Management accounting innovations are strategic management accountings that join the strategies to the value chain and link activities across the organization which relate to cost objectives. These innovations are very important in an organization setting. This is because they affect the activity based costing and activity based management. Activity based costing is developed to suit the manufacturing context, where activities are identified and costs allocated depending on the proportion of the resources it uses, and then the cost pool is allocated to the extent of cost driver absorbed by the product or service.
Activity based management is where deals with the identifying the benefits and influence of the innovation to the managers and employees satisfaction. This results to increased production in an organization when it is implemented (Emsley, 158-169). For effective performance of any company, the nature of information required for effective management and decision making is important. This calls for an innovative strategy which is supplied by the management accounting to the managers who in the end make decision which affect the performances of the organization from the information given by the management accountants.
Therefore management accountant’s innovations are important and play a vital role in decision making in any organization. Management accounting innovation plays a vital role is the running of an organization. This is because the innovations make the managers make decision which will result to improved performance. For example, management accounting innovations affect the organization in two areas of decision making. Strategic decision making and Tactical decision making. Strategic decision making focuses on the impact of competing strategies and their influence on how the organization handles their resources.
An organization achieves a competitive advantage by controlling resources that create customer value and that is not easily replicated (Emsley, 169-175). The use of managerial accounting innovations for tactical decision making is a major area for management of a company. In this case, the focus is shifted to how worker motivation affects production. When workers are motivated there is higher chance that they will work hard and smart thus improving the performance of the organization. Management accounting aims at meeting the decision needed by managers in an organization. Recently, there have been changes in organization designs due to change in information technology and competitive environments, resulting to new management accounting techniques (Bjpoornenak, 325-338).
These changes lead to innovations from management accounting which aims at fitting in the changing economic logics, social and political changes. Therefore, Management accounting plays a big role in coming up with these innovations which influence the unit managers to make decision that are aimed at increasing the organization’s performance. Therefore, a Management accountant plays a vital role in initiating innovations in an organization.
Management accountants can easily know whether an innovation is appropriate or not because they work together with the business unit managers. This means that these management accountants have a clear understanding of the decision made by the managers. In this case they are therefore an important unit in the organization because they know the right information for the right decision. Management accountant develop innovations to improve the performance of the organization by motivating the workers through incentives to innovate. These are rewards that enhance job satisfaction that is derived from greater job enrichment (Argyris, 234).
The use of non – financial measures and financial controls improve the firm’s performance.