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The last two decades have seen the re-evaluation of management accounting roles in terms of developing new technologies and systems as well as changes in the role of Management Accountant (Scapens R. W., 1990).This has led to a substantial degree of research interest in the changing function of Management Accounting and role of management accounting in business. Since Johnson & Kaplan (1987) alerted to accounting community, about the loss of relevance of management accounting to management and other information users, there has been an ample of research going on focusing on the changes to management accounting systems, techniques and practices and in turn the skills required for management accountant to cope with changing facets of demands. Some Recommended solutions to the issue of relevance included innovative costing and information frameworks like activity based costing, balanced scorecard, key performance indicators, economic value added and benchmarking (Khalid, 2000).
The factors such as globalization, accounting frauds and advancement in information technology have caused drastic changes to the way businesses are being run (Scapens, Ezzamel, Burns, Baldvinsdottir, & Norreklit, 2009) (Jarvenpaa, 2007). As accounting systems were developed because of complex interactions between business and external environment, management accounting as a role player in business environment is not unaffected by the drivers of change. As such, the role of the Management Accountant needs to evolve, so as to be able to align themselves and meet the challenges of today's dynamic business environment. Hence, the purpose of this report is to examine the changing role of Management Accountant and discuss methods for buildings up the necessary competencies for ensure success. This report shall be divided into the following sections:
Changing Role of the Management Accounting Professional
Skills and Knowledge that are Critical to the Success of a Management Accounting professional
Assessment of Group Members' Skills and Knowledge
Plan for Acquiring/Strengthening the Critical Skills and Knowledge
3.0 Changing Role of the Management Accounting Professional
"The characterization of management accountant in leading edge of companies have gone from 'bean counter' and 'corporate cop' on the periphery of business decision making to 'business partner' or 'valued team member' at the very center of strategic activity" (Paulsson, 2012).
According to Granlund & Lukka (1998), development of management accounting can be conceptually divided into 3 dimensions. First dimension is about innovations in management accounting. This includes strategic management accounting, activity based costing, strategic cost management, life cycle costing, competitor accounting, customer profitability analysis, economic value added management, non-financial measures, balanced scorecards. Implementation of these techniques can enhance the business orientation of accounting functions (Friedman & Lyne, 1997).
The second dimension is about more effective information systems like databases, data warehouse, ERP Systems and consolidation packages. By implementing modern financial and control systems and software, routine activities could be accomplished effectively and databases can be handled quickly and effectively on real time basis.
The third dimension is the human dimension, which sees management accounting either as a function or as a single individual.
There has been a cultural transition in the role of Management Accountant from number crunching and overall functioning of accounting systems to increasing business orientation. The decentralization of management accountants as business controllers, into a business unit has been one essential trend in this role development (Mattsson 1987).
The cause and effect like changes happening around the business, the affect in the Management Accountant's role and the competencies required are all closely related and can be best described using THE ONION MODEL.
The outer layer of ONION MODEL is the challenges or the changes in business. The challenges affect the role of Management Accountant which forms the second layer. This necessitates the competencies for Managerial, which forms the next layer. These competencies in turn cause changes in the personal manager types in Management accounting which lies in the next layer.
Focusing on the outer layer of onion model, there are many drivers that have brought about the major challenges and changes in the role of Management Accountant. On the environmental level, these includes Business internationalization and globalization, knowledge based economy, information technology, increasing competition and so on. On the organizational level, the causes includes more discriminated product and services for consumers, broader scope accountability requirement, changing work patterns and attitudes, core competencies, emphasis on customer and supplier relationships, downsizing, outsourcing, flatter organizational structure and team work.
All these changes in business environment has affected on how organizations operate trade and are managed. So this indirectly affects the functions and tasks of Management Accountant, who has traditionally provided information which facilitates or supports effective and efficient operations and management. Some of these changes directly affect Management Accountant like rapid development in information technology have made management accountant as well users able to avail with huge amount of information like data warehouses and so users expect them to provide more sophisticated and useful information using the data available. More over in this IT generation most of the accounting works are done by computerized programs and software, thus propagating the role of accountant from bean counting to computerized accounting systems leaving them more time to analyze and interpret.
The establishment of global markets, focusing on customer and improved quality of product and services, production technologies, all these have led to an intense level of competition between the organizations. This requires management to have measurements and performance indicators on these factors and management accountant being transformed to information specialist need to provide these and focus on nonfinancial information as well in decision making(Binnersley, 1997).So Management Accountant needs to concentrate more on adding value and getting integrated into organization.
Changes in the Management Accounting Function
According to Birkett (1989) "The purpose of management accountant was to provide quick and accurate information to management, enabling them to take necessary action"(p 16).A study by ASCPA concluded that "the management accounting function was value adding in strategy formulation, control and change" (Barbera, 1996b).
This shows the change in business environment and accounting philosophies, as well as in Management Accountant's roles.
Some additional information observed while comparing two studies are
Management Accountant's users, customer or clients more broadly include engineers, operations, marketing, HR, cross functional teams and cellular work teams.
Role of Management Accountants has expanded to provide expert advice, leadership in pursuing statistical and analytical techniques and design and the management of information systems, performance measurement systems, providing information, being analysts ,consultants and interpreters and managers of complexity (Barbera, 1996b).
The results of studies in US and UK have nearly mirroring findings. The IMA study found that the Management Accountants spent more time as an internal consultants or business analysts who works with cross functional teams and are actively involved in decision making and work close with customers to get correct information for accurate decision making (Russell, Siegel, & Kulesza, 1999).With these changes happening in the management accounting function requires new competencies, skills and knowledge base to compete and sustain.
4.0 Skills and Knowledge that are Critical to the Success of a Management Accounting Professional
There has been an intensive debate regarding the managing knowledge and competencies required in business management during last few years. Tight competition and new organizational practices requires exceptional demands of skills both in terms of qualitative and quantitative. Social skills are gaining demand, giving importance to appraising the situation from a personal competencies point of view. The competencies required for an accountant are also changing to meet the changing functional roles of management accountant.
Competencies and personality are essential for work role composition. Within certain limits, talents which are potential abilities can be developed into skills. So skills are more variable than talents. Some skills require natural talent and some can be developed through education, training and experience.
It could be noted that personality and talents and skills are stable over certain period of time but factual knowledge are more frequently subject of change. This in turn can be projected that the organizational roles of an individual and a group can be changed more easily and are the least part of the individual (Mintzberg, 1994).So the new task requires a new role of characteristics.
Essential competencies in most service sector profession like accounting are not technical and knowledge based but social interaction and communication based. Many studies have been made to identify the skills set required for a successful Management Accountant. For example, the task force report of the Institute of chartered accountants in Australia, vision 2020, has found that now an accountant need to have both generalist and specialist knowledge (ICAA, 1998). It is argued by AICPA vision 2011 that CPA's are becoming more market oriented than regulation, focusing more on value added services than traditional accounting serves (AICPA, 2012).
The core competencies required for a Management Accountant as identified by them are
Communications and leadership
Strategic and critical thinking
Focus on customer, client and market
Interpretation of converging information
Since strategic management has been prioritized as a knowledge base for future accountants, another study of CIMA members reveals that of the top ten rated skills for 2005, four stood out as pre-eminent:
Â· IT/system knowledge
Â· Broad business knowledge
Â· Integrating financial and non-financial information (Burns & Yazdifar, 2001).
A study of Chief Financial Officers (CFO) by Institute of Chartered Accountants prioritized skills like strategic management, accounting and finance (including knowledge and environmental management), people management and information technology (Simister, Roest, & Sheldon, 1998).
Another survey of CFO's in Australia in 2000 conducted by CPA Australia concluded that softer skills of management, people management and knowledge management are very much essential than the traditional skills such as cost and project Management, business valuation and taxation skills (Nash, 2000).A study by CIMA UK states that the essential skills are oral and written communication skills, time management skills that are more valued by (Hassall, Joyce, Montano, & Anes, 1999).
So we have distilled 5 key skills that today's Management Accountants needs are:
Solid knowledge of both financial and managerial accounting which leads to effective decision making.
Analytical skills and Problem Solving.
Knowledge of how a business functions/Business Strategy.
Ability to work on a team/People Management/Interpersonal Skills.
Oral, listening and written communication skill.
Knowledge of FA and MA:
It is essential for Managements to keep themselves abreast of the latest practices/trends in Financial Accounting (FA) and Management Accounting (MA). According to a survey conducted by Burns, Hopper and Yazdifar (2004), it highlighted the following key management accounting tools and techniques which management accountants need to be knowledgeable in:
Source: Burns, Hopper & Yazdifar (2004, p 6).
The knowledge will give them the edge and necessary ability to manage the business environment of today and the future. It will help to make effective and valid decisions. By not doing so, the role of management accountant will be irrelevant (Flamholtz, 1992).
Management Accountants in the current business world are needed more for their excellent analytical and problem solving skills. This may be attributed in a large part to 'highly integrated ERP systems which produce standardized reports having nearly taken over the role of gathering and summarizing information and the Management Accounting Professional now spending more time on analyzing and interpreting the information (Siegel & Sorensen, 1999), as he critically analyses the facts, makes sense of the numbers in the standardized reports and recommends viable solutions, than on the preparation of the standardized reports. One more reason for this may be that problem - solving using spread sheets gets more and more important (Ahadiat, 2008). Management Accountant key role is to understand and predict the influences of each move on business performance (Lee & Colbert, 1997) so analytical skills plays a key function.
Knowledge of how a business functions/Business Strategy:
Management Accountants are required to wear several hats simultaneously - they needs to be a strategic forward - thinker who can take the entire organization into consideration when making decisions and is well able to make sense of the numbers and put them in perspective (Burns & Yazdifar, 2001). Adding to this, they are required to link their inward perspective of the organization to the external factors such as customers and competitors which form his external perspective. This makes the business Strategic skills very important for Management Accountants.
Ability to work on a team/People Management/Interpersonal Skills:
Interpersonal skills are become very important in this new advisory role. Being an integrated member in process - oriented teams, relationship and trust - building is very crucial. MA needs to be capable of presenting information in an format understandable even if the other members of the team are non - experts. It adds value if the Management Accounting Professional has a confident yet friendly style and good interpersonal skills as is required for him to manage people and able to listen effectively to others (Burns, J; Baldvinsdottir, G, 2007). Thus, Management Accountants must develop interpersonal skills which are required to be an effective part of the team during the creative process.Â
Oral, listening and written communication skill:
These days Management Accountants are required to accomplish many non - accounting tasks which for the most part include consulting, strategic planning. This requires them to spend a substantial amount of time in meetings and over phone and work with people of different job functions and cultures. Hence, management accountants require good communication skills - both oral and written (Burns & Yazdifar, 2001). According to Stovall & Stovall (2009), good communication skills give them the abilities to convey accounting information understandably to non-accounting people.
In 1989 CEO's of big eight Accounting Firms (premerger) authored a publication named Perspectives on Education: Capabilities for success in the Accounting Profession in which a major portion dealt with communication skills including oral ,written and listening which they considered as an essential for a successful Management Accountant (Kathleen, Schmidt, & Madison, 1990).
5.0 Assessment of Group Members' Skills and Knowledge
Knowledge of FA & MA
Interpersonal Skills / People Management
# on a scale of 1 to 5, where 1 is poor and 5 is excellent
6.0 Plan for Acquiring/Strengthening the Critical Skills and Knowledge
There are many ways to improve these skills. A joint discussion have been made among group members and planned to improve in these areas.
Knowledge of FA and MA:
Take up professional development courses by leading accounting bodies:
Take up professional development courses like CIMA (CIMA, 2012) by leading accounting bodies to provide up-to-date knowledge in FA and MA. Involve in short seminars organized by CPA in Singapore for accounting professionals to know the latest practices in FA and MA (CPA Australia, 2012).
Access to online resources:
The Internet has opened up opportunities for MA professionals to increase their knowledge through online published articles, forums, videos and many more. One innovative way by CIMA is introducing a chat line via the internet for MA professionals to discuss or make queries (CIMA, 2012).
Analytical skills and Problem Solving:
Actively engage in reading books and create opposite point of view of stories and argument. Engage ourselves in researching arguments on both sides of any topic picked.
Study more mathematics, calculus, algebra and other mathematical subjects based on logic and analysis. By solving more mathematical problem analytical skills can be improved.
Solving puzzles, Sudoku and brain teasers in magazines, newspaper and on webs.
Pursuing MBA or MPA program which focus more on Analysis.
Knowledge of how a business functions/Business Strategy:
During the post graduate course all the team member have enrolled for the subject called strategy and Leadership and people in organization that's gives a broader idea on business strategies and how the business functions. The assignments are so well designed it gives a passive idea on how strategies can be followed in business and different models used.
Ability to work on a team/People Management/Interpersonal Skills:
Being pursuing the post graduate degree course we are being exposed to many ways to improve interpersonal skills within ourselves. The group assignments, studying in multicultural environment, group discussion and tutorial activities during the course have a great scope to improve the skills. Apart from the course all group members would be doing research in internet and tips to improve it (The Important Interpersonal Skills to an Entreprenuer, 2011).
Oral, listening and written communication skill:
Be involved in activities that helps improve communication skills
Participating in club activities may help in improving communication skills as one will need to interact with other people in discussions, presentations or meetings. Joining the Toastmasters Club is a good example as it even offers training for their members to develop their communications skills (Toastmaster Club of Singapore, 2012). Furthermore, they are also given opportunities in sessions to practice what they have learnt.
Learning from people who are good communicators
One great way is to learn from those who have good communication skills. It can be done either by one-to-one coaching where there is someone to coach you or watching videos of good communicators.
As reconnoitred by the various observations and notations made in this report, the role of the Management Accountant has undergone a clear transition over the last three decades in terms of the skills and competencies required by one who is successful. Several factors falling under the broad categories of Environmental, Organizational & Cultural changes have led the way to this complex yet expected change leading the way to arming the Management Accounting Professional with not just a strong knowledge in Financial and Managerial accounting but adding to it with strategic, analytical, communication and interpersonal skills. The present day successful Management Accounting Professional is a completely reinvented version of the one from yesteryears, wearing several hats simultaneously and with aplomb which enables them to seize the opportunities which would otherwise be directed towards the newly emerging competition - the Professional Specialists. The decision to change is at the door and not for longâ€¦â€¦â€¦..
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