© McGraw-Hill Education (UK) Limited 2013 MANAGING CHANGE AND CHALLENGES FOR THE FUTURE Chapter 22 1

© McGraw-Hill Education (UK) Limited 2013 There is considerable and on-going change in the business environment context within which management accounting operates; there are changes in the role of management accountants, and there are changes in the technical nature and the use of management accounting techniques and systems. We should closely investigate management accounting change, and more specifically managing accounting change, What is change and why the concern at all? 2

© McGraw-Hill Education (UK) Limited 2013 The common approach for a long time had been to view management accounting ‘change’ in a rather static sense; that is, the management accounting tools and techniques in use at any point in time were assumed to be ‘best’ practice. Such a view of management accounting was premised in rational-actor, equilibrium-based models that underpin neoclassical economics (see Scapens, 1994). 3 What is change and why the concern at all?

© McGraw-Hill Education (UK) Limited 2013 Change occurring at the following levels: 1.Environmental change (for example, new policies or rules at the economy/society level, new and emerging world orders, new technologies or new social fads) 2. Organizational change (for example, mergers and acquisitions, alliances and networks among and between organizations, or outsourcing) 3. Intra-organizational change (for example, the implementation of new accounting techniques, redefining departmental structures or staff re- skilling) 4. Group/individuals change (for example, the arrival and/or departure of staff, promotion or retirement) 4 What is change and why the concern at all?

© McGraw-Hill Education (UK) Limited 2013 By thinking about management accounting change as part of cumulative processes - The historical background, and emergence of change – for instance, where did the (idea for) a new management accounting tool come from, and why? Were there any key catalysts of change? - How was the implementation of this new management new tool designed? Did certain managers or even outsiders (for example, management consultants) have an influence on the design? - Did any unusual or unexpected features characterize the change process; in particular, were there any problems or tensions, and how were they dealt with? - With the benefit of hindsight, what might we learn from this particular management accounting change process? 5 What is change and why the concern at all?

© McGraw-Hill Education (UK) Limited 2013 An institutional theory of management accounting change starts from a premise that: - Management accounting constitutes a largely rules-based and routinized feature of day-today organizational life. - Such management accounting rules and routines augment stability and continuity over time in organizational practice. - In fact, rules and routines embodied in management accounting practices help bring order to organizations that otherwise could be far less organized given their very mixed and very complex make-up. A framework for understanding management change 6

© McGraw-Hill Education (UK) Limited 2013 Management accounting practices are central to the web of rules and routines in most organizations Institutions can be defined as shared and taken-for-granted assumptions in organizations – they are ‘simply the way things are around here’ For present purposes it is important to stress that an organization’s rules, routines and institutions should be understood as far as possible before engaging in any change. 7 A framework for understanding management change

© McGraw-Hill Education (UK) Limited 2013 An organization’s taken-for granted assumptions can have a direct and important impact on the eventual outcome of a change programme Unintended management accounting change 8

© McGraw-Hill Education (UK) Limited 2013 The prospect of successful change implementation is likely to be enhanced if the new management accounting systems are compatible with existing taken-for-granted assumptions in an organization, which may or may not change during subsequent implementation process. 9 Unintended management accounting change

© McGraw-Hill Education (UK) Limited 2013 Breaking the bubble It is important to question an organization’s existing settled assumptions before any significant changes to management accounting systems are made. By their inert and embedded nature, institutions will create a barrier to change, but institutions can and should at least be challenged. New management accounting systems can be designed (or bought) and changed relatively easily, but they can be very difficult to implement if they challenge existing taken-for-granted assumptions. Sometimes, change will demand breaking the bubble of taken-for-granted assumptions and this is not necessarily easy to do. 10 Unintended management accounting change

© McGraw-Hill Education (UK) Limited 2013 In respect of breaking the bubble, considerable responsibility must lie with the leaders of a change programme, who should seek to identify as far as possible the existing institutions within the organizational setting. They should also assess the extent to which new management accounting systems require institutional change 11 Unintended management accounting change

© McGraw-Hill Education (UK) Limited 2013 Institutional change Moreover, training in new procedures and assumptions should be both extensive and intensive – meaning that it should be given to everyone involved, and it should be of sufficient depth so that each person fully understands intended new ways of working. 12 Unintended management accounting change

© McGraw-Hill Education (UK) Limited 2013 Business partner role The ‘business partner’ role for management accountants, is whereby the latter spend less time with mundane and routine accounting tasks, and works more ‘out in the field’ as advisory colleagues to business managers. 13 Unintended management accounting change