Researchers must work more closely with practitioners. By Professor Robert Scapens, accounting and finance, Manchester Business School.
Recent years have seen significant changes in both management accounting research and practice. But while practitioners have transformed their role to become more useful to their organisations, academics still face challenges to show the practical relevance of their work.
New techniques in management accounting
A decade ago management accountants worked in the back office, acting as score keepers or bean counters. They have since changed their role to one of business support. They are now part of the management team providing inputs into management decisions.
While most management accountants consider the use of new, advanced management accounting techniques to be important, not everybody is adopting them. Nevertheless, there is substantial evidence of changes in the nature of the job. In particular, there is an emphasis on forward-looking information for decision making, rather than backward-looking information for control. This new focus is reflected in the importance attached to rolling forecasts and forecasts to the year-end.
A different view of costs
There is also increasing integration of financial and non-financial information. Performance measurement – in the form of scorecards, dashboards and so on – is becoming the focus of much management interest. Growing competition and global economic pressures have led to a more strategic or customer-oriented focus. In other words, the focus is on external market factors rather than internally on the control of costs. This is not to say that cost control is unimportant – it remains crucial. But costs have to be controlled with regard to the strategic directions of the business, rather than independently.
This has led many companies to identify key performance indicators (KPIs) which measure the aspects of the business that are crucial for long-term success. Many of these KPIs are non-financial. As a result, monthly management reports now contain a mixture of financial and non-financial information. Management accountants are frequently responsible for collating this information and preparing reports.
Accessing the information
Think back to the age of the bean counter when accounting information was held in a self-contained system. This was controlled from within the accounting function and accessed only by the people who worked in the accountant’s offices. Now, with the development of integrated information systems, this information is much more widely accessible. Managers can access accounting information at their desks or remotely on laptops.
Management accountants today fulfil many business roles. They help managers to interpret financial and non-financial information. They evaluate the operating and strategic consequences of alternative courses of action, in particular the impact on value creation. The accountants’ analytical skills, supplemented by extensive knowledge of the business, can put the management accountant in a strong position. He or she can recognise the strategic impacts and value creation potential of decisions taken in individual areas of the business. This role is crucial for the organisation as it helps to integrate its various activities and functions.
Management accounting research
Management accounting research has also moved beyond traditional theories. These portrayed management accounting as part of the formal hierarchical planning and control system of the organisation. Recent research has explored the much broader role of management accounting in the organisation.
Research published in Management Accounting Research (the research journal sponsored by CIMA) provides insights into the nature and role of management accounting in a variety of industries and across several different countries. Although there were some differences, the essential nature of management accounting practice did not seem to vary substantially across industries or countries.
The research shows that the complexities of management accounting practices transcend the simple economic decision-making approaches portrayed in most textbooks. Management accountants are increasingly involved, either directly or indirectly, in other functional areas. Furthermore, the research suggests that the traditional boundaries of the firm are being challenged. This is happening both internally, with new organisational structures (business process-oriented structures and flatter organisations) and externally, with new organisational forms (supply chains, strategic alliances, networks).
UK researchers cautious
Researchers in the UK tend to be critical and often quite suspicious of new techniques. They frequently look for the negative aspects of new developments and the drawbacks of proposed new techniques. The general feeling is that nothing is ever completely successful, and there must be at least some problems for the researcher to study. This can lead to important critiques of new techniques, but may also explain why there have been no major new techniques developed by UK management accounting researchers in recent years.
This is not to say that management accounting research in the UK has not been innovative. It has been very innovative in terms of the theories and research methods that have been developed. It has provided real understanding of management accounting practice, explaining why practices are the way they are, the possible consequences of these practices and how they can change or be resistant to change. There is now a wide range of theoretical perspectives that can be used to explain management accounting practice.
Focus on practicality
More work is needed to consolidate what has been learnt in order to focus on issues that are relevant to practitioners. The challenge for management accounting researchers is to collaborate with practitioners. Together they could use the recently discovered theoretical insights to explore the implications for management accounting practices. This is not to suggest that management accounting researchers should be developing fashionable techniques to compete with activity based costing or balanced scorecards. Rather they need to explore the practical implications of their theoretical explanations.
There can be constraints on such practical research in the UK – for example, Research Assessment Exercises (RAE). These are conducted every few years to assess the quality of research within UK universities. Although, in principle, practically-oriented research is considered (and indeed encouraged) by RAE, papers in international research journals receive the highest ratings. As a result, the appraisal systems within UK universities are focused on theoretical research rather than practical implications. The challenge for researchers is to undertake sound and innovative theoretical research, and in so doing to develop practical applications that are useful for practitioners.
Training issue
Another problem in the UK is that there are now relatively few professionally trained accounting researchers. In the past university accounting departments had researchers with practical and academic training. Today there are few such people. Most accounting researchers now follow a very conventional path – undergraduate degree, master's degree, PhD, then an academic appointment in teaching and research.
This is a fundamental structural problem that is going to be difficult to rectify, at least in the short term. Nevertheless, the challenge for management accounting researchers remains to find ways of increasing the practical relevance of their management accounting research.