Strategic management accounting (SMA) involves identifying, gathering, and analyzing accounting data to help management make strategic decisions and assess organizational effectiveness. The document discusses various perspectives on management accounting, including the technical-rational view, human relations view, contingency view, agency view, and political economy view. It also covers organization change literature and the sources and types of organizational change.
Strategic management accounting (SMA) involves identifying, gathering, and analyzing accounting data to help management make strategic decisions and assess organizational effectiveness. The document discusses various perspectives on management accounting, including the technical-rational view, human relations view, contingency view, agency view, and political economy view. It also covers organization change literature and the sources and types of organizational change.
Strategic management accounting (SMA) involves identifying, gathering, and analyzing accounting data to help management make strategic decisions and assess organizational effectiveness. The document discusses various perspectives on management accounting, including the technical-rational view, human relations view, contingency view, agency view, and political economy view. It also covers organization change literature and the sources and types of organizational change.
Process, and Issues (Haque, 2006) 1 Strategic management accounting (SMA) Definition: process of identifying, gathering, choosing and analysing accounting data for helping the management team to make strategic decisions and to assess organisational effectiveness. SMA is built upon the view that accounting should be tailored specifically to the strategies and environment of the business.
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 2 Ideas of SMA • Relation of many fields, such as: • Financial accounting originated to fulfill the stewardship function of business, mainly focus on external reporting • Management accounting in general sense, it identifies, collects, measures and reports information that is useful to managers in planning, controlling and decision-making technical-rational (conventional) role of management accounting limitations
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 3 Ideas of SMA Limitations of conventional MASs: Technical orientation Ignore human-relations aspects Ignore business context Focus on short-run decisions
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 4 Ideas of SMA • Cost accounting Hybrid of financial and management accounting • Cost management deeper understanding of the cost structure of the firms; combination of management accounting, production and strategic planning • Strategic cost management provides costing information for strategic decisions long-run focus
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 5 Theoretical perspective (viewpoints) of management accounting • Technical-rational view of management accounting • Weber’s bureaucratic rational-legal authority • The human relations view of management accounting • Contingency view of management accounting • Agency view of management accounting • Interpretive approach to control • Political economy view of management accounting • Organisation change literature
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 6 Technical-rational view of management accounting
Originates in economics Based on neoclassical economic theory, it presumes management accounting as a computational decision- making tool that helps maximise the goal of organisation
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 7 Technical-rational view of management accounting Key features: Assumes a preset goal or consistent goal set Alternative to achieve the goal are mutually exclusive, separate and easily identified Always possible to improve accounting information through the introduction of new technical developments, e.g. accrual accounting in public sector Focus on bureaucracy, hierarchical controls and optimal resource allocation
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 8 Technical-rational view of management accounting Weaknesses: Ignores the wider social, economic and political context in which organisations operate Fails to assess the effect of individual values and beliefs, organisational conflicts and the divergence of goals in the organisation upon decisions.
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 9 Weber’s bureaucratic rational-legal authority Weber sees bureaucracy as an organisational form to achieve rational-legal authority
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 10 Human relations view of management accounting Personal relations among organisational members are critical to performance Weaknesses: Human relations studies on accounting and control systems provide inconsistent results The adoption of scientific methods can neglect the important of individual’s understanding , values, meanings and culture Fails to explain how accounting and control systems may be products of the socioeconomic and political contexts in which the organisation operates Strategic Management Accounting: Concept, Process, and Issues (Haque, 2006) 11 Contingency view of management accounting Central idea is no universally acceptable model of the organisation that explains the diversity of organisational design it depends on the contingent factors relevant to the situation Criticisms based on highly technical view of organisational choice
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 12 Contingency view of management accounting Weaknesses: The conceptualisation, definition and measurement of key variables within the theory have not been adequately elucidate – they require greater theoretical and empirical attention Correlations reported in most contingency studies are small and not always consistent The theory fails to incorporate the wider context of organisation (i.e. social, political, economic and institutional aspects)
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 13 Agency view of management accounting Concerned with the delegation of decision-making authority by a principal (e.g. owner) to an agent (e.g. a manager). Agents will not always take actions that are in the principal’s best interest Owner can limit such behaviour with auditing, controlling, etc.
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 14 Interpretive approach to control It can better identify the social, economic and political aspects of management control systems in the organisation from the perspective of actors involved in their operations.
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 15 Political economy (PE) view of management accounting The PE approach emphasises the historical nature of the social world Attempts to understand a particular phenomenon from its socio-political contexts that exist at a time and place It takes into account the institutional legitimacy of the society in explaining management process in an organisation
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 16 Political economy (PE) view of management accounting PE approach helps an understanding of the mutual relationship between policy, state, economy and organisational processes, such as the design and use of management accounting systems
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 17 Organisation change literature Organisation change in response to existing problems and for continuous improvement Sources of change: Temporal External Internal
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 18 Organisation change literature Types of organistional change: Developmental Transitional Transformational
Strategic Management Accounting: Concept,
Process, and Issues (Haque, 2006) 19 Strategic Management Accounting: Concept, Process, and Issues (Haque, 2006) 20