Management Accounting Information and The Needs of Managers Perceptions of Managers and Accountants Compared

Management accounting information
and the needs of managers

Perceptions of managers and accountants compared
Bernard Pierce
a,
*
, Tony ODea
b,1
a
DCU Business School, Dublin City University, Glasnevin, Dublin 9, Ireland
b
Department of Accountancy, University College Dublin, Beleld, Dublin 4, Ireland
Received 9 October 2001; revised 7 November 2002; accepted 9 April 2003
Abstract
The study builds on prior research on information user perceptions and the roles of management
accountants. Perceptions of management accountants and managers in the same organisations
regarding information supplied by the management accounting function were compared and
differences highlighted. Perceptions of managers were also sought regarding desired changes in the
information supplied and desired future roles of management accountants.
Consistent with prior literature in MIS and accounting, the ndings showed evidence of preparer
user perception gaps. Major contributors to those perception gaps were identied as an imbalance
between technical and organisational validity, functional differentiation and an inherent tension
between the simultaneous requirements of independence and involvement. Managers views of
desired future roles for management accountants provided consistent indicators as to how those gaps
can be narrowed. The study also exposes inaccuracies in management accountants perceptions and
sets out implications for the design and reporting of future research.
q 2003 Elsevier Science Ltd. All rights reserved.
Keywords: Management accounting; Information needs; Managers; Accountants
1. Introduction
Arguments put forward by Kaplan (1984, 1988, 1990) and Johnson and Kaplan (1987)
triggered off a major discussion regarding the relevance of management accounting
0890-8389/03/$ - see front matter q 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0890-8389(03)00029-5
The British Accounting Review 35 (2003) 257290
www.elsevier.com/locate/jnlabr/ybare
1
Tel.: 353-1-7164741.
*
Corresponding author. Tel.: 353-1-7005450.
E-mail addresses: bernard.pierce@dcu.ie (B. Pierce), tony.odea@ucd.ie (T. ODea).
practices. Attention was focused on the paucity of empirical ndings regarding the
practice of management accounting. Anthony (1989, p. 18) highlighted this lack of
empirical evidence, arguing that information about management accounting practices is
abysmally poor. He criticised the assumption often implied in the literature that a specic
technique such as labour hour based overhead absorption is widely used, in circumstances
where there is little or no statistical evidence to indicate how many companies use that
technique. He also highlighted the lack of information about new techniques. Although
there has been a signicant increase in the number of published studies since then, many of
those studies were based on surveys of accountants and the ndings are typically reported
as evidence of techniques used (e.g. Drury et al., 1993; Innes and Mitchell, 1995; Clarke
et al., 1999; Innes et al., 2000). A more appropriate interpretation would view the ndings
as indicating what techniques are used by accountants and what information is perceived
to be used by managers. The primary focus of this study is on the perceptions of managers
regarding their own information requirements and their perceptions of the effectiveness of
management accountants in meeting those requirements.
2. Background
The importance of information user perceptions has been well recognised in the
management information systems (MIS) literature and importance to the users has been
put forward as the primary consideration in evaluating the effectiveness of an information
system (Lucas, 1975). It has been recognised that designers and users of information
systems have fundamentally different motivation and attitudes that may lead to very
different perceptions (Olson and Ives, 1981; Salaway, 1987; Green, 1989; Newman and
Robey, 1992). However, previous studies have focused mainly on the perceptions of users
(Goodhue, 1998), and the perceptions of systems designers/analysts have usually been
missing from this line of research (Weitzel and Graen, 1989; Rao et al., 1992).
It has also been shown that users and preparers may differ signicantly in how they
evaluate an information system (McKeen et al., 1994; Doktor et al., 1979). From the
preparers perspective, success is achieved when the system works, or attains technical
validity (Schultz and Slevin, 1975). For the user, a system is successful when it helps
enhance job performance, or attains organisational validity. It has also been found that
where preparers identify strongly with users requirements, users and preparers are more
likely to share the same perceptions of system effectiveness (Dickson and Powers,
1979).
Not surprisingly, therefore, successful implementation of system innovations has been
found to be strongly associated with acceptance and use (Lucas, 1975; Robey, 1979),
increased user satisfaction (Bailey and Pearson, 1983; Doll and Torkzadeh, 1988) and
perceived usefulness (Leonard-Barton, 1988). Perceived usefulness, in turn, has been
shown to be positively associated with actual use (Schultz and Slevin, 1975; Robey,
1979).
The rst major work on the use of accounting information by managers was by Simon
et al. (1954) and user perceptions have become increasingly prominent in accounting
studies during the last decade (e.g. Bruns and McKinnon, 1993; McGowan, 1998;
B. Pierce, T. ODea / The British Accounting Review 35 (2003) 257290 258
McGowan and Klammer, 1997; Shields, 1995; Bhimani and Pigott, 1992; Swenson,
1995). Shields (1995) identied a potential source of user preparer difference that
reected the validity argument in the MIS literature. He argued that accounting system
changes are administrative innovations, the success of which depends on how well
behavioural and organisational implications are dealt with. Successful implementation is
less likely if such changes are seen as technical innovations, such as acquiring a new
machine, for which economic and technical issues are the primary considerations. Shields
argued that the success of an administrative innovation depends on how well it matches
the preferences, goals, strategies, agendas, skills and resources of dominant or powerful
coalitions of employees, particularly top management (pp. 149150). Hopwood (1974,
p. 14) highlighted the organisational consequences of accounting information as follows:
social and behavioural aspects (of accounting) are just as much an indispensable part of
the whole as the more traditional technical aspects.
These issues pertaining to satisfying the information needs of users are closely linked to
a stream of research that has addressed the role of management accountants. Hopper
(1980) found that a large majority of managers expected their management accountants to
perform a service role that envisaged satisfying such managers information needs for self
control as the principal task of accountants (p. 402), and that this was more likely to be
achieved when the accounting function was decentralised. An important nding was that
very few of the accountants interviewed in the study described their role in book-keeping
terms, while a large majority stressed the service role and attached high priority to
activities such as liaison with managers and special projects. Furthermore, those
accountants with a service orientation preferred a decentralised management accounting
function, whereas those with a book-keeping orientation preferred the function to be
centralised.
These two functions involving book-keeping and the service role were evident in the
work of Simon et al. (1954) and have regularly been discussed in the literature under a
variety of titles to highlight potential conicts that are inherent in the roles that
management accountants are expected to full. For example, Jablonsky et al. (1993)
contrasted the roles of corporate policeman and business advocate. The US 1999
Practice Analysis of Management Accounting documented the transformation of
management accountants from scorekeepers to business partners (Siegel and Sorensen,
1999). Burns et al. (1999) noted a change in title from corporate controller to business
analyst, and the emergence of the hybrid accountant, who combined nancial
knowledge with commercial awareness. Granlund and Lukka (1998) presented the
transition from a historian and watchdog emphasis to the position of advisor and
change agent as one of expansion, whereby the latter roles are understood to
incorporate a watchdog function. They concluded, however, that the roles of bean-
counter and the business-oriented management accountant were so different that it is
difcult to imagine someone acting in both roles. Friedman and Lyne (1997) concluded
that the introduction of activity-based techniques has materially improved the image of
accountants, but that elimination of the bean-counter image in the long term will
depend on the ability of accountants to continually adapt to a rapidly changing
environment. The two roles were also identied by Brignall et al. (1999), who
concluded that a major reason for non-involvement of accountants in change
programmes was the presumption that accounting was bean-counting rather than
decision-support (p. 50). Sathe (1982, 1983) characterised the two responsibilities in
terms of independence (required for ensuring integrity of nancial information and
effectiveness of compliance and control procedures) and involvement (essential for the
management-service role and active engagement in the decision making process). Sathe
concluded that only strong controllers, who possess key personal qualities and skills
can overcome the inherent tension between the two responsibilities and give both the
required level of emphasis.
A study addressing the role played by management accountants in large manufacturing
organisations in Ireland found that they concentrated heavily on book-keeping and
appeared to ll only the traditional role of cost recorders, largely ignoring the
service/business advisor role (Clarke et al., 1999, p. 458). The study concluded that this
failure by management accountants to embrace a wider set of activities is causing them to
be marginalised and is attributable to a combination of supply and demand factors.
Educators and trainers are failing to develop the necessary knowledge, skills and abilities
in students and trainees, while managers are not demanding that their management
accountants move beyond their book-keeping and score-keeping functions.
Scapens et al. (1996) addressed the contention of Johnson and Kaplan (1987) that
management accounting was dominated by the requirements of nancial reporting. They
concluded that, mainly because of advances in information technology and database
systems, it is now possible to design management accounting systems that full the service
role and meet the needs of managers, rather than the demands of external nancial
reporting. Those needs increasingly demand the decentring of accounting knowledge
(Scapens et al., 1996; Cooper, 1996) to help managers cope with an increasingly hostile
environment. They also demand that the management accountant works closely with
managers and adopts a business perspective in the interpretation of a wide range of
information from a variety of sources.
A similar theme relating to the design of management accounting systems is evident
in the framework developed by Bjornenak and Olsen (1999), based on two major
dimensions relating to scope and systems. They argued that textbooks have, traditionally,
focused primarily on the scope dimension (what is to be accounted for and for what time
period) and that the systems dimension (the link between users of the system and how
the system is designed) is largely ignored, reecting traditional ties with nancial
accounting. From a review of contemporary management accounting techniques,
Bjornenak and Olsen concluded that both scope and systems dimensions are now
becoming more diversied. Importantly, they also concluded that the form of the system
is determined by its design characteristics (both scope and systems), as opposed to
particular models or techniques.
Broad scope information has long been recognised as being of value to managers
involved in decision making (Gordon and Narayanan, 1984; Larcker, 1981; Hayes, 1977),
particularly in cases where managers perceive their operating situation as uncertain, when
it can provide an aid to environmental scanning and improved decision response time
(Chenhall and Morris, 1986; Khandwalla, 1977). In those cases, where managers
environments are characterised by high levels of volatility and change, there is a need for
information that is targeted at specic elements of the operating situation (Gordon and
Narayanan, 1984). An important nding is that the value of broad scope information can
differ signicantly between functional areas. Mia and Chenhall (1994) reported
perceptions of marketing managers that showed signicantly higher levels of uncertainty
than those of production managers and concluded that the benecial effect on managerial
performance of using broad scope MAS information is moderated by differentiation of
activities in ways that isolate uncertainty within particular functions (p. 10). Their study
showed that a higher usage of broad scope information was associated with enhanced
performance for marketing activities but not for production.
Against this background, the current study was designed to incorporate two main
phases. The rst phase involved a large survey of management accountants working
in a broad range of manufacturing organisations in Ireland and sought to establish
their perceptions regarding the types of information used by managers in their
organisations. The ndings from this phase of the study were reported in Pierce and
ODea (1998a,b). While generating useful ndings in its own right, this rst phase
was also planned to provide the essential foundation for the second phase, which
focused on managers perceptions and which is reported in this paper.
Findings reported in Pierce and ODea (1998a,b) regarding management
accountants perceptions of the usage of specic management accounting techniques
were broadly in line with previous research reported in Ireland (for example in
Clarke, 1992; ODea and Clarke, 1994; Clarke and Toal, 1999), and elsewhere (for
example in Drury et al., 1993; Joye and Blayney, 1990). In particular, there was
perceived to be widespread use of specied traditional techniques (particularly
budgets and variance analysis) and relatively low adoption of new ones. There were
also signicant differences based on size and ownership status in that usage of both
traditional and new techniques was signicantly higher for larger companies and
multinationals than for other companies.
Although many studies of management accounting practices have been based on
similar surveys of management accountants and have generated useful ndings, surveys of
this type are particularly problematic for the researcher. Management accountants are the
most obvious targets for such surveys, since they are likely to understand the conventional
accounting terminology and are more likely than other managers to respond in relation to
accounting issues. Targeting management accountants, however, is also likely to involve
some additional risk of bias beyond that normally associated with surveys. Apart from the
usual risk of non-response bias, there is in this case a very real danger of respondent bias,
in that some management accountants may deliberately inate the importance of the
information they produce. There is also a risk that respondents may lack any detailed
knowledge or understanding of the types of information which their managers are using
and simply report what is being produced within their own departments. Finally, there is a
distinct possibility that some of the newer developments, which are the subject of many
surveys, may not be familiar to respondents, but they will not admit that fact for reasons of
professional respectability. For these reasons, surveys of this nature on their own cannot be
considered reliable indicators of what information is actually being used and do nothing to
establish whether, as critics suggest, management accountants are failing to respond to the
information needs of managers. The current study therefore included both management
accountants and senior managers from the same organisations.
3. Research questions
Reecting this background framework, the study addressed four questions, the rst two
of which relate to manager perceptions of their information needs and of the techniques
used by accountants to provide information that is relevant to those needs:
Question 1. How accurate are management accountants perceptions regarding the
following:
(a) the main items of information used by managers in managing their units?
(b) managers assessment of the quality of information supplied to them by the
management accounting function?
Question 2
(a) How accurate are management accountants perceptions of managers use of
information produced using traditional management accounting techniques?
(b) How accurate are management accountants perceptions of managers use of
information produced using new management accounting techniques?
The remaining two questions were designed to elicit managers views as to how
information could be improved to more fully meet their needs and how their management
accountants could best full their future roles as suppliers of that information:
Question 3. What major changes would managers wish to see introduced regarding
information supplied to them by the management accounting function?
Question 4. What are the perceptions of managers regarding the future role of
management accountants?
4. Research method
The design of the study was heavily inuenced by the need to collect structured data in
the same form from both MAs and managers, in order to facilitate comparison and an
assessment of the accuracy of MA perceptions. A further major consideration was the
desire to collect relatively unstructured data from managers concerning their perceptions
of what changes are needed in the information produced and the role played by
management accountants. It was therefore determined that in order to achieve sufcient
breadth, multiple sites were needed. However, given that every manager had to be
interviewed by both researchers, in order to ensure they understood terminology and that
responses to open questions were probed in sufcient depth, the sample of companies in
phase two needed to be kept small.
Phase one of the study involved a postal survey of management accountants. The
current phase followed this up with a company visit to each of 11 companies, and the
ndings reported in this paper are based on data collected from managers and management
accountants in those companies. The visits encompassed a meeting with the management
accountant as a follow-up to his/her completed survey, and individual meetings with
a senior manager in production and in sales/marketing. Meetings with management
accountants focused primarily on information provided earlier in the completed survey
questionnaires, specically relating to research questions 1 and 2. As the survey was
completed approximately nine months earlier, it was important to establish that the
information remained current and accurate.
Meetings with production and sales/marketing managers were each scheduled to last
approximately 45 minutes, but the managers were clearly enthusiastic about the subject
matter and meetings tended to overrun by up to 30 minutes. These interviews were semi-
structured, in the sense that specic information was requested relating to questions 1 and
2 using the same rating scales as those used for management accountants, and open-ended
questions were used to elicit information relating to research questions 3 and 4.
Participants were guaranteed anonymity for themselves and their companies, and provided
with a brief summary of the areas to be discussed in advance of the meetings.
Questionnaires were completed during the course of each meeting to record structured
data relevant to questions 1 and 2. All meetings were attended by both researchers and
proceedings were recorded.
The companies visited are all involved in manufacturing and sales/marketing, since the
research design required meetings with managers in both of these areas. Demographic
details of the participating companies are shown in Table 1.
For most of the companies, access was arranged through the management accountant,
who had expressed a willingness to participate on the completed postal questionnaire; the
remainder were approached through the researchers personal contacts. The management
accountants in all the participating companies were qualied CIMA members. Production
and sales managers had overall responsibility for a major business unit and were either
board members or reported directly to a board member.
Full transcripts were typed up within a short time of each company visit. Patton (1990,
p. 347) highlights the importance of capturing the actual words of participants in
qualitative research:
Table 1
Demographics of participating companies
Company Main business Ownership Size
Indig (note) M/N (note) Employees Annual turnover (IRm)
1 Labels 100250 ,25
2 Confectionery 5011000 51100
3 Medical equipment ,100 ,25
4 Agri chemical 5011000 101250
5 Shoe care 5011000 101250
6 Pharmaceutical ,100 ,25
7 Telecommunications 100250 2650
8 Electronics 10012000 101250
9 Agri food .2000 .250
10 Consumer goods 10012000 101250
11 Agri business 10012000 .250
Note: Indig, indigenous company; M/N, multinational subsidiary.
No matter what type of interviewing is used, and no matter how carefully one words
interview questions, it all comes to nought if the interviewer fails to capture the actual
words of the person being interviewed.
Data analysis was conducted using a combination of completed questionnaires and
interview transcripts. For research questions 1 and 2, a comparison of perceptions was
carried out by comparing responses of management accountants and managers in each
company. For questions 3and4, analysis of qualitative data was conductedusingprocedures
for data reduction, summarisation, classication and interpretation, as recommended in the
qualitative research literature (Miles and Huberman, 1994). This involved manual coding of
each transcript to identify signicant themes associated with the specic research questions.
Coding was initially carried out independently by the two researchers and any differences
were resolved by jointly re-reading relevant passages of transcripts, thereby ensuring as far
as possible that the analysis was complete and impartial (Lillis, 1999).
A summary sheet was then prepared, reecting the incidence of particular themes for
each manager in each company. Identication of themes was made easier by the fact that
the research questions were tightly focused on changes in management accounting
information (question 3) and desired future roles of management accountants (question 4).
Although the possibility of bias can never be totally eliminated from the collection and
analysis of qualitative data, the approach adopted was planned to be as systematic
and rigorous as possible, thereby providing assurance regarding validity, reliability and
auditability of ndings (Abernethy et al., 1999). Additional assurance was obtained from
triangulation between the different forms of data collected during the study. For example,
ratings for quality of information reported under question 1 identied timeliness as a major
issue. Analysis of responses to open-ended questions regarding desired future changes
revealed an overwhelming emphasis on timeliness as a key area in need of improvement.
Findings are structured around the main themes identied and direct quotes are
presented where they give a particularly good illustration of a recurring theme or a avour
of the context and depth of feeling in the original transcript. The nature of the analysis
requires frequent reference to management accountants, production managers and sales
managers, and the acronyms MA, PM and SM, respectively, are therefore used. Where
quotations from participants are reported, the source is identied by combining these
acronyms with the company identication number, so for example, PM9 refers to the
production manager in company number 9.
5. Results
Results are presented under three main headings: accuracy of perceptions, manage-
ments desired changes and future role of MAs.
5.1. Accuracy of perceptions
Research question 1(a) sought to establish the accuracy of management accountants
perceptions of the main items of information used by managers in managing their units.
For each participating company, the MA and individual production and sales managers
were asked an open-ended question regarding the most important items of information
needed by that manager to effectively manage his/her unit. The degree of accuracy of MA
perceptions was established by comparing the response of the MA with responses of the
PM and SM in the same organisation.
In order to develop an overall picture of the degree of perception accuracy, the
perception accuracy of the MA in each company was classied according to the following
rule. If the MA identied at least 75% of the items listed by the manager, the accuracy of
MA perceptions was classied as good. If the percentage identied was between 50 and
75%, perception accuracy was classied as moderate and if the percentage fell below
50%, perception accuracy was classied as poor. A potential weakness of this procedure
arises from the fact that not all items of information are of equal value, but given that all
items were identied by respondents as being of key importance, it was deemed a
reasonable measure of overall perception accuracy. A summary of the results is
presented in Table 2.
Wide variations in the degree of perception accuracy were found. Perception accuracy
was rated as good for six managers and in some of these cases, MAs gave a response that
was virtually identical to the responses of their production and sales managers. In these
companies, managers tended to be very clear about their priorities (e.g. volume, margin,
costs), and there was strong evidence that MAs were aware of, and responding to, those
priorities. In the majority of companies, however, there were varying degrees of
misconceptions by MAs. MAs appeared to be more aware of the needs of PMs than of
SMsfor example, all poor ratings related to SMs.
A good example of the gap between MA and SM occurred in company 8, where the MA
showed a poor grasp of SM information requirements (Table 2). The MA stated:
Table 2
Accuracy of MA perceptions of the main items of information used by managers in managing their units
Company PM SM
1 Moderate Good
2 Moderate Moderate
3 Moderate Poor
4 Good Good
5 Good Poor
6 Moderate Poor
7 Moderate Moderate
8 Moderate Poor
9 Moderate Moderate
10 Good Good
11 Moderate Poor
Overall summary (number of companies)
Good 3 3
Moderate 8 3
Poor 5
Total 11 11
On the sales sidethey are very interested in how much their margin is. Those are
really their measures, nancial measures. They are not really interested in how many
units, the yields and so on. They are really focused on their margins(MA8).
However, the sales manager in the same company indicated that his information
requirements were considerably more complex than this:
(accounting information)can show you some trends, but in order to get any valuable
information, as opposed to data, you really have to spend a lot of work delving into
those to see whats happeningWe have lots of data provided by the nance group,
they send over lovely spreadsheets but its quite difcult to gure out from what theyve
sent, what if anything is happeningYou have to basically build up your own
spreadsheets (SM8).
This typied the most notable inaccuracy in the perceptions of MAs, i.e. failure to
recognise the extent to which managers (especially SMs) were interested in receiving
information on the key drivers of their business, rather than merely bottom line
information.
There was repeated evidence of MAs not being aware of the key information
requirements of both PMs and SMs and of managers having to improvise by collecting
information through alternative sources, including nancial information such as costs and
margins. It was also evident that many of the MAs did not appreciate the breadth of
information required by most managers. For example:
At the moment, the main computer system is primarily geared towards accounting
informationcost of quality we generate ourselvesefciency information we also
produce ourselves (PM1).
We dont see the cost of waste or the cost of our poor quality (PM2).
I would do that [customer protability analysis] personally. I do not get that from
Finance (SM3).
Research question 1(b) set out to establish the accuracy of MA perceptions of
managers assessment of the quality of information supplied to them by the management
accounting function. MAs were asked to evaluate the information supplied by the
management accounting function to (a) production managers and (b) sales managers,
using a three-point scale (to a great extent, to some extent, not at all) and based on the
following ve criteria: relevant, accurate, timely, satisfactory to the head of
production/sales, and kept up to date for the changing needs of managers. Production
and sales managers were then asked the same question. An overall quality rating was
computed for each respondent by adding the scores for the ve quality criteria. A score of
15 is therefore indicative of perceptions that information is near perfect, while a score of
ve indicates perceptions of serious deciencies.
Perception accuracy was computed by subtracting the MAs overall quality rating from
that of the managers in the same company. A difference of zero indicates total agreement;
a positive score indicates that the manager gave a higher quality rating than the MA, while
a negative score indicates that the MA gave a higher rating than the manager. Results are
summarised in Table 3.
The total of negative differences across the sample (12 out of 22 managers) indicates
that the MA shows a tendency to overstate the quality of information supplied, particularly
in the case of SMs, where the gap appears to be widest (e.g. companies 3, 5, 11). The total
of positive differences indicates that the MA is likely to understate the quality of
information to a lesser extent (six out of 22 managers) and where this does occur, it relates
predominantly to information supplied to PMs.
Three companies (companies 1, 4 and 7) displayed either total agreement or only minor
differences in the perceptions of MAs and managers. In three of the remaining companies
(companies 2, 3 and 11), the MA gave a higher score for overall quality than both the PM
and SM. Results for the remaining ve companies were somewhat mixed.
In company 5, for example, PM5 gave more favourable ratings than MA5 on three of
the ve criteria and the same rating on the other two. In contrast, SM5 gave less favourable
ratings than MA5 on four of the criteria and the same rating on the fth criterion. There
was, therefore, a clear pattern of the PM being generally more satised with the quality of
accounting information than the MA, while the SM was clearly less satised than the MA
who considered the information to be impeccable (score 15). A similar pattern was also
evident in companies 6 and 10.
However, a clear pattern in the opposite direction was displayed in companies 8 and 9,
where the PM was generally less satised than the MA and the SM more satised than the
MA with the quality of information provided. There were no cases of the MA
underestimating quality of information provided by comparison with both PM and SM
simultaneously. These ndings (excluding companies 1, 4 and 7, where there was
substantial agreement) are summarised in Table 4.
Table 3
MA and manager perceptions of overall quality compared
Co. Information to PM Information to SM
MA PM Difference MA SM Difference
1 12 11 21 13 13 0
2 11 8 23 15 14 21
3 10 8 22 11 7 24
4 11 13 2 14 14 0
5 12 15 3 15 7 28
6 12 14 2 13 10 23
7 11 11 0 11 11 0
8 13 9 24 10 11 1
9 13 8 25 12 15 3
10 12 15 3 12 10 22
11 14 11 23 14 10 24
Number of cos
Positive differences 4 2
Negative differences 6 6
No differences 1 3
A high level of consistency was evident between the accuracy of MA perceptions
regarding the key information used by managers (Table 2) and managers assessment of
the quality of information (Tables 3 and 4). For example, ve of the six managers for
whom a good rating is shown in Table 2 show zero or positive differences in Table 3 (i.e.
MA perception was either accurate or understated). The only exception was company 10,
where the ndings indicate that, although the MA had a good awareness of the key items of
information needed by managers, the quality of the information actually supplied was
perceived by SM10 to be low. Furthermore, four of the ve managers showing poor ratings
in Table 2 show negative differences in Table 3 (i.e. MA perception was overstated). The
only exception was company 8, where SM8 gave a slightly higher rating for overall quality
than MA8. However, the quality rating of 10 provided by MA8 was the lowest rating of
quality of information provided to SMs.
Perceptions were analysed and compared across the ve components of the overall
measure of quality and differences between the perceptions of MAs and managers are
reported in Table 5. There was more agreement between MAs and managers on
perceptions of relevance and accuracy than on the other three criteria. However, PMs were
less in agreement (8 and 6, respectively) than were SMs (10 and 9, respectively). MAs and
Table 4
MA over/under-statement of PM/SM perception of overall quality of information
Overstated PM Understated PM
Overstated SM Companies 2, 3, 11 Companies 5, 6, 10
Understated SM Companies 8, 9
Table 5
Comparison of perceptions of ve components of overall quality between MA and managers
Co. Information to PM Information to SM
R A T S U Total R A T S U Total
1 0 0 0 0 21 21 0 0 21 0 1 0
2 22 0 21 0 0 23 0 0 0 0 21 21
3 0 0 21 21 0 22 0 0 22 21 21 24
4 0 1 0 0 1 2 0 0 0 0 0 0
5 0 1 0 1 1 3 0 21 21 23 23 28
6 0 0 1 1 0 2 0 0 21 21 21 23
7 0 0 0 0 0 0 0 1 21 0 0 0
8 21 0 0 21.5 21.5 24 0 0 0 1 0 1
9 21 22 22 0 0 25 0 0 1 1 1 3
10 0 1 1 0 1 3 21 0 0 21 0 22
11 0 21 1 22 21 23 0 0 22 21 21 24
Total neg. (#) 3 2 3 3 3 1 1 6 5 5
Total pos. (#) 3 3 2 3 1 1 2 2
Total no differences (#) 8 6 5 6 5 10 9 4 4 4
Note: The ve components of overall quality were as follows: Relevant (R), Accurate (A), Timely (T),
Satisfactory to the Head of Production/Sales (S), Kept up to date for the changing needs of managers (U).
managers disagreed more on timeliness, satisfactory to head and up to date criteria.
Agreement on these three criteria arose in 5, 6 and 5 cases, respectively, for PMs and in
only four cases each for SMs.
For SMs, the largest overstatements by the MA tended to occur for three elements of
quality: timely, satisfactory to the head of production/sales and kept up to date for
changing needs of managers, whereas understatements tended to be infrequent and small
across the ve dimensions. The pattern for PMs was noticeably different, with both
overstatements and understatements showing a relatively even spread across four of the
ve dimensions. There tended to be agreement on relevance, with overstatements by MAs
in three companies and no understatements.
Collectively, the ndings in relation to research question 1 identify substantial
differences between the perceptions of MAs and managers regarding the specic nature of
information deemed essential by managers for effective management of their units and the
quality of information supplied to them through the management accounting function.
5.2. Usage of techniques
Research question 2 pursued the accuracy of MA perceptions further, this time focusing
on perceptions of usage of traditional and new management accounting techniques.
Research question 2(a) addressed perceptions of usage of traditional techniques. The
survey of MAs listed ten traditional techniques, which were selected because of their
prominence in management accounting textbooks and previous surveys of practice. MAs
provided information regarding frequency of usage on a ve-point scale. For manager
interviews, the same frequency scale was used but two of the techniques were excluded
due to their technical nature (exible budgets and marginal costing). The remaining eight
techniques and the differences between MA and manager perceptions of usage frequency
are summarised in Table 6. Perception differences are computed by deducting each MA
score from the corresponding PM/SM score, meaning that a positive (negative) difference
signies that a higher (lower) frequency is perceived by managers. Score differences range
from 0 (indicating total agreement between MAs and managers on frequency of usage) to
4 (indicating the widest possible difference, given a ve-point scale).
Results varied widely across the sample of techniques but the only two techniques where
differences were consistently small or non-existent for both PM and SM across all
companies were budgeting and break-even analysis. These techniques were at the extremes
in terms of usage frequency, in that budgeting was the most frequently used of the
traditional techniques and break-even analysis was the least frequently used. The maximum
difference of four was reported in a number of cases, most frequently for DCF and ROI.
Given that these managers are involved at senior management level, it seems surprising that
they should indicate a never rating for techniques given an always rating by their MA.
Apparently contradictory results arose where managers reported high usage of specic
techniques that were rated as never or rarely used by their MA. For example, cost-plus
pricing was given a frequency rating of 5 (always) by PM1 but a rating of 1 (never) by
MA1. An identical pattern of ratings emerged for cost-plus pricing from a comparison
between MA3 and SM3 and for volume-based overhead absorption from a comparison
between PM4 and MA4. A similar but less extreme pattern was evident across a number of
Table 6
Usage frequency of traditional techniques: perception differences
Company 1 2 3 4 5 6 7 8 9 10 11 Number of companies
Technique Agree Higher Lower
PMs
Budgeting 0 0 0 2 0 0 0 0 0 0 0 10 1 2
Standard costing 0 21 2 1 21 0 1 1 0 21 0 4 4 3
Variance analysis 0 0 22 1 0 0 0 3 21 0 1 6 3 2
Break-even analysis 0 0 22 1 21 0 2 2 2 21 22 3 4 4
Cost-plus pricing 4 21 2 3 0 0 22 22 22 21 22 2 3 6
Volume based overhead absorption 0 1 1 4 23 0 3 1 21 1 2 2 7 2
DCF 22 24 1 22 0 0 21 21 24 0 0 4 1 6
ROI 22 22 22 0 21 22 1 21 24 21 24 1 1 9
SMs
Budgeting 0 0 0 2 0 0 22 22 0 0 0 8 1 2
Standard costing 0 21 3 23 21 1 1 0 21 0 0 4 3 4
Variance analysis 0 23 0 1 21 21 23 0 0 1 1 4 3 4
Break-even analysis 21 1 0 21 21 0 1 0 1 1 21 3 4 4
Cost-plus pricing 1 21 4 1 21 1 21 23 0 3 2 1 6 4
Volume-based overhead absorption 0 23 0 0 22 1 0 0 2 22 21 5 2 4
DCF 0 24 21 24 22 2 21 0 24 21 21 2 1 8
ROI 21 22 0 24 23 2 21 1 24 22 21 1 2 8
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other techniques. Qualitative ndings reported later in the paper suggest a possible
explanation for these apparently contradictory results.
Research question 2(b) addressed the accuracy of management accountants
perceptions of managers use of information produced using new management accounting
techniques. Ten techniques were included based on the most prominent new techniques
featuring in management accounting textbooks and previous empirical studies. Both MAs
and managers were asked to indicate frequency of usage on a ve-point scale. Summarised
results are shown in Table 7. Perception differences are again computed by deducting each
MA score from the corresponding PM/SM score, meaning that a positive (negative)
difference signies that a higher (lower) frequency is perceived by managers, that zero
indicates total agreement and four signies the maximum difference in perceptions of use.
Viewed across the sample, there were again some noteworthy cases of overstatement by
MAs, particularly relating to ABC, ABM (relative to both PMs and SMs), benchmarking
(for SMs) and distribution channel protability analysis (for PMs). There were other
substantial overstatements at individual company level, such as in company 7, where MA7
rated lifecycle costing as 4 (often) but the same technique was rated as 1 (never) by both
PM7 and SM7. These overstatements by MAs may be explained by a tendency to
deliberately overstate the value of information they are producing or alternatively by an
unfounded optimism regarding the usefulness of the information. As in the case of
traditional methods, there were frequent instances of understatement of usage frequency
by MAs, most notably for target costing (both PMs and SMs). The most extreme examples
of this occurred in company 7 where MA7 gave target costing a rating of 1 (never), while
PM7 gave it a 5 (always), and in company 10 where target costing was rated 1 (never) by
MA10 but given a 4 (often) by both PM10 and SM10. Non-nancial performance
measures showed a similar overall pattern of results from comparisons between MAs and
PMs, with the most extreme example occurring in company 3 where a rating of 1 (never)
was given by MA3 but a rating of 4 (often) was given by PM3. As for traditional
techniques, qualitative ndings reported later in the paper provide strong evidence that
managers obtain information from other sources to supplement that received from the MA.
This may help to explain apparent overstatements of usage frequency by managers.
Combining the ndings for questions 2(a) and 2(b) and using aggregate absolute
differences reported in Tables 6 and 7, Table 8 ranks all techniques (18 in total) in terms of
their contribution to the perception gap regarding frequency of use. A ranking of 1
indicates the lowest perception gap or highest level of agreement between MA and
managers.
It was noticeable that the greatest areas of agreement between MAs and managers were
in relation to techniques that have previously been reported (Pierce and ODea, 1998a,b) to
have very wide usage in these companies such as budgeting, standard costing, variance
analysis, non-nancial performance measures, customer protability analysis, and those
reported to have very little usage such as the balanced scorecard and break-even analysis.
The techniques in the bottom half of Table 8 contribute most to the perception gap and
include those reported to have moderate levels of usage (Pierce and ODea, 1998a,b),
encompassing a combination of traditional and new approaches. Collectively, the ndings
illustrate that there are many cases where managers are using information generated
through use of traditional and new management accounting techniques less frequently than
Table 7
Usage frequency of new techniques: perception differences
Company 1 2 3 4 5 6 7 8 9 10 11 Number of companies
Technique Agree Higher Lower
PMs
ABC 23 22 0 1 0 1 21 21 23 22 0 3 2 6
ABM 23 22 0 2 0 1 0 21 24 0 0 5 2 4
Customer protability analysis 0 21 0 21 1 0 21 1 0 23 0 5 2 4
Balanced scorecard 2 0 0 0 0 0 0 21 21 0 23 7 1 3
Lifecycle costing 0 21 0 0 2 0 23 2 21 0 0 6 2 3
Target costing 1 2 1 0 0 0 4 22 21 3 0 4 5 2
Benchmarking 21 2 0 21 21 2 1 0 0 21 23 3 3 5
Quality cost analysis 0 21 0 0 0 0 0 1 0 22 0 8 1 2
Distribution channel protability analysis 0 21 0 21 23 0 0 21 23 22 0 5 2 6
Non-nancial performance measures 1 2 3 0 0 1 2 22 0 2 21 3 6 2
SMs
ABC 23 22 0 21 21 0 22 0 22 22 0 4 2 7
ABM 23 22 0 21 21 0 22 21 24 0 0 4 2 7
Customer protability analysis 0 21 21 0 0 0 1 1 1 21 2 4 4 3
Balanced scorecard 2 0 0 21 0 0 0 1 21 0 23 6 2 3
Lifecycle costing 0 2 0 21 0 0 23 2 21 3 0 5 3 3
Target costing 0 1 3 23 0 0 1 1 2 3 2 3 7 1
Benchmarking 0 2 2 23 22 1 22 22 23 2 1 1 5 5
Quality cost analysis 1 21 0 1 0 0 22 1 23 22 3 3 4 4
Distribution channel protability analysis 0 1 0 0 21 2 0 2 21 1 2 4 5 2
Non-nancial performance measures 1 1 0 1 0 0 0 0 0 1 21 6 4 1
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perceived by MAs and the difference is large in many cases. At the same time, the
converse is also true. In many cases managers use specic items of information perceived
by them to be provided by either traditional or new management accounting techniques
more frequently than is perceived by MAs. The ndings suggest clear differences between
perceptions of MAs and managers regarding the types of information that managers need
and particular techniques associated with the preparation of that information. They also
suggest that managers desire changes in the information that MAs produce and in the roles
of MAs as providers of that information. It is to these specic areas that questions 3 and 4
are addressed.
5.3. Managers desired changes
Research question 3 sought to establish what major changes, if any, managers wish to
see introduced regarding information supplied to them by the accounting function.
Immediately following their evaluation of information received from the accounting
department, managers were asked an open-ended question to solicit views on this issue.
Since the analysis was based on cross-case analysis and identication of dominant themes,
the ndings are structured around those themes and quotes are selected to illustrate the
themes. In addition to addressing research questions 3 and 4, the qualitative ndings also
provide additional support and explanation for the earlier quantitative ndings with regard
to specic companies, and the main examples of this are highlighted.
Four main themes dominated responses by both PMs and SMs to the question on
desired changes. In summary, the managers want information that is more timely, broad,
exible and in a better format than at present.
Table 8
Ranking of techniques in terms of consensus between perceptions of MAs and managers
Technique Overall PM SM
Budgeting 1 1 2
Balanced scorecard 2 3 3
Customer protability analysis 3 4 3
Quality cost analysis 4 2 12
Standard costing 5 4 7
Non-nancial performance measures 5 12 1
Variance analysis 5 4 7
Break-even analysis 8 10 3
Distribution channel protability analysis 8 8 6
Lifecycle costing 8 7 10
ABC 11 12 11
ABM 11 10 12
Volume-based overhead absorption 13 16 7
Target costing 14 12 14
Benchmarking 15 9 16
DCF 16 15 16
Cost-plus pricing 17 17 15
ROI 18 18 18
5.3.1. More timely
Most of the managers identied timeliness as the key area where improvement is
needed:
The biggest deciency is the timeliness thing (PM9).
It is not timely. I am looking at information now that is two weeks old and I only got
this yesterday (PM2).
In many cases, the regular information which is currently supplied addresses managers
needs, but arrives late:
Most of the information produced by the accounting department covers most of what
we needThere is that time lag. If I want to nd out how long it took a particular
worker to do a job, I would have to do a physical search to nd the information (PM1).
The August results I will not get until possibly the 11th or 12th of September. To
me, thats history. In sales and marketing, you are looking at tomorrow or the day
after tomorrow. Yesterday is gone (SM3).
A clear contrast was evident between the views of the two managers in company 9.
PM9 was generally negative while SM9 was consistently positive in his views:
the monthly pack comes on the 22nd of the following month. Youre going back
talking about historic stuff. Too late, too late (PM9).
anything I look for, I getId say Im satised with what I get (SM9).
These views are consistent with the contrasting ndings for both managers reported
earlier regarding perceived quality of information and perception gap (Tables 3 and 4).
They also suggest that the contrasting perceptions may be closely related to the
effectiveness of communication between the MA and the respective managers, and the
extent to which the manager adopts a proactive approach to obtaining relevant
information.
A frequent example raised by managers was the failure of the MA to provide urgently
needed information in time for one-off decisions:
We just do not know the true cost when we are pricing out those tenders (SM3).
standard reports ok, but non-standard dont come timely, you know (SM1).
urgent information could take three or four days (PM1).
There was repeated evidence of accountants delaying information by engaging in
pursuit of spurious accuracy, while managers were forced to nd alternative sources of
information, often attempting to produce it themselves:
Things happen on a daily basis. What happens today, you need very good information
on it today. I think the accountants are in a sense trying to get 100% accuracy and they
will go down to the last digitMost of the line management out there are quite literate
in terms of obtaining information for themselves rather than waiting for two weeks to
get it from the accountants (PM2).
This provides an insight into apparently contradictory ndings reported in Tables 6
and 7, where managers reported signicantly greater usage of some techniques than that
reported by their MAs (e.g. target costing, non-nancial performance measures). There is
evidence that managers are resorting to preparing their own information to compensate for
perceived deciencies in that received from the MA.
The timeliness issue emerged also in companies which have invested heavily in
improving the accuracy of management information. For example, one company has
developed and implemented a sophisticated activity based costing system, but much of the
information is seen as being out of date:
we have an ABC model here which does give us product specic information,
but it is generated on an annual basis, and generally it lags the production year to
which it refers by about six monthsBy the time you get it, the window of
opportunity may have passed you. I think we need product specic information on
a monthly basis, at least (PM7).
Timeliness was a pervasive theme that was prominent in almost all interviews and,
consistent with data reported in the timeliness column of Table 5, was a bigger issue for
SMs than for PMs. There were only three interviews where timeliness was not raised as an
issue: neither manager in company 8 raised it (both strongly emphasising the need to have
more focused information) and PM11 made no mention of it (but emphatically expressed
the need for more broad-based information). There was strong evidence that lack of
timeliness was a major contributor to the perception gap highlighted for some specic
managers in Table 3 (e.g. PM2, PM9, SM3) and this is borne out by quantitative data
reported in the timeliness column of Table 5. It was also clear, however, that timeliness is
an important issue for most of the other companies, even where the MA has an accurate
perception of the managers needs (e.g. SM 1) and where the MAs perception of overall
information quality is accurate (e.g. PM7).
5.3.2. More broad-based
There was evidence of a perception among managers that many accountants limit their
contribution by adopting an excessively narrow focus on bottom line nancial numbers,
both in reporting past performance and projecting future performance. For example:
Im far more reliant on the primary informationwhat the materials are being bought
at and how Im doing labourwise on a weekly basiswe dont actually have a formal
systemof actually assessing where bottlenecks are, where problems are, and
assessing the total impact of those (PM11).
From an overall factory point of view, there are more important things in life than
accounting (PM1).
Managers perceive a clear need for a broader focus, incorporating timely reporting of
the key non-nancial variables which determine nancial performance:
the way we look at it is if you get the non-nancials right, then the nancials come
(right)and if we are looking at a nancial performance which is bad, that only tells us
the end resultFinancials only tell you you are bad, not how you got there (PM2).
Company 10 provided another example of contrasting ratings from both managers.
While the MA provided the same quality rating for both production and sales (Table 3),
SM10 was clearly less satised with accounting information than PM10. Interviews with
both managers indicated very different impressions of communication between manager
and MA:
generally we pick the phone up and say, hey listen, we need this, were not happy
with that, but generally the amount of unhappiness is negligible. Generally they provide
a very good service and they deal in the real world (PM10).
I have asked for (customer protability analysis). It is impossible to get. Obviously, if
you are negotiating with a customer, you want to know how much we have actually
spent on phone calls to them (and other activities). That type of information I would
certainly love to have (SM10).
This theme of broad-based information was more prevalent among SMs, featuring
prominently in seven of the SM interviews, compared with four PM interviews. It is
consistent with earlier ndings in Table 2 showing that the MA tends to have a more
accurate perception of the range of key information needed by PMs than SMs.
5.3.3. More exible
Flexibility as desired by managers is something more than elimination of rigidity (as,
for example, in the adherence to budget assumptions that are no longer valid). It also
encompasses a desire to get information that is more relevant, tailored to particular needs
of managers and less standard than currently offered. A common theme among managers
was that MAs tend to be inexible and are generally very slow to introduce changes to the
reporting system. For example:
In sales, we get every god-damn detail we did not want at allthe system was turning
out six hundred pages of reports at month-end that nobody actually looked at. It was
crazyThe policy appeared almost to be that okay, if somebody ghts hard enough for
something new, we will try and develop it and give it to them, but we wont drop
anything (SM11).
You dont maximise prots by producing reports. You maximise prot by giving
people the information they need, and a lot of the time the two do not necessarily go
hand in hand (PM7).
Both managers in company 8 were critical of the inexibility of the accounting
function:
We talk to the accounting people but get nowhere. The attitude of the accountant is that
this is the total cost bucket andif it is not applied to your product, it has to be applied
to some other product (PM8).
You have to basically build up your own spreadsheets (SM8).
SM8 had very little positive to say about his MA, and although a small positive
perception gap (1) was reported for this manager in relation to information quality
(Table 3), there is a strong indication that this is due to a low overall quality rating (the
lowest of all MA ratings of information supplied to SMs), as opposed to a favourable
impression on the part of SM8.
Managers ascribed the inexibility of MAs to a variety of possible causes:
I dont think its any inexibility in terms of the guys (accountants), but some of them
maybe dont have a strong background in IT (SM10).
Accountants have so much information, but they are so protectivethey dont tend to
give it out very frequently or easily (SM3).
They (accountants) are measured by the fact that they get a report out within a
particular timeframe, not by the relevance of it (PM2).
While two of the managers interviewed were looking forward to the introduction of an
integrated information system as a means of addressing this problem, evidence from other
companies in the study where such systems are already in use indicates that this alone will
not solve the problem of inexibility:
everything is now driven by SAPFrom my point of view this is not good,
becauseSAP reports on everything developed since it got up and running, regardless
of the fact that you could probably live with about half this information (SM8).
I often ask for things to be implemented, but then you nd that the programmers have
to be instructedYou get frustrated sometimes by not getting those systems
implemented and you are forced to keep some idea to yourself. You are now ddling
again with the Excel spreadsheets in your own mind to try to keep tabs with whats
happening (SM7).
SAP is the most common toolits absolutely useless if you want to do
something in particular (PM8).
Lack of exibility was also highlighted by managers in relation to key budget
assumptions. Major deviations occur, sometimes early in the budget period, but budgets
are not revised and quickly become out of date. Specic examples of areas where major
deviations are experienced are foreign exchange rates (SM10) and product mix (PM10).
Discussions with accountants provided some vivid examples of this type of inexibility.
For example:
I could never understand why, if you set a mark you would change it. If you change
your budget, your variance to actual is going to change as well. Might give a manager a
way out (MA3).
5.3.4. Better format/presentation
Along with increased timeliness, breadth and exibility, managers would like
information to be transmitted in a better format, in order to focus on key indicators as
efciently as possible. Some managers experience difculty when trying to compare actual
performance with budget because the actual gures are presented in a different format to
that used in the budget:
Not alone do we want (specic performance indicators)but they should also be
comparable to the budget (SM11).
Although there was general agreement that the format of reports has improved
signicantly in recent years, the desirability of further reducing the volume of gures by
increasing the use of charts and graphs was emphasised:
There are no graphsits all numbers. I would take those guresand I have my own
graphs that I do myself (SM3).
I know that management would often just like to see a histogram instead of a
mass of gures that you have to wade throughfor me, there are too many
guresoverload (PM7).
The problem of excessive volume was highlighted by many of the managers:
I get 14 inches of printout every month, of which I use only 5 pagesby the time you
do a deep analysis of those printouts, your pension time has arrived! (SM3).
There would be plenty of reports lying around the place, if you had time to read them
(SM4).
There is an awful lot of reading in our reports right now (PM5).
Not surprisingly, therefore, the need to facilitate management by exception was also
highlighted:
So he [middle manager] needs something that he puts there and he says okay, its
management by exception, Ive a problem here and Ill focus on that. I dont have a
problem there, Ill leave that alone (PM2).
He [line manager] doesnt have the time to pore over ithe needs something to
facilitate management by exception (PM8).
5.4. Future role of MAs
As the interviews with managers had primarily focused on their evaluation of the
service provided to them by MAs, a logical conclusion to each interview was an open-
ended question, inviting managers to share their views on the future role of MAs. The
question generated much interest, and there was a high level of consistency in the
responses. The main recurring theme was that of an MA as a business partner. Elements of
how the MA should interact with management were also highlighted, most of which would
contribute to a more meaningful partnership arrangement.
5.4.1. Partnership
A general theme in many of the responses was the need for the MA to full the role of
business partner. This was expressed in statements such as the following:
I think the days of the accountant are nearly gone, thank GodThey have to become
managers. The day has come when they must lose the image of debits and credits and
become partners with people in sales or administration. I think they have to change and,
if they do not, they will become auditors, appearing once a year to give you an audited
account of what you have done (SM3).
The partnership approach was seen as involving a relaxation of functional boundaries in
both directions. As well as MAs becoming more involved in functional areas such as
production and sales, functional managers were also actively involved in the design and
regular update of information systems. This tended to result in high levels of satisfaction
and commitment to those systems, as evidenced by statements such as the following:
the standard reporting systems have been designed by myselfI am getting most of
the information that I want (SM1).
A number of other consistent themes emerged, providing some indication of how the
MA might achieve the image of business partner. The most prominent of these are set out
below.
5.4.2. Physical location
The issue of physical location of the MA was raised many times throughout the
interviews. While sales managers were generally silent on this issue, it was raised
repeatedly by production managers:
I feel the accountant should be down there helping the guy to manage the plant (PM9).
The source of generating the information is getting closer to the plant all the time
(PM4).
Physical proximity was seen as a key aspect of the MA acquiring a good understanding
of the business and gaining the condence of managers by demonstrating a genuine
understanding of their information requirements. It was also seen as symbolic in the
development of a true spirit of business partnership and the dispelling of traditional images
of audit and control:
ve years ago, I dont think we even had an accountant. We were using group
accountants which is one of the reasons why we were getting very sketchy information
(PM5).
A good illustration of the potential benet of closer physical location was provided by
company 10, which reorganised the accounting function in recent years and now has MAs
situated beside the plant managers, adjacent to the factory oor. MAs are seen as integral
members of plant management inthis companyandthe PMplaces ahighvalue ontheir input:
I see that person as being the most important provider of absolutely essential
information to me, on-time informationI think that any plant manager working
without his accountant as his right hand is really not going to deliver. I really believe
that (PM10).
A notable feature of company 10 was a clear acceptance of the MA as a member of the
management or project team who specialised in nance and accounting. Of key
importance to this image was the fact that an MA was involved from the start in every
project and decision of consequence, and shared responsibility for outcomes.
5.4.3. Teamwork
A related recurring theme was the need for the MA to operate as an integral member of
the management team and to be seen, by himself and other managers, as a business
manager with specialist knowledge of accounting and nance. His success would be
measured in terms of his contribution to effective management, rather than the production
of standard reports:
We have to have some concept of management teams and the accountants have to be
totally involved here (PM11).
The cost accountant has to involve Production and Engineering (SM2).
Integration is the issue (PM8).
Many accountants are associated with an audit and control mentality, and this is seen as
unhelpful in their development as effective team members:
The accountant is maybe sometimesin the position of being more a policeman than
part of a team. An accountant would need to be very careful not to be couched in that
role (PM11).
They (accountants) see themselves as a police organisationpolicing the numerics of
the company (SM6).
Clearly, in some organisations, the MA is seen as being little more than a nancial
accountant who extends the mentality of auditor, rule-book and procedures manual to
monthly and quarterly accounts. A somewhat colourful distinction was drawn between
nancial accountants and MAs in company 11:
If the nancial accountant wants to save his own neck, he is going to follow
thatprocedures manual and thats it. Theres some justication in that area because,
at the end of the day, the nancial accountant is the overall scorekeeper and cuts very
much across the audit and taxation side of things. There are good reasons for that role.
There are not as many reasons for it in the management accounting role. Theres far
more need for the management accountant to insist on being part of the team and work
as part of the team (PM11).
A consequence of the absence of effective teamwork is communication breakdowns
between accountants and managers, several examples of which were evident in the data,
such as:
We end up disagreeing all the time. He (accountant) thinks I spend too much money
and I think that all he looks at are percents without much interpretation (SM6).
The importance of informal communication regarding the quality of MA information
was underlined by the fact that such feedback is not generally given in formal meetings:
You wouldnt do that in a formal way, no, in that we wouldnt hang the Finance guy
out to dry in front of his peers (PM7).
5.4.4. Understand the business
In order for the MA to operate as an effective team member, knowledge of the
companys business is a fundamental requirement. This was highlighted repeatedly by
both production and sales managers:
The better accountants are getting involved, they are getting to understand the business
and becoming involved in the strategy of the company, rather than sticking solely with
the gures (PM8).
One of the difculties we have here is that accounts people do not really have a proper
understanding of the production process (PM2).
This inability or unwillingness to gain a broader understanding of the business was seen
by many managers as being clearly manifested in the tendency by many accountants to
report gures without any attempt to interpret them:
(Accountants) know the gures, but they dont really know the business. Accountants
are reporting to accountants; they are off to one side (PM9).
If it doesnt make sense nancially, what does it need to have it make sense? How do
we adapt it? This is where you need that (accountants) involvement. (PM11).
A clear contrast was evident between the two managers in company 6, where earlier
analysis showed a high quality rating by PM6 and a positive perception gap, but the opposite
position for SM6 (Table 3). PM6 was consistently positive in his references to the MA:
its absolutely vital that the accountant understands the businessThat can often be
a barrier with accountantsJohn (MA) is extremely good at thatHe works at it. He
sits down and reads scientic papers. He is exceptional in that regard.
Referring to the same MA, however, SM6 was critical of his lack of understanding of
the sales function:
For John, the gures are king, but there are so many other things to look at. I did
Economics in my degree and I would have some appreciation of his perspective, but he
never spent a day selling.
6. Discussion and implications
The study was exploratory and inductive in nature, based on a small sample of
companies, and the ndings must therefore be seen as having limited generalisability. A
further limitation is that the analysis of qualitative data may always contain some element
of subjectivity. However, procedures used at each stage of data collection and analysis
were designed to minimise this risk, in accordance with recommended practice in the
qualitative research literature. Particular strengths of the study were the opportunity to
compare responses to the same questions by MAs and managers regarding the scope and
quality of information, to triangulate between quantitative and qualitative data, to obtain
insights into the information needs of senior managers and to probe managers views
regarding desired changes in information and future roles of MAs.
The ndings produced consistent evidence of a preparer user perception gap. This was
most prevalent in relation to the types and scope of information used by managers
(Table 2), the quality of the information (Tables 35), and the use of information pro-
duced using specied management accounting techniques (Tables 68). The ndings also
produced insights into how that gap has been narrowed in some instances and provided
strong and consistent indicators from managers as to how it can be narrowed further. A
high degree of consistency was found in the perceived deciencies of current information,
regardless of whether comments were in the context of relatively new systems such as
ABC or SAP, or more traditional areas such as budgeting or pricing/tendering.
Comments from MAs consistently indicated that they attach high priority to technical
validity and see accounting systems primarily in terms of technical innovations, as
opposed to administrative innovations (Shields, 1995). Frequent examples were
encountered where the information they produce lacks user relevance, or organisational
validity. Managers made repeated references to lack of timeliness in the information they
receive (often linked to a perceived pre-occupation with accuracy), little or no exibility,
an excessively narrow information set and a persistence on using an accountants format
(i.e. tables of gures) rather than a more user-friendly format such as graphs and pie-
charts. Managers perceive that the information they receive is driven primarily by
accounting rules and procedures rather than a judgement of user needs. This clearly
suggests that one of the contributors to the perception gap is the MAs insistence on
technical validity (Schultz and Slevin, 1975).
An interesting nding was the extent to which some managers gave a higher usage
frequency rating to specic management accounting techniques than that given by the MA
in their organisation. For example, a sizeable number of managers gave a higher rating to
target costing, non-nancial performance measures, distribution channel protability
analysis and benchmarking (Table 7). ABC and ABM, on the other hand, showed frequent
overstatements by MAs, compared to both PMs and SMs (Table 7). This may be indicative
of MAs associating high technical validity with high usage. ABC is likely to be more
appealing to managers if it is presented as a exible analytical tool, capable of making
useful contributions in areas such as target costing and protability analysis, rather than
merely a more sophisticated accounting technique.
Although the ndings clearly portrayed the dominance of technical validity in the MAs
interpretation of their role, there were numerous examples of how greater levels of
organisational validity are being achieved in some organisations. Some of these involved
extensive use of IT specialists by individual managers to design their own information
packages to supplement regular reports (e.g. SM8: you have to basically build up your
own spreadsheets). Others involved a compromise of technical accuracy by the MA and
the practice of good-enough accounting (Brignall et al., 1999, p.v). For example, in many
of the companies visited, variance analysis was conducted by reference to the original
budget instead of a exible budget to achieve increased speed and understandability. In
some companies, crude analyses of customer protability were used, thus avoiding the
difculties associated with indirect cost allocation. These examples serve to illustrate the
importance of close involvement by the MA in the management of the organisation, not
only to form a judgement on the degree of technical sophistication required but also to
ensure that the limitations of the resulting analysis are clearly understood by managers.
The involvement criterion, highlighted by Sathe (1982, 1983), was present to varying
degrees and seemed particularly important in achieving an effective balance between
technical and organisational validity. There was repeated evidence that the more MAs are
seen to be concerned with producing regular reports and complying with the procedures
manual, the less likely they are seen to be involved in the management of the unit. The
study produced some evidence of strong controllers (Sathe, 1982, 1983) who managed to
achieve an effective balance between independence (required for compliance and control
role) and involvement (needed for management-service role) reasonably well. There was
also evidence of strong managers, who combined a detailed knowledge of their
information requirements with an assertive, or at times aggressive, style of management to
ensure those requirements were met. Weaker managers, on the other hand, appeared
resigned to tolerating an information decit, which they tended to attribute either to their
own lack of accounting knowledge or the inexibility of the MA. Extending Sathes
analysis, therefore, these ndings suggest that a combination of weak MA-weak manager
is unlikely to create conditions where preparer and user share the same perceptions of
system effectiveness (Dickson and Powers, 1979) and therefore contributes to the
preparer user perception gap. By the same reasoning, a combination of either strong MA-
weak manager or weak MA-strong manager is likely to result in a smaller perception gap,
while a strong MA-strong manager combination is most likely to minimise the perception
gap. These propositions are summarised in Table 9.
For example, SM1 claimed to have designed his own information system and is now
getting most of the information that I want. MA1 had responded and showed a good
knowledge of SM1s requirements (Table 2) and accurate perceptions of quality (Table 3),
whereas slightly worse ratings were recorded for PM1, a less assertive manager. MA3
showed a strong adherence to the traditional control role with, for example, an aversion to
changing performance targets, lest it might give a manager a way out. In this sense, he
showed signs of being a weak MA, experiencing difculty in balancing control and service
roles. Neither PM3 nor SM3 appeared very effective in getting their information needs met
and the ndings showed moderate and poor knowledge on information needs, respectively
(Table 2) and negative perception of quality differences of 22 and 24, respectively
(Table 3).
Strong managers, on the other hand, seem to be effective in ensuring that their
information requirements are known and met. For example, PM10 asks directly (hey
listen, we need this) and gives a maximum quality rating of 15 (Table 3), while SM10
bemoans the fact that, despite having asked, CPA information is impossible to get.
Although MA10 gave the same overall quality rating for both managers, SM10 gave a
rating ve points below that given by PM10 (Table 3). SM9 was another example of a
strong manager (anything I look for, I get), giving a high rating for overall quality and
showing a positive perception gap (Table 3). PM9, on the other hand, showed no evidence
of having pressed to have his information requirements met, and recorded a low quality
rating and high negative perception gap (Table 3).
A striking feature was the extent to which a particular MA can be perceived very
differently by managers in different functions. For example, PM6 commented favourably
on his MAs knowledge of the business, rating him as exceptional and recorded a
positive perception difference (Table 3), whereas SM6 was consistently negative, viewed
the MA as a policeman and concluded that he did not understand the sales function. It
therefore seems clear that the success of a particular MA in being seen as sufciently
strong to effectively balance the demands of the book-keeper/service (Hopper, 1980),
policeman/advocate (Jablonsky et al., 1993), or scorekeeper/partner (Siegel and Sorensen,
1999) roles is to some extent function specic.
The demand factor (Clarke et al., 1999) can only be partially effective in closing the
perception gap, since weak managers are unlikely to demand information, preferring
instead to pursue other sources of information. The scope dimension (Bjornenak and
Olsen, 1999) can no longer be taken for granted, since the nature and timing of items to be
reported is subject to on-going change (for example, ve of the SMs in Table 5 reported
negative perception differences for kept up to date for changing needs). The increasing
importance of the systems dimension, involving on-going preparer user interaction,
therefore becomes apparent. The ndings conrm the need to achieve an effective balance
between design characteristics such as accuracy and timeliness and other aspects of the
technical/organisational validity trade-off, and conrm conclusions drawn by Bjornenak
Table 9
Manager/MA combination and the likelihood of a perception gap
MA Manager
Strong Weak
Strong Likelihood of perception gap minimised Likelihood of perception gap reduced
Weak Likelihood of perception gap reduced Likelihood of perception gap increased
and Olsen (1999) that the success of the system is less dependent on which specic
techniques are used.
The conict between the role of book-keeper and service-aid was in evidence
throughout the study. Managers generally accepted the need for effective control and
accountability, but saw the area of retrospective reporting and feedback control as
primarily the domain of nancial accountants and auditors. A particular source of irritation
for managers was to perceive their MAs as giving priority to these reporting and feedback
activities that added little or no value in the management of their unit, while reports
relating to urgent problems and special projects were often received too late to be of value.
The relevance of historical information has declined for most managers, with a
corresponding increase in the importance of information about the present and the future.
Information to facilitate feedforward control (Emmanuel et al., 1990) is therefore of direct
relevance and in essence forms part of the decision support role. Detailed reporting and
analysis of past performance can now be done largely by computers. The regular reference
throughout the study to the need for a stronger interpretative role for MAs was essentially a
plea for a stronger focus on the future, or feedforward control.
Reluctance by MAs to engage more in the service-aid role was partially attributed by
Hopper (1980) to their aspirations to develop a career in the accounting arena, as opposed
to general management. The current study revealed a very real concern among MAs of a
possible loss of hierarchical control as a reason for their reluctance to develop the service-
aid role. From the managers perspective, several comments referred, either directly or
indirectly, to the MAs incentive to produce standard reports, even when a signicant part
of the content is not deemed useful by managers. A stronger linkage of the MAs
performance to the business units performance, rather than the production of standard
reports, was put forward as a means of securing stronger commitment and incentive to
full the service-aid role. Managers highlighted three further related issues. Firstly, they
perceived the preparation of regular reports to be so time consuming that little time was
left for MAs to get involved in management issues. Secondly, they felt their MAs seemed
to claim proprietorial rights to the information they produced, which ran counter to the
managers desire for greater empowerment. Thirdly, they perceived MAs as being heavily
focused on bottom line nancial numbers and lacking the knowledge and skills necessary
to take a broader perspective.
Functional differentiation was another contributor to the preparer user perception gap,
in that there was consistent evidence of a wider gap for sales managers than for their
counterparts in production. For example, MAs underestimated the breadth of information
used by SMs to a greater extent than for PMs (Table 2). Regarding managers assessment of
the quality of information received from the accounting department, MAs showed a
stronger tendency to overstate the quality of information supplied to SMs than that supplied
to PMs (Table 3). SMs also showed a greater incidence of negative perception differences
regarding specic quality criteria (Table 5) and, consistent with this, the desired changes in
accounting information and the future role of management accountants as expressed by
managers were considerably more numerous and radical for SMs than for PMs.
Consistent with prior literature (Chenhall and Morris, 1986; Mia and Chenhall, 1994),
high levels of uncertainty in the SMs operating environment appeared to contribute to this
difference. SMs frequently referred to the speed of change and the fact that much
accounting information is out of date by the time it arrives. Although PMs operate in the
same environment, they are to some extent buffered and their tasks are partially protected
against external environmental uncertainty, in that they are largely dictated by production
schedules, deadlines and efciency targets (Mia and Chenhall, 1994). While the SMs were,
understandably, looking for more externally focused, forward looking, broad based
information, the ndings clearly showed a strong adherence by MAs to traditional
techniques and types of information and no sign that the particular needs of marketing
managers (Lau, 1999) were being recognised. There was also evidence of complacency
among MAs, apparently coming from a belief that SMs really only need historical
nancial information: that these are their measures. It was not therefore surprising to nd
that the greatest levels of dissatisfaction and the widest perception gaps were found among
the SM sample.
Prior ndings indicate that broad scope information is particularly helpful in improving
the performance of marketing managers (Mia and Chenhall, 1994) and that the potential
value of non-nancial information is enhanced when it is systematised and focused
(Vaivio, 1999). The evidence indicated that, rather than being developed in a planned or
systematic manner, non-nancial measures were usually introduced as a result of
suggestions or pressure from individual managers. Instead of being integrated into the
existing package of information to reect their connection with nancial outcomes, non-
nancial measures tended to be treated as an add-on. Given that broad scope information
has been found to be of particular benet for marketing managers, this failure to
systematise the ow of non-nancial information is more likely to have a negative impact
on perceptions of SMs than PMs.
SMs frequently made use of IT professionals to address their information decit. From
a comparison of SM perceptions of their MAs with their perceptions of IT professionals,
three major differences became obvious. The rst was that the IT personnel were generally
willing to work with managers towards the design of an information system that would
offer exibility, thereby enabling and empowering the managers to respond to rapid
change. MAs were perceived as having a wish to control the information in a manner that
militated against exibility and empowerment (SM3: accountants areso protective).
Secondly, IT specialists were seen as displaying higher levels of communication and
interpersonal skills than MAs. Communication between MAs and SMs was perceived by
SMs in many cases as being poor, with MAs largely unaware of their information
requirements, SMs often not knowing how to make their requirements understood and
subtle signals concerning changes desired by managers apparently being ignored by MAs.
Thirdly, some MAs were seen as being decient in IT skills (SM10: dont have a strong
background in IT), whereas IT specialists were seen as having a sufcient understanding
of accounting to design effective information systems.
7. Conclusion
The ndings highlight the knowledge and skills required of management accountants in
three main areas. Firstly, a thorough technical knowledge is essential in order to be able to
adapt information to the needs of a given situation and achieve an optimum balance
between technical and organisational validity. Secondly, a sound knowledge of other
business functions, such as IT, production and marketing is necessary. Finally, a well-
developed set of social and inter-personal skills is required. Thus equipped, the
management accountant is more likely to successfully balance control and support
functions and to meet the information needs of a wide range of managers across a variety
of functional environments, thus effectively co-ordinating information ows to link
different areas of the business and full key roles such as linchpin and facilitator
(Brignall et al., 1999, p. 31).
The central focus of the study was on manager perceptions regarding the usefulness of
current information and desirable changes to information and the role of MAs. There was
evidence of major differences between the perceptions of managers and MAs of the
usefulness of specic types of information and consistent indications from managers
regarding the desired future role of MAs. Improved management accounting information
can only come about through a convergence of the perceptions of MAs and managers
regarding the nature, timing and format of information required, thereby increasing its
usefulness or organisational validity. The ndings provide some insights and tentative
propositions, which offer potential to help bring about this convergence. Future research
could usefully be directed towards more extensive testing of the propositions put forward
in this paper and the development of a better understanding of factors that contribute to the
MAmanager perception gap in a variety of functional and institutional settings. It would
be particularly useful to consider the varying degrees of sophistication in companies
management accounting systems and to examine whether the nature and magnitude of any
perception gaps can be associated with characteristics of those systems.
Given the studys unique design, whereby the same questions regarding usage of
techniques were asked of MAs and managers in the same companies, important
implications can be drawn for the design of future studies. Many of the research ndings
to date regarding usage of specic management accounting techniques are based on
surveys of management accountants. Findings from those surveys are typically reported
in terms of frequency of usage of particular techniques. By asking the same questions of
managers and MAs, the current ndings revealed major differences between perceptions
of managers and MAs, thus underlining the importance of distinguishing between
information that is stated to be produced and information that is actually used. The
current study did not attempt to establish the reasons for these differences and
specically, whether they were due to deliberate bias in MA responses or genuine lack of
knowledge regarding what information managers actually use. What is clear, however, is
that future research into usage of techniques ideally needs to involve managers, and
where ndings are reported based only on data collected from MAs, it is important that
the limitations are spelled out and that the ndings are presented in terms of information
produced.
Acknowledgements
The authors gratefully acknowledge the helpful comments of Professor John Innes,
Professor Robert Scapens and two anonymous BAR referees.
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