Factors influencing the role of management accounting in the

Management Accounting Research, 1998, 9, 361]386 Article No. mg980080

Factors influencing the role of management accounting in the development of performance measures within organizational change programs Robert ChenhallU and Kim Langfield-Smith†

Many companies are undergoing organizational changes encompassing innovative approaches to organizing production processes, restructuring work practices and developing new planning and control mechanisms. This paper explores the role that management accounting played in the development of performance measurement systems within five organizations implementing change programs. The major case study is of a large manufacturing firm undertaking changes which included the development of team structures, the adoption of a customer-focused strategy and the implementation of new performance measurement systems. In this company, a lack of integration of operational performance measures with strategic priorities contributed to poor integration of team activities with overall strategy. The paper proposes five interrelated factors that may help explain the extent to which management accountants contribute to the development of integrated performance measures and change programs. Case evidence drawn from a further four firms is presented to provide some validation of conclusions drawn from the primary case study. Q 1998 Academic Press Key words: organizational change; management accounting; performance measures.

1. Introduction In recent years management innovations such as total quality management ŽTQM., continuous improvement methodologies and activity-based management have developed as a response to the changing nature of operations and competition ŽHayes et al., 1988; Chase and Garvin, 1989; Hamel and Prahalad, 1994.. These management practices are not restricted to production processes, but also include innovative approaches to restructuring work practices and developing new planning and control systems. Many management innovations associated with these change programs rely U

Department of Accounting and Finance, Monash University, Clayton, Australia. †School of Business, La Trobe University, Bundoora, Australia. Received 30 December 1997; accepted 10 May 1998. 1044]5005r98r040361 q 26 $30.00r0

Q1998 Academic Press

362

R. Chenhall and K. Langfield-Smith

on promoting a high degree of employee involvement, often using work-based teams. The result is that much of the responsibility for delivering change lies with the shop-floor employees ŽHackman, 1987; Cohen, 1993.. It has been claimed that the effective management of organizations undergoing change involves using information that assists in understanding how operations support strategic priorities and the interdependencies of activities across the value chain ŽNanni et al., 1992; Shank and Govindarajan, 1993.. A key component in developing such an understanding is the formulation of performance measures designed to coordinate manufacturing decisions and activities to achieve a balanced set of strategic priorities ŽNanni et al., 1990; Lynch and Cross, 1992.. It has been claimed that management accountants can help focus and enhance organizational change when they assist in designing performance measures ŽShank, 1989; Nanni et al., 1992; Shields and Young, 1992.. The opposing view is that innovative systems can be developed effectively by other parties within the organization1 ŽJohnson, 1992; Player and Keys, 1995.. In this paper, case study evidence is presented to identify factors influencing the role of management accounting in designing performance measurement systems within change programs. Following this introduction, the paper is divided into five sections. First, the case for and against the contribution that management accountants can make to the design of performance measurement systems is presented. Second, a description of the research method is provided. Third, a case study that explores the role that management accountants played in a company undergoing a change program is described. Fourth, five interrelated factors are presented that may help explain whether or not management accountants contribute to change processes. These factors are derived from the main case study and from four additional case studies. The final section presents a summary of findings and suggests areas for future research. 2. The role of management accounting in change programs There are two differing views concerning the role of management accounting in developing performance measures within change programs. First, some authors claim that management accounting, traditionally, is well placed to provide information to develop performance measures ŽShank, 1989; Back-Hock, 1992; Nanni et al., 1992; Shields and Young, 1992.. This follows from the established role that management accounting has played in evaluating managerial and organizational performance. It is suggested that accountants have valuable experience in identifying the way specific activities affect the overall performance of the organization ŽHorngren et al., 1994.. Recently, a variety of accounting techniques have been promoted to enhance the way in which performance measures assist in the management of change. These techniques focus on linking processes across operations, and with business strategy. These include the design of balanced scorecard models and performance measurement hierarchies ŽKaplan and Norton, 1992; Lynch and Cross, 1992; Nanni et al., 1992.. These measures may be particularly suited to balancing the initiatives within 1

For example, authors in areas such as manufacturing ŽHayes et al., 1988. and human resource management ŽWilson, 1994. discuss ways in which specialists in these areas can develop performance measures.

Performance Measures within Organizational Change Programs

363

sub-units and corporate-wide goals. While these techniques have been promoted widely in the academic and professional literature, there is limited evidence on the nature of the processes which assist or hinder the role that accountants can play in the development of these innovative systems. The second view concerning the role of management accounting in the development of performance measures is that the involvement of accountants does not necessarily lead to the improved design of performance measurement systems ŽJohnson, 1992; McKinnon and Bruns, 1992.. It has been claimed that there is a potential for management accountants to bring an overly financial view to the task, which may lead to an unbalanced set of performance measures ŽVollman, 1989; Eccles, 1991.. Nanni et al. Ž1992. point out that traditional management accounting performance measures do not track progress in executing strategy. They assert that management accountants have tended to provide performance measures with a product-oriented rather than a process-oriented focus. It is the latter that is more helpful in integrating activities with strategic priorities. There are examples where accountants have had low involvement or have shown little interest in organizational change programs, even when it is apparent that they have the functional skills to assist in the programs ŽHowell and Soucy, 1987; Eccles, 1991.. For example, studies have shown that it was the accountants who most resisted the implementation of an activity-based costing system ŽFoster and Gupta, 1989. and a product life-cycle costing system ŽShields and Young, 1989.. Eccles Ž1991. also claims that the desirability of involvement of either accountants or non-accountants in developing performance measures cannot be assumed as their roles are dependent on the history, culture and management style of the organization. The cases examined in this paper explore how management accounting contributed to the development of performance measures in companies undergoing change programs. In the main case, Cleanco, the performance measures developed by teams lacked coordination and were not supportive of the company’s strategic priorities. While it seems likely that the management accountants had the technical capabilities to assist in guiding the development of a balanced set of performance measures and to ensure that measures directed team activities towards strategic priorities, they were not involved in this process. 3. Research method The organizations reported in this study were chosen as they provided illustrations of the differing roles that management accounting may play in change programs. Thus, the choice of companies examined was not based on random selection, but chosen for reasons to illustrate the issues of concern. This is an appropriate method for choosing cases for analysis when the object is to extend or demonstrate theory ŽEisenhardt, 1989.. The approach involved selecting one company for a relatively extensive case study to explore the role of management accounting in a change program. Following this, four additional companies were studied to identify the extent to which the findings from the first case could be supported. The main case study, Cleanco, was identified as a potential research site as it was well known for undergoing extensive changes involving innovative management

364


practices. This had been documented in business journals and newspapers. The initial area of interest was to study how management accounting was involved in organizational change. Performance measures were found to be an important element of the change program, and became the focus for the research. The four additional cases were studied to provide further insights and elaboration on the findings from the primary case. The companies were chosen from a sample of organizations that the researchers investigated as part of a government-sponsored study of the development of ‘best practice’ in manufacturing companies. The four companies were similar to Cleanco, in that they were introducing change programs and designing new performance measurement systems. In two of the companies management accounting was involved in the changes ŽChemco and FoodInc. while in the other two cases ŽContainers and Coalcorp. accounting was not involved. The data for the cases were collected by interviewing key managers and viewing company documentation. Each interview was tape-recorded and later transcribed for analysis. It was believed that the advantages of tape recording]increased accuracy of data, and allowing the interviewers to give full attention to the interview}far outweighed the potential problems Žsuch as obtrusiveness of the taping process. ŽLofland and Lofland, 1984.. The managers who cooperated in this study were proud of their companies and very eager to share their knowledge. For Cleanco, interviews took place over a period of 6 months. The interviews were conducted by a team of four researchers who interviewed individual managers in pairs. Multiple investigators were used to enhance the creative potential of the study, and to give greater reliability and validity to the data and conclusions ŽEisenhardt, 1989.. The interviews were semi-structured so that similar issues could be addressed with different personnel. Following each interview, the two interviewers and at least one other member of the research team met to compare their understanding of the information gathered during the interview, and to consider the nature of the following investigations that would take place in the company. Using multiple researchers prevented premature closure of ideas by allowing different perceptions and insights to be shared. In all cases interviews were conducted with managers in their offices, which gave the researchers opportunities to observe the work setting, become more familiar with the company and its employees, and engender the high level of trust between manager and researcher that is so vital in this style of research ŽBuchanan et al., 1988.. The researchers were also given access to documentary information that provided additional evidence of the trust of managers. This documentary information included internal performance reports such as budgeting, cost information and operational statistics, as well as copies of internal correspondence concerning the development of new performance measures. 4. A case in performance measurement—Cleanco 2 Cleanco is a manufacturer of cleaners for domestic and industrial applications. It employs approximately 2000 people, and is part of a large conglomerate. The case focuses on the largest manufacturing site of the company, which produces industrial 2

For reasons of confidentiality, the names of all companies reported in this study have been changed.


365

Figure 1. Cleanco: organizational chart.

cleaners. The production of industrial cleaners involves strict quality requirements, raw materials that are difficult to process and wide variations in the size of production batches. There are over 1000 formulas and over 4000 different product variations. An abbreviated organizational chart is presented in Figure 1. Background to the change program In the late 1980s Cleanco introduced programs to change the organizational structure, improve work practices and systems, and modify the nature of the performance measures that were being used. At the time of the case investigation these structures and processes were still developing. Before 1988, Cleanco was regarded by managers within the larger company group as a poor performer both in terms of operational efficiency and financial results. A senior manager noted that it was seen as old fashioned and ‘more of a civil service than like a real company’. The drive to adopt TQM principles commenced with market research which recognized that Cleanco’s customers required more consistent customer service, and that the company was achieving only approximately half of its

366


deliveries to customers on time. The change program was initiated and led by the newly-appointed chief executive officer. The company identified strategic priorities}enhancing customer satisfaction and cost-reduction}that would enable the company to sustain competitive advantage. The first step was to introduce company-wide education programs to encourage all employees to adopt a distinct customer orientation. These training programs emphasized the new values and goals which were key to the new strategy. As part of the changes, non-performing managers were dismissed, which decreased the number of layers of management and increased spans of control. The change program also emphasized improvements in work practices to make the plant run more effectively. Several managers visited progressive Japanese companies and were particularly impressed by ‘cellular manufacturing’.3 Subsequently, the company restructured manufacturing operations into work-based teams centred on manufacturing cells. In addition, special project teams were formed throughout the company to focus all employees on customer service improvement initiatives. The accounting function at Cleanco The structure of the accounting function at Cleanco included a Corporate Accounting Department located within the industrial cleaners production site, which was responsible for preparing financial returns for the parent company, the accounts payable and payroll functions and a variety of management accounting functions. These management accounting functions consisted of administering the budgeting system, allocating costs between various cost and profit centres and processing data for performance reports. The department prepared a monthly Key Performance Measures report that contained financial indicators for the company and a few non-financial measures. These non-financial measures were typical of those used by companies in the industry. They included safety statistics for the plant and the percentage of orders delivered to customers on time ŽDIFT.. A site accountant was located within the manufacturing plant. This accountant was responsible for collecting and processing much of the transaction data at the sites and warehouses, batch costing, producing site reports of actual costs versus budget for the month and many administrative duties. In addition, there was a newly appointed planning and control ŽP & C. manager who reported directly to the manager of the industrial plant. While the P & C manager had been trained as an accountant, he essentially played a senior management role, advising on the financial implications of acquisitions and new projects. He was also taking an interest in performance measurement and the provision of cost information for managers’ decisions. In summary, the accounting function at Cleanco fulfilled traditional accounting activities such as preparing financial budgets and corporate reports. However, the accountants had also developed skills in activity-based accounting and had experience in process improvements. They had participated in TQM training programs within the company and were located in close proximity to the manufacturing operations.

3

Cellular manufacturing refers to work teams where the team is responsible for manufacturing a product or product line from the start of production to the finished product.


367

Performance measurement initiatives There were three main initiatives within the change program that established the impetus and direction for developments in performance measurement. First, the introduction of work-based teams, which centred on cellular manufacturing, provided the basis for an increased customer focus at the shop-floor level. A series of performance measures were developed by the work-based teams and used by the manufacturing managers and the teams. The second initiative was the introduction of a company-wide customer satisfaction training program. This was administered by the Customer Satisfaction Group within the Human Resources Department. An important aspect of this training was the development of customer-focused measures for each work-based team and department within Cleanco. Finally, there were moves to develop a performance-related pay scheme. This was the responsibility of the industrial relations manager and entailed the development of performance measures to reward the performance of work-based teams. Each of these initiatives will be discussed together with the development of performance measures and the role of the management accounting function. The first change initiative: the introduction of work-based teams Prior to the formation of work-based teams, manufacturing operations were structured functionally. That is, one group of employees handled material for production, the next stage in the production process was undertaken by another group of employees, and so on. The new work-based teams Žor manufacturing cells. consisted of approximately 12 people and were established to respond to specific customer requirements. These teams became responsible for receiving the raw materials from the supplier Žthe Cleanco raw material warehouse., processing the materials through several different machines and supplying the product to the customer Žthe Cleanco distribution centre.. Each work-based team reported to the manufacturing manager. Initially, a pilot team was introduced, and during the first 3 months of production significant process improvements were experienced as process time and man hours per batch dropped by approximately one-third. Also, the members of the team reported that they preferred operating as a team; it gave them ‘ownership’ of the product. The new team structures encouraged a strong motivational effect among shop-floor employees. A senior executive commented: Making cleaners is boring! How do we make people more interested in the work they’re doing? Broaden their scope of work, give them accountability and empower them to make the decisions. That’s really where the cellular concept comes from.

During the change processes, the work-based teams were encouraged to broaden their focus beyond routine manufacturing activities, and both manufacturing managers and production workers recognized that self-management within teams required consideration of process-oriented and customer satisfaction performance measures, greater awareness of safety and greater budget accountability. The development of performance measures. Many senior managers in Cleanco believed that performance measures were critical to the change processes. They provided ways of facilitating continuous improvement in key areas and promoting behaviour in ways

368


that would help sustain competitive advantage for the company. As part of the change process there was a move away from traditional process-based manufacturing measures which emphasized productivity and efficiency, towards a focus on customer satisfaction. The new customer-focused measures directed company employees towards improving product quality, delivery times and the accuracy of delivered orders. The processes that were used to develop new performance measures Žsuch as discussions within work-based teams and training workshops. encouraged a high level of involvement among team members, which further strengthened customer awareness. Before the introduction of work-based teams, manufacturing managers had developed and used a series of operational performance measures. These were delivery in full and on time to the customer ŽDIFT., safety and labour hours per batch. With the introduction of teams, more specific and actionable measures were developed to monitor manufacturing performance. Each team monitored approximately three or four measures that they believed were the most important for their operations. The measures varied with each team, and were chosen by the team members, with the help of the manufacturing manager or supervisors. For example, a particular workbased team might focus on productivity if that was considered a problem for that team. While each team included a measure of process time, this might only relate to some small section of their process. These measures were displayed on a board in the team’s work area, to focus the attention of the team members, and to allow problems and comments to be written alongside. DIFT had been used by Cleanco and in the industry for several years, and within Cleanco, was considered an important measure that captured many aspects of company performance. After introducing work-based teams, monthly DIFT performance for the plant continued to be reported throughout the company as part of the Key Performance Measures report produced by the Corporate Accounting Department. Also, team members developed several measures that they believed contributed to achieving a high DIFT. These ‘micro measures’ were monitored and used by manufacturing managers and team members, but not reported to, or used by, managers outside manufacturing operations. The measures related to processing: cycle time, rework percentages, idle time, percentage of batches adjusted. Safety was also considered important to the manufacturing managers, and had been reported in the accountant’s Key Performance Measures report prior to the change program. While these measures were not modified over the change period, the monitoring of safety adopted a higher profile. This was a result of safety receiving a higher priority by the parent company, and a particularly enthusiastic safety manager. The senior manufacturing manager explained: Our emphasis is on safety and occupational health first, then customer satisfaction, then the costs. The first thing I look at in the morning is the safety standards. I am fanatical about safety. The higher the safety standards that we seem to get, the better our quality. I know it’s the wrong way round, but it seems to be that way. The higher the safety standards the less industrial trouble. The higher the safety standards the better the place is kept}the more people take care of it. If someone raises a safety issue it’s investigated and it’s done}and we’ll talk about the money later.

Safety performance was monitored by all production employees and included the number of first aid injuries, participation in various safety programs, audits of processes and procedures and housekeeping.


369

The role of the accounting function. While the measures developed by work-based teams were recognized as important for monitoring particular activities, it was apparent that team efforts did not always support the company’s dual strategic priorities of customer satisfaction and cost-reduction. Some managers were particularly concerned about dysfunctional effects of the heavy emphasis placed on the DIFT measure and potential damage to both future sales and cost-control. However, they did not raise these concerns with the accountants nor actively encourage the development of a strategically-driven performance measurement system. The first concern with DIFT was that it did not distinguish between whether major or minor customers were being serviced accurately. The implications for the future business of Cleanco of failing to meet the orders of two major customers was probably greater than missing 10 minor customers. However, it was easier to achieve 100% DIFT on minor customers as this usually involved orders of smaller numbers and quantities of products. Second, a high DIFT could be achieved at great cost to the company. One distribution centre of Cleanco was achieving 100% DIFT by simply working all night to make delivery deadlines, or simply purchasing the cleaners from a retail store and delivering them to the customer! These forms of behaviour were inconsistent with a balanced approach to customer service and cost. A key aspect of developing work-based teams was to encourage teams to gradually develop and manage their own cost budgets. The potential dysfunctional effects of teams focusing on customer needs without concern for costs was explained by a senior manager: The guys in each of the teams are aware of the budget, they’re aware of the forecast and what they should produce, and they’re aware of the variance to that budget. Now whether it means a hell of a lot to them or not is questionable. wIndividuals in the teams believe thatx if a customer wants something he gets it and if you have to spend more money than you should, that’s a price you pay for servicing the customer. So the focus is not what’s it going to cost us, that’s a secondary issue.

The manufacturing manager emphasized that manufacturing performance measures had been discussed and debated in great detail by manufacturing managers. However, he reported disappointment concerning the lack of interest and involvement of the management accountants: It’s just ridiculous, here am I running my own systems and I’ve got all this nice stuff and I’m sure other people in other sites have got all their nice stuff. At a recent meeting of all the site managers we were trying to pull together the performance measures we thought were very important, and we had a list of about 50}but we’re basically in the early stages and whether the accounting people care or are interested, I really don’t know, because we don’t interact.

The senior manufacturing manager also described the role that the accountants played: They tend to be reporters}they report on costs, they consolidate, they provide the legal documentation every month Žincome statements and all the rest of it., so they tend to be after-the-event, except when it comes to budgeting, then they’re at the forefront. They basically count and report. They don’t have much interest in performance measurement.

370


The accounting function could have assisted work-based teams in focusing their activities on achieving a greater cost consciousness through the role of the site accountant. The site accountant calculated some monthly accounting data, including labour hours per batch, which he reported to the manufacturing managers. Labour hours per batch was a traditional manufacturing performance measure, and the site accountant believed it to be the most important performance measure for manufacturing. However, this measure was not considered important by manufacturing managers and the teams, and did not support or relate to customer focus. It was evident that the site accountant was ineffective in providing a supportive role for the work-based teams at Cleanco. In summary, there was growing concern that performance measures were encouraging actions that were inconsistent with the overall strategy of satisfying customers while maintaining cost-efficiencies. There was a potential role for the accountants to participate in assisting teams that were developing non-financial performance measures, and advising them as to the potential use of balanced measures. Moreover, the accountants had many opportunities to work with senior managers to develop integrated performance systems. This followed from their role in producing the monthly Key Performance Measures report, and through the role played by the site accountant. However, they did not respond to these opportunities. The second change initiative: customer satisfaction training program The second change initiative at Cleanco was the creation of a company-wide training program aimed at encouraging an improved customer focus. The objective was to develop a strong customer focus throughout the company and for customer satisfaction to become ‘the way of doing business’. The program was initiated by the Chief Executive of Cleanco who had a ‘gut feeling’ that concentrating on customer satisfaction could provide a competitive advantage for the company. The customer satisfaction manager described the events: No one in the industry was doing this. We were the biggest in terms of sales volume and R & D, but we were providing terrible returns to our parent company. People in the industry were renowned for poor service... our customers had low expectations so we thought we could actually steal a bit of a march. And we did, and it’s had rippling effects in the organization.

The customer satisfaction training program was managed and conducted by the Customer Satisfaction Group in the Human Resources Department. The Customer Satisfaction Group believed that a key to changing the organization was to focus on social skills and leadership: There’s a real understanding that the thing that’s going to make a company different from another company is its people. It is the behaviour that makes a difference. Fifty percent of the job is technical skills, the other 50% is the behaviour.

As part of this process, leadership workshop programs were established and attended by all senior and middle management. However, the central activity of the Customer Satisfaction Program was customer satisfaction training. This was undertaken by work-based teams and employees in all departments of the company. Notably, the management accountants did not participate in training that focused on leadership skills.


371

The training involved five steps. Each department was encouraged to identify their customers, and talk with those internal Žor external. customers to understand their requirements. The department identified their work processes and the way that they contributed to satisfying customer requirements. A manager noted: We ask, what are those processes? People usually say ‘we haven’t got any, we don’t know what they are’. A lot of time is spent in working through and even flowcharting them because of disagreements about how things work.

As part of the process, performance measures were developed by each department to address the areas which were critical to customer satisfaction, and procedures were developed to reduce variability in performance. Continuous improvement processes were driven by the question ‘What are the steps we have to take to actually achieve continuous improvement?’ The role of the accounting function. Several senior managers within Cleanco described the company as having shifted from a heavy reliance on financial measures towards a greater focus on non-financial measures, particularly those related to customer satisfaction. At management meetings a large proportion of time was spent discussing non-financial performance. The chief executive of the company regularly addressed all employees on the performance of the company, and typically considered nonfinancial measures before the financial ones. However, many senior managers believed the lack of balance between financial and non-financial measures did not encourage an assessment of the cost and benefits of improving customer satisfaction. It seems likely that the lack of integration between measures arose because the measures evolving under the Customer Satisfaction Program were developed independently from the financial measures used in the accountant’s monthly Key Performance Measures report. The role that the accounting function played in the Customer Satisfaction Program was that of a participant department. As part of the program, the Corporate Accounting Department was required to examine their relationships with their Žinternal. customers. It was during this exercise that the level of dissatisfaction with the accounting function was revealed: If you talk to people about their perceptions of the service they provide in accounting, they’re either really annoyed with the service they get or they say, ‘well I do all my own stuff anyway because I can’t rely on the data that they provide me with’. So they’ve got a real integrity problem with the whole organization. The Information Systems Department is important to Accounting and yet that relationship doesn’t seem very good. We actually look to the accountants to provide the scorecard for the organization. There are huge opportunities in accountants being attached to the business operations providing explanations and providing some advice, providing some sort of consultancy service. So I think that’s pretty important and building the relationship and being seen as part of the business, part of the team rather than a supplier. The whole relationship needs to change within Cleanco. Now I think it might be a criticism we could level at the whole industry. The issue is being ‘a team player’ and working on their relationships with the other departments. It’s not as though we have a bucket load of resources, so we need them to help us.

372


In summary, the Customer Satisfaction Program was considered important in reinforcing the customer orientation throughout the company. However, there was concern among some managers with the increasing emphasis on customer satisfaction measures, to the neglect of other measures, particularly financial measures. The accountants did not take the initiative to become involved directly in the program, except as a participant department. Consequently, any potential influence they may have had on balancing the performance measurement system could not take place. The third change initiative: performance-related pay The third change initiative was the development of a performance-related pay system. In the early 1990s, the industrial relations ŽIR. manager of Cleanco was given the responsibility of developing performance-related pay systems for all departments. The performance-related pay scheme was aimed at allowing all employees to share in profit increases, to provide incentives for greater productivity improvements and increased profitability. The development of performance measures. The performance-related pay system was to be implemented, initially, in the manufacturing and warehousing areas of the company. The IR manager called a meeting of all plant managers and team leaders from all Cleanco plants to identify appropriate measures for the new system. From approximately 35 potential measures, the IR manager identified seven as appropriate for the industrial products plant. These are described in Table 1. The safety and DIFT measures were included as these were traditional measures acceptable to all production employees. The remaining five measures were chosen as they contributed to achieving DIFT. The ‘forecast accuracy’ measure was not within the control of work-based teams, as it related to the production planning estimates that were provided by the Marketing Department. It was included, though, to encourage increased communications between non-manufacturing and manufacturing personnel, and to allow the effect of inaccurate forecasts on manufacturing operations to be highlighted. These measures would be displayed in prominent places within the plant, showing actual performance against targets. Targets and measures would also be broken down by work-based teams. This initiative provided an excellent opportunity to develop an integrated set of performance measures, as it was intended that the performance-related pay system would be integrated with the Customer Satisfaction Program.

Table 1 Measures for performance-related pay Performance measures Safety DIFT Items unsupplied Made on time Cycle time Batch accuracy Forecast accuracy

Definitions No. of days since last medically treated injury Percentage of customer orders delivered in full and on time}month to date No. of items per 1000 items ordered}yesterday Percentage of batches delivered to warehouse by due time}month to date Time it takes to complete manufacture of a standard batch}month to date Percentage of batches requiring adjustments}month to date Percentage of forecast within actual specifications each month


373

The role of the accounting function. The IR manager approached the Corporate Accounting Department and the P & C manager to gain their assistance in designing and running the new performance-related pay system. This was necessary, as the impact on profitability of improvements in each of the measures needed to be assessed before bonuses could be paid. Work-based team members were to be paid a share of any cost savings that they achieved through improving performance. However, the IR manager experienced opposition from the accountants to the scheme. He also became aware that a conflict existed between the accounting and manufacturing personnel, evidenced by their inability to communicate. The P & C manager stated that the measures selected and their definitions were ‘abysmal’, because there were ways of achieving improvements in the measures that would not improve overall profitability. He also stated that it was inappropriate to link pay to those measures, as it was difficult to quantify the effect of improvements in those measures on cost levels or profitability. For example, the accountants claimed that they could not gauge the profit effect of a 1% improvement in DIFT. In fact the P & C manager stated that he could not prove that any cost improvements flowed from DIFT improvement. In response to these concerns, the accountants suggested an alternative set of performance measures for manufacturing operations: v v v v v v

Safety. Percentage of batches requiring adjustment. Quantity of reworked products. Number of changes to manufacturing schedule. Number of complaints received from customers re product quality. Absenteeism.

They also added measures for cost and stock levels: v

v v v v

Manufacturing controllable cash fixed costs for each work-based team Žcost centre.. Stock losses. Stock write-downs. Raw materials stock turnover. Stock held for greater than 6 or 12 months.

While the IR manager appreciated the need for balanced measures to reduce the incentive for ‘gaming’, he was not happy with the accountant’s suggestions. He also believed that there were confidentiality issues in placing costs and cost targets on public display boards}whether total departmental or team costs or standard production costs. The IR manager commented: The accountants want the measures to be all encompassing, and they find it hard to talk in the language of the shop floor. They are mostly interested in costs and stock levels. The shop floor understands cycle time and DIFT, but not ‘manufacturing controllable cash fixed costs’. The guys will not understand this}what does it mean! If we use ‘cost per cost centre’ as a board measure it can be taken out of context. We’ll get guys asking, ‘Why has this group got a million dollar budget, and we have only half a million dollars’. How do you put costs up on a public display board without breaching confidentiality?

The IR manager strongly believed that the accountants should be the ones to run

374


the performance-related pay scheme as they were the ones who could best process the data and determine the size of the bonuses}‘the bean counters are the best ones to dish out the money. I ultimately want them to take ownership’. However, until he was able to get the accountants and manufacturing managers to meet and agree on a new system, the manufacturing performance-related pay system would not proceed. Summary From the case description it is apparent that performance measures were considered to be of key importance in effecting change within Cleanco. In particular, non-financial measures were widely accepted, especially within manufacturing operations, as providing ways to monitor performance and encourage continuous improvement. However, the development of performance measures was uncoordinated, and some managers believed that operational measures, particularly those initiated by workbased teams, were not linked with broader strategic priorities. Particularly, they were not sufficiently integrated to balance customer satisfaction and cost.

5. Case analysis Earlier we examined opposing views of the potential role of management accountants in developing performance measures within organizational change programs. We observed that at Cleanco the management accountants were not involved in developing performance measures. It is possible to identify, from the case, five interrelated factors that may help influence the extent to which management accountants contribute to the development of performance measures. The first factor is the existence of a shared view of the role that the accounting function can play within change programs; second, the level of senior management support for the development of management accounting innovations; third, the presence of a management accounting champion; fourth, the level of technical and social skills of management accountants; finally, the positioning of management accounting within the formal hierarchy. Each of these factors will be considered, first, in the context of Cleanco. Brief summaries of the experiences of four additional companies will also be presented to provide some validation of the findings. Table 2 presents a summary of the five factors as they relate to the five companies. Chemco and FoodInc are examples of companies where management accountants were closely involved in the change programs. At Containers and Coalcorp, management accountants had little involvement in change. Further details of the four additional companies are presented in the appendix. A shared view of the role of the accounting function A shared understanding of the constructive role that management accountants can play in organizations pursuing change programs, has been identified as important in ensuring the relevance of management accountants ŽSimons, 1990; Dent, 1991.. Particularly, for accountants to contribute effectively to the design and management of performance measurement systems, they must want to participate, and managers must actively seek their contribution.


375

Table 2 Summary of cases studies by the five factors Shared view of Senior Accounting role of accounting management champion within change support for programs accounting innovations Involvement of accountants within change programs Chemco Yes Yes Yes FoodInc Yes Yes Not needed No involvement of accounting within change programs Cleanco No No No Containers Coalcorp

No No

No No

No No

Accountants have well-developed technical and social skills

Authority of accountants derives from formal hierarchy

Yes Yes

No No

Social skills}no Technical skills}yes No No

Yes Yes Yes

There was some uncertainty, among the managers at Cleanco, as to the role of management accounting within the change program: should they be involved in designing performance measurements systems at the operational level, or should they only be responsible for providing traditional financial performance measures? The accountants claimed they were under pressure to prepare conventional financial accounts and saw this as their main priority. While they were skilled in innovative management accounting methods, they appeared unclear as to their role and the potential use of these methods in the change program. The manufacturing personnel believed that the accountants were technically competent but were not helpful in assisting in the development of performance measures. Yet, many managers considered that the accountants should have provided greater assistance, and expressed disappointment with their contribution to the performance-related pay initiative. At the same time, senior management did not encourage the accountants to assist in developing measures that could address the growing problem of an unbalanced performance measurement system. Thus, at Cleanco there was a lack of a shared understanding of the objectives of the accounting function; there was no common view as to the appropriate accounting culture within the changing organization. The uncertainty of their role contributed to conflict and a growing dissatisfaction with the accounting function. At Chemco and FoodInc there appeared to be common understanding of the potentially useful role that management accounting could play within the change program. The management accountants were involved closely with the team-based change initiatives, and interacted with senior managers and employees to develop performance measures and undertake cost-management exercises. At Chemco the management accountants played an active role as members of cross-functional process improvement teams. They gained considerable credibility as they had the skills to identify ‘quick fixes’ in cost-reduction projects. The nature of the accounting culture at Chemco is captured in a comment by the customer service manager:

376

R. Chenhall and K. Langfield-Smith The customer focus is really hitting home with the accountants. They are looking at the customer outside the company, and their customers inside the business, and asking ‘what can we do to help?’. And they actually make changes to the systems to help their customers}it’s fantastic.

It appears that the role of management accounting had undergone considerable change, in parallel with the changes that were taking part in the wider business. Part of this change was the new policy of recruiting accountants who had stronger technical skills, including experience in developing performance measures, and who had broad-based business skills. In Chemco, there was a common understanding of the potentially useful role that management accounting could play in the change initiatives. Part of the implementation of a comprehensive planning and control system at FoodInc involved the senior managers and accountants developing a recognition, throughout the organization, that performance measures were important in achieving an integrated effort towards change. A senior manager claimed that the comprehensive planning and control system was based on a culture ‘in which the performance evaluation system was accepted throughout the organization as essential to make the respective elements fit together as a whole’. A performance measurement process ŽPMP. was developed interactively over 4 years, in direct response to the requirements of employees and managers for performance measurement information. The extent to which the accounting culture was shared throughout the organization is evident in the way in which the PMP was implicated in a broad range of managerial functions. These were described by a senior manager as: ...linking business plans, shared values and individual key results; increasing manager and employee accountability and participation in managing performance; implementing team performance reviews to monitor teamwork effectiveness; ensuring an equal focus on both goal setting and evaluation; providing a key tool for employee development; assisting in ensuring fair evaluations across departments; performing a personal development review to help determine performance related training and development.

The accounting culture was seen to fit with other processes ‘that focused on ongoing coaching and feedback from customers, suppliers and peers’. At Containers and Coalcorp the company’s management accountants were not involved in the development of performance measures. In commenting on the major impediments to the success of implementing change programs, senior managers at Containers suggested that many middle managers and the accounting staff had been isolated from the dynamics of change. Containers efforts in developing performance measures that assisted in balancing customer service, delivery and cost, involved seconding an accountant from the parent company and employing a consultant to develop an activity-based management system focused on integrated performance measures and cost-management within teams. The consultant sought information from teams on their views as to appropriate measures and reviewed these with senior management over a period of 4 months. At the end of this period, the consultant’s contract concluded and the seconded company accountant returned to the parent company. The result of this effort was


377

the design of a technically sophisticated activity-based management system. Yet, this system was not implemented for 12 months, and then mainly as a mechanism to sensitize teams to cost-management principles. There was some confusion as to the intended involvement of the accounting department in the new activity-based systems. There was considerable activity in the development of performance measures in the parent company of Coalcorp. However, there was little interest from Coalcorp’s management in introducing these innovations. Coalcorp’s management believed that their local accountants should be concerned only with conventional financial functions, and which did not include involvement in performance measures related to the mining process. The performance measures used by Coalcorp were very much focused on operational matters such as safety and yield, but did not directly support the profit-based strategy. Through their contact with the parent company accountants, the local accountants understood the potential for accounting to play a wider role within the company. Particularly, it was clear that performance measures could act to balance safety and yield with profitability. However, they believed that their primary loyalties were to the managers of Coalcorp, and they did not seek to promote accounting techniques implemented within the wider corporation. In summary, at Chemco and FoodInc there appeared to be a common understanding among managers and accountants that the management accounting function could make a useful contribution to the change activities. At Containers and Coalcorp such an understanding was lacking. Some of the factors that may lead to the development of a common understanding, and may have contributed to the ability of accountants to participate, will be discussed in the following sections. Senior management support for accounting innovations The importance of senior management support for the adoption of innovations in general has been recognized ŽKanter, 1983; Walton and Susman, 1987., and in particular for accounting innovations ŽCampi, 1992; Keegen and Pesci, 1994.. At Cleanco, senior management did not seem to expect innovative practices to originate from the accountants, and limited their accounting expectations to matters concerning budgets and corporate accounting matters. One explanation for this lack of concern with accounting innovations is that senior managers’ attention was focused on the technical aspects of the change programs, such as improvements in production processes and restructuring into manufacturing teams, which they believed could produce short-term performance improvements. Consistent with the notion of ‘accounting innovation lag’ ŽDunk, 1989; Foster and Ward, 1994., it seems plausible that senior management did not recognize, or did not greatly value, the potential longer term benefits that may arise from developing innovative performance measures. At Chemco, senior management recognized that both technical and accounting innovations could provide benefits for the company. Improvement to performance measures were often raised as an issue of concern when implementing these innovations. Accounting personnel were actively involved in the change programs, and were able to contribute to improvements in performance measures. The support for accounting innovations was also high at FoodInc, as management

378


recognized that accounting innovations were complementary to implementing technical changes. Accountants were involved directly in these change initiatives. In contrast, while senior management at Containers initiated the decision to develop activity-based management there was little initial enthusiasm to implement the performance measurement and cost-management systems. After 12 months senior managers recognized the potential benefits to be gained from the new systems and set about their implementation. This included identifying the potential for the accountants to contribute to the systems and devising technical and social training programs for them. The management team at the parent company of Coalcorp was recognized in business circles and the media as highly professional and progressive. Attention was given to both technical and accounting innovations, but at Coalcorp the main concern was with technical innovations. Coalcorp was geographically isolated from the parent company and management and accountants had little contact with the parent. While the parent sought to implement innovative accounting systems throughout the group, the barriers of distance and a desire to preserve local ways enabled Coalcorp’s management to ignore, or at least postpone, addressing head office accounting innovations. In all five companies there was a high level of enthusiasm among management for technical innovations. However, in only two companies, Chemco and FoodInc, was there a recognition of the complementary nature of accounting innovations. It remains unclear as to how accounting lag may be effectively countered within organizations. Championing the accounting function As technical innovations can dominate the attention of senior managers in the early stages of change programs, it is likely that forceful action is required if the potential benefits from contemporary accounting systems are to be considered throughout the organization ŽKanter, 1983; McNair et al., 1990.. A strong and influential ‘accounting champion’ may assist in gathering support and generating high levels of enthusiasm for the involvement of accounting in change programs. At Cleanco, the lack of interest from senior management in innovative accounting was not challenged by an aggressive championing of the accounting function. Leadership to effect the development of performance measures was not provided from the accountants who were passive and did little to initiate innovative practices. They did not see their role as introducing change, even when encouraged to do so by other managers. Some leadership in accounting matters at Cleanco came from the P & C manager, who had skills and experience in accounting. He had recently joined the company and was much more assertive in initiating debate over the potential role for accounting to assist in the change programs. It is noteworthy that he was not located within the Corporate Accounting Department. This may well have contributed to his lack of direct influence on the management accountants. The most striking example of the impact of a champion of management accounting occurred at Chemco. The divisional accountant was a dynamic personality and had a broad vision of the future of the accounting role. He described his proactive approach:


379

My objective is to get as many accountants out in the field as possible. Unless the accountants start to work with the operational people we will never be able to achieve a better result.

Senior management confirmed that the divisional accountant was important as a change agent and had been instrumental in initiating development of performance measures that related ongoing activities with the overall strategic priorities. At FoodInc the accountants formed part of the management team that developed and implemented the PMP. The company did not require an accounting champion to promote accounting innovation because managers, employees and accountants all shared a common view of the role and purposes of accounting within the organization. A contrasting situation was found at Containers where the accountants did not command the respect of senior management and were considered somewhat unimaginative. Certainly, they did not actively propose accounting change and appeared not to have urged senior management to involve accountants in the process of designing the activity-based management system. It seems likely that the passive nature of the accountants contributed to their exclusion from the design of new systems and to the slow adoption of the systems. At Coalcorp, there were no accountants championing change. The local accountants accepted that their duties comprised managing traditional functions such as purchasing and accounts payable, cash flow management and financial budgeting. While they had the respect of managers, they seemed reluctant to risk antagonising management by suggesting a stronger role for accounting in the company. This was the source of some conflict between the dynamic chief controller of the parent company and the local accountants. It seems that the presence of a strong accounting champion has the potential to counter uncertainty among accountants or management as to the value that accountants can add to change programs. Also, the champion may act to promote enthusiasm for accounting innovations among management. This appears to have been the case at Chemco. Alternatively, as was found in FoodInc, in situations where there is strong management support for an active role for accounting in change programs there may be little need for an accounting champion. Social and technical skills of the management accountants Leadership represents only one factor influencing the social interactions that take place between individuals within organizations. Understanding the way in which management accountants interact with others involves considering the nature of both their social and technical skills ŽKinnie, 1989; Shields and Young, 1989.. At Cleanco, management recognized the accountants’ abilities in servicing corporate reporting requirements. However, the accountants’ skills were not limited to these traditional functions and included many aspects of contemporary accounting. They were familiar with activity-based costing and non-financial performance indicators. Moreover, as part of the customer satisfaction program, they had analysed and re-organized their own work processes. Like all personnel in Cleanco, the accountants had received training in TQM. Given this technical expertise it was surprising to many managers that the accountants were not involved in assisting others in the organization to develop performance measures.

380


During the customer satisfaction training and the development of performancerelated pay, the nature of the poor relationships between the accounting department and its internal customers became evident. Some managers expressed frustration at the accountants’ reluctance to interrelate with managers and operational team members. It appears that to develop performance measures at Cleanco, the accountants faced the demanding tasks of both gaining the trust of operational employees and the confidence of senior managers. Accounting researchers have noted that the development of trust between accountants and the users of accounting information is an important factor linked to the effective development of accounting systems ŽFoster and Ward, 1994; Ross, 1994.. It has been suggested also, that the development of social skills required to engender trust involves considerable human relations sensitivities and individual commitment to cultivate appropriate interpersonal skills ŽSenker, 1985; Buchanan and McCalman, 1988.. At Cleanco, it seems plausible that the accountants lacked the social skills that have been identified as essential for individuals to participate effectively in change programs ŽKotter and Schlesinger, 1979; Schonberger, 1986.. One way of assisting in developing these skills is to commit time and effort to social skills training ŽKinnie, 1989; McCall, 1993.. At the time of writing the Cleanco case, specific training in critical interpersonal skills had not been undertaken by the accountants. In summary, the accounting expertise at Cleanco included technical skills broader than merely cost-accounting. However, the social skills that could assist them in liaising with teams and senior management appeared deficient and targeted training was not provided. This may have limited the potential for the management accountants to contribute towards the major change activities of the company. At Chemco and FoodInc the accountants’ abilities to relate with others in their respective organizations was strong. Several Chemco managers commented that the accountants had helped bring about change as they were able to talk directly to managers and to teams of employees. The successful involvement of the accountants appeared to be partly a consequence of their skills in performance measurement and cost-management and their broad company view; and partly due to employees’ enthusiasm to discuss their information requirements with the new style accountants who seemed to be open and willing to talk about issues concerned with running the business. The accountants at FoodInc also had high levels of technical and social skills. As part of the implementation of a comprehensive planning and control system, the company developed extensive social training modules to emphasize the importance of communications between staff at all levels Žincluding accountants. and to establish trust. This was seen as critical to the acceptance of the performance measures by senior and manufacturing managers and team members. A senior manager commented: We see the training project as making all the bits and pieces of our change program fit together. It considers all aspects of our business which we embraced in the concept of our integrated approach to best practice.

An important component of the social skills training program was to ensure that the role of accountants was ‘coach not cop’. Senior managers believed that the efforts


381

to develop new performance measures had been successful and depended on the formation of a ‘non threatening environment with the correct mix of training, communication, leadership and a great deal of empathy and understanding’ between managers, accountants and the shop floor. At Containers, the accountants were excluded from the change initiatives, even when these involved developing enhanced performance and cost-management systems. While the accountants acknowledged that they did not have the technical skills to develop such a system, they were concerned that they had not been invited to contribute to the new developments. Nor had the company or its consultants suggested that they should be trained in the techniques of activity analysis and its implications for the accounting systems. It seems likely that the exclusion of the accountants from developing the new system isolated them further from manufacturing operations and senior management. The accountants at Coalcorp, who were aware of accounting developments in the wider company, had difficulties in communicating the value of these innovations to managers. While we do not have any direct evidence to suggest a lack of social skills, it is clear that the accountants did not have the confidence to initiate discussion on new accounting methods, or to act as intermediaries between the innovative parent company accountants and the management at Coalcorp. In summary, a combination of well-developed technical and social skills, as possessed by the accountants at Chemco and FoodInc, may assist the participation of accountants in change programs. While the Cleanco accountants had sufficient technical skills, like the accountants at Containers and Coalcorp, their lack of social skills prevented them from successfully interacting with teams and contributing to the change processes. The positioning of accounting within the formal hierarchy The importance of accountants operating independently of the formal hierarchy is consistent with the recommendations of several authors that control mechanisms in organizations requiring high levels of integration should rely on ‘integrative personnel’, not on formal hierarchies ŽLawrence and Lorsch, 1967; Macintosh and Daft, 1987; Mohrman, 1993.. The accounting function at Cleanco was isolated from the new team-based structures on the shop floor, and remained positioned within the formal bureaucratic hierarchy which had existed prior to the change program. This may have made it difficult for the accountants to be accepted as partners with the shop floor team members and to participate in change initiatives. The accountants continued to rely on their position in the formal hierarchy for their power and functioning. As a result, team members identified the accountants as part of the old bureaucracy, and appeared unwilling to have them act as participants within their teams. The position of the accountants in the hierarchy at Chemco had changed over the prior 3 years. Originally they were located in the head office and had been identified as a service, supporting senior management and producing the company’s corporate accounts. Next, they had moved out of their head office service unit to play a hands-on role in the business units. At the time of researching the case, the accountants at the business unit level were in the process of relocating to the production plants, to be closer to the core activities of the business. The divisional accountant stated that the function of the accountants was to work

382


closely with the production and sales people, to gain their respect by giving business advice and acting essentially in a training role to keep staff from ‘losing perspective’. This orientation was dramatically different from the situation at Cleanco. At FoodInc, the formal hierarchy had been abandoned, which facilitated the involvement of accountants, and other specialists in the operations of the business. Teams were expected to assess the adequacy of communications with accountants and the usefulness of decision support systems. Given this orientation, the accountants were forced to gain the acceptance of the teams to justify their involvement in assisting in implementing the performance evaluation systems. The source of authority for the accountants at Containers and Coalcorp was similar to that at Cleanco. Senior managers believed that the accountants’ main role was to prepare corporate financial accounts and assist in areas such as managing accounts payable and receivable, and maintaining financial budgets. The accountants developed information systems to provide data for these functions. These systems were sanctioned from above and compelled manufacturing managers to provide the required data at specified times. Consequently, accountants interactions with the employees were perceived as being authorized by senior management and communications tended to flow through formal channels. Senior managers at Containers commented that any future involvement of accountants in assisting team members in their activities would require the accountants to gain their legitimacy from the team members, rather than rely on their formal connections with senior management. At Coalcorp the activities of the accountants were also focused primarily on gathering financial data to complete accounting reports that were required by the parent company. The activity of coalmining was the focus of all employees of Coalcorp, except the accountants. The nature of their accounting functions set them apart from the other employees, and their isolation and clear reporting relationships with the parent company did not contribute to any hands-on involvement with change. In summary, the findings of the cases suggest, that in organizations that have adopted team-based structures, accountants who continue to derive their authority from their position in a formal hierarchy are likely to have difficulty being accepted by teams. 6. Concluding comments The focus of this study was to explore the role that management accountants may play in the development of performance measurement systems in organizations undergoing change programs. A major case study, Cleanco, and four minor cases formed the basis for identifying five interrelated factors that may influence the potential for accountants to play an active role in the implementation of change. At the broadest level, the case studies illustrated the extent to which the culture of the accounting departments matched with those of the organizations, as they sought to implement change programs. The first factor identified as influencing the participation of management accountants in change activities is a shared view among managers and accountants of the role that the accounting function can play within change programs. In only two


383

companies was there a strong shared view that accountants could make a useful contribution. Second, it was suggested that accountants are less likely to participate in change when support for the development of accounting innovations is neglected by senior managers who enthusiastically promote technical initiatives. However, the evidence suggests that concern with technical change does not necessarily inhibit the adoption of accounting innovations. Our third factor, suggests that an ‘accounting champion’ may be required to promote the role of accounting in change activities, particularly in the face of weak management support. The need for well-developed technical and social skills among accountants was identified as the fourth factor. Training is important in enhancing the social skills of individuals involved in change programs ŽKotter and Schlesinger, 1979; Schonberger, 1986; Keep, 1989.. It may also be important in ensuring that management accountants possess those technical skills that provide the basis to develop a strategic focus. The final factor relates to the position of accountants within the formal hierarchical structure. A reliance by management accountants on the formal structure for their authority was found to be an impediment to their involvement in change programs that involved team-based structures. The evidence from the five cases presented in this paper raises issues concerning the potential for management accountants to play an active role in implementing change programs. As such, the paper contributes ‘to our emergent appreciation of the way in which accounting is used in organizations, usefully supplementing the more quantitative approaches to research pursued by contingency theorists’ ŽDent, 1991.. There are several opportunities for future research that arise from the findings of this study. In general, additional case material, particularly longitudinal studies of the way accounting systems evolve within change programs, are required to validate and extend the findings of this study. Future studies into implementing contemporary management accounting may well benefit from combining knowledge from human resource management and management accounting. More specifically, future research may investigate how organizations develop different types of accounting cultures, and determine the impact of these cultures on the effectiveness of management accounting and organizational performance. Dent Ž1991. provides some helpful insights into studying how accounting cultures can change as organizations undertake change programs. Further studies are also needed to discover how and when the need for accounting innovations are identified and evaluated, as organizations undertake change. In the light of the neglect of accounting innovations in favour of technical innovations, another fruitful area of inquiry is the extent to which management accountants, or others, can counter any tendency for accounting innovation lag by effectively championing the potential role of management accounting in change programs ŽShields and Young, 1989; McNair et al., 1990.. Finally, our evidence suggests that there was a need for accountants to develop social skills to allow them to interrelate with and to gain the trust of employees and managers. Trust has been identified as important in ensuring that members of the organization accept accountants as providing a service that is potentially important to their change activities. However, more research is required to aid our understanding of the dynamics involved in ensuring effective interaction between operational personnel and accountants, the latter having the dual role of gaining acceptance by operational personnel and of liaising with senior management.

384


References Back-Hock, A., 1992. Towards strategic accounting in product management: Implementing a holistic approach to a data and methods base for managerial accounting, European Journal of Operations Research, 61, 98]105. Buchanan, D. A., Boddy, D. G. and McCalman, J., 1988. Getting In, Getting Out, and Getting Back, in Bryman, A. Žed.. Doing Research in Organizations, London, Routledge, pp. 53]67. Buchanan, D. A. and McCalman, J., 1988. Confidence, Visibility and Performance: The Effects of Shared Information in Computer-Aided Hotel Management, in Boddy, D., McCalman, J. and Buchanan, D. A. Žeds.. The New Management Challenge: Information Systems for Improved Performance, London, Croom Helm, pp. 17]29. Campi, J. P., 1992. Its not as easy as ABC. Journal of Cost Management, Summer, 5]11. Chase, R. B. and Garvin, D. A., 1989. The service factory, Harvard Business Review, July]August, 61]69. Cohen, S. G., 1993. New Approaches to Teams and Teamwork, in Galbraith, J., Lawler III, E. E. and Associates Žeds.. Organizing for the Future } The New Logic for Managing Complex Organizations, San Francisco, Jossey-Bass, pp. 194]226. Dent, J. F., 1991. Accounting and organizational cultures: A field study of the emergence of a new organizational reality, Accounting Organizations and Society, 16, 705]732. Dunk, A. S., 1989. Management accounting lag, Abacus, 25, 149]155. Eccles, R. G., 1991. The performance measurement manifesto, Harvard Business Review, January]February, 131]137. Eisenhardt, K., 1989. Building theories from case study research, Academy of Management Review, 14, 532]550. Foster, G. and Gupta, M., 1989. Manufacturing overhead cost driver analysis, Journal of Accounting and Economics, January, 309]337. Foster, B. P. and Ward, T. J., 1994. Theory of perpetual management accounting innovation lag in hierarchical organizations, Accounting Organizations and Society, 19, 401]411. Hackman, J. R., 1987. The Design of Work Teams, in Lorsch, J. W. Žed.. Handbook of Organizational Behavior, Englewood Cliffs, NJ, Prentice-Hall, pp. 315]342. Hamel, G. and Prahalad, C. K., 1994. Competing for the Future, Cambridge MA, Harvard University Press. Hayes, R. H., Wheelwright, S. C. and Clark, K. B., 1988. Dynamic Manufacturing: Creating the Learning Organization, New York, Free Press. Horngren, C., Foster, G. and Datar, S., 1994. Cost Accounting: A Managerial Emphasis, Englewood Cliffs, NJ, Prentice-Hall. Howell, R. A. and Soucy, S. R., 1987. Cost accounting in the new manufacturing environment, Management Accounting, August, 42]48. Johnson, H. T., 1992. Relevance Regained: From Top Down Control to Bottom Up Empowerment, Toronto, Free Press. Kanter, R., 1983. The Change Masters, New York, Simon and Schuster. Kaplan, R. S. and Norton, D. P., 1992. The balanced scorecard-measures that drive performance, Harvard Business Review, January]February, 71]79. Keegen, D. P. and Pesci, S. W., 1994. Why not reengineer the management process itself, Journal of Cost Management, Spring, 63]70. Keep, E., 1989. Corporate Training Strategies: The Vital Component, in Storey, J. Žed.. New Perspective on Human Resource Management, London, Routledge, pp. 109]125. Kinnie, N., 1989. Human Resource Management and Changes in Management Accounting Systems, in Storey, J. Žed.. New Perspective on Human Resource Management, London, Routledge, pp. 137]154. Kotter, J. P. and Schlesinger, L. A., 1979. Choosing Strategies for Change, Harvard Business Review, March]April, 106]114. Lawrence, P. and Lorsch, J., 1967. Organizations and Environment, Cambridge, MA, Harvard University Press. Lofland, J. and Lofland, L. H., 1984. Analysing Social Settings, Belmont, CA, Wadsworth Publishing Company.


385

Lynch, R. L. and Cross, K. F., 1992. Measure Up } Yardsticks for Continuous Improvement, Cambridge, MA, Basil Blackwell. McCall, M. W. 1993. Developing Leadership, in Galbraith, J., Lawler III, E. E. and Associates Žeds.., Organizing for The Future } The New Logic for Managing Complex Organizations, San Francisco, Jossey-Bass, pp. 256]284. McNair, C. J., Lynch, R. L. and Cross, K. F., 1990. Do financial and nonfinancial performance measures have to agree, Management Accounting, Nov, 28]36. McKinnon, S. M. and Bruns, W. J., 1992. The Information Mosaic, Cambridge, MA, Harvard Business School Press. Macintosh, N. B. and Daft, R. I., 1987. Management Control Systems and Departmental Interdependencies: An Empirical Study, Accounting Organizations and Society, 12, 49]61. Mohrman, S. A., 1993. Integrating Roles and Structure in Lateral Organizations, in Galbraith, J., Lawler III, E. E. and Associates Žeds.. Organizing for the Future } The New Logic for Managing Complex Organizations, San Fransisco, Jossey-Bass, pp. 109]141. Nanni, A. J., Dixon, J. R. and Vollman, T. E., 1990. Strategic Control and Performance Measurement, Journal of Cost Management, Summer, 33]42. Nanni, A. J., Dixon, J. R. and Vollman, T. E., 1992. Integrating performance measurement: Management accounting to support the new manufacturing realities, Journal of Management Accounting Research, 4, 1]19. Player, R. S. and Keys, D. E., 1995. Lessons from the ABM battlefield: Getting off to the right start, Journal of Cost Management, Spring, 2]37. Ross, A., 1994. Trust as a moderator of the effect of performance evaluation systems on job related tension: A research note, Accounting Organizations and Society, 7, 629]635. Senker, P., 1985. Planning for Microelectronics in the Workplace, Aldershot, Gower. Schonberger, R., 1986. World Class Manufacturing, New York, The Free Press. Shank, J., 1989. Strategic management accounting: New wine, or just new bottles, Journal of Management Accounting Research, 1, 47]65. Shank, J. and Govindarajan, V., 1993. Strategic Cost Management: The New Tool for Competitive Advantage, New York, The Free Press. Shields, M. D. and Young, S. M., 1989. A behavioral model for implementing cost management systems, Journal of Cost Management, Winter, 17]27. Shields, M. D. and Young, S. M., 1992. Effective long-term reduction: A strategic perspective, Journal of Cost Management, Spring, 16]30. Simons, R., 1990. The role of control systems in creating competitive advantage: New perspectives Accounting Organizations and Society, 15, 127]143. Vollman, T., 1989. Changing Manufacturing Performance Measurements, in Turney, P. B. B. Žed.. Performance Excellence in Manufacturing and Service Organizations, Sarasota, FL, American Accounting Association, pp. 53]62. Walton, R. E. and Susman, G., 1987. People policies for the new machines, Harvard Business Review, March-April, 98]106. Wilson, T. B., 1994. Innovative Reward Systems for the Changing Work Place, New York, McGraw Hill.

Appendix — The four minor cases Chemco is involved in the marketing and refining of petroleum products. In 1992, the company underwent an intensive restructuring from regional divisions to product-based business units, and commenced a major cost-reduction program. These changes were in response to pressures from the parent company to improve profit performance. The new strategy underlying the company was based on improving customer satisfaction, increasing returns to shareholders and the development of all employees. These changes formed the basis for the development of company-wide performance measurement systems in which the accountants played a significant role. Cost-reduction initiatives were undertaken by a series of cross-functional teams.

386


FoodInc is a manufacturer of food products. In the early 1990s the company experienced pressure from its parent to improve performance in areas of product quality, cost and reliability. Its change program involved considerable capital investment, with the objective of doubling output within the Asia Pacific region. Considerable changes included the development of work-based teams formed along product lines. The company embarked on the development of a comprehensive planning and control system that sought to integrate strategic plans with operational activities. The accountants worked closely with senior managers to develop the performance measurement systems. Containers manufactures metallic containers for both domestic and export markets. The company was involved in a variety of change initiatives over a 10-year period, including TQM, just-in-time and value-added management. The company complemented these technical changes with efforts to empower its work force. Manufacturing work-teams had been in place for 2 years. An activity-based management system was designed for the company by external consultants approximately 16 months prior to the case study investigation, but had not been implemented. The management accountants did not contribute to the development of these systems. Senior management had become concerned at the lack of involvement of the accountants in the change programs, and were intending to encourage greater involvement. Coalcorp is a coal mining subsidiary of a large conglomerate. Over the prior 3 years the company had instigated extensive changes to mining methods and transportation in an effort to improve costs and reliability. Work-based teams were introduced to enhance motivation and commitment to improving productivity, cost and safety. The company was located in a coal mining area, which was 120 miles from the parent company. While the company was accountable to the parent, it guarded its independence, identifying closely with the region and the customs and beliefs of coal mining organizations. The parent of Coalcorp was recognized in business circles as a highly innovative company. It was attempting to introduce integrated performance measures as part of its improved management practices into subsidiary companies. While the accountants at Coalcorp were aware of this drive they appeared content to play a passive role and restricted their operations to conventional financial functions. There was no pressure on the accountants from Coalcorp management to move outside of their current responsibilities.