Accounting Innovation in Modern Organizations - Essay Example

Running Head: MANAGEMENT ACCOUNTANT INNOVATION Management Accountant innovations and Modern Organizations Name Course Instructor Date Word count 1,525 Management Accountant innovations and Modern Organizations Management accountants have been known to be the key factor in initiating change through their management accounting practices. An innovation can be professed as an idea or an objective that is seen as new and thus is subject to adoption. Management accounting innovation is one of the core themes driving modern organizations. According to Emsley (2005), innovations enable organizations to go through difficult and harsh business conditions. Although management accountants have been accused of their inability to innovate, they have done much in ensuring that business organizations stay afloat despite turbulent moments. In order to put this harsh judgement behind them, management accountants have been on the forefront in ensuring that organizations are taking up radical innovations whose aim is to ensure that organizations stay afloat and competitive. According to Milova (2011), relative advantage, compatibility, complexity, trial ability and observe ability are the characteristics that drive accounting innovation in modern organizations. Management accounting innovation as a theme driving modern organizations In terms of economic benefits, relative advantage refers to the point whereby an idea is seen as being greater or more applicable to the one it is replacing. Management accountants come up with new workable ideas that replace the existing old ones whose time to be replaced has come. These individuals usually ensure that the new idea or innovations costs do not override those of the benefits. Thus, before any innovation is absorbed into the organization, an evaluation of its costs and benefits is carried out to determine its workability. The advantages of the new innovation should be its driving force to being adopted into the organization. Any innovation, as Milova (2011) puts it, should be compatible with those already in place. The new innovation should portray a degree of constancy with the history and experience of the potential adopters. Compatible innovations are usually readily acceptable into the system because they agree with the goals and objectives of the system. Complexity is the level to which an innovation proves hard to be understood and used in order to achieve the goals and objectives of an organization. Management accounting innovations are usually complex but simple to implement because they are usually compatible with the existing systems. Milova (2011) has the view that management accounting innovations are try able and in the long run workable. The innovations are usually tested before they are fully operationalized into the organizational system. If they are found compatible after the trial period expires, the innovations are adapted into the organization. The trial period enables the management determine the flexibility and manageability of the innovation. Observe ability is the degree or level to which an innovation can be easily explained to others. The innovation should be one that can be easily communicated to the general public through journals, business magazines and articles. Any article should be observable in order to deliver tangible and satisfying results. The role of the management accountant in driving change I agree that the role of the management accountant has been adequate in driving change. Management accountants have come up with the Beyond Budgeting initiative that many have seen as a worthwhile innovation. As milova (2011) states, many researchers are of the idea that accounting systems should change in order to keep up with the stride that technological and business inclinations are taking. Though accounting change is tedious to apply, the management accountants are working round the clock to put to rest this age long assertion. According to Sulaiman and Mitchell (2005), management accountants have introduced additions to the already existing management accounting systems, for instance the starting of a non-financial performance measure. Management accountants have also replaced the fixed budgeting system with flexible budgets that are compatible, operational and manageable. The outputs have been modified to suit the market demands and in so doing meeting the customers’ needs. Technical modifications have been made to the organization’s accounting systems for example other ways of separating fixed and variable costs have been innovated. To some extent, I agree that the role of the management accountants in driving change has been insufficient. Emsley (2005) argues that the advantages of the management accounting innovations cannot be observed earlier because they have very high uncertainties. He goes on to argue that improved accounting data is not sufficient to compete progressively and hence improve an organizations standing. In this case, managers spend too much time testing the efficiency of these innovations. Time wastage usually leads to accounting holdups. Emsley (2005) notes that all this time wasting business can be halted if the management level learns to trust the management accountant’s estimations, especially in the area of accounting innovations. Seal (2010) has the view that selected management accounting observations may contradict with the vested interests of the top management and in such cases, the top management might favour one that is theoretically lacking in content but practically advantageous for them. How role involvement affects innovativeness Emsley [2005] suggests that the sole purpose of management accountants is to ensure that the managers of the organization are provided with relevant information on the relevant business innovations to be adopted. Over the years, as Emsley puts it, management accountant have been involved in multiple roles in the organizations, for instance, storekeeping, attention directing and problem resolution. The information submitted by the management accountant is usually vital for decision making. Knowledge about the appropriateness of the innovation is important because it assists in avoiding time lag. Management accountant have been advised to work less in accounting function and more with business units concerned with management accounting information. Due to the desire to do things differently, management accountants come up with radical innovations that drive the organization forward. Emsley states that the management accountant who has an inclination towards role involvement will spend more time with business units and thus will show a mutual understanding towards the data needs of the business unit supervisors. This enables the manager to assess the performance of the management accountant to determine whether they are in line with the innovation needs or the organization. According to Emsley [2005] the role involvement influence is three fold on the organization innovation process. The management accountant needs to have the relevant knowledge in order to come up with the appropriate innovation. One needs to know the innovation well and then have an overview of its suitability to the organization’s needs with the relevant and suitable knowledge, the management accountant is able to meet the business units managers requirements since the management accountant work hand in hand with the managers, they will be able to know the pronouncements made and hence the innovation needs of the unit. Since the management accountant knows the demands of the business unit, it won’t be taxing to come up with radical innovations that are compatible with the existing ones. The management accountants who do not coordinate activities with the business units are likely to be in the dark on the innovation needs of the organization. Knowledge of an innovation beforehand enables the management accountant present workable outlines to the unit managers for acceptance. The rate by which the managers accept the innovations usually influence the rate of innovativeness in an organization. Innovations that have a business leaning are more likely to be incorporated into the system by the managers because it is assumed that they address the needs of the organization. When the management accountants have clearly outlined the benefits of the innovations, it becomes hard for the managers to resist implementing such insightful advancements. Emsley (2005) argues that innovations whose costs and benefits are not clearly illustrated are likely to be turned down by the managers. Moreover, the management accountants need to encourage the managers to spend a little more time studying the innovations to become accustomed to them and thus actualize them. In some cases, due to trust, the manager can accept the management accountant’s opinions on the innovation. Trust, being a key factor in the workings of a business unit, must have been established in the past. Emsley (2005), states that incentives to innovate are important in any organization that requires radical changes in its operations. The incentives are usually in the form of rewards and long term promises. Job fulfilment and better working conditions also motivate the management accountants to innovate. The incentives are usually initiated by the superiors, in the case of a business unit, the manager. Incentives are important in any organization because they assist in motivating the workers to work towards the attainment of goals and objectives. References 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. Milova, Y. (2011). Organizations’ receptiveness to management accounting innovations: the Beyond Budgeting case: A study on the basic characteristics of the Beyond Budgeting Roundtable Organizations. SNF Report No.07/11 Seal, W. (2010). Managerial discourse and the link between theory and practice: From ROI to value-based management. Management Accounting Research, 21 (2): 95- 109. Sulaiman, S. and Mitchell, F. (2005). Utilizing a typology of management accounting change: An empirical analysis. Management Accounting research, 16 (4): 422- 437. Read More