Accountability Measures against Human Performance - Assignment Example

Accountability measures against human performance and the M-form corporation ethics BY YOU YOUR SCHOOL INFO HERE HERE Accountability measures against human performance and the M-form corporation ethics Introduction The M-form corporation is one that is “vertically-integrated and multi-divisional” operating in foreign and domestic environments (Harvard Business School, 2002, p.2). Because of its multi-divisional structure, the M-form corporation requires more extensive operations developments, control systems, auditing, and cultural knowledge to satisfy multiple stakeholder and shareholder groups. The complexity of the M-form business and its inter-dependencies between operating units requires that human performance be measured in terms of accountability and relies on the talents of management accountants to oversee costs, operations, and explore efficiencies of scale related to economics. The role of management accountant in the M-form business is multi-faceted, requiring extensive knowledge of the internal organisational structure, strategic or executive-level goals, the external environment, and capital investment. These responsibilities sometimes forbid ethical behaviour due to what is referred to as freewheeling opportunism, or short-term strategies that require flexibility to seize opportunities as they present themselves in the organisational environment. This paper describes the role of management accountant, the nature of ethics in these responsibilities, and the need for accountability in this particular role. Management accounting and behaviours Management accounting is defined as: "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources” (United Nations, 2005, p.1). It is a multi-faceted role under this definition that takes into consideration the impact of human capital development, creating efficiencies in operations, and cost controls. Helgesen & Voldsund (2009) break down the role into specific sub-categories of responsibility that include measurement of equity, maximizing earnings per share, cost of goods sold, and general return on investment. Clarke & Tagoe (2002, p.11) identify management accounting as a responsibility for communicating strategic intention throughout the business by establishing performance measures and continuously monitor strategic goal validity. These performance measures typically include establishing quality control and lean manufacturing (when appropriate), benchmarking successful industry practices, cost analyses, and establishing a profitability analysis template related to capital investment, governance, and general accounting systems (D’Souza, 2010). The aforementioned management accounting practices do not necessarily represent the entirety of the job role responsibilities, but provide an overall picture of its dynamic structure and obligations for the MA. Simpson (2007) describes the freewheeling opportunism model that often guides a fast-changing multi-national environment in which it becomes unrealistic to assume the entire strategic planning process. Instead, Simpson suggests that development of short-term strategies is necessary when flexibility is required in order to seize a presented opportunity. Change, then, based on necessary small-scale business improvements is constant for the management accountant. If the management accountant is unable to gain consensus from all key stakeholders and shareholders before making business decisions related to costs and controls due to the freewheeling opportunism necessary to satisfy strategic goals, performing unethical behaviour can be an outcome. Why is this, necessarily? Responsibilities, operationally, for the MA include understanding the customer as well as development of appropriate marketing strategies, such as conducting product-mix analyses and establishing pricing structures to satisfy profit goals (Fung, 2006). Short-term opportunities for pricing re-structuring on products or services might be required, as one example, in order to meet with competitive pricing based on the market structure the M-form business operates in. For instance, in an oligopoly dominated by only a handful of key competitors, one competitor may establish short-term, massive pricing reductions as it enters a new market overseas to guarantee brand establishment. Thus, after analysing all areas of operations and costs, the management accountant may recognize that in order to maintain competitiveness, a certain level of price discrimination must occur on its products and services in the short-term. Price discrimination is defined as “charging different customers different prices for the same product” (Boyes & Melvin, 2007, p.482). In a multi-national environment, this can be a reality based on competitive pricing actions in different key target markets. Domestic stakeholders or the overseas customers that is being charged different prices may view this as unethical price gouging, which can lead to negative publicity or disgruntled shareholders that do not agree with the short-term pricing strategy. By not gaining shareholder consensus in order to seize an immediate opportunity, the M-form business may witness share prices drop due to lack of confidence or any other investor-related negativity. Thus, from the shareholder perspective, demands for more internal controls directed at management accounting practices can represent an externally-driven risk factor that impacts capital growth with perceptions of unethical pricing behaviours. Lord (1996, p.351) offers that management accountants must collect competitor information, match accounting with strategic goals established, and further “exploit cost reduction opportunities”. The management accountant may have to promote short-term price reductions in order to ensure strategic, competitive position without addressing governance boards or the shareholder until competitor prices have increased in the target market. Even though the MA is satisfying all of his or her responsibilities related to the role, the management accountant has adapted the business strategy and made macro-level budgeting decisions as part of freewheeling opportunism that has presented itself. In reality, the MA does not require auditing of their job performance or establishment of controls, however the external forces that stand to gain from business profitability may demand exactly that, thus bringing up the argument that unethical behaviours have occurred as part of rational self-interest. This is only one example of the nature of accountability in the management accounting role, but it does serve to illustrate the complexities of balancing financial and strategic goals with externally-driven forces that monitor business performance. Bellis-Jones (1998, p.68) supports that management accountants must provide “quantified visibility” of what is actually occurring in the business to support change programmes to satisfy the business strategy. In the case of short-run price discrimination, the MA is actually performing their job with the utmost excellence, but runs the risk of antagonizing shareholders and stakeholders in the process. The tangible validity of short-term price restructuring to stay competitive may be based on hard evidence from strategic market analyses and cash flow analyses, however the risk of supposed unethical behaviour lingers from investors or even consumers who are the target of this short-term price discrimination policy. Another role in management accounting includes establishing controls such as total quality management (TQM). This is a form of system evaluation related to production, investment, marketing, or even labour relations (Fung, 2006). In order to gain support for a TQM environment, the business requires an accepting human culture of change that is willing to provide cooperation for realignment of many different divisions. “Leaders need to model the desired behaviours of the culture and teach others how to enact these behaviours” (Levin & Gottlieb, 2009, p.32). Why is this relevant to accountability and the MA role? In order to gain support for necessary change initiatives, establishment of culture geared toward meeting performance targets and strategic goals is required. Under social learning theory in psychology, individuals will model the behaviours of attractive and credible role models based on what they witness being rewarded or punished (Neubert, Carlson, Kacmar, Roberts & Chonko, 2009). The management accountant must consider the role of employees and managers to achieve TQM goals and therefore model desired behaviours in order to gain cooperation and collaboration. If the MA is rewarded for these and other actions related to strategy change, it is likely the culture will embrace these attitudes and mimic them to achieve cultural unity. Thus, it becomes more difficult to adopt unethical behaviours since the MA is in a position of organisation-wide visibility with the cultural centre watching to ensure everyone in the business if focused on total quality management. The management accountant also establishes performance measurement systems and reward systems to ensure compliance and motivation to achieving strategic goals and optimize the entire enterprise (Clinton & van der Merwe, 2006). Avoiding unethical behaviour then becomes best practice, since one of the goals in this role is to build a unified culture of cooperation to change and new business developments both financial and operational. With much organisation-wide visibility it becomes easier to avoid unethical behaviours since the watchful eye of stakeholders is evident in all divisions. Conclusion Evidence provided indicates that improved visibility within the M-form business in the role of management accountant acts as a deterrent for unethical behaviours to develop. Additionally, perceptions of unethical behaviour from the external shareholder or stakeholder can occur as questions of accountability might be raised due to any number of practices developed as a competitive tool. Since the role of MA does not necessarily allow for all business decisions related to finance and operations to achieve consensus from all share- and stakeholders, it is best to remain transparent in all functions related to cost and profitability as a means to ensure accountability. The role of management accountant in an M-form business is multi-dimensional, laden with risk associated with accountability, but despite this that MA must remain dedicated to performing their cost-related and governance responsibilities to be successful in this role. References Lord, B. (1996), Strategic management accounting: the emperor’s new clothes?, Management Accounting Research, 7(3), pp.347-366. Bellis-Jones, R. (1998), Handbook of cost management, Management Accounting, 76(10), p.68. Boyes, W. & Melvin, M. (2007), Economics, 6th ed. Houghton Mifflin Company. Clarke, P. & Tagoe, N. (2002), Strategic management accounting – do we need it?, Accountancy Ireland, 34(6), pp.10-12. Clinton, B. & van der Merwe, A. (2006), Management accounting – principles, techniques, and management processes, Cost Management, 20(3), pp.14-23. D’Souza. (2010). [internet] Strategic cost management, D’Souza Financial Consultants Pvt. Ltd., Institute of Certified Management Accountants [accessed November 1, 2011 at http://www.cmaindia.net/images/CMA_brochure.pdf] Fung, T. (2006) [internet] Product and customer profitability, The Hong Kong Polytechnic University [accessed October 31, 2011 at http://www.af.polyu.edu.hk/download/new_ug/AF4103.pdf] Helgesen, O. & Voldsund, T. (2009), Financial decision support for marketers in the Norwegian fishing and furniture industries, British Food Journal, 111(7), p.622. Levin, I. & Gottlieb, J.Z. (2009), Realigning organization culture for optimal performance: six principles & eight practices, Organization Development Journal, 27(4), pp.31-47. Neubert, M., Carlson, D.S., Kacmar, K.M., Roberts, J. & Chonko, L.B. (2009), The virtuous influence of ethical leadership behaviour: evidence from the field, Journal of Business Ethics, vol.90, pp.157-170. Simpson, J. (2007). [internet] Strategic management, p.4. [accessed October 31, 2011 at http://v5.books.elsevier.com/bookscat/samples/9780750686785/9780750686785.pdf] United Nations. (2005) [internet] Technology: environmental management accounting initiative, UN Department of Economic and Social Affairs [accessed October 31, 2011 at http://www.un.org/esa/sustdev/sdissues/technology/estema1.htm] Read More