The Designation of Management Accountant - Essay Example

The designation of Management Accountant Introduction If we strictly go by the issue under consideration, then the designated ‘Management Accountant’ gives an impression about the management accountant of a bygone period when accounting and management techniques were not so automotive or computerized. Management accounting even in that period was not confined only to measuring the success or failure of business; but was more generalized than a specialization of a particular segment of business management. Today we have specialists in every segment of management accounting; right from planning stage of a business to evaluation of success and failure. The comparison is between the changing portfolios and not the changing designations of management accountants. The unpredictable growth, both in the fields of management techniques as well as the magnitude of the business, has basically caused further subdivisions in management accountants’ responsibilities. The responsibilities of each segment of management accounting were earlier managed under one designation titled ‘management accountant’; but now with subdivisions of management accounting into various segments, different segments has come to be known or designated under the title that represent their job description. That does not mean the status of ‘management accountant’ has been marginalized or is disappearing. In fact, hitherto clubbed responsibilities under one designation are now being shared under different jobs designated as per their portfolios and job descriptions. With this background let us examine the issue ‘whether internationally the title ‘Management Accountant’ is disappearing from industry. Contents Introduction Division of portfolios Globalization and Management Accountancy Changing Roles of management Accountants Corporate Governance Conclusion Division of portfolios Recent technological innovations and developments have made ‘management accountancy’ so important that almost each and every section of business activity needs to be served by the expertise of a management accountancy expert in one way or the other. Jack Cooper, in an article’ What Executives Really think of MBAs’ by Geoffrey James in online Magazine BNET, was quoted as saying, “MBAs are marvelous to an IT organization. They generally have right business demeanor, as well knowledge of economics, finance and accounting, as well as some theoretical understanding of how to manage people.” (Jack Cooper, CIO Bristol Myers). It appears that the domain of ‘management accountancy’ has been so enlarged and enhanced that further branches and sub divisions are required to meet and serve the ever growing needs of fast changing business arena. In fact Bhimani Alnoor, while writing abstract for his book titled ‘Contemporary Issues in Management Accounting’, has summed up the entire issue as under: “Over the past decade, the management accounting has seen changes not just within the existing domains of the field but has also witnessed extensions outside is established realms of activity. Wider systematic transformations including changes in political regimes, novel conceptions of management controls, the impact of globalizing forces on commercial affairs, shift in notions of effective knowledge management, governance and ethics, and technological advances, including the rise of broadband, have all impacted management accounting endeavours. The field is as fast changing as it has ever been.”1(Bhimani Alnoor, May 2007) Management accountancy has now become much faceted action trying to ensure commercial success through its endeavours in all possible way for different segments of business management. It has started managing or covering in depth even those business segments or areas that management accountant earlier used to consider parts of total package of the general management. Take the case of planning for a new business or for extension of an existing business. Earlier the management accountants were never considered part of planning or promotion processes. The roles of management accountants used to feature only at the initiations of actual business. But in modern technological set up ‘promotion and planning of businesses’ needs the services of a management accountant, as the financial stakes even at planning and promotion stage have reached such a magnum magnitude that even a simple mistake in planning and promotion may bring in huge losses for the promoters. The importance of management accounting can be realized from the fact that it has to enlarge its control into many new and upcoming segments of business like planning and promotion, budgeting and responsibility accounting, integrated cost management, environmental management, traditional financial management, effective performance analysis and management, resource management, general administration management, and many others. Certainly, the dear old revolutionary ‘management accountant’ was not resourceful or effective enough to carry on all theses activities using only one designation. The designation ‘management accountant’ needed to be devolved as per delegated subdivisions of management accountancy. The difference is that now management accountant is being ascribed as per sub divisional delegated assignment of ‘management accountancy’. That is the reason that those delegated subdivisions of ‘management accountancy’, have now acquired specialists titles attached as per specialist positions delegated under the title of ‘management accountant’. Management Accountant is there to stay so long as business activities are there but will be more known by refreshing and new titles of management accountancy jobs those will be newly inventes as per business requirements. Globalization and Management Accountancy “Accountants became suddenly intriguing in 2002 with the spectacular collapse of Arthur Anderson, because of its involvement in the scandals surrounding the fall of Enron.”(Economists.com. July 2007). That was the scenario few years ago. But the globalization has created such opportunistic situations for all concerned that innovations and enlargement of any type of professional service relating to business has become inevitable. Management accountants have also undergone such an environment where they to innovate or enlarge their style of functioning as globalization demands services on an uneven and non traditional pattern. The European Institute for Advance Studies in Management Accounting held its 5th conference in Belgium in December 2006 for this specific purpose of deliberations on changing scenario in management accountancy. The purpose statement of the conference stated as under: “The rate of change in the practice of and research on management accounting appears to be increasing. Many organizations are attempting to change their existing, implement new and innovate, management accounting practices, based on new management accounting and business organization ideas, practices, structures, processes, systems and information. A number of new challenging objects of measurement and control have recently emerged, including intellectual capital and network of organizations. The roles and designs of budgeting systems appear to be rapidly changing. While much of this innovation and implementation concentrates on new costing or performance measurement systems, there is also change related to the roles of management accountants in organizations. Current developments outlined above provide many opportunities for innovative management accounting research, and for a fruitful integration of existing accounting knowledge and the currently emerging practice issues. The purpose of the conference is to examine innovative accounting practices and innovative ideas about how to conduct research on them.”(EIASM, December, 2006) The result was that delegates brought out different perspectives, modern approach, and innovative styles into ‘management accounting’ services. One of the delegates, Robert Chenhall of Monash University, Australia suggested horizontal accounting within organizations. As per abstract of his presentation, “An organizational structure perspective provides an overview of recent thinking about business unit restructuring such as teams and structural modularity and patching. A key research question is how management accounting can be designed to be consistent with intent of these new structures?”(Robert Chenhall, 2006). This statement answers all those quests about diminishing values of ‘management accountant’. In fact the values of services of a management accountant are being recognized as per the structural modularity and patching. One can say management accounting services are being reinvented; those would be rendered tailored as per the exact requirements. In this fashion innovative style of rendering management accounting services would be explored. An example in this regard is ‘Activity Based Costing’ (ABC). Now the professional who would be expert in rendering services with regard to ABC may be designated as ‘Cost Accountant’; but then cost accounting is an extended service of broaderly viewed management accountancy. Innovations in management accountancy may bring in more refined designations of management accountants; but the essence of services remaining the same and that is effective management accounting. In Global context, US accountants have perhaps not given due emphasis to management accountancy as they heavily relied upon financial accountancy, and this may have created an impression that management accounting is perhaps loosing its charm or authenticity over a period of time. Bruce Pounder, CMA, CFM in his article ‘How globalization is Affecting US Accountants’ has posed a situation or query that probably has led to the belief that ‘Management accounting’ is loosing its designation to other professional designations. Bruce Pounder in his article states that, “Traditionally, the accounting profession in the United States has been focused on the preparation and auditing of financial accounting statements. When most Americans think of ‘accountants’ they think of CPAs and other practitioner of financial accounting. Yet outside the United States, the discipline of management accounting has been well organized as an important segment of the accounting profession, much more so that it has within the US.”(Bruce Pounder, 2006). This does not mean that management accountancy, if not being practiced in US with aplomb, has lost its charm or its designation to other professional designations. In fact Bruce Pounder in the same articles provided a much needed relief stating that “Highly successful accountants understand and practice both.” This implies that management accounting is being practiced by financial accountants, though they might not have qualified or designated as management accountants. In other words, designation may not be static for management accountants but management accountancy is the increasing requirements of those industries and businesses that operate on global basis. The global charm might have changed the designation of management accounting, but can never change the increasing requirements of management accounting to globalized businesses. Changing Roles of Management Accountants In the article ‘Roles changing for management accountants’ published in November 1999 issue of Journal of Accountancy, the Institute of Management Accountants (IMA) was quoted stating as under: “Management Accountants now spend more time wrestling with strategic issues than ever before. New research revealed they spend less of their time performing traditional accounting functions and more time on strategic planning, internal consulting and computer based operations. Long term strategic planning topped the list of work activities most critical to company success for the majority of accountants surveyed in business and industry.” (IMA, 1999). Similarly Derby Kerby and Jeff Romine warned that, “It is imperative that management accountants become knowledgeable about trends affecting business and finance, prepared to change the types of task they perform, and willing to acquire the necessary knowledge and skills to function as full fledged business partners.”(Derby Kerby and Jeff Romine, Feb 7, 2008) That means managing accountants are changing lanes for extension of their profession. The real reason for reduction in demand for jobs designated as ‘management accountant’ is rapidly changing roles for management accountants; and thereby the jobs are being designated as per newly found job descriptions. Over last few years all most all professional industries have received wake up calls. Either basic definitions of those professions are being redefined or they are being forced to look beyond their predefined objectives. Management accountants have been facing this scenario of changing roles for quite some time now; and their designating as per job descriptions have been caused mainly by following factors: Management accounting is concerned with execution of jobs relating to fields of formulating business strategy, decision making, planning and control, internal control, corporate governance, efficient exploitation of resources, and many others. All these fields are explosive arenas for innovative ideas leading to basic academic changes in their learning. This situation seeks job designated in a way that reflect their specializations, though basically all these specialists are management accountants. Technological changes have lead to decision making based on information gathered in a data base. This requires an analysis of information gathered in the data base. Naturally management accountant doing such analysis if called an ‘analyst’ would reflect the true nature of activities performed by such management accountant. Similarly cost management segment of management accounting is a highly specialized field that requires job related study and grooming of the candidates over the job training. Here also ‘cost accountant’ would be a suitable designation as compared to management accountant. Company mergers and acquisitions have become necessities in globalized scenario. Specialist management accountants are required to get mature the often sensitive and well published merger and acquisition deals; and that is why their jobs need specific description in the designation allotted to such management accountant. Corporate Governance “Usually management accountants are part of executive teams involved in strategic planning and or the development of new products.”(Careers information, CollegeGrd.com). But modern business environment has become more volatile, less predictable, globalize, and more risky. The recent corporate collapses like ‘Enron’, WorldCom’ and many others, have raised the question mark on the way corporations are being managed world over. Under such environment the issue of ‘Corporate governance’ has gained prominence in the management perspective of any organization. This has raised the hopes from emerging professional segments of management accountants. Melissa Bushman in her article ‘Careers in Management Accounting’ in journal ‘Associated Content’ have stressed that “There are many different positions in the workforce open to management accountants. Following are some examples of positions that could be filled by management accountants……Accounting Manger, Accounting Administrator, Senior Finance Analyst, Manufacturing Cost Accountant, and Budget Analyst.” (Melissa Bushman, Jan. 2007). The idea of Melissa Bushman is management accountants are important functionaries of business operations. They are in great demand for different positions, though those positions may not be designated as management accountants. They need to focus on the several of corporate governance functions like strategic Management, risk Management, Crisis Management, legal Compliances, and many other functions. All above stated activities are related and dependent upon management accounting redefined functions. It is certainly not possible for one management accountant to explore, devise, and successfully implement the management strategies of all such activities. That means management accounts are required to meet the needs of specific needs of corporate governance. Attaining expertise in any of the above stated facets of management has become academic curriculum of modern management studies. Furthermore, practical experiences in order to successfully tackle the problems in managing the affairs of specific strata of management, has become an essential qualifications. This has given rise to emergence of different management accountants specialized to meet the needs of different specialized fields of management. Though every one of them is basically a management accountant, but their identification as a management account does not disclose the field in which they have acquired expertise. Hence a different type of nomenclature is needed for each one of them, and this nomenclature reflects clearly their expertise. In other words management accountants performing specific and specialized activities have come to be known by the designation that reflects the job description. They are management accountants, though they may be designated by different nomenclature. Conclusion The impression that job designation ‘management accountant’ is finding its way out from the industry is absolutely biased. In fact the profession of management accounting is flourishing with increase in newly found management activities caused by globalization and technological inventions. Even in US, wherein some time ago an accountant only meant a ‘Certified Public Accountant’ who was a financial accounting expert, a realization has usurped that the gains and accomplishments of management accountants being realized in Europe and developing Asian nations are an important tools of modern day business. Management accounting is vast expanding with ever increasing expertise requirements in its different segments. It is fact that the jobs in any filed would gain importance and prominence only when their designation reflects the job description. No one will like to designate a ‘resource accountant’ as a ‘management accountant’ even though resource accountant’s expertise is based on various intricacies and expertise activities conducted by a management accountant. In nutshell, job designation might have changed over a period of time to reflect job descriptions, but the designation ‘management accountant’ has gained further superiority, as it is difficult to find a management expert who has combined expertise of different management accounting jobs designated as per their specialized job descriptions. References: Bhimani Alnoor, Contemporary Issues in Management Accounting, Abstracts, May 2007, http://www.oxfordscholarship.com/oso/public/content/economicsfinance/9780199283361/toc.html Bruce Pounder, How Globalization is Affecting U.S.Accountants, viewed on February 4, 2008, http://www.accountingweb.com/whitepapers/How_Globalization_is_Affecting_US_Accountants--by_Bruce_Pounder_of_CPEanywhere.pdf Careers information, Accountants and Auditor, Collage Grad. Com, viewed on Fem 7, 2008, http://www.collegegrad.com/careers/manag01.shtml Derby Kerby and Jeff Romine, What’s ahead of management accountant?, New Accountant, Feb.7, 2008, http://www.newaccountantusa.com/newsFeat/ip/ip_whatsahead.html Economist. Com. Accounting for good people, from the Economist Print Edition, July 19th, 2007, http://www.economist.com/business/displaystory.cfm?story_id=9507322 EIASM, 5th Conference on New Directions in Management Accounting: Innovation in Practice and Research, Belgium, December 14- 16, 2006, http://www.eiasm.org/frontoffice/event_announcement.asp?event_id=434 IMA, Roles changing for management accountants, Journal of Accountancy, November 1, 1999, viewed on February 4, 2008, http://www.allbusiness.com/management/339388-1.html Jack Cooper, former CIO of Bristol Myers, quoted in an article ‘What Executives Really Thinks of MBAs’ by Geoffrey James in online journal’BNET’, viewed on Feb.7th, 2008, http://www.bnet.com/2403-13070_23-170572.html Melissa Bushman, Careers in Management Accounting, Associated Content, Jan. 26, 2007, http://www.associatedcontent.com/article/126445/careers_in_management_accounting.html Robert Chenhall, Horizontal Accounting within Organization, Abstract, viewed on February 4, 2008, http://www.eiasm.org/UserFiles/File/Chenhall.doc http://www.accountingweb.com/whitepapers/How_Globalization_is_Affecting_US_Accountants--by_Bruce_Pounder_of_CPEanywhere.pdf Read More