Management Accounting Innovation as One of the Core Themes Driving Modern Organisations - Coursework Example

Issues in Management Accounting Management accounting innovation as one of the core themes driving modern organisations Traditionally, management accountants play different roles within an organisation. These include general administrative work, developing accounting concepts relevant for the organisation and making strategic decisions (Sunarni, 2013, p. 619). On the other hand, business organisations are continuously facing volatility within the business environment. With increased competitiveness and rapid changes in other factors of both the external and internal business environment, organisations are required to innovate continuously (Nuntha, Phapruke & Sutana, 2012). This is regarded as the only way by which they can adapt to and survive volatile changes in their business environments. Since the ability to adapt to and survive in the changing business environment requires good decision-making, management accounting innovation fills this gap by providing the right kind of information required by the decision makers. Management accountants, by virtue of fulfilling their different roles within organisations, influence the decision-making process of organisations at different levels. It is the increasing need for businesses to remain competitive in the market and the resulting need for accurate information to allow decision-making that makes management accounting innovation one of the core themes that drive modern organisations. Role of management accountants in driving innovation I agree that the role of the management accountant has been adequate in driving innovation. This is because of the following reasons. First, it has been observed that finance in general plays a key role in promoting innovativeness within organisations (Tysiac, 2013). This is because organisations require the input of finance professionals during all stages of innovation. Since management accountants are involved in organisational operations at different levels they play a leading role in driving innovation within organisations. Secondly, innovativeness has been enhanced through the many functions of management accounting. For instance, Krell (2011) describes the role of management accountants as one that is primarily concerned with driving change within organisations (p. 4). This arises from the need to develop innovative means of dealing with changes caused by fluctuations in economic, technological and demographic factors. This corresponds with the finding that management accountants have been able to fulfil their role of driving innovativeness within business organisations (Emsley, 2005, p. 171). From Emsley’s (2005) argument, it can be seen that depending on their role-orientations, management accountants have been responsible for implementing innovative practices within their organisations. This finding coincides with Collins, Lawrence, Roper and Haar’s (2011, p. 2) argument that with the increasing need for sustainability, management accountants play an important role by providing information that is relevant and useful to the entire organisation. This way, management accountants, when working under business units, are in a position to provide strategic and innovative solutions to organisations. How role involvement affects innovativeness Role involvement influences innovation within an organisation in three key ways: providing knowledge about the appropriateness of the innovation, enhancing acceptance of the management innovations developed and providing incentives that are essential for innovation. This is because of a number of reasons. First, it is observed that innovations in management accounting take the form of either new techniques or different methodologies of doing work (Emsley, 2005, p. 160). In order for new techniques and methodologies to be adopted and implemented, there is need for exhaustive information to be provided in order to enable decision makers to decide on the best course of action for the organisation. It has also been pointed out that management accountants, while playing their roles, interact with different professionals who play different roles in the decision-making process within an organisation. In doing this, management accountants may fulfil their roles while being oriented towards accounting processes of the business units. Since management accountants interact with business unit managers while taking a business-oriented role, their technical knowledge is a key factor in determining whether particular innovations are appropriate to an organisation. Second, it is true that management accountants enhance innovativeness within an organisation by influencing how business managers accept the innovations developed. Due to the administrative nature of management accounting innovations, other decision makers within an organisation may be reluctant to accept them as being able to increase the overall competitiveness and performance of an organisation (Emsley, 2005, p. 163). In addition to this, there are many other scenarios which create the right conditions for management accountants, through role innovation, to influence the acceptance of innovations. For instance, Ax and Bjornenak (2005) state that general acceptance and adoption of an innovation depends on how well the diffusion process is managed across the social system (p. 7). This is influenced by barriers, resistance and the extent of the information field. It can be seen that through their role-involvement, management accountants are able to reduce resistance, overcome barriers and increase the field of information within an organisation. This in turn enhances overall innovativeness. Third, it is argued that incentives to innovate are generated in scenarios where management accountants operate under the leadership of a business unit manager (Emsley, 2005, p. 164). With the desire to achieve the goals of the business unit, management accountants operating under such circumstances tend to provide new information that enhances innovativeness. Yazdifar and Askarany (2010) identify several factors that act as incentives for an organisation to accept and adopt management accounting innovations (p. 4). These include the current state of the management accounting innovations in use and other potential social benefits provided by the innovation. Such factors influence the decision of business managers on whether to develop their own innovations or adopt read-made financial management innovations (Xue, 2006, p. 12). Since management accountants are required to provide information about these factors, they consequently influence the level of innovativeness within the organisation. How management accountants can accelerate innovation within an organisation There are several ways in which management accountants can accelerate innovation within an organisation. First, innovation can be accelerated when managers operate under the orientation of a business unit. This is in contrast with what the situation is when management accountants fulfil their traditional functional roles under the functional approach. In the former case, management accountants are not only able to gain firsthand knowledge about the business operations of the business units but also are in a position to have a direct influence on the way the business is run. This way, management accountants are obliged to develop innovative ways of providing information required to achieve the goals of the business units. Therefore, innovation is enhanced when management accountants fulfil their roles under the business unit arrangement as opposed to traditional functional arrangement. Second, management accountants can accelerate innovation within organisations by focusing on roles that enhance sustainability and strategic decision-making. This is in contrast to the traditional functional goals of bookkeeping and administrative functions which provide little inspiration for management accountants to innovate. Therefore, when management accountants are required to solve key problems within an organisation and take part in the strategic decision-making process, their level of innovativeness is enhanced because of the nature and extent of information required for such functions. Third, management accountants can accelerate innovation when they are provided with the right incentives for their work. This is usually derived from the kind of leadership that management accountants are subjected to in the course of their work. For instance, when they work within business units which are headed by non-accounting professionals, the level of responsibility assigned to them provides incentives and inspiration to be innovative. This is in contrast to what the situation is when management accountants work under traditional functional arrangements and are led by accounting professionals. In such a scenario, management accountants feel less obliged to make innovative contributions to the organisations in the course of their work. References Ax, C., & Bjornenak, T. (2005). Bundling and diffusion of management accounting innovations: The case of the balanced scorecard in Sweden. Management Accounting Research, 16, 1–20. Collins, E., Lawrence, S., Roper, J., & Haar, J. (2011). Sustainability and the role of the management accountant. CIMA Research Executive Summary Series, 7(14), 1–14. Emsley, D. (2005). Restructuring the management accounting function: A note on the effect of role involvement on innovativeness. Management Accounting Research, 16(2), 157– 177. Krell, E. (2011). Forecasting the future role of the management accountant. Emerging Issue Paper, CMA. Retrieved from http://www.cma-canada.org/index.cfm/ci_id/20539/la_id/1/document/1/re_id/0 Nuntha, C., Phapruke, U., & Sutana, B. (2012). Managerial accounting innovation implementation and valuable decision-making: An empirical investigation of electronics part business in Thailand. Journal of International Business and Economics, 12(5). Retrieved from http://www.freepatentsonline.com/article/Journal-International-Business-Economics/312173004.html Sunarni, C. W. (2013). Management accounting practices and the role of management accountant. Review of Integrative Business & Economics Research, 2(2), 616–626. Tysiac, K. (2013). How finance and accounting can boost innovation. CGMA Magazine, September 10, 2013. Retrieved from http://www.cgma.org/magazine/news/pages/20138692.aspx Xue, Y. (2004). Essays on the relation between managers’ incentives and financial accounting information. PhD Dissertation, Massachusetts Institute of Technology. Retrieved from http://dspace.mit.edu/bitstream/handle/1721.1/28685/59006455.pdf?sequence=1 Yazdifar, H., & Askarany, D. (2010). A comparative investigation into the diffusion of management accounting information in the UK, Australia and New Zealand. CIMA Research Executive Summaries Series, 5(9), 1–11. Read More