XBRL Adoption at HMRC and CH
XRBL and Electronic Government Initiative
The research highlights the importance of e-government and systems to help achieve fully integrated government systems in the near future. E-commerce led to the development of technology capable of revolutionizing the way in which common transactions are handled. These technological developments and the successes of e-commerce led to the idea that this same technology could be used to transform the bureaucratic processes of governments around the world. This was the topic of the current research study. However, this concept has met with a considerable amount of skepticism from scholars, who focus on the number of failed projects as evidence of e-government to serve the public's needs (Fountain, 2001).
Despite the pessimistic attitude of some towards the electronic business movement, there is still a considerable faction that feels that one can learn from past failures and transform them into suceesses. They are willing to give new projects a chance to succeed before passing judgment on the effectiveness and ability of e-government to serve the needs of the people. This study explored HM Revenue and Customs office (HRMC) and Companies House (CH) and their movement towards e-government as a means to conduct day-to-day transactions. Currently, many companies and agents are reluctant to file their Corporate Tax returns and VAT electronically using the current system. This hindered the ability to develop e-Government to the point where paper filing becomes obsolete.
This research explored technology adoption process of these two agencies and its impact on the ability to institute XBRL as a means to file personal and business taxes electronically in response to a mandate that all filing be done electronically by April of 2012. This research will explore the results of the analysis by comparing the adoption process by XBRL and CH, using the TOE model as the framework for the argument.
The Problem
Electronic services have several advantages for both HMRC and CH through improved online services, lower operating costs and the ability to deliver services to a greater number of consumers. Among the problems cited for failure of companies to adopt e-filing were problems with HMRC's website due to technical problems and difficulty encountered during authentication processes (HMRC, 2006). Problems with customer logins and frustration with the system were key reason that customers cited for preferring to file their taxes using the old papare filing system. In order to realize a return on their investment and respond in accordance with the Aril 2012 e-filing mandate, HMRC needs to increase electronic filing of taxes. This would also benefit customers as well, by providing them a more convenient and expedient means to file their taxes. In order to do this, HMRC needs to make certain that the system is working properly and is as frustration free as possible for the tax filer.
In order to address the technical issues and authentication issues behind the unwillingness of clients to use the electronic filing system, the use of Extensible Business Reporting Language (XBRL) has been proposed. Aside from an exploration of the innovation adoption process between the two organizations, the purpose of this research is to explore the possibility of establishing a joint filing facility that combines the services of HMRC and Companies House to file corporate tax returns by the year 2012.
Companies House (CH) has initiated the first XBRL-based system for filing a set of abbreviated and dormant accounts. This system has been in existence since 2005 (Companies House Annual Report, 2008). Since the inception of this system, CH has experienced a serge in its electronic filing services. This increase supports the use of XBRL for the processing of electronic filings and provided the rationale for this research study. This study focused on the motivations of the government in mandating such a system, the process of adoption, and factors that promote or serve as hindrances in that process.
The Internet is an excellent channel for communicating many types of business information. The interviews conducted as part of this research support this fact. The final results of the interviews indicate that XBRL and its successor, iXBRL will more than likely be adopted as the language of choice for the electronic filing of tax documents of both corporate and personal taxes. The adoption process encountered several roadblocks that will be discussed at length throughout this chapter. However, it also had many positive influences that led to its final adoption at both CH and HMRC.
Key Research Findings
XBRL is open standard and free of license fees, making it a cost-effective solution to corporate and government entities alike. XRBL is platform independent, making it an excellent candidate for many different types of systems and applications. The adaptability of the language gives it potential for the development of an international standard using it as a backbone. In Chapter 1, it was found that XBRL is easy to adapt to a number of applications easily. These applications include applications from financial and accounting reports to social networking. These factors would tend to favor the adoption of XBRL for many applications including those being considered by HMRC and CH. However, despite these positive aspects, it is not likely that the joint collaborative project between CH and HMRC will result in future success.
In order to understand key issues regarding the adoption of XBRL, let us examine how this change came about. XBRL is a form of XML (Extensible Markup Language). Mark-up language consists of a dictionary of tags that allows the computer to understand and description of the text. One of the more familiar and early mark-up languages is HTML, which is used for web pages. XML is a more generic form of mark-up language that allows the text to be used for a number of applications, such as PDAs, text messaging via mobile phones and other ecommerce applications. XML is an open standard, which means that anyone can use it without paying a royalty. Software packages are developed using XML and those can be patented and protected, if they qualify.
XBRL is an extension of XML that takes the tags further and describes the environment in which a set of financial accounts have been drawn, XBRL is specifically designed to serve the needs of the accounting community and includes elements such as the year, period, and name of the account. However, for the most part, tagging systems such as these are meant to be read by computers, not humans. They are difficult to read, as one has to either understand the tags, or ignore them. They are complicated to the eye. They are not easily exported to word processors or spreadsheets, such as Excel. Therefore, many application have HTML and XML tags embedded in their programming.
XBRL is an excellent language for computers, concentrating on data transfer, rather than human readability. There was a concern that the tax inspector, or the customer receiving a request from CH may not be able to understand it (Keeling, 2009). Inline Extensible Business Reporting Language (iXBRL) was the solution to the problem. This tagging system allows the system to bridge between HTML and XBRL, allowing XBRL documents to be read by humans. XBRL is about submitting data, not about submitting documents, as tax filers currently know them. Much apprehension exists regarding the accuracy of data and "mistakes" that are a result of the translation process, rather than filer error. Prior to iXBRL, many accounting programs used PDF files as a means to communicate data in a meaningful way (Keeling, 2009). iXBRL will add the element of user-friendliness to the XBRL submission process. This was a key concern in the development of eGovernment services.
One of the key factors in the promotion of technology is to gain understanding of the adoption process within an organization. This research explored the adoption of XBRL in two different UK regulatory agencies. A comparison of the adoption process of these two agencies gives us an example of the types of processes that may be experienced as other agencies and companies begin to adopt XBRL as the backbone of their system.
In addition to the adoption process itself, the study also explored the factors that influence the innovation adoptions process in the two government agencies. Kanal (2006) found 40 critical success factors including technology, organization, external and collaborative efforts. Tornatzky and Fletcher (1990) presented similar findings and found that people, organizations, politics and intercompany relationships also contributed to the adoption of innovation and new technology. In the case of CH and HMRC, the relationship used to be informal, with a casual exchange of information between the two organizations. According to interviewee, Jeff Smith (P2), this relationship changed as soon as they entered into a collaborative project together. The relationship changed and the formal hierarchy harmed the personal relationships that had been formed. It introduced a formality that replaced the former team spirit and complicated interactions between the two agencies.
Overall, the interviewees provided a wealth of information and expressed opinions that provided an excellent basis for the analysis of the technology adoption process. Within these findings are many insights and differences in opinion as to the benefits and caveats of XBRL adoption. In the a case of HMRC, privacy issues are a key factor in the reason for their partial adoption of XBRL, rather than the full adoption undertaken by CH. The interviewees were from varied backgrounds and included three from HMRC and four from CH. They included persons from many different facets of the project. They included interviews from accountancy, the Manager of Online Services, a Technical Architect, and a Process Advisor. These interviewees represent technical personnel who are directly involved in the project implementation. The list of interviewees also included senior management, including the Head of Development, Senior Project Manager, and Business Systems Analyst.
The interviewees represent diversity in opinions among those in various phases of the project. They represent numerous disciplines that are involved as well. Each professional was concerned about the overall project, but they focused mainly on their area of expertise. The various positions of the interviewees provide more rounded opinions concerning the various aspects of the adoption process. For instance, upper project managers have different opinions and concerns from the accountants involved in the project. These two have different opinions and concerns than the IT professionals. The selection of interviewees revealed valuable diversity in the opinions expressed. This provided the researcher with an excellent source for getting to the reasons behind the different adoption processes, allowing the researcher to focus on the many aspects of the process, rather than on the end result.
Each interviewee provides the researcher with a focused perspective on the problem. They provide their opinions and perspective from their own personal point-of-view and concerns over the project. By looking at the combined effects of these viewpoints, one can begin to see the entire picture of what happened during the adoption process. There is always a complex number of players, each with differing perspectives in the adoption of any technological process. Each has their own focus, which may make it difficult to see the overall picture. The focus of this research is on the factors that influence the adoption of XBRL as a means to promote e-filing of taxes that will be required in the following years. It focuses on the processes involved. Therefore, analysis results will be based on composite responses and on the coding scheme discussed in Chapter 4. However, the analysis will not rely entirely on these schemes, but on qualitative reflection by the research as well.
Part 1: Roger's Innovation Adoption Stage Process
Roger's innovation adoption stage process was discussed in Chapter 3 as a potential framework for the analysis of the adoption process. knowledge, persuasion, decision, implementation, and confirmation. The first analysis of the processes will use the framework provided by Rogers as its basis.
Stage 1: Knowledge
Roger's knowledge stage were not entirely under the control of the HMRC and CH. This stage came as a result of the Lord Carter Review, which recommended that XBRL be adopted by the agencies. However, due the ease with which XBRL can handle data, both agencies were already in the process of researching XBRL. Lord Carter's Review simply made them search for knowledge more earnestly then they were by themselves. It gave them the push to take steps towards the next stage in the process and final implementation of XBRL. The adoption of XBRL was no longer an idea, it was a goal, with a definite end date set for implementation. Both agencies had to work towards that end.
Rogers assumes that the knowledge and awareness are a function of the adopter's education and exposure to mass media. Although both agencies were already researching the possibilities of XBRL over their PDF and XML formats, the Lord Carter Review acted as a change agent. However, the power level between the recommender and the adopter are differential in this case. They are not on an even playing field and the recommender has considerable authority over the adopter. The adopter does not have a real choice in going along with the recommendations. They must take the recommendations of their superiors. Both CH and HMRC were already familiar with XBRL, the Lord Carter Review gave them the push to further their research.
Rogers indicates that knowledge finding is not a passive activity, particularly when the need exists for the innovation. In this case, the need to explore the innovation was thrust upon the two entities. They had to examine the technology and learn as much as possible about it, only their search became active, rather than casual. The first formal meeting where everyone agreed to explore XBRL at HMRC occurred in 2002 as a result of a workshop. From that point, HMRC held over 20 meetings to explore XBRL (Interviewee Jeff Smith, P2). From the very beginning, XBRl seemed like the solution for CH. They immediately saw it as the solution to their paperwork processing problem. They know that XBRL would help to resolve data reconciliation problems and the problems of processing tremendous amounts of paper filings (Ros James, P5). At this point, the process for HMRC and CH are similar and both immediately recognized the potential of XBRL long before the Lord Carter Review recommendation.
Both Jeff Smith and already had a strong opinion of the capabilities of XBRL and its use in e-filing taxes. Greener was already aware of XBRL and its potential for the online filing of taxes. He was aware of its technical positives and negatives and could provide a comprehensive assessment of the technology early on in the adoption process. Greener served as a consultant for many of the other persons involved in the adoption process and was a valuable source of information for other team members. Greener played a key role in the dissemination of knowledge to others within the company.
Interviewee Richard Harries of HMRC has a basis strictly in the tax business. His area of expertise revolves around the taxonomy of the filing process. He feels confident that XBRL will be able to provide the needed solutions in this area. Both Greener and Harries see the limitations of XBRL in their ability to deliver a consumer readable format. The problem lies in finding a way to take advantage of the data capability of XBRL, without having the consumer file the same information in redundant formats. In this case, iXBRL may provide the solutions.
These interviews highlighted the various levels of pre-existing knowledge about the process and its impact on the dissemination of knowledge among other adopters. We found that the opinions of knowledgeable adopters may have an impact on the opinions of other adopters. In this case, Greener may have been seen as the "expert" due to his extensive IT background. This may have given him more credibility and his opinions more weight in the dissemination of knowledge among other team members. However, it may not be apparent to other adopters that Greener's opinion is only one aspect of the abilities of XBRL to fulfill the needs of HMRC. There are certainly many other aspects to consider, such as the successes expressed by Harries or the ability of XBRL to be read by the consumer.
One of the most important aspects that was discovered during this stage of the innovation adoption process is that during the knowledge stage, opinions begin to be formed that may ultimately affect the final decision that is made. If the adopter has no previous knowledge of the technology, they are open to suggestion and may be influenced by those with strong opinions. If they already have a considerable amount of knowledge, they may be unwilling to listen to the opinions of others, particularly if that person has a difference in opinion. These factors were not discussed extensively in the works of Rogers, but became apparent during the interview process of this research. In this manner, this research extended the works of Rogers to include the affects of group dynamics in the knowledge stage. Required interest vs. genuine interest has a profound impact on the enthusiasm demonstrated in the knowledge gathering phase of adoption.
This research highlighted the adoption process introduced by Rogers. It provided a greater depth of exploration into the Knowledge stage proposed by Rogers. We learned that knowledge acquisition has many facets that go beyond basic knowledge of the technology. We also learned that biases can be formed early on that may affect the evaluation and decision stage. These biases can have a positive or negative affect on the willingness to adopt the technology. Power struggles and hierarchies also play a role in team dynamics, as we saw in the influence of Greener and Harries over other team members. Rogers' innovation stages of adoption are complex when the decision involves a team.
Knowledge dissemination differed between HMRC and CH. The basic process was the same in both organizations. In both organizations the knowledge acquisition began with a few members of the team. At HMRC, it was key personnel such as Smith, Greener, and Harries that first explored the topic in depth. The knowledge that they learned was disseminated to the rest of the group through a series of formal meetings. HMRC took a more informal approach to the knowledge dissemination process. CH used a more formal approach. They had a few key people conduct, test, and design the system. Knowledge was passed from the few "experts" on XBRL to the rest of the group through formal training sessions. CH used a staged process of knowledge dissemination, where the knowledge was first passed on within the company and them it would be disseminated to the corporations that would be required to use the new filing system. HMRC tended to pass the information on in a large chunk, rather than using a formally staged process like that of CH. These two approaches demonstrate differing routes to knowledge dissemination and highlight the organizational culture and personal style of each agency.
Stage 2: Decision
Rogers' decision stage is the second stage of the innovation adoption process. In its most simplistic form, the decision stage is where the organization reaches a decision to adopt or reject the innovation. Rogers assumes that the decision-making unit is exposed to the innovation in the knowledge stage. The processes that occur during this stage are complex and vary according to the organization. This research focuses on the processes involved in the adoption of XBRL, rather than on the final decision itself.
The interview results between the HMRC and CH demonstrated the influence of organizational culture and experience with e-filing. In order to gain a deeper understanding of the factors that influence Rogers' decision stage we will compare and contrast the fundamental elements of these processes for these organizations. Rogers' assumption that all members of the decision-making team are exposed to the technology and have at least some knowledge of it will be considered to be true for this group of interviewees. Both organizations used different, but equally effective means to disseminate knowledge among team members. Although they have various levels of knowledge and exposure to XBRL, by this point in the process, they have at least some working knowledge of it, as it relates to their field of expertise.
Smith points out that the motivations of HMRC differed from his personal motivations. The motivation of the department centers on getting better quality data. It is based on reducing risks and about the necessary compliance processes. However, Smith's personal viewpoint any change is disruptive to the day-to-day processes of the organization. He feels that even though the concept behind XBRL is excellent from a technical standpoint, the adoption of any technological change would be detrimental due to the learning curve involved.
In the case of CH, the committee had the job of "selling" the idea to others. They were not allowed to approach the topic with complete impartiality. They had been handed a mandate from above and were responsible for building interest in XBRL. This gave them a biased opinion and influenced the adoption process as well. They had to present XBRL in a positive light that would lead to the eventual adoption, as proposed in Lord Carter's Review. This case study revealed that bias can play an important role in the decision-making process.
Another key factor that played into the adoption process was the weight placed on various factors in the examination. For instance, Smith placed very little weight on the interoperability of XBRL with the systems already in place and on other technical issues. He placed much more emphasis on he human factors of the technology and the affect that it would have within the organizaiton. Smith did not support XBRL because he did not feel that his clients would support it, but he did see the technological superiority of XBRL over the methods currently being used. Greener placed all of the weight almost exclusively on the technological, rather than human factors involved in XBRL. This difference in emphasis had a significant impact on the decision-making process at HMRC.
The decision-making process for HMRC involved an extensive knowledge gathering phase, including consultation with various experts and others in the field. It involved examination of case studies from other countries that had implemented XBRL. There were many factors that were considered in the decision-making process for HMRC. Before making the final decision HMRC examined the issues of foreseeable difficulties, data usage, security, and the issues involved in the joint reporting facility, and other strategic measures. This thorough examination of the various factors involved in the HMRC adoption decision would lead one to believe that this played a key role in the decision.
The decision-making process regarding XBRL at CH was quite different from that at HMRC as they already had prior experience with XBRL. Their decision making process was less emotional and based more on the technological aspects than the decision at HMRC. Due to their experience with XBRL, they knew many of the technical issues that would arise. They were able to take a more objective look at XBRL than HMRC. Their decision as to whether to adopt HMRC was based on their opinions of their own past experiences.
As one can see, Roger's decision-making stage is complex and difficult to predict. Many factors play into the decision process. Different weight is placed on various factors. The decision to adopt innovation is not a strategic decision as we have seen. It depends on the expectations of the company, or in some cases, past experiences with the technology. There is no clear method for making decisions and many of them depend on the dynamics within the individual organizations. The "personalities" of the organization play a key role in the decision process as well as their experiences with the technology in the past.
Stage 3: Implementation and Confirmation
Rogers considers the last stage to be the implementation and confirmation stage. This stage will never take place if it is halted in the decision making process. Strong opinions formed in the knowledge gathering and decisions making stage may have a negative impact on the ability to move a project into the implementation and confirmation phase.
The implementation stage includes the actual installation and use of the technology. In this stage of the adoption process, the focus turns from mental action to physical action. The implementation of the technology becomes a reality.
In very few cases does the adoption process halt in this phase. All of the technical issues are typically resolved in the decision making phase. However, there are cases, where the adoption can be halted, particularly if the technology does not perform as expected. This is an issue that could be a possibility for CH. It is possible that the adoption process could be halted if XBRL does not meet their expectations or if it causes problems on the client end. However, another possibility is that the chosen language for HMRC does not work as expected for the individual tax filer and that they will reconsider XBRL as an alternative in the future. HMRC has adopted XBRL in a limited basis for their corporate filer, but not for their individual filers.
The confirmation stage is a time of evaluation and assessment just after implementation. There is no set time limit for the confirmation stage and much of it depends on the type of technology being implemented and the application for which it is being used. Sometimes the evaluation stage is weeks and sometimes, it is years. During this time the functionality and usefulness of the technology is assessed. Technical problems are noted and the ability to perform the required tasks is assessed. If at any time, it appears that the new technology is unacceptable, the adoption process could be halted and alternatives sought. The chance for replacement with a different technology depends on the availability of substitute technology and the amount of time and money required for the investment. If new technology is chosen, then the adoption process begins again from step 1 for the new technology.
The adoption of new technology is influenced by the conditions for which the technology is needed. The process of technology adoption is generally undertaken for the purpose of fulfilling a need. In this case, the need is to improve the tax filing and reporting system in the UK. CH decided to implement XBRL and currently has plans to expand the types of filings that can be accomplished online. In the future CH plans to expand its services to include joint returns or dormant and abbreviated accounts (Jo Jones, P6). HMRC will continue to evaluate its success with corporate filings using XBRL and will continue to work on the problems that it faces with privacy issues and the filing of individual returns.
Part 2: TOE Model Analysis
Now, we have examined the cases of adoption of XBRL at HMRC and CH using Rogers' Stages of Innovation Adoption. We found that innovation is a complicated process with many factors that can affect the outcome. Through an examination of the HMRC and CH cases,, it was found that the stages do not always progress in the order described by Rogers. Sometimes there is a blending of the stages and it is difficult to determine where one ends and the other begins. Next, we will examine these two cases using the TOE model.
XBRL and iXBRL represent an opportunity for the government to offer higher quality services to consumers and for consumers to experience the benefits of improved governmental efficiency. However, none of these benefits will be realized if the technology is not adopted. The adoption process is essential to the success of the project. In order for the new innovation to be useful, it must become ingrained in the business processes and corporate culture of the organization.
The TOE model extends Rogers work by including the external environment in the analysis. Rogers analysis only addresses internal factors that affect the adoption process. As one can see from the HMRC case and the CH case, the type of data and dynamics within the organization have a dramatic impact on the final outcome of the adoption process. Perhaps the greatest contribution of these two cases is that they demonstrate how differently Rogers innovation adoption process can be when applied to different organizations.
The TOE model will help the research to examine factors outside of the organization that will affect the innovation adoption process. The TOE model combines technological, organizational, and environmental factors that will have an impact on the adoption process of XBRL at HMRC and CH in the UK. The TOE model is consistent with the work of Rogers and provides another aspect to the analysis. Each of the factors in the TOE analysis may have differential effects. Some may positively affect the adoption and some may have a negative impact on the adoption process. These factors may have different effects at different stages of the adoption process. Understanding how factors in the TOE model affect the stages of the adoption process differently will help us to compare and contrast these two adoption processes at HMRC and CH respectively.
Technological Factors
Technology and its ability to serve a need within an organization provide the motivation to undertake the knowledge process. The need at HMRC and CH already existed. Their volumes have increased in relation to the amount of paperwork involved with tax filing. The process using the paper system is cumbersome and costly in terms of time and personnel. The need for the technology existed long before the ultimatum from Lord Carter. Both organizations had already begun the knowledge gathering phase in response to similar needs within their organization. The need for a more efficient system became a high priority as the amount of time and the inefficiencies of the paper system grew. XBRL emerged as the technology of choice to help fulfill the needs of these two organizations. The ability of the technology to fill the needs of the organization play a key role in motivation for the knowledge stage to begin.
In order for the technology to be adopted by the organization, it must become an integral part of the organization. That process was quite different for HMRC and Ch. Many of these differences were due to the types of data that needed to be process and the dissemination of that information in the two organizations. Both organizations depend on financial data, which XBRL is specialized to handle. However, it is the rendering of that information into a readable format the proved problematic. How these two organizations arrived at solutions to this problem are an important step in the adoption process.
Technology has several attributes that affect the initiation, adoption and acceptance of the technology in the organization. It has a greater effect on the adoption and routinization of the technology, than on the initiation of the process. The ability to convert the technological idea of the technology into a working part of the organization depends on the adoption process and its ability to resolve problems that arise. Significant differences in the abilities of CH and HMRC to do this were closely related to the types of information that they processed and how that information would be used.
The characteristics of the technology and the availability of the technology are key attributes that affect the adoption process. In the case of XBRL, the technology is widely available to anyone who wishes to use it. Availability is not a factor in the adoption process by either CH or HMRC. However, several characteristics of the technology demonstrated themselves to be a key challenge in the adoption process. XBRL is computer friendly, but not people friendly. The manner in which both companies overcame this challenge highlighted the adoption process.
The adoption process for HMRC highlighted the knowledge and decision stages of the process. When one examines these two processes, it becomes evident that sometimes there is no clear distinction between when one phase ends and when one phase begins. At times, companies may institute a formal designated period for knowledge gathering. This information is then presented in a formal format and the decision stage officially begins. This was the case at CH, where a formal information gathering stage ensued. This was followed by formal training of personnel and then dissemination of the process to the public. This signaled the end of the knowledge gathering stage.
However, sometimes, the knowledge gathering stage is an informal process with no set end point. This was the case with HMRC, the consultants held over 20 meetings to share information and discuss XBRL. However, this process seemed to meld with and integrate the decision stage. It was difficult to distinguish the knowledge and decision stage that eventually led to the rejection of XBRL at HMRC for individual tax filers. According to interviewee Harries, it was not felt that XBRL had the proper taxonomy to support the computations notes that accompany tax returns. It was not a user-friendly enough interface for individual filers, but would be OK for tech saavy business filers.
The interviews with Ros James (P5) and Jo Jones (P6) demonstrate that the adoption process at CH was much more formal and Rogers stages can be more easily distinguished than in the HMRC case. According to Interviewee, Ros James (P5), he was asked to manage implementation of electronic accounts systems. He then began the process of acquiring knowledge. XBRL was one of the options that he explored. His knowledge gathering process led him to believe that XBRL was the best way to go for CH, even though the process for developing the friendly version of the presentation was quite difficult from a technical standpoint.
In the decision phase of the adoption process, James felt that XBRL would be the best way to interface with their many types of clients. The difference between CH and HMRC is that CH needs to interface with common people on the streets. Anyone who wished to obtain the tax records of a company can simply request them through the system. CH resolved accessibility issues through having a front end operation and a back end operation. The back end operation allowed companies to file their tax information and to interface with officials. The front end operation provided publicly accessible information. This was an important factor in the adoption process, as it represents a commitment to XBRL. The team was willing to work through difficulties to find a solution to make the system work. Not all roadblocks lead to the failure to adopt the technology. This an important factor in Rogers' adoption process. It also highlights the importance of the technology and its ability to render usable data in a format that is understandable in the knowledge gathering and adoption stages of the process.
The case of CH demonstrates how the technology can differentially affect various stages of the adoption process. Both CH and HMRC had problems rendering the data into a format that was usable by the human component. CH solved the problem by using Adobe software to design the XBRL stylesheet. They designed an intelligent PDF that could be downloaded via Ch's website. HMRC designed a version using XML Schema, only they used it in a way that was not compatible with the way the schema worked. This led to the development of a version 2, which worked in harmony with XML schema rather than against it. HMRC built on existing standards, transferring what they knew about XML to the world of XBRL. HMRC created an XSLT style sheet, that takes XMLinput and produced output via HTML or PDF format that easily understandable to the human interface. This example demonstrates how CH and HMRC took different approaches to the common problem of XBRL being data friendly, but not people friendly.
This brings up another point in the adoption process. Not all roadblocks lead to failure to adopt the technology. However, not all roadblocks can be resolved as this one was. Sometimes no solutions can be found to the roadblocks. This may or may not lead to failure to adopt the technology. It depends on the importance of the issue. Small problems may not lead to rejection of the technology, it may be felt that the overall benefits outweigh the risks. This is the key to understanding the decision phase of Rogers innovation adoption process. The company will balance the positive aspects of the project with the negative ones. Managerial obstacles may negatively affect the adoption process. Managerial difficulties often arise from the technology itself. In the case of XBRL, it was privacy issues and the ability to be rendered into an understandable format that posed the greatest challenges.
The first people to gain knowledge and a thorough understanding of XBRL at CH were the programmers and systems developers. At HMRC, IT personnel and the manager of e-filing were the first to become aware of the technology. In the knowledge gathering process, they had to decide whether the technical issues would be easy to work around. The knowledge stage of the team involved some design work with XBRL. The examination went beyond reading and into the field, with trials and tests at the knowledge gathering stage. Throughout this process, only a few people knew about the work with XBRL. When the team felt confident that XBRL was the software of choice, the four IT persons then began to prepare a pitch to inform others about their successes.
The team began to pitch the idea of using XBRL to others in the organization. This is still part of the knowledge stage, as the team wished to spread knowledge of XBRL to other decision makers within the organization. They spread this knowledge through in-house training courses and other places to learn to use XBRL. The knowledge gained by the four was spread to others in the organization.
The decision making process at CH was combined with the implementation phase. They trained personnel and began the implementation. The decision phase entailed trials conducted during the knowledge phase. However, CH decided that they favored the system enough to introduce it on a small scale. They conducted usability trials that involved accountants and people working at SMEs to see if they could use the system or encountered any problem. This early stage of the implementation process was meant to find any problems before the project went full scale. They took notes regarding the success of these trials and based final changes to the system on feedback. This early stage of the implementation phase is an important step in the success of the adoption process. It allows the company to work out problems on a small scale before tackling the larger project. This saves money in the long-term, as any errors can be fixed on a smaller scale. In the case of CH, this method of implementation supported further adoption of XBRL for the entire entity.
For CH, implementation involved two different groups of stakeholders. Those inside of CH and clients outside of the company. Knowledge disbursement inside of the organization was rather easy and a formal process was already in place for doing so. However, building a knowledge base outside of CH was a different matter. The ultimate goal of the project was to get companies to file their taxes electronically using the new system. Until large scale implementation of the project, most of the general public was not aware of the system or the changes that it would entail. Therefore, one portion of the implementation phase means going back and instilling the necessary knowledge in the general public. This is risky, as there would be a tendency to reject the new changes due to concerns over security or ease of use.
The most difficult task faced by CH was getting leery customers to use the new system. This is also a challenge faced by HMRC. One of the key arguments was whether to use incentives or a direct mandate to get them to use the new system. They had to get the message out to the public in a way that would build support for the new system. Internal knowledge dispersal to CH staff took place via formal training routes already in place. Getting the message out to the general public is an advertising and marketing problem. Even if the general public is eventually mandated to use the new electronic filing system, PR is still necessary to build support for the new system. One of the biggest challenges that CH has faced to date is getting the public to accept and use the new system. HMRC will face a greater challenge in getting individual filers to accept the system, as they are less tech savvy then corporate filers. They will be likely to face greater resistance than CH in gaining public acceptance.
Technological issues center on the ability to handle large client lists. The authentication process can be quite time consuming, causing delays and frustrations for filers. It can also result in large scale system issues that can have an impact on the ability to complete the transaction. The literature review cited this as a key reason for the low percentage of adoption in the past.
As one can see, knowledge dispersal is a complicated process. One has to determine the different audiences who will need the information and which information they will need. The CH case tells us that there is a timing element to the dispersal of knowledge to certain groups of stakeholders. The same was true of HMRC, although, they tended to allow the process to flow organically, rather than forcing a strict structure and deadlines on the process. They simply allows the stages to progress naturally at their own pace., This represents two different organizational cultures and the importance of organizational culture in the knowledge dispersal process.
Knowledge dispersal may have to be integrated into different phases of the adoption process and may not always come in the first stages. This type of knowledge dispersal supports the complexity of the knowledge dispersal process. It also supports the complexity of the adoption process, as many phases need to be integrated into other phases when necessary. The adoption process does not always progress in an orderly fashion through Roger's phases of adoption.
Because the information processed by CH is public information, the validation process occurred in conjunction with the implementation process (Jo Jones, P6). Data validation had to be part of the design and implementation process. This is a key strength of XBRL and an inherent part of the technology. It could not occur after implementation was complete, as Rogers suggested. It was essential that the information that the public received was accurate from the very beginning. Testing occurred throughout all of Rogers phases in the implementation process used by CH.
Swanson (1994) found that IT innovation could be divided into three basic types. Type I refers to innovation that is confined to technical tasks. Type II supports business administration and Type III is embedded in the core of the business. Most forms of e-business fall under the category of Type III innovation. This would certainly be the case with XBRL, as this technology is expected to replace the current business process. It will represent the core of the e-government and will perform both administrative and analytical tasks. XBRL would be embedded in the business processes of HMRC and CH, facilitating the sharing of information and allowing them to extend their basic business products to meet the needs of their clients more cost effectively and efficiently.
The technology itself represents one factor of the technology assessment. However, so does the knowledge of the technology. The technology factor entails the IT infrastructure, Internet Skills, and e-business knowledge of the parties involved. Both HMRC and CH have an appropriate infrastructure for the adoption of XBRL. They both have IT experts who can guide them through the process in the adoption of XRBL. Internet skills at both HMRC and Ch are on a somewhat equal basis for the staff and associates that would use the system. The e-business know how is a matter of training and the IT department can quickly disseminate the necessary information within the organization. Controlling technological factors within the organization is not a difficult task using the formal knowledge dissemination strategies already in place.
However, adoption and usage of e-government is heavily influenced by external technology factors. The program is designed to interface with the customer and promote use of the electronic filing systems. This aspect of technological knowledge represents an external factor that the organization cannot control as easily as internal factors are controlled. It is difficult to regulate the level of knowledge possessed by the general public. Some customers will be more familiar with the technology, but for others it will be a foreign concept.
Regarding the level of technological know how of their customers, CH and HMRC differ dramatically. CH typically handles the filing of business tax returns. This group of users is more likely to be technologically savvy and able to adapt to the new system. They are used to computers and use them on a daily basis in their businesses. Technology is expected to be less challenging for this group. In the case of HMRC, the group of users consists primarily of individual filers. Individuals may not be as technologically advanced as business users. This places HMRC at a disadvantage concerning the knowledge level of their users.
There are actions that can be taken to increase the knowledge level of the end users, but these efforts may not reach a majority of the population. There are a number of actions that can be taken to remedy this external threat to innovation adoption. For instance, one can offer free technical help through a support desk. One can hold training courses or distribute educational material. However, these measures still do not help those who have little exposure, or possibly even a fear of the technology involved. These measures will help to increase public acceptance of the technology, but they are not foolproof solutions. They depend on the willingness of the users to participate in them. A potential lack of knowledge regarding e-government technology is more problematic for HMRC than for CH due to the user base with which they must interface. The attributes of the technology itself presented a key challenge for both CH and HMRC.
Organizational Factors
Several organizational factors are key to the success or failure of the adoption process. These factors include the formal and informal linking structures, communication processes, and the size of the organization. Linking structures within HMRC are considerably more formal than at CH. This became apparent in the manner and approach of the interviewees. It was apparent in the manner in which they addressed each other. At Ch, the linking structures are more formalized, with specific routines for getting resolution to problems.
The same can be said for the communication processes at both organizations. HMRC tended to use informal discussions and open meetings. CH used formal training sessions designed to communicate a certain message. These two styles worked within the organizational contexts, but represented differences in organizational culture within the organizations. Communication style has the greatest impact on the adoption process, regardless of the style used. If the organization communicates effectively than communication can have a positive impact on the innovation adoption process. Ineffective communication can have a negative impact on the adoption process. For both CH and HMRC, their effective communication processes support the adoption of XBRL.
Zhu, Kraemer, and Xu (2003) found that larger firms are more likely to adopt technology than small ones. This occurs for several reasons. First, larger corporations have greater resources to devote to the adoption of new technology. Secondly, they are more likely to achieve economies of scale. They have a greater capacity for bearing risk. Finally, they have greater influence over trading partners to force them to adopt the technology. HMRC and Ch are government entities and although they are not in the private sector, they possess many of the same characteristics as a larger corporation in terms of technology adoption and the ability to bear the risk. They have the power to mandate use of the new system by the public for the filing of their taxes.
In terms of organizational scope and size, the HMRC and CH can be classified in much the same manner as any privately owned large firm. They are more likely to adopt technology than smaller firms or organizations. Due to the volumes and expense of returns being processed, technology has become a necessity in the ability to handle the large volumes of work that have become the norm within the organizations. Organizational factors make it likely that HMRC and CH will adopt technology as the means to resolve their cost and efficiency issues.
Organizational factors are important at every stage of the adoption process. Communication is highlighted in the knowledge and adoption stages. The effectiveness of communication styles is important to the proper dissemination of knowledge to those at the appropriate levels of the organization and the community. The ability to communicate not only the right message, but also the timing of the message are important. In the case of CH, the routes of communication, as well as the timing of the messages was carefully laid out in stages. At HMRC, although the route of knowledge dissemination was similar, their was no carefully laid out plan. Knowledge transfer happened on an as needed basis. This may prove to be a hindrance when the organization decides to introduce XBRL to the individual filing population.
Environmental Factors
Consumer readiness and infrastructure is an important factor in the decision to adopt e-business, at least in the private sector (Zhu, Kraemer, and Xu, 2003). Internet penetration is a key factor in consumer readiness. For the private entity, if the customers do not have the Internet, then the adoption of e-business may not be feasible. For government entities such as HMRC and CH, this factor presents an interesting conflict. In April of 2011, all tax filings are mandated to be performed online. As discussed earlier, many business clients already have computers and access to the Internet. However, not all individual filers will have access to, or knowledge of how to use computers for their tax filing.
The infrastructure to provide access to the Internet is already in place, but not all of the individuals will have access to it. Either these clients will have to purchase computers, an expense that many individuals cannot afford. They can use public computers, such as at Libraries, but this gets into security and privacy issues. They may also have to bear the expense of having their taxes prepared by a tax professional and e-filing for them. These options will create an extra inconvenience for some individuals. However, it also opens up a greater demand for businesses that offer e-filing services.
In a discussion of the TOE model, many arguments are based on private sector business. However, for government entities many of these factors are different. For instance, part of the external environment for private sector business is competitive pressure. There is no competition in e-government. Therefore, this element of the TOE model does not apply to this case. Another difference is the focus of technology adoption.
In the case of e-business, the convenience factor is weighted towards the consumer. It is based on allowing them greater convenience and access to the products that they want. In the case of e-government, the focus is on the entity, not the tax filer. The public has an obligation to file their taxes, whether it creates an extra inconvenience or not. The government entity is the one that experiences convenience in this case. They can mandate what the public must do and the public has little control over the decision. Past experiences with e-filing indicate that only a small percentage have chosen this option in the past. However, as of 2012, 100% of all filers will have to find a means to file their return by electronic means. In this case, adoption of the technology focuses on the needs of the government, not on those of the public.
The environmental and regulatory issues typically addressed in the TOE model affect CH and HMRC equally. This only differences may be changes in the timing of filings. They both must follow similar government regulations, although they have specific issues that only affect their organization, such as the need to interface and provide information the public by CH. HMRC is affected to a greater degree by privacy issues. However, for the most part, both organizations are equally affected by outside environmental factors. This was one of the few places where the both organizations are on equal terms. They both must contend with similar environmental issues.
Both CH and HMRC have similar legal pressures being thrust upon them as well. Lord Carter's Review placed both agencies in the situation of being required to find a process that worked in their agency for e-filing taxes. The adoption of XBRL for use by the HMRC and the CH has the support of top government officials. The HMRC will receive close to ?170 million for the upgrade of their systems. Government reforms, such as CHIPS, that reduces the tax burden on small businesses will also have an impact on the implementation of e-filing. Currently, the ability to adopt the change depends on the ability to filter the changes down to legal advisors and others working with small companies. E-filing would allow regulatory changes to be built right into the software. The individual filers would be able to obtain the correct knowledge needed for filing their return correctly.
The Banking Industry as Regulatory Hurdle
One does not typically think of the banking industry as a regulatory agency. However, they function in this manner unofficially. Their opinions regarding the potential success, failure, or risks of a project will play a key role in the decision. Essentially, if the bankers decide not to finance the project, it will cease to exist. Without the available financing, the project is at a standstill, regardless of the progress of the adoption process within the organization. The organization can decide to adopt the technology, but in the end, they must convince the bankers to continue the project, or the adoption process is halted.
The importance of the banking industry in the adoption process was a key element that was not addressed in Rogers innovation adoption process. The TOE model indirectly includes outside factors in the environmental factors, but this model also fails to address the importance of the banking industry decisions in innovation adoption. In the end, the bank has the final word on whether the project will be completed. If they decide to fail to fund the project, the adoption process is halted. The bankers have their own agenda concerning the project.
This factor brings up the issue of balance of power in the adoption process. This topic is not addressed adequately in either Rogers process or in the TOE model. The organization may successfully progress through the process of XBRL adoption. However, if they cannot convince the bankers, all of the effort is lost. This highlights the importance of finding concrete evidence that supports the benefits of XBRL and its superiority over other methods and software. The banking industry serves as a regulator with a considerable amount of power over the organizations. They have the ultimate veto power by means of withholding funding for any project that they choose not to support. Unlike the organization that must justify their reasons for the project and present compelling evidence to support the need for technology, the banker does not have to justify their position. It is enough for the banker to simply to refuse to finance a certain project and to back another.
The case of HMRC demonstrates that the road to adoption of technology is a perilous and treacherous road. Along the way, there are many factors that can disrupt the process and either slow it, or stop it completely. Organizational culture is a key factor in the development of these characteristics. However, we also found that the banking industry can represent an insurmountable obstacle in the adoption process. Ultimately, it is the banking industry that makes the final decision and is the key determinant of whether the project will continue past the knowledge stage and proceed to the implementation stage. If at any point in the implementation phase, the banking industry does not see the results that they expected, they can pull financing and stop the project. Smith highlighted the importance of catering to the interests of the banking industry. He states,
"What we want to do is to engage some consultants and work with some large institutions and big banks possibly and really concentrate on external financial reporting benefits which I think is the key [R19]. not the benefits to accountants or HMRC, but what the likes of large banking institutions to say that XBRL can save them fortunes but they can't see it or they don't want to see it."
The case of HMRC highlights the importance of external factors and entities on the adoption process. In the case of the banking industry, the balance of power becomes an important issue in technology adoption.
One of the key differences between the HMRC and the CH case is that HMRC was starting from scratch. CH already had an XML Schema base system in place. They are adding the XBRL service to its existing backbone. This is much easier than building from scratch and played a key factor in the justification of XBRL in the case of CH, but not in that of HMRC. This case study provided the basis for in-depth analysis that was not possible without the interviews conducted in conjunction with this research study.
Greener attempted to justify the costs of the switch in a reduction of errors and the ability to process claims faster and more accurately. He explained,
"There is always an element of error, capturing the data in XBRL means that we eliminate re-keying errors, and re-keying costs and we can get much more data, and we can analyze the whole of corporate filing for a year of almost 10 million companies. So you can see where it benefits HMRC and Treasury because it allows them to have so much confidence in the data they are collecting and boiling them down for a politician can understand [R93]."
Apparently, this justification was not enough to convince those in control to continue with the project. The transition to XBRL would mean extensive re-keying and software development to bring the current system into the XBRL environment.
This argument by Greener, when compared to the response by Smith demonstrates that there are many different opinions regarding the costs and benefits of the project. It also highlights the factor of the personal perspective of the various players in the adoption process, as discussed earlier in this chapter. From the perspective of Richard Harries (P4), XBRL would mean a tremendous improvement over the manual system. Translation of tax codes into the technology were one of the foreseeable obstacles, but Harries felt confident that the technical department would be able to accomplish the task. All of the players have a small piece of the puzzle and not everyone can see the project from the others point-of-view.
Conclusions Based on TOE Analysis
Using the TOE method to analyze the external factors that influence adoption of XBRL by HMRC and CH reveals several characteristics that distinguish these entities from others in the private business sector. Their position as government entities places a different emphasis on the external factors than would be expected in the private sector. If one were to make a generalization regarding the importance of internal and external factors that influence the adoption of technology in government entities, one would have to place a greater importance on internal, rather than external factors. External factors affect private business entities to a greater degree than government entities due to their need to attract customers. Government agencies do not have that concern. The public has little power to control government actions. In private business, the customers have considerably more control over the entity. They can refuse to use their services. This is not a choice for government entities. This is an important factor in the adoption process.
Comparison to the private business sector makes the importance of this difference more apparent than when one considered CH and HMRC within their own regulatory context. Another difference between government and private entities is the level of infrastructure and technology available. The ability to fund technological projects is usually not a problem for government entities. They have a greater tolerance for risk than private entities. They must please stakeholders, but there is a greater tolerance for error than in the private sector.
In terms of organizational factors, HMRC and CH function more like a big corporation than a small business. However, there are many differences that distinguish them from the private sector. Their bureaucratic structure is much like the formal hierarchy of a corporation. However, as we found in the interviews, even these government agencies can perform using formal structures or they can function in a more informal fashion. Internal factors, such as those discussed in Rogers innovation adoption process play a much more important role than the external factors found using TOE analysis.
Challenges of the Adoption Process between HMRC and CH
HMRC and CH faced several challenges in the adoption process, many of which have been highlighted throughout this chapter. As we address these issues in a deeper manner, several key differences between the adoption processes of HMRC and CH begin to emerge. The problem of security is a key issue that faces both organizations. An examination of how they tackle this issues will provide further insight into the adoption processes within the organizations.
XBRL is not the most secure application for data transfer. All data is public information. In the case of CH, this was not an issue because all corporate filing information is publicly accessible. However, in the case of HMRC, privacy and confidentiality issues abound, as this agency primarily deals with individual tax payers. XBRL may not be the best option for e-filing HMRC documents due to the extra-added privacy issues.
Issues of privacy are not as critical for CH, due to the type of information that they collect. This information was supplied by interviewee Jo Jones, but was not addressed in the adoption discussion by HMRC personnel. The decision partially to adopt XBRL may have been due to technical issues than originally thought. However, it is difficult to determine the extent to which technical issues were involved in the personal disagreements cited by Smith. In an analysis of issues related to the adoption of technology, it is often difficult to determine the root cause of problems. The answers are often wrought with personal opinions and missing information, as was found to be the case at HMRC. In this case, HMRC may not have realized the same benefits as CH, due to the types of data that they process.
Rogers adoption process model provides a general outline that is followed by almost every individual or company, but there are many factors that can alter this process. In the case of HMRC and CH, it would appear on the surface, that the adoption process would be similar. However, when one digs deeper than the surface, it becomes apparent that major differences exist in the types of data that they process and how it must be handled concerning privacy issues.
Rogers innovation adoption process and TOE analysis provide valuable tools for analyzing the process involved in the adoption of technology. We found that government agencies function somewhat like a large corporation in terms of the technology adoption process, but there are many differences as well. In the private sector, it is of utmost importance that the customer accepts and adopts the technology as well. In the case of HMRC and CH tax filers will be mandated to use the new system, whether they prefer the new system or not. The focus of the technology adoption process at HMRC and CH is on the service provider, not the end user. Although, extensive effort has gone into making certain that the system functions as it were intended.
Responses were more consistent among CH interviewees, than among HMRC interviewees. CH interviewees seemed to provide the same general path to adoption of XBRL. They were able to overcome challenges that needed to be addressed along the way. HMRC was unable to overcome the challenges that they faced with the new system as far as individual tax filers were concerned. The type of data collected by each agency was found to be the root of differences in the adoption process. HMRC feared that XBRL would not provide the privacy and security needed by their agency for the filing of individual returns. The type of data to be processed and its distribution characteristics were found to be key factors that placed limits on the adoption process.
The literature review found that online delivery systems define a certain type of relationship between the regulatory agency and the citizen. The technology serves as the means for communication regarding transactions. In the case of CH, some customers complained about the inability to customize the form with their own logo (Ros James, P5). Changes were made to attempt to comply with their requests, but these attempts were unsuccessful. For now, customers must use the provided format and style sheet. The purpose of XBRL stresses functionality over aesthetics. The purpose is to process forms more quickly and efficiently. It is nice to make this an enjoyable experience for the public, but it is not necessary for the functionality of the software. Some sacrifices such as these must be made in order to develop a system that will meet the needs of the majority. This challenges continues to plague HMRC as it struggles to meet the April 2012 deadline for the filing or all returns using XBRL. iXBRL may provide the solutions that it is looking for as it attempts to make the system friendly to the individual tax filer.
The digitization of HMRC and CH tax filings is only a small step in what is to become a large scale, interdepartmental project of grand scale. The digitization of government services is a process that must happen in stages. Several agencies have already instituted many digital features. According to the literature review, the eventual goal is to develop a "Government Gateway" to serve as a central registration and authentication point for secure online governmental services (HM Government, 2008, p.27), Digitization of the tax filing services is an important step in the development of comprehensive e-government services. Success of the digitization of this process is crucial to the ability to digitize other departments and functions as well.
According to the literature review, only 15% of small companies choose to file their returns electronically, as opposed to electronic filing. It was surmised that the need for computer equipment was a key factor in this decision and that many small businesses could not afford the computer equipment necessary. For large companies, the problem appears to lie in the number of notes accompanying the tax return. This was found to be a problem for both HMRC and CH.
The problem with corporate filings was found to be associated with differences in accounting methods. CH is currently attempting to develop software the meets the needs of small businesses, as well as that which meets the needs of large corporations as well. The inability to handle the types of data needed by HMRC was a key factor in the failure to adopt XBRL for their individual tax applications.
Privacy Challenges
The literature review found that privacy concerns were among the most important issues in the adoption of e-government. It is feared that access to and abuse of personal information may pose a key roadblock to the adoption of e-filing. This problem is not confined to the computer and the internet, but this technology makes the scope and scale of the potential problem much larger. This factor was supported by the interviews conducted as part of this research. Privacy concerns and the inability to restrict certain information was a key factor in the decision of HMRC to fail to adopt XBRL for individual tax filers. It was felt that the software would not provide the security needed for the processing of individual tax information.
CH addressed the privacy issue much differently. They used a front end/back end approach that allowed corporations to enter information in the back end, but only allowed access to certain publicly available information through the front end. It is not known if a similar approach would work for HMRC in the future, regarding personal tax information. It is suspected that the same approach developed by CH would work for almost any other government agency. One of the key factors in the failure of HMRC to consider these options was that their senior IT personnel was fond of XML and presented a biased perspective on the abilities of XBRL.
There is much to be done if the tax filing system using XBRL is to be online and working sufficiently by the April 2011 deadline. The literature review revealed a general atmosphere of concern over the ability to make all of the necessary changes to accomplish this task. Of particular concern was the potential damage to small accounting firms. If they cannot afford the software, training and equipment to make the change, they may not be able to file their taxes on time, or at all in some cases. With no option to file a paper return, many of these problems may run into compliance issues. Compliance will not be as big of an issue for larger companies and government agencies.
One of the key concerns raised in the literature review is that accounting is not an exact science. The types of information and how it is reported have many legitimate variations. These differences in accounting technique represent a key challenge in the adoption of e-filing for companies. Finding format that will suit diverse business needs poses another challenge in the adoption of XBRL by the HMRC and CH. Thus far, this issue has represented a key roadblock in the adoption of the software for both companies. However, Ch was able to work around this issue, while it remains one of the factors that led to the failed adoption by HMRC for individual tax filers.
The key problem addressed in this literature study is the ability to motivate companies to adopt XBRL as the method of choice for electronic filing of their required tax information. Many companies currently prefer to use Word, Excel, or other existing software over XBRL and it is anticipated that it will be difficult to convince them to change (ICAEW, 2009). The literature review indicated that many have concerns over the adoption of XBRL for their accounting needs.
The interview responses supported these points that were found in the literature review and in Chapter 2. Many of the suppositions and results of other studies corroborated the findings of this research. However, it was found that this was only true for studies that included government agencies. They did not apply to the private business sector. Government agencies have a different set of circumstances than those in the private sector. The research supports work previously performed by others in the literature review.
Combination of CH and HMRC
Aside from the adoption of XBRL, the combination of CH and HMRC was also discusses in the Lord Carter Review. The idea was to create a one-stop location for the filing of all types of taxes. This proved to be a more complicated task than initially anticipated. The outcome of this project is not yet known. Through an examination of the process of XBRL adoption, several factors became apparent that will affect the combination of these two government agencies. It may be possible to contain them in the same physical location or location on the Internet, but combining the business processes will prove a difficult task. That is not to say that it will not happen in the future, only that many factors that affect the adoption of XBRL will also affect the ability to combine these two agencies.
The interview with Jeff Smith points out several differences in organizational culture that will affect the ability to combine the two departments. Regarding HMRC's relationship with CH, Smith commented that they had been working on a consulting basis with CH long before the Lord Carter Review. Before the Lord Carter Review, CH and HMRC maintained an informal relationship. However, since the mandate to combine the two agencies, the relationship has changed to a more formal one. Smith feels that this formal relationship had an impact on the ability of the two organizations to function together effectively.
He says,
"The link between CH and HMRC back in the days was quite informal when I turn in some meetings with people in Companies House, shake hands, and build relationships with people. This is not the case now, especially with having Jack Mansfield now, if I
need to know anything, I know who to talk to. It was not Jack back then [R1]."
The interview with Jeff Smith also highlighted another organizational culture factor that affects the ability to adopt XBRL at HMRC. They like to do things by consensus, and if one or two person do not agree, then the process of adoption is halted. They do not continue with the process despite one or two rejections. They like to have everyone 100% on board. Smith states,
"We do things largely by consensus, which is very good things but quite frustrating when you try to make thing happen, and we can see that in our consultations done in this project (XBRL). ..We do not want to impose things; we like to take people with us [R1]. If one or two people say it is not good idea, then we do take this seriously. It is frustrating if you feel you are right, which I have seen in XBRL. The process is tortuous and slow."
This is an organizational characteristic that can play a key role in the adoption process. In many cases, a power structure exists in which the opinions of the managers can override the opinions of others on the team. Smith admits that concern over the opinions of everyone creates a tortuously slow system, but it also functions to serve as a key to long-term support. When the project is finally approved, everyone is on board with it 100%. However, it is also possible that an impasse could result in a complete halt of the project, just because one or two people disagree with the idea.
Lord Carter proposed joint filing based on the fact that HMRC is also part of the corporate tax return. Carter's recommendation was based on the feeling that corporate filing of returns to both HMRC and CH was an unnecessary burden on corporate tax payers. However, Greener points out that Carter did not understand the differences and necessity of both filing systems. From Carter's point the double filing represented waster and redundancy. From the point of Greener and other IT professionals, it is necessary due to fundamental differences in the data and problems with restricting public accessibility to certain corporate information.
Data sent to CH is in an abbreviated format that is publicly accessible. However, the data sent to HMRC requires full P & L. accounts, so this is not the same content as is sent to CH. Small companies can use CH's abbreviated format, therefore, they do not have to file the full account required by HMRC. It is estimated that between 80-90% of the reporting companies are small enough that they never have to file the full account with HMRC. Joint filing with HMRC would make filing for small businesses much more time consuming and difficult. This is particularly the case with sole proprietors. This is a major point of contention that needs to be resolved and one that Lord Carter did not understand when he made his recommendation.
CH saw many of the same advantages as HMRC in the ability of XBRL to justify and check accounts. They saw it as a much faster way to process claims and its decided advantages over manual methods of verification and validation of accounts. We have already discussed the successful adoption process of XBRL by CH and the steps entailed in Rogerian adoption of the software. CH represents a classic case of a successful adoption. Interestingly, the problem of bank financing and its role in halting or continuing the project did not come up in the interviews with CH personnel. Jo Jones (P6) commented that funding was not a problem for CH. It was apparently an issue of great concern to HMRC, but not to CH.
Interviewees at HMRC do not feel that joint filing with CH is possible. However, Ros James (P5) is more optimistic in the ability to accomplish joint filing between the two entities. CH recognizes the complexity of the task and the differences in information being reported as key challenges. CH foresees these challenges being overcome by having one software package where the client types in the information and one report gets fired off to HMRC and the other to CH, each containing the appropriate format and information for each recipient. This is a practical solution, even though it may seem technically challenging at first. CH has already tackled several tough technical issues in the adoption of XBRL and they are much more optimistic in the ability to tackle similar challenges in the future.
One of the key problems with the joint filing is privacy of information. This was a major issue with HMRC and demonstrated itself to be a difficult roadblock to the process. CH customers also expressed concerns over private information accidentally being released to the public by CH if joint filing happens (Jo James, R217). This problem also represents a key concern for CH. Unless the problem of privacy of information submitted to HMRC is resolved, this issue may be the stopping point in the ability to achieve joint filing with HMRC and CH. Interviewee Gareth Lewis (P7) also felt that joint filing with CH and HMRC would happen in the future.
Conclusion
Chapter 5 presented the results and analysis of the interviews with key HMRC and CH personnel. It used information from the background and literature as the framework for the analysis. It discussed compared the innovation adoption process at HMRC and at CH using Rogers' innovation adoption process and TOE analysis as a key means of comparison. Elements not included in Rogers analysis and the TOE model, but found elsewhere in the literature review were also included in the finding and results.
The findings and results of this study undertook a thorough examination of the adoption processes of HMRC and CH. The paths of adoption were found to be similar in many ways, but in this case, these paths led in different directions. For CH, the path led to use and adoption of the technology. This comparison allowed the researcher to focus on the processes involved, rather than the end result. HMRC only adopted XBRL for a portion of their filings. They are yet to adopt it for individual filers.
It was found the adoption process for both HMRC and CH followed the process set forth by Rogers. Because the entities involved were government agencies and were not subject to the market factors of the private sector, internal factors were found to be more valuable than external factors in determining the course of action. This research successfully met the goals set forth at the beginning of this research study. It allowed a thorough examination of the processes involved in the adoption of innovation for government agencies.
Both HMRC and CH faced similar challenges in the adoption of XBRL. CH was able to find innovative ways to meet these challenges, leading to the ultimate implementation of the technology. HMRC saw the problems are insurmountable. They did not seem as enthusiastic and open-minded about XBRL from the very beginning. They preferred the methods already in place. A lack of initiative and enthusiasm was apparent in the interviews with key HMRC personnel.
These findings One of the most important findings of the study was the role that the balance of power played in the ability of the process to progress. Differences in opinion were evident in the interviewees that reflected their personal opinions, biases, and the limited perspectives of their job description within the company. All of these opinions contributed to the whole in a significant way. However, in the end, the players with the most power made the key decisions regarding disposition of the XBRL project. Chapter 6 will discuss the implications of these findings in relation to understanding the process of innovation adoption.
XRBL and Electronic Government Initiative
Chapter 6: Conclusions and Implications
The findings of the research study found that using Rogers theory of innovation adoption, the process of adoption is similar for both HMRC and CH. The research took an explanatory approach to answering the key research questions. The outcome of the adoption process was not as important to the researcher as the process itself and its implications for the introduction of future innovations into the system. This research viewed the technology adoption process through the lens of the two organizations involved. However, these findings are only important in the context of the larger project. The following will explore the findings and conclusions of the research project in relation to the process of the development of a one-stop e-government portal.
Comparison of HMRC and CH
The adoption of XBRL and the proposed joint filing of business tax forms represents a step in the process of the development of the eventual e-government portal. As regulators, HMRC and CH are quite different in terms of the type of data that they require. The biggest difference between these two entities was found to be the level of privacy necessary for them to carry out their proposed functions. CH has a greater interface with the general public than HMRC. CH must provide abbreviated company information to the general public that requests it. HMRC has contact with the general public through the filing of individual and small business taxes. However, this interface is unidirectional. They receive information from the public, but this information is largely private. They do not have to provide confidential information about filers to third parties. This creates a very different accessibility and data sharing environment for HMRC and CH.
HMRC managers and IT professionals faced the same data related challenges experienced by CH. However, they did not see a way around them and they soon became bogged down in the details of the implementation process. The difference in the results obtained by HMRC and CH may have been the attitude and approach taken by key leaders within the organization. This supports the role of the leader in the success or failure of a project. These experiences can serve as lessons to be learned in other projects undertaken by these or other agencies on the way to e-government.
The adoption of XBRL was being considered by both organizations long before Lord Carter's report. It is natural for technologically oriented persons to keep up with the latest trends and developments. Therefore, when Lord Carter's report was published, both agencies were already exploring the possibilities that lie with XBRL. They already had a collaborative relationship, albeit an informal one. The publishing of Lord Carter's report simple formalized the approach being taken by both organizations. The April 2012 mandate gave both organizations a definitive timeframe in which to work. Both organizations were under the same constraints and were already considering the merits of XBRL as an addition to or replacement for their existing systems. They were already in Rogers' knowledge stage. When Lord Carter's Review formalized the goal, both organizations then began a more formal knowledge gathering process.
The outcomes experienced by HMRC and CH differed largely due to differences in organizational culture and outlook. These two organizations are key examples of how managerial support and enthusiasm for a project can affect the enthusiasm of the rest of the employees. The attitude of leadership is contagious and as these two organizations demonstrate, leadership outlook and opinions at the beginning of the project can affect the final outcome. If leadership wishes to push the project forward, they must express enthusiasm and optimism from the beginning. They must carry this attitude throughout the project. It they lose their support for the project, then this attitude will permeate the rest of the staff. This lesson can be applied to almost any organization that wishes to undergo a change or adopt a new technology.
Lord Carter mandated the technological changes and the changes in the ability to file taxes jointly for both organizations. However, Lord Carter was an outside third party. He was not an IT person and he did not work inside the agencies. He was a knowledgeable outside, making recommendations to complex structures and organizations. These recommendations may have been well-meaning and in what was perceived to be in the best interests of the public. However, as these two cases demonstrate, the final outcome of these proposals depends on a complex adoption process, at which point a number of circumstances can bring the project to a halt.
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