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Management Accounting
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Abstract
The prime objective of the paper is to explain the traditional management accounting and how it has evolved. The paper critically evaluated the role of management accountants present in the firm for examining the change induced by using emerging advanced and sophisticated management accounting tools and techniques in their roles. The paper assessed the roles which was perceived traditionally to be as a controller and cost recorded and how their roles have evolved to broader strategic roles which are important vitally in decision-making and planning. The paper been separated into two sections where the suggestion from various scholars on the roles being changed and not changed have been mentioned. The paper can be considered as a modest study of various literature works for identification of reasons as to why some scholars have suggested that the role of management accountants have changed and some disagree with the same. The paper attempts to evaluate critically the various sets of arguments. In order to assess their roles, the roles, activities and skill requirements of the management accountants have been studied.
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Introduction
The changes being incorporated in the recent years in the role of management accountants have been argued strongly in the academic literature due to the development of various emerging advanced and sophisticated management accounting (MA) systems, tools and techniques (Guilding, Cravens and Tayles 2000; Tsamenyi, Cullen and Gonzalez 2006; Scapens and Jazayeri2003). The emerging management accounting techniques like the balanced scorecard (BSC), activity-based costing (ABC), strategic pricing, quality costing, strategic management accounting (SMA), throughput costing etc. have been investigated and examined by various researchers and academics (Atkinson, Balakrishnan, Booth, Cote, Groot, Malmi, Roberts, Uliana and Wu 1997;Emsley 2005). The acceptance of the management accounting tools being mentioned above and the inherent skills being demanded from the management accountants have been argues in favor and against the motion (Yazdifar and Tsamenyi 2005; Kennedy and Sorensen 2006).
The applications of these management accounting tools and techniques have been contributed to the change in the roles of all the management accountants by becoming a vital member of the organization participating in the decision-making team and being a strategic planner as compared to the traditional functions of the cost controllers and the scorekeepers. (Seal, Cullen, Dunlop, Berry and Ahmed 1999; Burns, Ezzamel and Scrapens 1999). The effectiveness of the management accountants tools and techniques have been evaluated by various scholars (Haka and Heitger 2004), and how these tools have been adopted in the firms and organization as opposed to the counterpart traditional tools (Joshi 2001; Crenhall and Langfield-Smith 1998a). Further the preferences and attitudes of the managers regarding the realized and perceived benefited were also derived by various study from using the specific tools (Guilding, Cravens and Tayles 2000; Adler, Everett and Waldron 2000).
Arguments In Favor of the Changing Role
Earlier it was seen that the management accountants were functioning as support staff for all the decision makers but with the emergence of various tools and techniques, their roles is seen to have evolved from serving as internal customers directly to the strategic planner and business partners. Now that the management accountants are equal member of the decision making system, they have the authority and responsibility for telling the operating executives and the various types of information which they may or may not consider relevant to the business decisions and they also have the authority to improve the quality of decisions, if they desire to do so (Zimmerman 2009: 13).
The researchers like Emsley 2005 and Abernethy and Brownell 1999 suggest that due to inherent relationship of Mas with diverse array of disciplines of management, it might be suggested that the use of tools and techniques can help in expanding the tasks of management accountants from bean counting, score keeping, cost controlling to a wider strategic and multi-disciplinary roles. For example, the BSC or Balance Scorecard is not merely a performance measurement framework in the organization but is used as a comprehensive strategic planning system, sustaining the ability for transforming and improvement, enabling all the Mas in recognizing the image of organization in customers’ eye and for focusing on the critical business processes. (Kaplan and Norton 1992; Silk 1998).
This indirectly suggests the fact that the management accountants spend more time in classifying, identifying activities and analyzing the costs. Further they have to allot these costs to procurement, designing, distribution and marketing of products and services (Cardinaels et al. 2004). Therefore the accountants have to assess the system of products, marketing, manufacturing and other work processes of the various departments (Cadez and Guilding 2008). Additionally, it has been investigated by various manufacturing firms that a varying combination of various tools and techniques of Mas are used for greater strategic focus (Crenhall and Langfield-Smith 1998a).
Granlund and Lukka (1998), and Malmi (1999), investigated the transition phase in the practices of MAs Finland and studied the transformation in their roles and responsibilities from being the cost controllers to one of the most vital part of the managerial decision-making. The table provided below compares the usage rate traditional as well as advanced MA techniques.
Similarly, a study by Yazdifar and Tsamenyi’s (2005) estimated that one of the most important skill required in the Mas was the business performance evaluation. This factor continues to remain the most important task for MAs in future. The other strategic tasks and requirements were estimated to be planning and managing operations of the budget, cost and financial control and profit improvement.
Therefore it can be estimated that the Management accountants are positioned in their respective teams for solving intricate issues and problems and for improving esiting processes. They are also called for organizational skills and analyzing the quantitative and oral information especially in the cross-functional team meetings (Kennedy and Sorensen 2006, Nilsson and Rapp 1999). The same was reported by findings of Crenhall and Langfield-Smith (1998b) who reported that the management accountants present in the firms have adopted the team based structure which is imperative for adapting to the authority and skills as compared to the formal hierarchies so as to be highly effective in the team settings.
Arguments against the Changing Role
With the organization being highly centered on the MA tools and techniques, their benefits are usually seen to be over emphasized. According to Yazdifar and Tsamenyi (2005) the benefits of implementation of such tools have not always outweighed the cost of implementation. In developing countries, the adoption rate for new MA tools is seen to be quite low (Scapens 2000, Yazdifar and Tsamenyi 2005) suggesting that there is no drive to widen the roles of management accountants. There are various factors that are responsible for lower probability of adoption of the new techniques like the requirement of extensive data extraction from various divisions, departments for customer profitability analysis, activity-based costing etc. making it time-consuming and laborious. (Cardinaels et al 2004). The high cost of advanced tool is another issue due to competitor focused accounting, environmental costing, quality costing and value chain costing (Cardinaels et al 2004). Additionally, the execution of such techniques are seen to necessitate the additional skill requirements like better quality communication, enhanced coordination, systems knowledge etc. (Kennedy and Sorensen 2006; Emsley 2005; Yazdifar and Tsamenyi 2005). This particular factor is seen to act like an impediment in adoption owing to the efforts and time demanded in learning the skills. According to Guilding, Cravens and Tayles (2000), the MA tools do not operate as per the expectations in case the environment of the firm is not highly competitive in nature. Various studies have depicted that the managers are perceiving to the traditional techniques for better performance even in the developed countries (Abernethy and Brownell 1999; Joshi 2001). Additionally the resistance to change becaue of high uncertainity associated with the process is one of the reason of sticking to the traditional method (McSweeny 2002). According to researchers like Dixon 1998, Bromwich 1990 and Cadez and Guilding 2008, one of the key reason of not adopting to the new techniques in spite of the availability of the relevant literature is the ambiguity that concerns its particular meaning among the prospective managers. According to Zainuddin, Z.N. and Sulaiman, S. (2016), the management accountants have been facing issues due to customer focus, globalization and rapid changes in the technology, reduction in the inventory cost, target costing, Just in Time inventory, supply chain management etc.
Lord (1996) and Dixon (1998) have stated that the perceived benefits of the Management Accountant can easily be achieved even in the absence of any MA tool or process therefore the overall importance of the emerging MA framework can easily be diluted. Similarly, studies have reported that various MA tools are under-utilized owing to extensive information demands and lower benefits of these techniques as compared to the traditional techniques (Crenhall and Langfield-Smith 1998a, b; Joshi 2001). Therefore, the management accountants should go beyond their own traditional responsibilities and roles and play as a strategists on their own in spite on deeding on the sophisticated MA tools.
The Verdict
It is difficult to attain an absolute reconciliation among the two arguments presented in the study. The modest reconciliation that can be drawn from the study is that the role of management accountants have gradually changed in the recent years with their immense importance released in the industry (Kennedy and Sorensen 2006). If the transition is not as steep as from the cost controller to the full-fledged strategic planner, then at least to a critical role player who is responsible for analyzing, planning, classifying as well as controlling the cost (Zimmerman 2009).
According to Emsley 2005, their roles have changed from coordinating the outcome towards assisting in the formulation of critical strategy. It has also been recognized that the acceptance of the emerging and sophisticated MA tools is quite low (Joshi2001; Yazdifar and Tsamenyi 2005) and majority of the organization still prefer the traditional techniques to be highly beneficial as compared to these tools. Although there emergence has ensured that the role of current management accountants is not going to be the same again (Malmi 1999). However, ti has to be considered that the smaller firms are avoiding the implementation of such tools and one can aruge that the role of management accountants have changed proportionally to the degree of using the tools and their adoption in the specific organizations only. The same cannot be generalized for all the management accountants (Shank 1989).
Conclusion
One must acknowledge the fact that the business is a dynamic discipline where everything is bound to change (McSweeny 2009). The role of management accountants has been severely affected by the emergence and development of several advanced MA techniques. One must recognize that their benefits are usually over-emphasized and they have a plethora drawbacks (Lord 1996), and the organizations have been using these tools immensely (Cadez and Guilding 2008). The greater amount of use of such tools is bound to enhance the importance of the management accountants and their role in the firms in the near future. However, with the emergence of such techniques, the management accountants are also facing various challenges. The issues of intense competition and globalization will shift the focus of managements from core activities and needs of the customers (Zainuddin, Z.N. and Sulaiman, S., 2016).
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