Alternative management accounting (AMAR)

In this paper, the emergence of alternative management accounting (AMAR) will be discussed followed by the contributions it has brought to the field of knowledge. After which, reasons why alternative management accounting research’s tools and techniques has not successfully displaced the use of traditional accounting research’s and techniques in organizations will be discussed. The importance of addressing this issue is to justify if this alternative direction is right within management accounting academia, and whether it should be continued.
The emergence of alternative management accounting research occurred in the late 1980s partly due to the shortfalls of the traditional management accounting approaches. Traditional management accounting research (TMAR) is objectivist-orientated, with a focus upon unifying characteristics. These assumptions have limitations and hence are unable to provide broader insights into the nature of management accounting.
TMAR makes no distinctions between the perspective of the organization and its managers (Puxty, 1993). In general, this approach encouraged a “financial accounting mentality” and also encouraged a focus on external financial reporting requirements (Johnson & Kaplan, 1987). It was widely believed that all management accounting research existed to inform rational decisions to achieve organizational goals which essentially refers to achieving shareholder wealth maximisation. TMAR also has an implied assumption that the manager is isolated from other decision makers when making decisions (Scapens, 1991). Group decision makings were either ignored or considered to be non-existent in TMAR. Traditional approaches are problem motivated and are aimed towards bettering and refining tools and techniques to inform rational decisions in order to achieve given organizational goals (Covaleski, Dirsmith & Samuel, 1996). As a result, it provides narrow insights as focus was not brought into the broader social, political and economic settings (Macintosh, 1985).
Traditional management accounting thoughts was greatly influence by neoclassical economic analysis (Scapens, 1994). According to Otley (1984), though management accounting centres on the provision of information, the core theoretical approach derives from economics in which the rational model dominates. The utilization of power, group considerations, choices and purposes are disregarded or excluded from neoclassical analysis. Such factors are assumed to minimally impact individuals (Spechler, 1990).Individuals live and interact within society, but are not altered or affected by these social interactions (Ulman, 1998). Neoclassical economics has no intention to explain behaviours if managers within the organization (Scapens, 1994) and hence cannot adequately study social phenomena since it does not consider the political, social and organizational factors that affect individuals.
Ryan and Scapens (2002) state that management accounting research based upon positivist theories; “may be useful for predicting general trends, but they will not be helpful in explaining individual behaviour; nor are they likely to be useful as guides to individual managers or firms about their own economic behaviour”.
Traditional management accounting researches offers a narrow insight to the world, which limits individuals’ abilities to create and analyze interesting propositions and develop meaningful stories about MA in its social, organizational and behavioural contexts (Hopper, Storey & Willmott, 1987). Rational designs also limit one’s abilities to develop critical positions and impends the ability of MA research community to carry out significant scientific conversation and achieve progress.
The limitedness recognised in the rational designs approach of traditional management accounting has ignited the interest of a core group of alternative management accounting researchers from Europe who had strong sense and beliefs that management accounting was much more beyond the very simplistic positivist technical view. They believed that there was a lot of new and important insights that AMAR could bring to the field of knowledge and began to emphasise the need to study management accounting in the contemporary world from a broader political, cultural and social perspective (Baxter & Chua, 2003).
Critique of Means-Ends reasoning
Traditional MA tools and techniques are developed from rational design theories (Hewege, 2012) but it was never questioned if the tools and techniques are practical or useful for the organization. They might be unintended and unrelated to achieving unclear organizational goals. Even when organizational goals are not achieved, managers choose to learn from the failures and improve on the tools and techniques used. Therefore AMAR promotes rethinking and restructuring traditional practices. The organization should question if better finances automatically denote benefits for the company and consider if the reputation or social responsibilities might have greater impacts on a companies’ long-term growth.
Critique of the real
Information can be easily manipulated which means that information presented might not portray an objective view. Hence, the importance of MA tools and techniques are subject to the reader’s interpretation due to differing reactions that people have towards the information they have. Every organization is different which means tried-and-tested concepts is not adequate to capture the performance of the whole organization. It is crucial for managers to accept the fact that there is no ‘one’ ideal solution. Mouritsen’s study (1999) suggests that due to the current technological advancements, non-human actant can be relied on to aid in the interpretation of information. Management accountants can have more time to focus on other important things such as improving the performance of the company from social, or cultural aspects.
Critique of accounting’s impotence
The apolitical imagery of TMAR is challenged by AMAR. AMAR enables us to understand the ability of management accounting practices to achieve or bring about a certain result. Baxter and Chua draws an example of this from the politicised budgetary process of a Swedish local government (Jonsson, 1982). Although technologies such as budgeting systems were thought to be useful in influencing important decisions, it might in fact be detrimental for the organization if they are invented for use by the personally motivated. They may mobilise political power to set policies and rules and as a result, influence management accounting practices which might not contribute to achieving organizational goals. AMAR states that it is these technologies that contribute to the overt clashes of interests in organizations and society, and the oppression of others (Chua, 1995).
Critique of accounting change
The rational designs approach provides sparse empirical evidence that an enlightened, well-engineered and progressive path characterises the development of management accounting technologies (Baxter & Chua, 2003). Some researchers demonstrated the roadblocks that particular organizations faced in attaining a fit between management accounting control systems and appropriately modifying environments contexts when using the rational design approach (Ezzamel & Bourn, 1990). AMAR has increased understanding of accounting change by conveying distinct insights. For example, attributing changing of sociocultural, political and economic conditions to a plethora of changes within MAP in the 20th Century including the emergence of value-added accounting (Burchell, Clubb & Hopwood, 1985). AMAR recognises that accounting changes are not predictable, not controllable, exclusively technical or well-behaved. Memorably, many of these perspective would not be covered in the mainstream approach.
Critique of bodiless forms of MA practice.
Baxter & Chua (2003), discussed the ways in which management accounting is both inhibited and assisted by the inherent attitudes of its proponents. This alternative research highlighted the importance of interactions between the management and the organizational participants. Management accounting is not just about the techniques that inform, maximise, and optimise decisions- it also focuses on the people who uses them, and who continually interact to understand their needs and habits. For example, emphasising the need to motivate companies’ employees. This is supported by Preston’s (1986) research, which set an anchor between an organization’s processes and an individuals’ involvement within them.
So what practical contributions has AMAR made? Alternative management accounting researchers have been challenged to face important contemporary topics which includes but not limited to globalisation, hybridity and the network society (Baxter & Chua, 2003).
Globalisation brings about high exposure of information, increasing trade and competition. And in these contexts, it is not enough for companies to remain competitive just by using financial measure. As testified to by Kaplan and Norton, who stated that financial measures tell stories of historical events, which are appropriate for industrial age companies whereby customer relationships and long term investment capabilities were not critical for success. However, these financial measures are inadequate for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.”
Globalisation causes the global dissemination of technology, popular culture, workers, financial capital, knowledge, and goods and services. Though globalisation uproots MA practices from their context and diffuses it to other remote locations, knowledge of how technologies travel and the issues that result from it are very limited (Vaivio, 2008). AMAR sees management accounting as a set of practices implicated within complex processes of societal and organizational interpenetration which requires implementation of expert systems that interconnects time and spaces.
AMAR has helped developed tools and techniques like Economic Value Added (EVA) and the Balanced Scorecard (BSC) to help companies gain competitive advantage in this environment. The balanced scorecard is a tactical planning and management system that is used in business and industry, government, and non-profit organizations worldwide. The purpose of the BSC is to improve internal and external communications, align business activities to the stratagem and vision of the organization, and monitor organization performance against planned goals. It is a performance measurement framework that considers both strategic non-financial performance measures and financial metrics to give managers a more holistic view of the performance of the organization (Kaplan & Norton, 1996).
Hybridity suggests the examination of the functioning of management accounting in conditions with both traditional and new elements such as the local and the global, private and public. For example, the university in which Baxter and Chua worked in an educational institution that was widely viewed to be a public institution. However, reducing government funds and increasing fee paying students dominated the budget of the faculty. Hence the university is in a way, no longer considered to be a public institution but is not a private one either. This creates contradictions, but accounting inscriptions are central to the ongoing function of this hybridity by conveying economic differences between public and private entities and traversing this differences to enable the university to function.
AMAR contribute insights to the hybrid roles of management accountants. Instead of their traditional score keeping controller role, their new accounting role is focused on consulting and helping the organizational participants implement and adapt to the new accounting change. This is supported in Pharmaceutical, which is a UK Based manufacturing branch of an international pharmaceutical product producer, where hybrid accountants assist day managers with day to day decisions as well as advising performance measurement product stream leaders on strategic issues (Hopper, Northcott & Scapens, 2007). A change in the image of accountants was observed by looking at how they were portrayed in software advertisements. It was seen that the image of accountants has changed from being dependable and logical to a more self-indulgent person from the 1970s to the 1990s (Baldvinsdottir, Burns, Noreklit & Scapens, 2009).This reflects changes in wider social practice from a modern way of thinking to a hyper modern way of thinking.
Finally, it has been suggested by Baxter and Chua (2003) that we are living in the network society. This basically meant a digitized, technologically advanced “surveillance society,” where management accounting can cause any type of action to become visible. Through qualitative analysis, we can ask whether management accounting is taken on-board in the creation of a “super panopticon,” an open space where personal privacy is exposed (Baxter and Chua, 2003). Latourian researchers are known to be the most suitable out of the other approaches to take on such modern-day alternative research, in view of the close attention this point of view lends to the interaction between networks of individuals and non-human objects, such as computers (Baxter & Chua, 2003).
AMAR has brought insights to show how management accountants have been influenced by external factors. It was identified in a study that social advertisement has encouraged management accountants to hand over control to systems which are able to do everything while the accountants themselves should follow instructions (Baldvinsdottir, Burns, Nørreklit & Scapens, 2010).
AMAR has also contributed to the growth of new management accounting techniques including technology road mapping to help organization fit in the new technological advanced environment. Technology roadmapping is a flexible technique prevalent within industries to balance long-term strategic issues alongside short-term financial performance. The approach provides an organized way to explore and communicate relationships between evolving and developing markets, products and technologies over time. It is suggested that the roadmapping technique can boost companies’ chances in stormy environments by providing them a focus during environment scans, and a means of tracking the performance of individual, including potentially counterproductive, technologies (Phaal, Farrukh & Probert, 2004).
Whilst Miller and O’Leary recorded widespread use of technology roadmaps in their case study of Intel corporation, its use in capital decision making practice is still in its infancy. Also, despite its recognised potential for supporting strategic investment decision-making, this strategic analysis tool has yet to make its way into mainstream capital investment academic materials. (Hopper, Northcott & Scapens, 2007)
Despite the advances of knowledge through AMAR over the last 30 years, AMAR has not completely displaced the traditional approaches. Organizations outside Europe still uses the traditional approaches to determine the performance of the company. This is because changes are often time-consuming and expensive, considerably impacting an organization’s overall success. Another reason on why organizations refuse to change is due to a form of mimetic isomorphism (Baxter & Chua, 2003). This is with a mind-set that “since other organizations are still going on well using the traditional, rational approaches, so must we.” Also, according to the theory of structural inertia, organizations are hesitant towards change because they are reluctant to take unnecessary risk. They prefer replicable behaviours as constancy is rewarded. Change not only disrupts current business but also can lead to disaster. As a result, organizations continue with past procedures, even when it seems irrational to do so (Hansen, 2012).
Though TMAR have their own limitations, they should not be replaced by AMAR. A blend of usage of tools and techniques developed from the two areas of research should be considered by organizations. For example, using TMAR techniques to influence financial measures and using AMAR techniques to focus on non-financial measures which help organizations grow substantially and maintain sustainability in both short-term and long-term aspects.
In conclusion, AMAR emerged mainly due to limitations identified in the traditional rational approach and increased interests. AMAR has contributed significantly in helping organizations operate and gain competitive advantage in the contemporary environment. The direction to explore into AMAR is right because in doing so, regression will not occur within the MA academia (Lukka & Mouritsen, 2002). However it is important for AMAR to not lose sight of its public responsibility, and for it to persist in providing insights that protect individuals against impersonal, entrenched forces that are not in their interests. Qualitative research needs to investigate the social, societal and political facets of management accounting, and remind us of the larger picture containing the beliefs and motivations that lie beneath the surface of modern practice.

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