been adequately addressed in accounting
literature: the significance of using a contextualized approach to hybridization processes in the
colonized societies that take into account how the experiences of historical domination of Western
powers as well as local cultural and religious contexts can shape the practice of Western
management technologies. For example, the role of Islam and an anti-imperialist perspective on
local knowledge management interfere with Western management approaches and have built a
new public management’s identity construction in the context of Iranian public management. This
analysis encourages us to move beyond binary conceptualizations that consider elites’ identity
244
construction in the context of Iran and other Islamic countries in terms of either accepting or
rejecting Western modernity (Yousfi 2014).
The empirical findings in this study give new insights into how specific historical, cultural, and
political contexts have shaped the practices of performance management by showing the
coexistence of multiple value regimes in the context of Iran. Following Said’s (1979, 2012) and
Cooper and Ezzamel’s (2013) arguments on the globalization discourses, my study contributes to
accounting in the globalization discourse by articulating how the integration of Western
management approaches into the local ideology has produced an ambivalent practice of
performance management, the way in which local managers mobilized the global discourses to
formulate their own space of discursive expressions wherein they reimagine their managerial
circumstances and identities. Moreover, the contribution of this study has confirmed Ezzamel et
al.’s (2007) studies in the context of China by explaining how a specific political and cultural
elite’s attitudes to Western management approaches have produced and disseminated performative
ideological discourses that influenced the practices of accounting technologies. This study also
extended Mihret et al.’s (2020) work on the interplay of national and transnational norms and
added a new dimension to the hegemonic correlation of the ideologies of colonized societies with
imperialist aspects in the globalization era.
Following Boltanski and Thévenot’s orders of worth framework (1999, 2006), my study has
contributed to the co-existence of other values or polities (such as religious values and nationalist
values) beyond the Western social context in which it is tacitly embedded. The empirical findings
of this study confirmed the significance of accounting technologies (such as PMS) for supporting
a compromise between multiple conflicting values within the organizational setting in ways that
facilitated dialogue between two ambivalent ideologies through the notion of hybridity. This
finding also extended Annisette et al.’s (2017) study on the role of accounting in justificatory
actions and compromising arrangements by adding that the PMS can also function as a mediating
tool between multiple value regimes to stabilize the tensions and inconsistencies between them.
This study applied interdisciplinary views on accounting and its role in society (Burchell et al.,
1980; Gallhofer & Haslam, 2004; Sikka, 2012), which is required to be historically and
contextually reviewed and interpreted to clarify socio-cultural consequences. Accordingly, this
study confirmed the previous arguments that PMS can play different roles in organizations and
society by both reflecting and enabling the construction of a community with both institutional
245
forms and modes of social actions (Burchell et al., 1980; Chenhall & Moers, 2015; Mouritsen &
Kreiner, 2016).
9.4 Limitations and Potential for Future Research
When conducting this study, I faced some challenges. Therefore this research has its limitations.
First, it was very difficult to gain official access to the Iranian petroleum companies as they are
strategic public organizations in Iran. A special letter was submitted by the Ministry of Science,
Research, and Technology to the Ministry of Petroleum and the National Iranian Oil Company in
order to receive permission to conduct this research.
Second, as there was arduous administrative bureaucracy involved in gaining access to
organizational actors, the number of participants was limited to 22 managers from all levels (e.g.,
upper-level managers, middle-level managers, and lower-level managers) and various disciplines.
Third, this study focused on certain aspects of performance management regarding time and the
number of respondents in Iranian petroleum companies. Therefore, further research is required to
concentrate on other aspects of performance measurement and management in practice.
Forth, this study provides valuable opportunities for further research by highlighting the following
gaps which need to be explored: What are the longitudinal dynamics of hybridization and how can
they change over time and space? What are alternative ways of dealing with multiple and
conflicting values other than the hybridization process? Under what conditions can we observe
different modes of stabilization between multiple values, such as the domination of one value over
others (e.g., Agamben, 2005), the strategy of hypocrisy (e.g., Brunsson, 1989), or the coexistence
within different times and situations (e.g., Carlsson-Wall et al., 2016)? How do organizations
minimize their legitimacy threats and increase the chance of survival in dealing with multiple value
regimes? These questions open a broad horizon for future investigation.
In terms of new contributions to the Orders of Worth framework, notably those of Boltanski and
Thévenot (1999, 2006) and Stark (2009), this study indicates the intertwining of competing orders
of worth with inter-organizational co-operation and organizational change as well as attempting to
produce compromises in a non-Western social context. Therefore, explicitly focusing on the other
pragmatic sociological aspects of the orders of worth, such as the processes of justification and
legitimation, could be a potential source for future empirical studies.
246
The findings of this study can also help scholars interested in international political economy and
policymakers to understand the structures, hierarchies, local values, and power dynamics in the
context of Iranian public organizations.
247
Appendix A
A sample of semi-structured interview guideline
Section A – General profile of the interviewee
1. Could you please describe your current job position?
a. For how many years have you been working in this position?
b. What are the main tasks that you are responsible for in your position?
c. How many people are you supervising at the moment?
2. Could you please describe your previous career path experiences?
a. What is your educational background?
b. Where and in what kind of positions did you work before you started your current job position?
c. Do you have any study or work experience abroad? If yes, what kind of experience / where?
Section B – Performance measurement and management
1. What kind of performance measurement technology are you using?
2. How do you measure organizational performance?
a. What kind of dimensions of performance are measured (e.g., financial performance, non-financial
performance such as market share, customer satisfaction, delivery performance, etc.)
b. How are these dimensions of performance operationalized / measured (e.g., ROL, EVA, satisfaction
surveys, etc.)?
3. How is the performance measurement technology used in your organization?
a. Do you use the performance measurement technology for the purpose of evaluating individuals or
groups?
i. If for one or the other or for both, in what way is it used? (e.g., performance-related rewards,
punishments; evaluation of particular aspects of performance: which ones are used, which ones are
measured, but not used for performance evaluation … why are some measures used, and not others?)
b. Do you use the performance measurement technology for the purpose of target setting and budgeting?
If yes, in what way?
i. How are targets set (e.g., based on past performance, based on strategic goals, bottom-up in a
participative way, set top-down, set for particular period such as a year or half a year, etc.)?
ii. What happens if targets are not met?
c. How are the performance measures communicated and discussed?
i. Who is involved in these discussions?
ii. What is discussed in these meetings / how are the measures discussed?
d. Are there any differences amongst departments in how they measure performance and in how they
use performance measures (e.g., employees and managers)?
4. How does the current measurement system help you to improve dimensions of organizational
performance which you consider to be relevant?
248
a. In your view, why is this the case (e.g., related to measurement, or to the use of the performance
measures)?
5. How does the current measurement system (or elements of the system) fail to help you improve
dimensions of organizational performance?
a. In your view, why is this the case (e.g., related to measurement, or to the use of the performance
measures)?
6. What challenges do (or did) you face when developing and implementing performance measurement
systems?
7. What challenges do (or did) you face when applying performance measurement systems?
8. Are you operating a formal performance management system? If yes, to whom do these processes
apply (e.g., upper level, middle level, low level or professionals)? And how?
9. What strategies of your organization have been linked (e.g., cultural strategy, reward strategy or team
work strategy) to the performance management system?
10. Are there any internal or external parameters (e.g., politics, economics and organizational culture)
which affect the use of performance measurement systems?
a. If so, how do these parameters affect the use of performance measures in your organization?
11. In the past, did you experience any changes in the way in which performance was measured / used in
your organization?
a. If yes, please describe these changes.
b. How did these changes come about, in your view (what were the reasons for these changes)?
Section C – Decision making processes
1. What kind of information is collected and used for decision making?
2. How is the information collected, interpreted and used for decision making? Is there a different
kind of decision making for each sector (e.g., human resource management, investment,
international agreements and etc.)?
3. What kind of decisions are the most crucial ones?
4. Does the performance measurement technology affect your decision making?
a. How?
5. Who is responsible for the decision making? And how is this process applied?
6. Are there any internal or external parameters (e.g., politics, economics and organizational culture)
which affect the decision making process?
b. How do these parameters affect the decision making process?
Section E – Final question
1. Do you have any other comments about performance measurement practices in your organization
which we have not discussed so far?
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Appendix B
The list of interview participants
SN. Participant position Type of
interview
Date of
INTVW Duration
No.
INTVW Code
1 CEO Note-taken 06.08.2017 1:20 hrs 1 P1-NT-Aug17
2 Business planning manager Voice recorded 09.08.2017 1:30 hrs 1 P2-VR-Aug17
3 CFO Voice recorded 21.08.2017 1:00 hrs 1 P3-VR-Aug17
4 Head of international relations Voice recorded 26.08.2017 1:25 hrs
2 P4-VR-Aug17
Note-taken 05.09.2018 0:40 mins P4-NT-Sep18
5 HR manager Voice recorded 02.09.2017 1:45 hrs
2 P5-VR-Sep17
Note-taken 06.09.2018 0:50 mins P5-NT-Sep18
6 HR administrative officer Voice recorded 12.09.2017 2:00 hrs 1 P6-VR-Sep17
7 HR development officer Voice recorded 12.09.2017 1:30 hrs
2 P7-VR-Sep17
Voice recorded 13.09.2018 0:45 mins P7-VR-Sep18
8 Business development manager Voice recorded 24.09.2017 1:40 hrs 1 P8-VR-Sep17
9 ICT manager Voice recorded 26.09.2017 2:00 hrs
2 P9-VR-Sep17
Voice recorded 25.09.2018 0:30 mins P9-VR-Sep18
10 Deputy of IT design and
development Voice recorded 04.10.2017 1:45 hrs 1 P10-VR-Oct17
11 Deputy of IT planning and
control Voice recorded 11.10.2017 1:30 hrs 1 P11-VR-Oct17
12 Operational manager Note-taken 16.02.2018 1:20 hrs 1 P12-NT-Feb18
13 Procurement manager Note-taken 16.02.2018 1:15 hrs 1 P13-NT-Feb18
14 Project manager Note-taken 23.02.2018 1:00 hrs 1 P14-NT-Feb18
15 Supply chain manager Note-taken 23.02.2018 1:00 hrs 1 P15-NT-Feb18
16 Head of controls on petroleum
exports Note-taken 18.08.2018 0:45 mins 1 P16-NT-Aug18
17 Marketing manager Voice recorded 20.08.2018 1:10 hrs 1 P17-VR-Aug18
18 Head of strategic planning and
energy management Note-taken 21.08.2018 1:00 hrs 1 P18-NT-Aug18
19 Deputy of the Center for Energy
Studies Note-taken 25.08.2018 1:10 hrs 1 P19-NT-Aug18
20 Head of public relations Voice recorded 25.08.2018 1:20 hrs 1 P20-VR-Aug18
21 Security manager Note-taken 24.09.2018 1:15 hrs 1 P21-NT-Sep18
22 R&D manager Note-taken 02.10.2018 1:00 hrs 1 P22-NT-Oct18
Source: Developed by the author, 2018
250
Appendix C
The list of observed meetings
SN. Subject Key points Participants Date Code
1
The role of the
petroleum industry
staff in the country’s
economic growth
and development
- Performance-related
rewards
- Formation of a committee
to examine staff problems
- Progress of South Pars
phases
- Amendments to the new
petroleum contracts model
CEO, Business planning
manager, CFO, HR
manager, ICT manager,
Marketing manager,
Head of controls on
petroleum exports, Head
of strategic planning and
energy management,
Business development
manager.
July, 2017 M1-2017
2
The essentials of
interaction with the
performance
management
systems
- Progress in performance
management phases
- The necessary
coordination between
organizational objectives
with staff objectives
- The strengths and
weaknesses of staff
- Improving workforce
productivity
HR manager, HR
administrative officer,
HR development
officer, Deputy of IT
planning and control,
Project manager, One
member of the Center
for Energy Studies,
Head of public relations,
R&D manager.
Aug, 2017 M2-2017
3
Status and prospects
of exploration and
exploitation of oil
wells
- NIOC policy-making
- Production status
- Practical solutions to
improve the status of oil
wells
- Obstacles to the
development of oil fields
Deputy of Petroleum
Minister, CEO,
Operational managers,
Head of strategic
planning and energy
management, Supply
chain manager, ICT
manager, Business
development manager,
Deputy of the Center for
Energy Studies, Head of
international relations.
Oct, 2017 M3-2017
Source: Developed by the author, 2018
251
Appendix D
The list of organizational documents
SN. Document type pages Issued by Year Code
1 HR general policy guideline about the
organization’s staff terms and conditions of
service
89 NIOC 2011 D1-2011
2 Quarterly journal of training & development
of human resources 32 NIOC 2011 D2-2011
3 Training courses schedule /handbook 14 NIOC 2011 D3-2011
4 ICT brochure about PMS 64 NIOC 2012 D4-2012
5 Official correspondence letters about PMS 10 NIOC 2012 D5-2012
6 Employee Performance appraisal 11 NIOC 2012 D6-2012
7 The Iranian petroleum industry outlook 35 Ministry of
Petroleum 2012 D7-2012
8 Balance Scorecard Hierarchy Structure 15 NIOC 2013 D8-2013
9 Competency model 2 NIOC 2013 D9-2013
10 Administrative circulars 18 Ministry of
Petroleum 2013 D10-2013
11 The human resources management in the
petroleum industry 150
Ministry of
Petroleum 2014 D11-2014
12 Performance management model in the
Iranian petroleum industry 35 NIOC 2015 D12-2015
13 The relations between the National Iranian
Oil Company and the Ministry of Petroleum 10
Petro
Energy 2015 D13-2015
14 Quarterly journal of human resources
management in the petroleum industry 106
Ministry of
Petroleum 2017 D14-2017
15 Internal reports 8 NIOC 2018 D15-2018
16 Journal of Iran petroleum No. 77 63 Ministry of
Petroleum 2018 D16-2018
17 Journal of Iran petroleum No. 78 63 Ministry of
Petroleum 2018 D17-2018
Source: Developed by the author, 2018
252
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