Understanding Management Accounting Practices

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Understanding Management Accounting Practices

Table of Contents

Introduction
Main text
Conclusion
References

Introduction

The framework which was developed by Burns and Scapens in 2000 sought to explore the dimension with which management accounting change could be understood by studying of the rules and routines that shaped organizational activity. This framework was termed the OIE (Old Institutional Economics). The framework originated from the work of early American institutionalists. Thus the framework has succeeded in understanding and exploring of how management accounting changes may result and what may influence them in organizations.

The ways of thinking and the underlying assumptions that condition people how to behave are engraved in the institutions. Burns and Scapens conceptualize a figure where institutions are placed at the top and actions at the bottom. Actions are those that are carried out by the individual organizational actors. The institutions at the top and actions at the bottom are linked by rules and routines. While the rules shape the actions that people take, the actions may change the rules and routines.

The rules and regulations may change overtime, or may become modified relatively as the organization moves through time. The daily actions are directly linked to the rules and routines, but more subtle and abstract linkage exists between rules and routines with the institutions. It may be slow to institutionalize new and emerging rules and routines because institutions can be slow to change. The organizational rules and routines are comprised in the organizational know-how and not bound to individuals because people come and go. Members of the organization make sense out of their actions and the actions of others through the rules and routines, which also comprise the management accounting practices.

The idea of institutionalization presents a thought of historical construction of how we behave. Institutionalization means that the routines which have been taken for granted are passed on to individuals as they come and go out of the institution. The existing routines are likely to produce a force against change. What we do or how we act today may be influenced by the decisions and choices that we made in the past. Actions taken previously or in the past may limit particular options, or that the previous actions make some of the available options very costly or too difficult. This is the idea of the Lock-in-history as theorized by writers of OIE.

Main text

Evidence that things can change or that revolutionary changes can take place in an organization exist because organizations can be admitted into others and be absorbed into new practices. Stability within an organization may be possible, in that elements of stability may be present within change, while change may be necessary if things must remain stable. The process of management accounting change is influenced by the existing ways of thinking within an organization.

It is possible that resistance will occur against new management accounting systems and techniques (change), if there is no careful consideration of the prevailing institutions in an organization. In addition, the process of change may be influenced by the prevailing institutions. Management accounting change occurs as a continuous process rather than a discrete process (Scapens, 2006).

Although Burns and Scapens framework has been challenged by a number of study, these studies have not rendered them useless in other ways. Burns and Scapens framework has not captured a number of issues, for example, those touching to trust, power and agency. A certain study view that issues of trust need to be considered while studying management accounting change. In addition, the issue of power is an important consideration.

Distrust can disrupt the process of management accounting change in that managers for example may fail to use accounting. This was found in a case study of Malaysia which studied a certain public utility. Tension and conflict between internal and external institutions resulted in this organization. Introduction of new accounting systems became a problem because of the lack of trust in the accountants by managers (Scapens, 2006).

Conclusion

Power becomes essential in the study of management accounting change process because power struggle may arise during the process. For example, explicit use of power and taken-for-granted assumptions may be used to keep in place rules and routines in an organization (Scapens, 2006). In addition, certain leaders may resist certain practices that encourage change. Power also may influence introduction of new systems in an organization in that the way the organization is managed highly determines the way people perceive change.

In particular, management styles have been linked by studies to the possibility of organizations accepting or rejecting change. Organizational actors may however act to cope with the behavior of the management, or may move to try to overcome the power of the leaders to push way for change. In some cases, some of the positions in an organization may not be easy to challenge or open to challenge, and this influence the way in which power affects management accounting change.

References

Scapens, R.W. (2006) Understanding management accounting practices: a personal journey, The British Accounting Review, 38 (1), pp. 130, Elsevier SD Freedom Collection. Web.

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