Habits and Routines influence on Management Accounting....

 Achievements of Burns and Scapens

Burns and Scapens (2000) discuss management accounting’s link with the institutional behaviour, their achievement surround the fact that unless routines and habits within the framework of the institution are analysed, change in management accounting which is imperative for organizations’ progress cannot effectively be implemented.

As Burns and Scapens (2000, p.13) explain “...an evolutionary perspective is required to understand an organisation’s management accounting practices...” they eradicated the notion of management accounting being a static concept and challenge the notions that change in management accounting only occurs due to external influences including the advancement of technology and the economic environment.

Scapens (2006, p.11) states that economics especially those linked to personal gain depending on individual performance can sometimes halt management accounting processes as being conducive to effective control. Furthermore, he claims that irrational behaviour can take place in such instances such as the problems faced with the banking industry recently. When bankers sold subprime loans, they stood to gain financially even though they were not necessarily acting in the best interest of their customers and since the purpose of a business is “to create and keep a customer” (Atrill & McLaney 20012, p.35) their behaviour is unexplained by new institutional economics. Management accounting arguably failed to reproduce the information needed to stop irrational behaviour taking place due to individual financial gain of the players involved. Habits and routines in this case offer a more compelling explanation, the banking industry routines, although unethical and did not serve the customer were legal and hence the players just followed the routines. Habits and routines are central to Burns and Scapens (2000) framework.

Limitations and extensions

Having analysed differing theories Scapens (2006, p.10) recognises that academia and practice in the field of management accounting change can differ as he cites an example from a manager of large UK multinational informing him that things are not done in a clear cut way as many influences are at play which result in a ‘mish-mash’. i.e. Management accounting is effected by many factors.

If we consider internal organisational politics, then is it not more likely that individuals will follow the routines of those who have the power to promote them? Or effectively keep them in a job when the economy is in decline? As Scapens (2006, p. 23) notes “...external pressures generate internal conflicts” which could lead managers to distance themselves from management accountants and therefore the information needed for management accountants may become restricted or worst still manipulated, so the routines may change as the Burns and Scapens (2000) model indicates but they may shrink not progress the role of management accounting.

In such cases, external influence such as regulation maybe the only way to ensure that management accounting stays relevant and hence this would change the liability to each individual supplying the information, hence more challenges may become apparent including limited feeding of information to the accountants, only enough to serve the law but not to progress the organisational other objectives.

Processes that are shaping management accounting

The progress of management accounting can indeed be haltered and the process being merely a standard stemming from historic and organisational cultural behaviour. 

David (1985 p.332) pointed out that decisions are sometimes dictated and unchangeable due to previous decisions, he cites an example of the currently used keyboard, that although if changed holds many benefits the change itself amortised the benefits due to the retraining of people involved. This indeed can be transmitted to management accounting; if the change required is costly then the processes that could become outdated may still be used, they then become formalities and hardly conducive to the general progression of the organisation.

Management accounting can also be shaped by acquisitions, mergers, regulation and trust of the management accountant.

If we consider the ‘mish-mash’ mentioned earlier the human element would become visible, those who trust the management accountant would be more likely to partake in providing information, as Scapens (2006, p. 24) mentions, trust is key and important in shaping management accounting, therefore moving forward organisations may need to target those who have high social capital for such a role. Traditionally we may consider people in the sales field to have high social capital and those in the accounting a more subdued personality, yet in order for trust to be established management accountants, must take a more people friendly approach.

Challenges in the future to shaping practices

As the field of management accounting becomes more valued, those skilled in the field may become scarce, prompting organisations to hire average people who may follow the old routines but not necessarily possess the skills to create new ways that benefit the organisations  processes in the field.

Furthermore, the rapid change of technology requires ways in which the organisation can stay ahead, management accounting is a centre of information and the ability for an organisation to use the information effectively gives it an edge over its competitors as Taylor (2007, p.337) pointed out ‘The ability to access the knowledge existing throughout the MNC’s global network is what gives a firm a competitive advantage over local firms’.

 Yet technology poses threat, with all the information stored with a few people, the organisation risks losing its proprietary information to competitors due to unethical employees or hacking. 

The more competitive an industry becomes the more there will be a need for creative, aggressive management accounting and therefore more technology will be created to cater for that industry’s managerial accounting needs. 

In my judgement, a field this important, where the reporting serves to manoeuvre pivotal decisions for an organisation should be handled professionally with the aid of tailor made technology that can be updated or partners in the field. 

References

Atrill, P. & McLaney, E. (2012) Management Accounting for Decision Makers. 7th ed. Harlow, England : Pearson Education Ltd.

Burns, J. & Scapens, R. (2000), 'Conceptualising management accounting change: an institutional framework', Management Accounting Research. 11(1) March pp. 3-25.

David, P.A. (1985), 'Clio and the Economics of QWERTY', American Economic Review. 75(2) May p.332-337. 

Scapens, R.W. (2006) ‘Understanding management accounting practices: a personal journey’, The British Accounting Review. 38(1), March pp.1–30, Elsevier SD Freedom Collection [Online]. DOI: 10.1016/j.bar.2005.10.002 (Accessed 10th November 2013).
http://dx.doi.org.ezproxy.liv.ac.uk/doi:10.1016/j.bar.2005.10.002

Taylor, S. (2007) 'Creating social capital in MNCs: the international human resource management challenge', Human Resource Management Journal, 17 (4), November pp.336–354, Wiley InterScience [Online]. DOI:10.1111/j.1748-8583.2007.00049.x
http://dx.doi.org.ezproxy.liv.ac.uk/10.1111/j.1748-8583.2007.00049 (Accessed: 10^th November 2013).