Table of Content
2. Changing role of management acccountants
2.1. Management accountants role in general
2.2. The four types of management accountants
3. Problems with the changing role of management accountants
3.1. Making data reliable
3.2. Producing managerial tools
3.3. Participating in board meetings
3.4. Participating in decision-making
4. Management accountant's role in different cultures
5. Practical experiences
5.1. Overall setting of the department
5.2. Practical problems vs. theoretical problems
5.3. The question of cultural differences
Controlling is the process of monitoring and analyzing activities for making sure that they are accomplished as planned and correcting any deviations. However, in the course of time, the area of responsibility of management accountants has changed. In the following essay we show the changing role of management accountants in recent time and in different cultures.
In the first part of our paper we discuss the role of controllers and how it changed in recent time. The second part is about the four types of management accountants, which are the “discrete” type, the “safeguarding” type, the “partner“ and the “omnipotent” controller, based on a field study conducted by Lambert and Sponem (2012). With the help of a case study about problems in the daily life of controllers in a french aeronautics firm form Morales and Lambert (2013) we will show different inconveniences, which come along frewuently with the modern type of management accounting. Another question we will discuss in this essay deals with the controller's role in different cultures of several countries, where a paper by Granlund and Lukka (1998) was taken as the basis. In the last part we included some practical experiences which were gained in a practicum made by Patrick and we try to compare these experiences with the theoretical part of our essay in order to check the findings from the three afore mentioned papers our work is based upon.
2. The changing role of management accountants
2.1. Management accountants role in general
When asked about their perception of their own role in modern organisations, many controllers state, that they want to work closely together with operational managers, help them to make financially well-founded decisions and provide overall understanding for „what is going on in the accounts“. Being „close to the business“ for the sake of monitoring and analyzing and finally improving the position of the firm, was deemed to also be very important in nowadays management accounting. Management accountants see activities where they have to participate actively in the decision-making process as the most interesting aspect of their job (cf. Morales and Lambert, 2013). But has the role of management accounting always been the same or has it gone through some major changes in recent time?
In the past, management accountants were seen as stereotypical „bean-counters“, whose main task was to produce reports and tables, mainly on a routinely basis, which did not really grant them a lot of respect and appreciation throughout the organization. They were not really seen as assistants in decision-making or even business partners and did not work together with managers closely on a regular basis. As management accountants did not have a whole lot of authority and were not really involved in the business very much, management accounting was seen as a minor role by operating managers (cf. Morales and Lambert, 2013). Management accountants were seen as business historians, in contrast to business partners, leaving them in a role which was more closely related to book-keeping (cf. Granlund and Lukka,1998).
Nowadays one can observe that management accountants are expected to be more business-orientated and work together a lot with managers all over the different departments of firms. The image of modern management accountants has turned from „weak controllers“ more to „strong controllers“ (cf. Morales and Lambert, 2013). This turnaround does not seem to be a real change in roles, but more of an expansion towards new tasks and possibilities within an organisation (cf. Granlund and Lukka,1998). According to what Granlund and Lukka observed, this expansion took place in the following manner: first, controllers were seen as „business historians“, then their role was perceived as an „organizational watchdog“, then the view changed to them being „advisers or consultants“ and finally the „modern role“ as a fully participating member of the management team or even a change agent emerged.
In the business world of recent time, management accounting and cost control is seen as a key success factor, there seems to be more appreciation for management accountants, which is also inforced by the increasing tendency of decentralization. In the past, management accountants often had frequent interactions with production departments, but not that much with sales and marketing departments, which has also changed in recent time. They have to interact with very many different people within an organization and are seen to be a part of management in line, as well as „local guardians“ on staff. Their work today is much more focused on the present and the future than a few decades ago, and they have to face the stereotype of a „bean- counter“ much less often than in earlier time, because nowadays philosophy has changed to „being approximately right is better than being precisely wrong“ (cf. Granlund and Lukka, 1998).
Trustworthiness, prudence and punctuality are still core expectations as they were in the past. The expectation of accurateness has undergone a significant change: the „old-fashioned“ controllers were meant to be strictly accurate, whereas the „modern“ controllers are expected to be able to judge by themselves which degree of accuracy is appropriate for a certain task. In addition to that, modern management accountants are meant to articulate their opinion in every situation and in a straightforward manner, „old-fashioned“ controllers were expected to keep silent and only talk when they were asked about financial numbers. In today’s business world, management accountants should not be afraid to criticize the plans of top management if there really is some professionally qualified reason to do so. Management accounts face rising expections in terms of communication skills in their own language, as well as in foreign languages, because the main form of communication has moved away from formal reporting towards personal face-to-face interactions. In todays time, not just the numbers are important, but their meaning is seen as the crucial point, therefore management accountants need to have very good analytical and logical thinking skills. There should be literally no boundaries for the controllers, because in order to do their job properly, they have to communicate with virtually all people in the organization, whereas some time ago, management accountants were limited only to the accounting function, which did not require that much communication. Controllers are now seen as rather independent teamworkers, so they have to be well-organized and team-oriented (cf. Granlund and Lukka,1998)
They are increasingly supposed to help others in terms of self-control and learning, which also leads them to being viewed less as „watchdogs“. Furthermore, controllers have gained a lot more independence and responsibility in the last few decades and therefore, their work is respected much more than in the past (cf. Lambert and Sponem, 2012).
2.2 The four types of management accountants
Lambert and Sponem have conducted a field study in a french Aeronautics firm, where they have determined four different “types” of controllers in different organizations:
The Discrete Type of controller has not very much authority and his/her work is seen as a service for other departments of the firm. The low authority very often leads to demotivation and the feeling of uselessness of the management accountant. He is not very present in the firm, as his main tasks are reporting and raising awareness for costs. They are quite independent, therefore they can give themselves additional tasks, such as looking for potential cost-reductions or inefficiences in the firm. The problem of this kind of role model is, that too much responsibilty and influence can slip away from the controller and lead to control problems on a firm-wide level (cf. Lambert and Sponem, 2012).
This type of management control is very often found in high potential growth markets, like the luxury products industry or the pharmaceuticals sector, as the success of these companies depends on innovations and the differentiation of their products. If there is a too high impact from the financial department, it could hindering the creativity of staff, therefore operational managers should not be distracted too much by financial issues brought in by management accountants. (cf. Lambert and Sponem, 2012)
The safeguarding type of management accountant also has little authority, but provides his/her services to the head offices instead of the local managers, so one could say that they have hierarchically higher partners to work with. This can also cause problems because the local managers and other people who work with them see them as the watchdogs for top management, therefore they sometimes have difficulties in getting together the right set of information for their daily work, because people often do not want to reveal certain numbers to them. Furthermore, they are often accused of only being „finance people who do not know the business well enough“, so that means they have to face disrespect to a certain degree (cf. Lambert and Sponem, 2012).
According to their position in the company they also very often have the feeling of uselessness, what dissatisfies these management accountants. This is one of the main reasons why the safeguarding management accountant positions are very often seen only as an intermediate job, as many of them are looking to change their function or have a career as managing directors in their minds (cf. Lambert and Sponem, 2012).
The third style of management accountant was called „ the partner “, who has a rather high degree of authority and responsibility in the organisation. Additionally to cost accounting and other typical tasks, they are also highly involved in taxation issues and financial engineering. Due to their high level of autonomy and responsibilty, they do not see themselves in a position of subordination and they seem to be highly recognized and respected in their firms. Their rather high position in the organzation can also cause problems, as the operational managers rely on the results the management accountants are offering them. It can even lead to them having too much influence, which can be counterproductive, because co-workers, who know about their important status in the organization, may be a little afraid to show them all the pieces of information, which could be relevant for the management accountants job. It was observed that with this type of controller, there was an increasing tendency for gaming the budget and other habits that are potentially harmful for the firms long- time success and that can also lead to control problems in the organization (cf. Lambert and Sponem, 2012).
It is a huge advantage for modern-day firms that all kinds of financial issues are getting involved into the operational and strategic decision making process, as this minimzes the risk of failed decisions based on wrong or unqualified financial judgements made by the operational management team (cf. Lambert and Sponem, 2012).
The most powerful type of management accountant was characterized as „the omnipotent controller“. As financial issues and results are the most important part of decision-making nowadays, they are responsible for cost-controlling in the entire organization. This type of management accountant was mostly observed in rather decentralised organizations which were structured in profit centers or revenue centers and were therefore looking for „global control“. Their opinions regarding investment decisions and other important aspects are deemed to be very important. Controllers who are in this kind of position were highly respected and sometimes even seen as „corporate cops“, so the problems that could potentially emerge are quite similar to those arising with the „partnering style“ of management accounting (cf. Lambert and Sponem, 2012).