Pedagogical cases in the strategic development of management accounting systems

Discussion of the ‘lost relevance’ of management accounting and the ‘gap’ between theory and practice has focused the criticism that management accounting education is built round a set of techniques applied in simplified settings. One reason for this may be the scarcity of case studies, discussing management accounting practices, which may be adopted in classroom situations. The recent promotion of ABC, throughput accounting, just-in-time (JIT) methods and performance measures to support modern manufacturing provide additional educational challenges relating to the integration of these into the accounting curriculum. There is a danger that these may also be developed as other techniques to be learned in isolated situations rather than to be applied selectively by organizations in appropriate situations. This paper offers two case studies which support class discussion of accounting requirements within a modern manufacturing and commercial environment. The cases emphasize that any one technique is inappropriate to all situations. They force examination of manufacturing and marketing policy and strategy in the development of appropriate management accounting information. The authors' experiences of using the case studies is evaluated, to determine the strengths and weaknesses of using the non-numerical cases as a basis for class discussion of contextual factors in accounting system design.     

Exploring a `non-financial' management accounting change

Many normative calls have appeared for including strategic non-financial measures into management accounting systems. This paper explores the emergence of non-financial measures in the organizational context of Lever Industrial-U.K., a service-oriented British chemicals company. Tracing the mechanism of this management accounting change, the study identifies the dynamic forces which are driving it. The paper points at the systematization of non-financial measures as an essential phase of the change process. However, the paper also suggests that non-financial measures become a powerful vehicle for focusing interactive management control into the organization's strategic uncertainties. This interactive `Focus Potential' of non-financial measures goes beyond their diagnostic role as strategic controls.@e$g0     

CEO turnover in China: the role of market-based and accounting performance measures

We investigate the relationship between chief executive officer (CEO) turnover and firm performance in China's publicly traded firms. We provide evidence on the use of accounting and market-based performance measures in CEO turnover decision. We also investigate the moderating roles of noise in performance measures, firm growth opportunities, state-owned enterprises, and corporate governance reform on the weights attached to these performance measures. We observe that Chinese listed firms rely more on accounting performance than on stock market performance when determining CEO turnover. Firms with noisier performance measures and larger growth opportunities rely less on both accounting performance and stock market performance in CEO replacement decision. State-controlled firms are more likely to use accounting performance to determine CEO turnover. Finally, we observe that the weight attached to the accounting performance measure is significantly reduced and the weight attached to the stock market performance measure is significantly increased after the governance reform. We also observe that the reform has different impact on state-owned firms and private firms in terms of the sensitivity of CEO turnover to firm performance.     

Management accounting systems change and departmental performance: the influence of managerial information and task uncertainty

Despite the proliferation of new management accounting techniques amidst pressures of organizational and global change, the issue of changes in firm-wide management accounting and control systems (MACSs) has largely been ignored in the research literature. This study explores the indirect effect of MACSs change on departmental performance for a cross-sectional sample of 232 medium-sized Singaporean firms. It is hypothesized that MACSs change affects performance but not directly. Instead, this relationship is mediated by managerial-relevant information (MRI) that is impacted by MACSs change, which, in turn, enhances performance. Task uncertainty is expected to moderate the intervening linkages; specifically, the latter are anticipated to strengthen under conditions of more task variability and task difficulty and, thus, augment the indirect effect of MACSs change on performance. The results offer support for the positive indirect effect of improving departmental performance from more MRI, triggered by MACSs change. Although not large, the indirect effect is strengthened when task variability and task difficulty are high. Overall, the findings are consistent with the stated purposes of management accounting that are embedded in normative definitions, and which are relied upon to motivate the framework for analysis.     

Management accounting and the challenge of strategic focus

The paper presents a case study of management accounting in a company that had been a highly diversified conglomerate but was implementing a new strategy of product market focus combined with a more multinational scope. Formerly subject to a simple but rigorous form of financial control, the new organizational identity of becoming a high-growth, high-technology company posed fresh challenges for its control style and, in particular, for the role of management accounting. The paper draws on self-referential systems theory in order to analyse the paradox that while an organization can become more focused on particular markets and technologies, its management accounting seems to become more diffuse and differentiated. As the company sought to develop a different corporate epistemology through the reproduction of a fresh identity, it established new forms of corporate communication through its quality and performance management systems. Autopoietic theory would acknowledge that management accounting should provide some system guidance but would warn against the possible danger that some forms of performance control may damage company self-production.     

New development: China promotes government financial accounting and management accounting

In late 2013, China's political leadership decided to require the government to practice accrual accounting and prepare whole-of-government financial reports. This decision was codified in the new budget law and followed up by a State Council directive endorsing the reform proposal of the Ministry of Finance. Some basic government accounting standards have been made public for comment. In the same timeframe, the ministry also decided to promote management accounting in order to raise the competency and contributions of China's millions of accounting personnel.     

On the emergence of strategic management accounting: An institutional perspective

Strategic management accounting (SMA) has been presented as an efficacious approach to strategy formulation and implementation. It also suggests accountants move away from purely financial concerns to give consideration to wider business issues. Management accounting change has attracted significant research attention in recent years. This case study explores the issues which surround change and which enable the adoption of SMA and the repositioning of management accountants to become more strategic. The empirical enquiry is based in one company through a prolonged series of interviews and meetings which enabled activities over a number of years to be reviewed. This revealed an increasing strategic role for management accountants in informing strategic decision‐making and how this role came into being. The research is informed by institutional theories and neoinstitutionalism in particular, to interpret the external and internal influences on the change in roles of some management accountants and the outputs of their work.     

Influence of cost accounting change on performance of manufacturing firms

The purpose is to analyze the influence of cost accounting change (CAC) on the financial performance of Finnish firms. Empirical data are based on a survey responded by 121 manufacturing firms. PLS is used to extract the influence of CAC on performance. The general expectation is that CAC should have a positive lagged effect of performance. However, prior empirical evidence is mixed and usually only a weak influence is found, if any. This study shows that CAC is closely associated with a simultaneous pricing system change (PSC). CAC and PSC are interrelated because product cost usually plays an important role in pricing. PLS shows that CAC has a weak positive lagged main effect on performance whereas PSC has a strong negative effect. The total effect of CAC is insignificant because the positive direct effect is offset by the negative mediation indirect effect through PSC. The result indicates that when assessing the influence of CAC on performance it is important also to take account of the corresponding indirect influence through PSC. The study also shows that perceived environmental uncertainty (PEU) has a strong negative moderating effect on the influence of PSC on performance. Thus, the influence of PSC on performance is more negative when PEU is high.     

On the interplay between environmental reporting and management accounting change

This paper investigates how environmental reporting (ER) and environment-related management accounting (EMA) practices may interact in the process of responding to disturbances of the natural environment (e.g., changes in environmental regulation, green consumerism, societal pressures for environmentally-responsible conduct). Based on data gathered in four Belgian case companies, we find that the emergence of an interplay between ER and EMA practices is related to the change pathways followed by these disturbances. Moreover, the strength of the environmental disturbances, top management commitment and the presence of an environmental champion are important contingent factors in understanding the development of a recursive relationship. Finally, the findings illustrate that an interplay between ER and EMA practices has the potential to foster or stifle organizational greening.     

Organisational change, outsourcing and the impact on management accounting

New empirical evidence is presented on organisational change, outsourcing and the impact on management accounting in three types of organisations: private sector companies, the National Health Service and Local Authorities. Spearman rank correlations are used to examine three propositions: that (i) change in organisational form exists and may be related to an increased use of outsourcing or subcontracting; (ii) outsourcing is expected to improve organisational flexibility and/or the service of an activity, to lead to cost savings, or to allow the organisation to focus more clearly on its core business; and (iii) outsourcing promotes change in management accounting. Statistical support is found for each of our three propositions. This is further supported by reference to three illustrative case studies. Overall, we conclude that organisational change, as effected by the use of outsourcing, is related to specific changes in the organisations' management accounting systems.     

Contingencies influencing the management accounting practices of Estonian manufacturing companies

Having regained independence in 1991, Estonia has undergone fundamental political and structural changes over the last decade, which have also affected the operation of its companies. This paper examines the management accounting practices of Estonian manufacturing companies, exploring the main impacts on them within a contingency theory framework. The methodology comprises an analysis of 62 responses to a postal questionnaire survey carried out among the largest Estonian manufacturing companies. It is comparatively infrequently that Estonian manufacturing companies have made improvements in their cost accounting methods, although the majority of respondents appear to acknowledge the importance of these practices in finding and lowering real product costs and modernizing the cost accounting systems. The effectiveness of an accounting systems’ design depends on its ability to adapt to changes both in external circumstances and internal factors. We have found some evidence that changes in cost and management accounting practices are associated with shifts in the business and accounting environment as external contingencies, and with those in technology and organizational aspects as internal contingencies. This research aims on the one hand to confirm earlier findings related to the ‘contingent factors’ that influence management accounting and on the other, to identify possible new factors, such as, for example, the legal accounting environment and shortage of properly qualified accountants.     

Risk regulation,community pressure and the use of management accounting in managing climate change risk: Australian evidence

This exploratory study is amongst the first to investigate how companies perceive the regulation of carbon emissions and the pressure exerted by the community in an environment characterised by risk and uncertainty. Semi-structured interviews were conducted among 39 executives who were directly involved in carbon emissions management in 18 large listed Australian companies. Consistent with Prospect Theory, we find that decision-makers are threat biased and are more likely to take immediate actions when climate change issues are framed as threats as opposed to opportunities. From the interview data, it is seen that managers use management accounting techniques as a risk management tool in mitigating risks associated climate change issues. Furthermore, this use of management accounting appears to be driven primarily by the protection of economic interests, regulatory pressure and reputational pressure. The study provides insights into how perceptions of climate change uncertainties and external pressure for disclosure of emissions information influence companies to use management accounting in managing climate change risk.     

Social and environmental accounting,organisational change and management accounting: A processual view

Consistent with calls for in-depth studies of social and environmental accounting and reporting (SEAR) intervention (Bebbington, 2007, Fraser, 2012, Contrafatto, 2012), our paper focuses on the interrelationship between organisational change and SEAR practices, as well as the involvement of management accounting in such organisational dynamics. Drawing insight from both Laughlin (1991) and Burns and Scapens’ (2000) theoretical frameworks, we explore the processes of change through which SEAR practices become elevated to strategising status, in the context of broader organisational and extra-organisational developments, but we also illuminate how institutionalised assumptions of profit-seeking limit the extent to which broader sustainability concerns become infused into day-to-day business practice. Our paper highlights the importance of management accounting in facilitating and shaping the cumulative path of SEAR practices (and sustainability more generally); however, we also heed caution against uncritical reliance upon conventional management accounting tools. The following paper extends our understanding of SEAR practices as cumulative process over time, an awareness of the potential limits to such developments in profit-seeking organisations, and stresses a need to be circumspect when involving management accounting.     

Smart work and hard work: explicating a learning orientation in strategic management accounting

This paper examines the skills and aptitudes necessary to undertake a strategic management accounting project. It argues that individuals involved in such projects are required to work both smart and hard. This argument is developed theoretically by reference to the work of educational psychologists who have identified two different types of goal orientation which people pursue in achievement situations: the learning orientation and the performance orientation. Evidence that strategic management accounting requires a learning orientation is provided by means of a case study which describes its use in a competitive tendering situation. This is followed by a discussion of the potentially symbiotic relationship of strategic management accounting and organizational learning. The discussion leads to the specification of a research agenda that may have significant implications for the practice and learning of management accounting.     

The development of management accounting in UK clearing banks, 1920-70

There is a perception that, in the British banks which dominated the industry for much of the twentieth century, management accounting was limited in scope and contributed to a general inefficiency in these institutions. Various official reports published from the 1960s until very recently have reinforced this view. However, some authors have argued that the banks were more sophisticated in their management than such criticisms would imply. This paper investigates the role, development and limitations of management accounting in the sector, drawing on archival evidence and relating this to the more general development of management accounting. In advancing our understanding, evidence is found to support both views.     

Utilising a typology of management accounting change: An empirical analysis

Management accounting change, currently an increasingly popular focus for research, is not a uniform phenomenon. Its nature and form may vary across multiple dimensions and this variation has been neglected by researchers who have tended to study change per se rather than distinguishing it though a categorisation by type. This paper explores the forms which management accounting change has taken in a sample of manufacturing companies by utilising a simple typology of management accounting system change, derived from the existing research literature, consisting of addition, replacement, output modification, operational modification and reduction. This classification is combined with information on the incidence, location, importance and success of management accounting changes to provide some analytical insights into the variety and patterns of change within these companies and to derive some guidance for future research on the topic.     

Public service motivation and performance: The role of organizational identification

Although the association between public service motivation (PSM) and job performance has received increased attention, there is limited knowledge of the mechanisms underlying its effects. Utilizing data from Chinese civil servants and their supervisors, the authors found that PSM results in higher levels of organizational identification and leads to higher levels of job performance because civil servants perceive the organization’s fate and results as their own.

IMPACT

Our study demonstrates that organizational identification is a key mechanism that explains how public service motivation (PSM) leads to higher levels of performance. To improve performance, public agencies should create an environment that helps employees identify with the organization, for example by highlighting the distinct services that the organization provides for the public and by establishing socialization practices for newcomers.     

The role of change agents and imitation in the diffusion of an idea: charge and discharge accounting

Medieval charge and discharge accounting was the most prevalent accounting system of its time. The first medieval charge and discharge system can be identified in the English Exchequer about 1110. This paper argues that the ideas behind the Exchequer were gradually diffused both internationally and nationally. This paper charts the export of charge and discharge systems to other European Exchequers, to monasteries and bishoprics, to lay estates, to manorial accounting, to guilds, boroughs, universities and parishes. From a single high status source at the start of the 12th century, charge and discharge accounting came to be imitated through mimetic and normative institutional isomorphism by a wide range of lower status medieval institutions by the late 15th century. In the first phase of diffusion, certain key individuals of wealth and power are identified as change agents. In the second phase, individuals, and accounting and estate management texts played an important role in the diffusion. The role of geographical proximity and accidents of history is also explored.     

Conference address: the accounting education change movement in the United States

This paper is based on a keynote speech made before the British Accounting Association Special Interest Group on Accounting Education in May 2002. Its purpose is to present the author's perspectives about the accounting education change movement in the United States during the decade of the 1990s. The paper questions whether accounting is taught too much from a practical as opposed to a conceptual basis. It also questions whether textbooks have remained sufficiently contemporary and kept pace with the needs of accounting instructors and students. The paper then turns to the issue of professional image, suggesting that recent corporate scandals have tarnished the image of the accounting profession. The recommendations of the so-called change literature are then used as a basis for suggesting that academe must take care not to let analytical skills become a casualty of change. Finally the paper provides suggestions regarding the design and process of scholarly papers on the subject of accounting education.     

The relations among competition, delegation, management accounting systems change and performance: A path model

This paper is concerned with an empirical investigation into the relations among competition, delegation, management accounting and control systems (MACS) change and organizational performance. It follows a standard contingency type path modeling to propose that intensity of competition causes firms to change their MACS and that this change enhances their performance. Delegation of authority is implicated in the model as competition encourages delegation, and this in turn causes the change in MACS, as well as enhancing performance directly. The results from a sample of Australian strategic business units indicate that (1) increased competition results in improved organizational performance indirectly through a greater number of changes in MACS, and (2) increased delegation of authority to lower level management leads to higher organizational performance. These results contribute to the management accounting change literature by providing empirical evidence that the relationship between competition and organizational performance is mediated by a decentralized organizational form and changes in MACS of the firm.