Critically assess the role of management accountants

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Assessment Code: MGT3930

Due Date: 23 February 2015

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This paper argues that the evolution of the role of management accountants (MAs) from the 1990s to 2013 is both necessary and unavoidable. This is because traditionally, MAs perform independently without any cross-functional interaction with other departments. Furthermore, MAs were not involved in any strategic planning or decision making process for the organisation. Hence, there is a need for the change in the role of MAs based on themes such as decentralisation of MAs, introduction of new techniques, advancement in accounting technology and organisation culture.

The need for an evolvement in MAs

As stated by Simon et al, 1954, MAs were initially centralised in headquarters focusing on providing relevant data to the relevant parties. They were not actively involved in organisation’s operations, therefore they were always deemed as an outsider to organisation (Golembieski, 1964).

However, due to rapid development in the global business environment, the traditional role of MAs had to evolve. This was because the traditional role was too simplified to be used in the new complex environment (Golembieski, 1961), as traditionally they are only focus in data entry and score-keeping. Thus, they are deemed as an outsider to the organisation. As stated in Golembieski, 1961, if organisations continued to adopt traditional role of MAs, its operation model would lose its effectiveness and efficiency compared to its competitors applying the new role where they play a more pro-active role in organisation.

The transition from centralisation to decentralisation

Formerly, MAs are centralised because they are always stationed in headquarters, they are technical and focused on the financial aspects of the accounts with little understanding on how it may affect the operations. Besides that, MAs were also involved in score-keeping activities, attention- directing and problem-solving (Simon et al, 1954). They perform independently without cross-functional interaction with other departments. Furthermore, MAs were not involved in any strategic planning or decision-making process for the organisation.

Hence to retain their competitive edge in the complex environment, organisations have to slowly adopt the new role of the MAs. The new role allows the MAs to become more pro-active in operations as they will be decentralised to various business units (Golembieski, 1964). The decentralisations of MAs allow them to understand the units’ operation better, thus enabling MAs to participate actively in decision-making aspects that will improve the efficiency of the unit. It is also beneficial for organisation as it encourages more interaction and closer proximity between manager and accountant, which reduces misunderstanding between the MAs and manager (Pierce & O’Dea, 2003). Therefore, MAs will become more accessible and knowledgeable about the operations, which in turn makes the managers more willing to accept their accounting report (Pierce & O’Dea, 2003). Hence, MAs are able to gain more legitimacy from managers. The decentralisation of MAs is further amplified in Granlund & Lukka, 1998. It is seen as a central element in improving the role of MAs. It can be labelled as a national norm for organisations in Finland having to adopt towards decentralised staff functions. This was one of the first signs of an evolution of the role of MAs.

However, all forms of evolution comes with obstacles and challenges. The first was the conflicting role for MAs who are decentralised and those who are located at headquarters. Based on Hopper, 1980, there was a presumption that lower and middle management believed that the accountant should perform a service-oriented role. This implied that managers at the branch wanted their MAs to play a service role regardless of their structural position as required by the business environment.

For those MAs centralised in headquarters, their main role was to be a book-keeper. These book-keepers prioritize information to upper management as they are very bureaucratic. They were only interested in clear promotion direction.

Whereas for those decentralised in various branches, they are more service-oriented. These MAs identified the service provided to lower and middle management as their priority. This implies that there are less hierarchal control but it encourages more horizontal communication and legitimacy (Hopper, 1980).

Having two perspectives of the same roles created confusion within organisation and hence greater uncertainties. Furthermore, as stated by Hopper, 1980, some traditional accountants are unwilling to make the change as they do not want to drop down the hierarchy. Furthermore, financial data could be manipulated before reaching headquarters due to less check and balance involved and greater interaction between MAs and branch managers, allowing them to work together to manipulate the accounts.

Resolution of confusion through ABC

In order to solve the confusion, the legitimacy of the new role had to be built. This was in the form of the activity-based costing (ABC) system. Hence, Friedman & Lyne, 1997, emphasized the importance of MAs to adopt the ABC. ABC is a method that examines the relationship between cost, activities and product before allocating the resources. Hence, it is important to have high degree of interaction between MAs and the branches.

ABC allows MAs to better understand the branch operations and to promote better decision making when being compared with MAs that employed traditional techniques such as standard costing and variance costing (Kaplan & Johnson, 1988). This allows MAs to better allocate financial resources to the branches.

Since implementation of the ABC, MAs have more cross-functional collaboration with the branches which lead to better accounting data for decision making (Friedman &Lyne, 1997). Furthermore, it improves the relationship between MAs and branches, which increases the legitimacy of the new MAs’ role. Most importantly, organisation can better manage their cost.

The implementation of the new ABC techniques has also allowed the role of management accountant to evolve throughout the years from traditional bean counter to becoming more strategically and operationally focused. Hence, MAs now not only need to analyse its own cost structure but also do competitors analysis (Bromwich, 1990). Furthermore, MAs must be able to consider the costing together with the demand from market (Bromwich, 1990). Most importantly, MAs must be able to measure their value-add against the competitors. This new skills which are a prerequisite to the new role of an MA will allow organisations to come out with effective strategies against their competitors.

Another challenge faced in the evolution of the role was the new skills required.In order to maintain their new roles, MAs are now expected to have both financial and business management skills (Yazdifar & Tsamenyi, 2005). However, there is a lack of individuals who can fit the role and it can be more costly to recruit and train MAs (Sathe, 1983).

Advancement of technology

As the complexity of the world increases, one of the most important push factors for the further evolution of the roles was the advancements of technology in the world which led to the development and introduction of the Enterprise Resource Planning System (ERPS). With it, MAs are able to focus more on complex activities such as coming up with strategies from financial data (Granlund & Malmi, 2002).

The ERPS system integrates all data and processes of the business function, enabling MAs to interpret various performance indicators and show the relationships between indicators quickly (Scapens, 2004). Hence, allowing MAs to assist management with strategy and operating decision in real time. With ERPS, the basic accounting work can be done more efficiently. This is because it integrates various aspect of the business into a single information system (Granlund & Malmi, 2002). MAs can also use real-time information provided by the ERPS to make decisions quickly in the new fast moving business environment (Byrne & Pierce, 2007).

This ERPS has further allowed MAs to evolve into a specialised consultant. However, it meant that even more skills and knowledge were required to sustain the new role. Some of these skills are consulting skills and strong communication and relational skills (Byrne & Pierce, 2007). Furthermore, MAs have to take a wider view of the business and be able to link cost and financial information to the strategic development of the business (Birnberg et al, 1983).

Another problem in the way of evolution was the integration of the system which required time leading to delays in the development of the business. Most importantly, the complexity of the system also hindered other sophisticated accounting developments (Scapens, 2004). The evolution process is further consolidated because of the decentralisation and advancement in technology, hence resulting in a shared understanding between the MAs and the business units within the organisation, allowing the MAs to match their activities with the organisation’s ongoing needs (Burns & Baldvinsdottir, 2005).

The changing needs for business to be more market ready, has also further boosted the need for the evolution of the role of MAs to be specialised consultants with special financial knowledge (Mouritsen, 1996). In order to gear up towards the new role, organisations have provided recruitment, training and career planning to promote the role change of MAs(Mouritsen, 1996).

Having a pro-active role allows MAs to provide the management with information from a financial perspective (Burns & Baldvinsdottir, 2005). The title of a specialised consultant increases their legitimacy, encouraging business units to seek their advice within their organisation (Mouritsen, 1996). However, the evolution of the role of MAs to become more pro-active in the consultation role led to some neglecting their original accounting responsibilities.

Increase in size and complexity of organisations

With the rapid development of the global business environment and the increase in size and complexity of organisations, there was a need for the role of MA’s to further evolve from specialist to controllers. (Sathe, 1983). The controller supervises the accounting department and assists management in interpreting and utilising managerial accounting information. A strong controller requires good supervisory skills from MAs as they have to manage a team of accountants. This is in contrast from the traditional role where MAs mainly focus on financial data and work independently.

As a strong controller, MAs are actively involved in business decision making processes and can retain a senses of objectivity. This ensures alignment between MAs and the organisation. Furthermore, MAs can recommend courses of action and challenge the plans and actions of operating executives (Chenhall & Langfield-Smith, 1998). Most importantly, it can create synergy and efficiency across organisation as there will not be any duplicate work as all works will be assigned accordingly by the MAs in their new roles as controllers. (Burns & Baldvinsdottir, 2005).

The evolution of the role was further legitimised by professional bodies who encouraged management accountants to take on more managerial responsibilities (Clinton & White, 2012). The trainings for MAs have also evolved in both the academic and professional aspect towards a more business oriented approach (Clinton & White, 2012). This has greatly influenced the knowledge base of future accounting professionals.

However, one of the key drawbacks to the evolution of a specialist into a controller is a situation where there is over check and balance in the organisation, which can limit the creativity and entrepreneurship of the organisation (Sathe, 1983).

The ineffectiveness of the traditional organisational culture

Traditionally, organisation’s culture perceived MAs as a non-value added role to organisation, hence they were not involved directly in any business operations. Older generation of MAs are also unwilling to take the changes as they have to upgrade their skills to meet the new role (Granlund & Lukka, 1998). Furthermore, many institutions are still teaching the traditional method of MAs, hence those new MAs will not be able to adapt to the new culture (Jarvenpaa, 2007). Most importantly, the complexity of the new role will make it difficult for large organisations to fully integrate the new culture within a short time frame which may result in role confusion as employees do not know which culture to follow on. Thus, making it difficult to legitimise the role of MAs.

With evolution comes the need to legitimise evolution through organisational culture. This is because employees in the organisation will behave according to its culture (Jarvenpaa, 2007). Furthermore, accounting is also seen as a cultural object as all organisational actions and decisions are derived from the foundation of accounting (Jarvenpaa, 2007). Hence, organisations must re-structure their traditional culture to allow the legitimising of the new MA’s role.

But due to changes in the business environment, MAs have to take on a more value-added role in the organisation. Hence, in order for all employees to acknowledge and accept the evolution of the role of MAs playing a more pro-active role, organisation had to take a few initiatives to change the organisational culture to support the new role. Several of the initiatives as stated by (Jarvenpaa, 2007), are role modelling by top management through proactive participation, development of new accounting innovation that supports business management such as ABC and story-telling about the value-added service that MAs have provided to the organisation.

Role modelling is where the management can lead the changes by allowing MAs to take up more strategic roles and allowing them opportunities to present their ideas in a formal setting within organisation. Furthermore, organisations develop new accounting techniques that free up time, allowing MAs to take on more complex duties as compared to their traditional role.

The management have also explained to employees through story telling on how the new MAs’ role has brought about value-added services to the organisation. This greatly boost the image of MAs in the organisation’s new culture as more employees now understand and accept the critical role that MAs play in the modern function of the organisation. This is because to legitimise the new role, it is important to gain support from the management by improving the perception of the organisation accounting function, the formal authority of MAs and their social and technical skills.

Hence, on top of creating new role identity for MAs and legitimising their new role, the organisation has went on to institutionalise the new role of the MAs. Organisations have taken several initiatives to do so as stated by (Goretzki et al, 2013). There are organisations to conduct seminars and conferences to get the new ideas and network across and ensure that the MAs are well aware that they can provide value-added service in this new role.

Furthermore, organisations link their MAs with wider institutional environment which can provide guidance principles for the new roles. Most importantly, professional bodies and organisations cooperate and instil a new culture for the MAs. This ensure alignment between the operational and financial aspect of the business, which will result in goal congruence between MAs and the business that allows better adaption of the new role (Pierce & O’Dea, 2003).


In conclusion, the decentralisation of MAs, the change in organizational culture and the advancement of technology have allowed them to play an important part in the organisation where they are operationally and strategically focus. Employees of the organisation no longer see them as a bean counter but more of a business consultant where they will seek advice and consulting service. Most importantly, the evolution has been necessary and should continue as the times change to allow MAs to maintain their relevance in the economy.


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