Importance of management accounting practices: a case of Burns and Scapens framework

Author: Iloka Benneth Chiemelie
Published: 4th of october 2014

1.      Introduction

Management accounting is an important aspects of both the management and accounting features in any given organization. This is because it deals with auditing systems that audits the performance of corporations in terms of how they have meet set corporate objectives, factors that influenced such achievements an ways they can better their performance in the future. Thus, some of these features will be addressed in this paper.

2.      Achievements of the Burns and Scapens framework for studying management accounting change

The framework is basically focused on understanding the rules and routines that shape the actions undertaken by people in the organization. As time passes, these actions are developed to follow the rules and regulations, but they also have the potential of changing existing rules and regulation in order to aligned such rules and routines with certain actions.

The achievements of the framework is centered on the understanding that introducing new management accounting systems within an organization without careful consideration of the prevailing institution does have the potential to bring about resistance. Additionally, the prevailing institutions does have the potential of shaping the character and context of the change process within system, thus locking the organization in certain course of action as demonstrated in the booster rockets for space shuttle.

Thus, the Burns and Scapens framework has achieved great success by ushering in successful grounds for studying the stability and change occurring in management accounting. This is because the framework understands that they are both internal and external players in ensuring stability within an organizational system.

3.      Limitations and extensions of the framework

1.      Linkage between external and internal institutions – the study by Nor Aziah Abu Kasimon public utility in Malaysia shows that when organization when under high pressure from the government, it was forced to commercialize, corporatize, and then privatize (see Nor-Aziah, 2004a, b). As the company commercialized, it was forced to recruit new staffs to fill in empty accounting positions in which existing staffs had little to do. However, these new staffs were fresh graduates and were considered needless-meddlers in the system. Thus, the lack of linkage between external and internal institutions limits the adoption of the framework.

2.      Trust – the case of GM’s acquisition of NP is a clear demonstration of the influence of trust in the adoption of management accounting practices. Once acquired, NP started to face numerous problems including corruption charges against its chairmen (Busco, 2003; see also Busco et al., 2002, Busco et al., 2006) and GM was forced to revolutionize the company and fully integrate it into its own system. Thus, the lack of trust can limit applicability.

3.      Power – the power specific individuals have to make decisions as is in the case of the Portuguese firm can influence change process (Ribeiro, 2003; Ribeiro and Scapens, 2004) and damage institutionalize practices. Thus, the success of applicability of the accounting practice depends heavily on power of decision makers.

4.      Agency – in the case of GM and NP, there was high influence of agency as the public anticipated and demanded for change. Thus, the actions of third parties in the form of agents can limit overall applicability.

In order to eliminate these limitations, an extended form of management accounting which calls for diversity is recommended. This will address all the individual and independent facets, and create a common and beneficial unit in which all the potentials for limitations are addressed.

4.      Evolution and revolution are changing management accounting practices

Although the change process seems difficult from the above discussion, it is important to understand that it doesn’t mean that revolutionary change is not possible. For instance, Nuovo Pignone (NP), an Italian company was acquired by US based General Electronics (GE) in 1994 (Busco, 2003; see also Busco et al., 2002, 2006). NP was a very bureaucratic organization as it was partly owned by the Italian government. It has different policies from the GM’s of financially-oriented and member-driven approach to management, which has high emphasis on both cash generation and integrity. Within 3 years of its acquisition, GM successfully integrated NP into its global network of companies and such success demonstrated that revolutionary management accounting is possible and it is the way for the future.

5.      Potential future challenges to management accounting in the future

As the call for diversity increase, it becomes very difficult to manage stability in the change process experienced in management accounting. This is because diversity creates room for different functions to be performed at the same time, while also giving power to things that were previously irrelevant. For instance, a company in both USA and Italy might create room for accounting diversity, which means that different approaches will be adopted in these countries. Thus, it becomes difficult to solve problems with the same solution as there are differences in the way accounting practices are adopted in their two sections.

6.      Conclusion

In conclusion, it can be seen that management accounting practices are undergoing tremendous change, and the change calls for quailing irrelevances in the system in order to establish a more effective and efficient unit. However, such practice does come with huge quest for occasional monitoring as diversity in accounting practices can influence stability negatively.

7.      References

Busco, C., 2003. The role of performance measurement systems within processes of (un)learning and change, Unpublished PhD thesis, University of Manchester.

Busco, C., Riccaboni, A., Scapens, R.W., 2002. When culture matters: processes of organizational learning and transformation. Reflections: The SOL Journal 4 (1), 43–52.

Busco, C., Riccaboni, A., Scapens, R.W., 2006. Trust for accounting and accounting for trust. Management Accounting Research 17(1), forthcoming, doi:10.1016/j.mar.2005.08.001.

Nor–Aziah, A.K., 2004a. Corporatisation, loose coupling and stability: accounting change in a Malaysian public utility. Unpublished PhD thesis, University of Manchester.

Nor–Aziah, A.K., 2004b. Corporatisation, loose coupling and stability: the role of accounting and accountants in a Malaysian public utility. Paper presented at the Fourth Conference on New Directions in Management Accounting, EIASM: Brussels.

Ribeiro, J.A., 2003. Institutionalism, power and resistance to management accounting: a case study. Unpublished PhD thesis, University of Manchester.

Ribeiro, J.A., Scapens, R.W., 2004. Power, institutionalism, ERP systems and resistance to management accounting: a case study, Presentation at the Annual Congress of the European Accounting Association. Czech Republic, Prague.