Management Accounting Innovations - Assignment Example

Running Head: MANAGEMNET ACCOUNTING INNOVATIONS Innovations accounting innovations Name Course Lecturer Date MANAGEMENET ACCOUNTING INNOVATIONS Question 1 Management accounting innovation is increasingly becoming more popular among organizations. As many researchers have detailed in literature, the roles of management accountants is gradually changing in order to adapt to more innovative methods. In the past, the roles of management accountants were basically concerned with attention directing, scorekeeping and problem solving roles. Attention directing and scorekeeping are mainly concerned with control type issues and compliance reporting while problem solving role deals with provision of useful information needed in the decision making process by business unit managers (Christian and Trond, 2005). Over the years the problem solving role has become the central role of management accountants and is gaining more importance than the other roles. This is because the business environment is becoming increasingly uncertain prompting necessity for different and new information to manage these uncertainties. To keep pace with this dynamism, management accountants have been forced to spend less time in their accounting functions and devote more time gathering information that will transform management accounting. Emsley (2005) refers to this as the role involvement of the management accountant. Role involvement and innovativeness are closely related. Question 2 It is quite evident that the role of a management accountant has been adequate in driving innovation. This is because there have been changing roles of management accountants requiring them to drive innovation so as to stay ahead of other competitors. Birkett (1999) maintains that, with the constant changes in business processes, management accountant innovators need to work more as innovator thus requiring them to focus largely on management accounting information. A management accountant drives innovation by being more radical in adapting new innovation within organization accounting department. The role of management accounting in driving innovation promotes the supply of innovation such as the balance scorecard and ABC which are helpful in exploiting various potential consulting opportunities which have positive impact on the organization accounting system (Birkett, 1999). The role of management accounting in driving innovation is considered as a rational process which assists organization in creating a stronger competitive advantage. Further, role of management accounting in driving innovation is considered as a rational process whereby organization are able to largely position themselves so as to enhance their level of performance as well as outcomes. For management accounting to be effective in delivering innovation there is need to understand an organization development path right from its initial idea to a point where this innovation will successfully be implemented. It is important that in their quest to deliver innovation, management accountants need to understand their role of driving innovation will not perform well by using a single innovation ABC. There is need to understand variation in accounting innovation in order to understand the role of management accounting in driving innovation. Question 3 I totally agree with Emsely (2005) that the role involvement is expected to affect innovativeness in terms of incentive to innovate, knowledge about the appropriateness of innovation, and finally, acceptance of the innovation by business unit managers. It is quite evident that both knowledge about the appropriateness innovation and acceptance of the innovation by business unit managers largely affects the ability defined by a management accountant towards innovation whereas the third which is incentive toward innovation largely affects on the management accountant motivation to innovate (Emsley, 2005). Knowledge about the appropriateness of innovations enables management accountants to determine whether an innovation to be taken is appropriate or not. The knowledge adopted should reflect on changing business needs and is less likely to be constrained by the accounting option. Based on acceptance of innovations by business unit managers, is largely considered to be necessary especially in initiating innovation. Modernization initiated by management accountants reduces uncertainty perceived by business unit managers regarding the numerous benefits that come along with innovation. According to Chenhall (2003), this element creates benefits that are of high benefits not only to the accounting department but the whole organization. Further, this knowledge is able to distinguish on why a particular innovation is more to succeed as opposed to another. It creates a confidence that usually materializes on accounting innovation whereby a business unit manager is required to spend more time so as to become more familiar with the information widely being generated by the selected innovation thus appreciating its usefulness. This situation is also considered to have relevancy for radical innovations whose benefits are not understandable in cases where there is lack of acceptance by business unit managers (Chenhall, 2003). Finally, incentive to innovate is a role involvement affects the development of innovations. Chenhall (2003) maintain that, situations where incentives are determined by management accountant, it is quite evident that incentive are largely geared to the numerous achievement of a given unit goal. Through the incentive to innovation method, management accountants are able to achieve functional goals as opposed to business unit goals. Scapens (2000) asserts that, functional orientation requires management accountants to invest considerable effort and time to convince the business manager of the innovation benefits. Incentive within the management accounting should include rewarding as well as defining future prospects but also includes enhancement of job satisfaction that come along with greater job enrichment. It is therefore right to say that the role involvement is expected to affect innovativeness in term of; incentive innovate as well as obtaining knowledge about appropriate and acceptance of the innovations by business unit manager (Scapens, 2000). Question 4 One way in which management accountants can accelerate innovation within the organization is by way of categorizing the innovation. Mazza and Alvarez (2000) states that there is particularly one category that has been vastly used in management practices: radical and non-radical innovations. Radical innovations are those driven by the management to introduce a new management accounting practice or technique. In other words, it represents the management’s desire to do something totally different. On the other hand, non-radical innovations represent the activities by management accountants to transform the existing management accounting practices or techniques. They are driven by the desire to do things better (Christian and Trond, 2005). Deep understanding of the appropriateness of the innovation is a fundamental ingredient in accelerating innovation within the organization. Wang (2007) maintains that innovative management accountants are those aware of an innovation and the appropriateness of such innovations in terms of meeting organizational needs. To achieve this, management accountants should work at close proximity with business line managers in order to have a clear understanding of business unit managers’ needs. Besides that, they become more familiar with the kind of decisions made by business managers hence the kind of information needed to make such decisions. Knowledge about an innovation’s appropriateness is not enough to completely initiate the innovation into the organization. Acceptance of this innovation by business unit managers should be of priority consideration while initiating the innovation. Innovations initiated on the basis of business unit orientation are more likely to be endorsed because they reduce the uncertainty of failure of the innovations which is a common perception by business unit managers. Besides that, they become less resistant towards the innovations. Uncertainty becomes apparent since the benefits of management accounting innovations are difficult to demonstrate outwardly rather in physical in comparison to technical innovations. For instance, it would be easy to convince managers about a technical innovation that involves a machines that runs faster thus improves production rather than a management accounting innovation which can enhance the decision making process through introduction of administrative innovations (Mazza and Alvarez, 2000). Essentially, business unit managers should be kept up to speed with information regarding the innovations so that they gradually appreciate the benefits of the innovations. In this case, the social identify theory comes in handy. This theory proposes that management accountants should become part of the business unit managers to ensure that their views and innovations become easily accepted by the rest of the business unit managers. This particularly applies to radical innovations which might cause a high degree of uncertainty to the business unit managers since it involves a lot of resources. References Birkett, W. (1999). Innovative Management Accounting: Insights from Practice. Sydney: UNSW Press. Chenhall, R. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Acc. Organ. Soc. 28, 127–168. Christian, A. and Trond, B. (2005). Bundling and diffusion of management accounting innovations: The case of balance scorecards in Sweden. Management accounting research, Volume 19, Issue 1, p. 1-20. 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 Mazza, C., and Alvarez, J. (2000). Haute Couture and Pret-a-Porter: The Popular Press and the Diffusion of Management Practices. Organization Studies. Volume 21, p. 567-588. Scapens, R. (2000). Conceptualizing management accounting change: an institutional framework. Manage. Acc. Res. 11 (1), 3–25. Wang, J. (2007). Enabling management accounting innovation. Singapore accountant, volume 23, Issue 4, p. 54-59. Read More