The Future Direction of UK Management Accounting Practice

The Future Direction of UK Management Accounting
Practice
The Results of a Research Project funded jointly by

Chartered Institute of Management Accountants and
Economic and Social Research Council
John Burns, University of Manchester
Mahmoud Ezzamel, University of Cardiff
Robert W. Scapens, University of Manchester
REVISED DRAFT: November 2001
Contents Page
Acknowledgements 1
Executive Summary 2
I. Background 3
II. The Changing Nature of Management Accounting 4
III. Non-Financial Performance Measurement and the Management Accounts 7
IV. The Role of Management Accountants in the 21st Century 9
V. Some Survey Evidence 12
VI. Towards New Forms of Control 17
VII. Future Direction: The Challenges Ahead 19
Bibliography 21
Appendix A 24
Appendix B 25
Appendix C 26
Acknowledgements
This report is based on a research project undertaken by researchers at the Manchester School of
Accounting and Finance. At that time all the researchers were located at the University of
Manchester, although Mahmoud Ezzamel has since moved to the University of Cardiff. The
research team would like to express their gratitude to Chartered Institute of Management
Accountants and the Economic and Social Research Council1 for funding the research, and to all
those who freely contributed their time completing the questionnaire and/or being interviewed.
Our special thanks go to all the managers we interviewed in the case study companies who
generously gave considerable amounts of their time. Also, the research team would like to thank
the administrative staff who helped manage the project and transcribed the many interview
tapes: namely, Hilary Garraway, Helen O’Neill, Maureen Scapens, Anita Ward and Myrna
Frost. Without all these contributions the research would not have been possible.
1
Reference: R000236095
The Future Direction of UK Management Accounting Practice
Executive Summary
This is the first of two monographs which together describe the findings of a research project
investigating dimensions of management accounting change in the UK. This first monograph
presents a more general discussion of the changing nature of UK management accounting
practices. In addition to describing how the day-to-day work of management accountants in
business in changing, the monograph also presents suggestions of possible directions that
accounting practitioners, the professional accountancy bodies (especially CIMA) and accounting
educators might (and probably should) consider in the twenty-first century. A second
(forthcoming) monograph focuses more directly on the complexities of, and the difficulties
involved in, the process of implementing change in management accounting systems and
techniques.
Ever since the publication of Relevance Lost (Johnson and Kaplan) in 1987, academics in
particular have investigated whether there has been sufficient change in management accounting
practice through recent decades in order to keep pace with the increasingly fluid informational
demands of business managers. The findings to date, a combination of questionnaire surveys and
case studies, are mixed – and, in some instances, contradictory. Some results, particularly the
questionnaires, have suggested that management accounting practices continue to be slow to
change despite the broader (environmental, technological and organisational) change that has
taken place over the last two decades. Case studies, on the other hand, particularly those written
by leading US accounting scholars, largely promote companies’ engagement in so-called new
“advanced” management accounting techniques such as activity-based costing or balanced
scorecard.
This first monograph represents a thorough examination, and up-date, of the changing nature of
management accounting in the UK. The argument made in subsequent chapters will be that UK
management accounting practices are indeed changing, and changing quite fundamentally. But,
rather than necessarily comprising change in the specific management accounting systems or
techniques in use, a case is made for the importance of considering change in the manner by
which the, often quite traditional, management accounting systems, techniques and information
are actually being used. This is consistent with the findings of questionnaire studies (e.g., Drury
et al., 1993) which suggest, at least at the superficial level, that traditional management
accounting continues to be used. However, it suggests that such studies fail to identify
fundamental changes in the use of traditional management accounting practices.
In addition, there also appears to be an increasing number of companies which are beginning to
adopt the new “advanced” management accounting techniques – albeit still probably at a much
slower rate than their advocates would like. Together, these developments in UK management
accounting practice are having particular impact on:
(1) the role and tasks of management accountants working in industry; and,
(2) more generally, the shape of the accounting (or finance) function.
Taken together, both monographs will provide management accounting practitioners, business
managers and educators with additional insight into the complexities of accounting change and
change implementation. With the benefit of such insights, opportunities for future research
abound – and both reports will endeavour to provide examples of these opportunities.
2
I. Background
Recent environmental, organisational and technological developments suggest that change is

likely to be an all-pervading feature of most companies in the 21st century. Management
accounting is no exception – management accounting systems and techniques, the role of
accountants in business and, more generally, the shape of the accounting function2 have been
subject to considerable pressure for change over the past decade.
In 1995, together with the Economic and Social Research Council, CIMA funded a longitudinal
research project that has studied various dimensions of management accounting change in the
UK. A number of papers and articles have already been published (Appendix A), and in another
CIMA report3 we explore the difficulties of changing management accounting systems and
techniques. This report provides the broad context for that other report. Here, we attempt to
describe the nature of management accounting practices as we enter the 21st century, and suggest
some implications for the future. Despite claims elsewhere that management accounting
practices have not changed, we will describe the nature of the changes that have taken place in
recent years, and identify opportunities and threats for the future.
The genesis of the research dates back to Johnson and Kaplan’s widely cited book, Relevance
Lost: The Rise and Fall of Management Accounting. In their book, which they published in
1987, they claimed that management accounting in the United States (and by implication,
elsewhere in the western world) had change little since the 1920s, despite the considerable
environmental, organisational and technological change that has taken place in the intervening
years. According to Johnson and Kaplan, management accounting had lost its relevance, and
consequently was failing to meet the informational needs of managers in the 1980s. In this
report we will show how management accounting in the UK has changed during the 1990s, and
that it is now much more directly focussed on the needs of managers.
Since the publication of Relevance Lost, both authors, and particularly Kaplan, have called for
case studies of innovative companies, and subsequently much research has been devoted to the
promotion of new, so-called “advanced”, management accounting techniques, such as activity-
based costing, the balanced-scorecard, strategic management accounting, and economic value-
added. However, the findings of various questionnaire studies (e.g., Drury et al., 1993) have
suggested that traditional management accounting systems and techniques continue to be used.
Nevertheless, the advanced techniques are being used, although possibly not as widely as their
advocates might have liked. Furthermore, we will argue that that UK management accounting
practices are indeed changing, and changing quite fundamentally. But, rather than change in the
specific systems and techniques in use, it is change in the way in which management accounting
systems, techniques and information are actually being used. Such changes have important
implications for the role of the management accountant and the shape of the accounting function
in the future. These implications will be explored below, but first we will briefly outline the
research methods used in the research project.
2
As we will indicate later, terms and job titles are also changing. In some companies, the job title of management
accountant is being replaced by, for instance, business analyst. In addition, various terms are used for the
accounting department – e.g., the finance department. In this report we will use the term accounting function to
indicate the areas of responsibility of the specialists who would conventionally be called accountants.
3
See Burns, J., Ezzamel, M and Scapens, R.W., The Challenge of Management Accounting Change: Behavioural
and Cultural Aspects of Change Management, London: Chartered Institute of Management Accountants, 2002.
3
The research is based on a combination of case studies and survey methods. Six case studies
were conducted over periods of 3-5 years, as well as two shorter case studies (see Appendix B).
In addition, there was a field survey, in which the researchers visited a further 12 companies, and
two mail surveys of CIMA members. The first mail survey was sent to almost 1000 CIMA
members in 1997. However, the response rate was very disappointing and it produced only 91
useable responses. Nevertheless, these responses provided valuable insights into the extent of
management accounting change in 91 UK-based companies, and access to the 12 companies
visited in the course of the field survey. In view of this low response rate, a second mail survey
was conducted in 20004, addressed to another 1000 CIMA members. This produced 279
responses, which will be described later (see Section V).
The companies that were the subjects of the case studies were clearly forwarding thinking,
although they would probably not describe themselves as “leading edge”. Nevertheless, the
field survey and the two mail surveys indicate that the changing practices we observed in the
case studies are taking place elsewhere, but they are not universal. This report is intended to
provide an overview of current management accounting practice, as found in the companies we
studied, and to indicate the direction of change, both to assist those who have not already
changed, and to explore the implications of the changes for management accountants and their
professional body, and also for accounting educators. We will draw selectively from our case
studies, several of which are described more fully in our other CIMA report, and we will
describe some of the survey results. We are not claiming that the practices described in this
report are in some way novel, the changes we observe have been evolving over the past decade,
and some have been already identified by ourselves and others researchers, both in the UK and
elsewhere (for examples see: Innes and Mitchell, 1989; Bhimani, 1996; Scapens et al., 1996;
Foster, 1996 and Siegel Sorensen, 1999). Our intention in this report is to pull together the
various changes to provide a picture of current management accounting practices in the UK, and
the direction for the future.
II. The Changing Nature of Management Accounting
This section will outline the changes in management accounting that have taken place since
Johnson and Kaplan claimed that management accounting had lost its relevance. But first we
will briefly mention some of the changes in the broader business environment, which have
impacted on management accounting in recent years.
• Globalisation and customer focus: There is much rhetoric about globalisation,

increasing competition, more volatile markets, faster reaction times, and so on. But
beneath the rhetoric, there have undoubtedly been significant changes in the economic
climate; with more global competition, and the emergence of more market- and
customer-oriented companies. The following comment, by a senior accountant in
Techno, a multinational company manufacturing computers and computer peripherals,
was fairly typical of many interviewees:
The nature of [Techno] at the moment is so dynamic. It’s changing so quickly
because of globalisation, and the move towards retail channels and consumer
products. That’s completely different from what we have ever done before. And it
doesn’t just affect the people working in the front end, it really ripples behind
everyone. Because they have to change their way of working to react to the
consumer market.
4
We are grateful to Hassan Yazdifar for assistance in analysing the results of this survey, and the University of
Manchester, Graduate School of Economic and Social Studies for funding it.
4
• Technological Change: The pace of technological change over the last 30 years has
had a profound affect on day-to-day organisational life. There have been considerable
advances in both production and information technology. But in particular, the
dispersion of personal computers and computing capacity around the organisation over
the last 10 years has had a profound effect on the nature of work, and on the
information flows around the organisation. Furthermore, enterprise resource planning
systems (such as SAP) are becoming more common, particularly in large multinational
companies, but also, more recently, in medium-sized companies (see Scapens, et al.,
1998).
• Changing Organisational Structures: Whereas the 1970s witnessed a wave of

acquisitions and mergers in the UK, with the creation of huge and powerful
conglomerates, by the 1990s organisations were moving in the opposite direction
through de-mergers, and focusing on core competencies, with non-core activities
increasingly out-sourced. Such trends have, in recent years, been important in shaping
management processes – for example, with extensive management de-layering, de-
skilling, downsizing, employee empowerment and business process re-engineering (see
Ezzamel et al, 1993). Such changes in management structures inevitably require
change in the provision of management information
• Fashion and Other Factors: The first of our two mail surveys asked respondents to
indicate the factors which had brought about change in their management accounting
practices in the first half of the 1990s. One major factor was: a feeling at top level
management that change is necessary – this factor was identified as important by 78%
of the respondents – which seems to suggest that change can be regarded as
“fashionable”. Another important factor was changing management information needs
(82% of the respondents). This indicates that management accounting change is
important because managers now have different information needs - possibly as a result
of changes in market conditions, increasing competition, and changes in organisation
structure and business strategy.
It is probably also worth noting that factors reported to be less important were: external
financial reporting requirements (reported as important by only 34% of the respondents),
and, perhaps somewhat surprisingly, imposition of new management accounting
practices by parent companies (again only 34% of the respondents considered this factor
to be important).
These factors are shaping the environment in which management accounting is operating. We
will now explore how management accounting practices in UK companies have been affected by
these “external” factors. The first mail survey indicated that major changes had taken place in
the management accounting practices of the responding companies in the early 1990s. Of the 91
respondents, 53 reported that either substantial or very substantial change had taken place in
their companies in the period 1991 to 1996. Furthermore, follow-up interviews indicated that
even where ‘no change’ had been reported, there was at least some evidence of change in the
way in which the management accounting information was being used.
With this in mind, the following are some of the specific impacts that the external factors
identified above have had on the management accounting practices.
5
• Database Technology: One of the reasons advanced by Johnson and Kaplan for
management accounting’s lost relevance, was the dominance of external financial
reporting over management accounting. They argued that if a company has only one
information system, the statutory nature of the external financial reporting requirements
would, in the vast majority of cases, take precedence over the information needed for
internal management decision making. However, modern database technologies
facilitate the storage vast amounts of information, in easily accessible forms, and as a
result, information can be analysed in a number of different ways. Thus, it is now
feasible to design an information system that simultaneously meets the needs of
different users and, in effect, for a company to have different information for different
purposes.
Another significant effect of such technological developments is in the way in which

information is dispersed around the organisation. Most routine transaction processing is
now computerised – including much routine management information. This information
can now be made easily accessible at all levels of the organisation, and managers, with
PCs on their desks, can immediately see their variances and monitor their actual
performance – possibly daily, or even in real time. This replaces the previous system
whereby managers had to wait until the end of the month for the management accountant
to “produce the numbers”. As such, accounting reports are extracted from the
information system, rather than being the basis on which information is provided to the
rest of the organisation. It could be said that the role of accountants has changed, from
one of information provider to, at least to some extent, that of a customer of the
information system. This change was implied in a conversation with one CIMA member
working at a multinational car plant, who said:
Finance [the accounting department] used to produce all sorts of information. They don’t
do that so much now because systems are such that managers can get the information
without any reference to the finance analysts. So both have access to the same information.
But they use it in different ways. That has been the major change.
• Decentering Accounting Knowledge: Another consequence of the advances in

information technology is what has been called elsewhere: “the decentering of
accounting knowledge” (see Scapens et al., 1996). The understanding of accounting,
the awareness of the financial implications of business decisions, and the use of
financial numbers in management decision making, have all been pushed further down
the organisation, and as a result, managers at all levels are becoming more financially
literate. This process has been facilitated by the increased availability of information
technology, but was motivated largely by the problems UK companies faced, in recent
years, coping with the increasingly hostile economic conditions that have made it
essential for managers at all levels to be fully aware of the financial consequences of
their actions. As a result accounting information such as budgets, variances, and actual
results are now available at most levels of the organisation hierarchy. Even in
companies that have not implemented one of the new integrated information systems
(such as SAP), we observed that accounting-type information is often available, for
instance, in the production information system. Cost management is now recognised as
primarily a management (not an accounting) task, and managers increasingly think and
talk about their activities in terms of costs and their cost implications.
This decentering of accounting knowledge means that, within the various functions or
areas of a business, there are individuals who understand costs, variances, accounting
6
reports and so on. Such individuals may be accountants (part or fully qualified), but can
also be individuals, trained in other areas, who have attained some degree of financial
literacy, possibly through an MBA degree. In one interview, such people were described
as “pseudo-accountants”. Such a term could be applied to the increasing number of
people who have accounting knowledge and, although not trained as accountants, can
access, analyse and use accounting information without the intervention of an
accountant. They access the accounting information contained in the information system,
analyse it for their own or their manager’s purposes, and can use it in their own decision
making. However, there is an important role here for the management accountant to
ensure that the accounting information is not being used inappropriately.
• Forecasting: The comparison of actual against the forecast is an increasingly important

management tool. Several interviewees criticised the traditional use of budgets,
claiming that they are “out-of-date on day 1”. In other words, circumstances can change
between preparing and implementing the budget. Although most companies continue to
prepare such budgets, they are increasingly being used as flexible, rather than fixed or
static, plans. They are often updated with rolling forecasts, possibly for 3-6 months
ahead, or with forecasts to the year-end. Such forecasts appear to be increasingly
important for monitoring performance, as the following comment from a senior
Planning and Reporting Manager at Techno illustrates:
We have shifted away from that model [the traditional budget] a little bit - with a shift more
to a kind of six-monthly cycle. The emphasis is definitely on providing good quality
information further up the organisation. They’re getting away from spending a whole lot of
time doing the budgets,… [and] more to: “Okay, let’s set an initial set of numbers, and let’s
track that, and let’s keep people informed about how the actual forecast is deviating from
that.
Such forecasts require considerable input from individual departments and functions, as
only they have the necessary detailed knowledge. Consequently, as they are their own
forecasts, individual managers have a greater feeling of ownership of the information; as
compared to the budgets that may have been compiled by accountants and possibly
imposed by senior managers. As a result, this increasing use of forecasts, in conjunction
with the decentering of accounting knowledge (described above), has contributed to the
major shift which is taking place in the ownership of accounting reports – i.e., a shift
from the accountants to the business managers.
III. Non-Financial Performance Measurement and the Management Accounts
In the main, the above discussion reflects a shift in the nature of, and responsibility for, the
monitoring of financial performance. However, alongside financial measures there has also been
growing interest in non-financial performance measurement amongst many of the companies
studied - frequently driven by corporate strategic concerns and an increased “commercial
orientation” amongst managers (and accountants). The notion of a commercial orientation, or a
focus on the needs of customers and the strategic direction of the business, contrasts starkly with
what Johnson and Kaplan termed a “financial accounting mentality”. The financial accounting
mentality – with its undue focus on bottom-line profit figures –was regarded as a major problem
in the UK during the 1980s. But currently, more emphasis is given to being commercially
oriented, although this does not mean that profit is unimportant – profit remains crucial to all
businesses. A commercial orientation recognises that the need to continue to earn profits in the
future is just as important as reporting a profit in the financial reports of the current period. This
implies a more strategic view, and an emphasis on managing the capacity to generate profits.
7
Such a philosophy does not necessarily imply less measurement and quantification – indeed, it
may involve more quantification and a broader range of performance measures. In addition,
there are likely to be ongoing comparisons of actual performance against the targets set for these
various performance measures. But these comparisons may take place over time periods that are
different to traditional accounting cycles. The use of these broader performance measures are
likely to continue, and possibly grow further, with the spread of value-based management and
the use of value-based reporting for external investors and shareholders – for example, a number
of the companies studied had either implemented, or were considering implementing, EVA5.
Delivering and conveying the notion of value, through a broad range of performance measures,
appears to be a potentially very important role for the management accountant in the 21st
century.
The increasing competition and global economic environment, mentioned earlier, has led to a
more strategic, or customer-oriented, focus in UK businesses. That is, a focus on external market
factors, rather than an exclusively internal focus on the control of costs. This is not to say that
cost control is unimportant – it remains crucially important. But costs have to be controlled with
due regard to the strategic directions of the business, rather than independently and focussed
exclusively on cost reduction. This has led many companies to identify their key performance
indicators (KPIs) – namely, measures of those aspects of the business that are crucial for its
long-term success. Many of these KPIs are non-financial. Responses to the first mail survey
indicated that non-financial performance measures are the most frequently used “new”
management accounting technique – it was reported by almost two thirds of the responding
companies. Interestingly, although non-financial performance measures are generally considered
to be important, the balanced-scorecard (see Kaplan and Norton, 1992) is used by only 20% of
the respondents. From discussions in both the case studies and field survey, it appears that
companies are developing their own methods of assessing non-financial performance.
In view of the increasing importance attached to non-financial performance measures – together

with the increasing dispersion of accounting information throughout the organisation, described
earlier - the future role of the management accounts might reasonably be questioned. In most
companies, management accounts are produced periodically, usually monthly. Whether they are
called the ‘management accounts’, the ‘monthly business report’, the ‘financial package’, or
whatever, most companies produce monthly accounts, for local managers as well as for
transmission up the organisational hierarchy, ultimately to the Board of Directors. However, a
common view of the role of the management accounts was typified by the following comment of
the Managing Director of Chemicals, a relatively small chemical processing company, who
described the presentation of the management accounts at the monthly Board meeting, in the
following terms:
The accountant presents the management accounts at the beginning of the Board meeting
and it takes 20 minutes - including the jokes!
The serious point being made was that the management accounts are used to set the scene for the
subsequent discussion, but they should not contain any new information. The Managing Director
explained that he would be very worried if the management accounts contained any information
that he did not already know. He also explained that he would be very concerned if there was
any information in the management accounts that his managerial colleagues did not already
know. The information should already have been available in the information system and
monitored continuously. In his opinion, it is too late to wait until the monthly accounts are
5
EVA is a registered trade-mark of Stern Stewart & Company
8
produced. They are not a management tool per se – they simply aggregate the financial results
for the month, so that the whole management team is aware of the general position. They
provide a guide to progress, but only in the context of the wider set of available information. In
particular, they have to be interpreted in the context of the broader performance measures
described above – thereby linking the financial outcomes with the strategic consequences of the
activities that have been undertaken.
Once it is recognised that the management accounts are partial, in that they do not capture all the
dimensions of the business, we need to give careful consideration to their relevance and
usefulness. The management accounts report the profitability of a specific period, measured
according to a particular set of widely understood rules, but they may not indicate whether the
business is being developed in a way which will lead to profits next year and the year after, and
so on. They may not show, for instance, if profits this year have been earned by reducing quality,
which may in turn have alienated customers, who may stay with the business this year because
they have no alternative supplier in the short term, but who will be able to find other suppliers in
the future. So what can be done?
If the accounting reports are incomplete, we could introduce new methods to make them more
complete, such as activity-based costing, EVA , and so on. The alternative is to recognise that
the management accounts have to be used with appropriate caution, alongside techniques that
seek to measure, possibly in non-financial terms, other dimensions of the business. For example,
Jazayeri and Hopper (1999) studied a company that had introduced World Class Manufacturing
(WCM), which comprises a series of techniques designed to enable manufacturing companies to
produce as efficiently and as effectively as possible, and which includes a broad range of both
financial and non-financial measures. According to these authors, one effect of WCM was the
simplification of management accounting reports. Although the company concerned had
previously used extensive standard costing systems, when WCM was introduced the information
needed by managers became readily available in the manufacturing performance reports, and as
a result the standard cost information became redundant. It is the manufacturing information that
gives managers their detailed understanding of the business, and the management accounts
provide only a simple summary of the aggregate financial results for the period.
This case illustrates that it may not be necessary for the management accounts per se to be all-
encompassing, and to capture all aspects of business performance. Rather, they can be kept
relatively simple, as other information can be used to interpret the financial results. The notion
of retaining simple management accounts, but placing them in the context of broader, strategy-
based performance measures, epitomises the fundamental change which is taking place in the
use of traditional management accounting, in contrast to a change in the form or content of the
management accounts. The new, “advanced”, techniques and systems may not have been widely
adopted, and traditional management accounting continues to be used – possibly even in simpler
forms. But there is significant change in the way in which the traditional systems and techniques
are being used, and this can have important consequences for the roles and expectations of
management accountants, as will be shown in the next section.
IV. The Role of Management Accountants in the 21st Century
A key role for the management accountant is to link the monthly accounts to the wider set of
information, which is available to the management team. This wider information will include
financial and non-financial measures, as well as both long-term and short-term performance
indicators. The management accountant has to reconcile the broad view of the business,
9
expressed in the various performance measures, with the narrower financial view shown in the
management accounts. For this purpose the management accountant needs a broad-based
understanding of the business and it operations. This suggests a role for the management
accountant somewhat different to the traditional controllership role.
In the traditional role, the management accountant was viewed as an independent, objective
monitor of the financial performance of the various sections of the business. This role was
usually expressed in a system of responsibility accounting, and a focus on cost control. But now,
the management accountant is more concerned with integrating different sources of information
and explaining the interconnections between the non-financial performance measures and
management accounting information. This integration is particularly important because it
enables individual managers to see the linkages between their day-to-day operations, how these
operations are presented in the monthly management accounts, and how they link to the broader
strategic concerns of the business, as reflected in the non-financial measures. Thus, integration
can nowadays be seen as the key role of the management accountant. Interestingly, in a number
of the companies we have been studying, management accountants who undertake such roles are
changing their job titles – from management accountant to business analyst, business advisor, or
process consultant. This broader role is discussed in more detail, below.
In recent years, there has been some discussion in the professional accounting press about the
role of the management accountant. In particular, it has been argued that the “bean-counter” is
being replaced by the “business advisor” (see for example, Matthews, 1998; Sheridan, 1998).
The management accountants of the 1990s have seen a shift in their activities from routine
accounting tasks (e.g., transaction processing, financial reporting and clerical aspects of financial
control) to a more proactive and central role within the management process. As discussed
earlier, information technology has considerably simplified routine accounting tasks, which now
demand far less time and have the added benefits of reduced costs, improved information
processing and increased information accessibility, as well as the more indirect benefits of
improved supply chain relationships, better customer account management, and improved
relationships with bankers and other financiers. As such, routine accounting tasks have become
no less important, but technological advances have made them much simpler and more
“automatic”.
In our case studies, we found centralised (and quite small) teams of accountants, frequently in
so-called Centres of Excellence, providing specialist accounting services (e.g., external financial
reporting or customer accounting) for the entire business. In some instances consideration was
being given to the possibility of out-sourcing these specialist accounting services. Furthermore,
many tasks traditionally performed by the management accountant, e.g., budgeting, variance
analysis and management reporting, are now increasingly performed by non-accountants (see
Scapens et al., 1996). However, the decentering of accounting knowledge does not mean that
accountants no longer require technical accounting expertise. Although we are seeing greater
empowerment of employees and the local ownership of financial numbers, management
accountants still need to draw on their technical expertise to integrate the financial and non-
financial performance measures into a coherent and comprehensive picture of the business.
Nevertheless, the evidence from the case studies in particular, does appear to support the
findings of an Industrial Society survey (see Matthews, 1998), which reported that accountants
generally view themselves as providing an array of services beyond purely technical accounting
matters, and give particular emphasis to the need for proficiency in hands-on information
technology design. According to that survey, management accountants expect their future roles
10
to include: designing, developing and operating financial and management information systems;
advising on operational decisions, programmes and projects; managing and organising others;
developing strategic financial plans, formulating and monitoring business and marketing
objectives; and, managing customer interfaces. The survey report goes on to argue:
Those who grasp the opportunity presented by the new technology and ‘bend’ it to
their advantage may reap the benefits of a wider and more varied role, with
greater management responsibilities, and perhaps greater rewards, and more
involvement in business strategy. Those who resist the change will find
themselves increasingly ‘sidelined’ as computers take over many of the more
mundane tasks, and other managers are better able to access and understand basic
financial information (Matthews, 1998, p.69).
Many management accountants are now working significant amounts of time within their
business units, or business process, whereas in the past they tended to work in a functionally
independent accounting group and entered the units or processes “from the outside”. As such,
the management accountant is working alongside, rather than separate from operations
managers, engineers, sales managers and so on (see Ezzamel et al., 1997). Consequently, such
management accountants are increasingly becoming integral members of management teams,
rather than external controllers who are generally uninformed and unskilled in the wider
management processes (see also Sheridan, 1998; Berry et al., 1999). One CIMA member
interviewed during the field survey, regarded teamwork as essential:
If people are going to just look at the books of account and produce all the audit
statements and all these wonderful things, then yes, fine, let them go away and play -
bores me to tears. Management accountants need to look at the actions, changes,
purchases and so on that are required by management - to look at the financial
implications of those decisions on the well-being of the company, the profitability of the
company, the long-term well-being and so on. They need to help… these guys to guide the
way the business is run in the most beneficial financial way. But these people need to
make sure that the quality is maintained, that they can in fact produce that way. So, it’s a
team. And each plant…has got to work as a team to keep the thing going in the most
profitable way. And the management accountants are there to give a service to
everybody.
But if management accountants are to expand their role and activities, through membership of
cross-functional teams, they need to understand the complexities of business processes and have
the capability of interacting with people in all areas of the company. It may be that, as Mackey
and Thomas have suggested:
Future management accountants will resemble – if in fact we have not already
become – more artisans than technicians, more Picassos than Taylors, and more
generalists than specialists (1995, p.112).
Numerous examples of this new trend were observed in the case studies and field survey – an
example, drawn from the Pharmaceuticals case, is described in Appendix C. In general, there
was widespread recognition that management accountants need to have in depth understandings
of their business, to enable them to enhance their contributions to corporate goals. A senior
accountant at the UK headquarters of Techno said of the accountants within his company:
We actually need to become…the guide towards managing a business. Because even
though the numbers aren’t the answer to everything, they are damn important. What we
should be doing, is producing management accounting data, doing simulations, doing
what-if analyses – to give the manager better information for decision making…. And so,
we need to become mini-general managers, and think about how the general managers
11
think about the business. So that you can think about the decisions that he needs to make,
and then you can supply the right information, and right scenarios for that.
But broad understanding of the business requires broader forms of training and experience, not
simply training in accounting numbers. In particular, management accountants need to be able to
relate the accounting and financial information to the wider information flows within the
organisation, including strategic information, and also to recognise the limitations as well as the
potential of management accounting.
In a number of the cases, we observed management accountants becoming increasingly involved

in issues of corporate strategy; and proactively involved, rather than merely supporting the
strategic decision making process (see also Berry et al., 1999). In the course of the case studies
and the field survey we became aware of a considerable number of tasks in which the
management accountants are now becoming involved, including amongst others: assessment of
the financial implications of operational decisions, including risk assessment; short-term tax
considerations; assisting managers to make short-run profits on currency dealings; establishing
new contracts (e.g., with suppliers); assisting in decisions over potential acquisitions and/or out-
sourcing decisions; proactively supporting research and development decisions; and, assisting
with licensing and/or regulatory issues.
Finally, it is worth noting that a familiar, and sometimes intractable, problem for management
accountants who want to engage in such wider managerial activities is the generally negative
image of accountants that is sometimes found in the UK (see Beard, 1994; and Smith and
Briggs, 1999). Evidence from the Pharmaceuticals case suggests that process accountants in that
company are perceived as different from “other accountants” and, as such, they are regarded by
the process managers as legitimate and necessary members of the process team. This certainly
helped the process accountants in Pharmaceuticals to extend their role within the newly
restructured organisation (see Appendix C), apparently without significant resistance or conflict.
This particular case illustrates how important attitudes and perceptions can be. As Jablonsky et
al. (1993) pointed out, it would be unwise to assume that superficial changes of job titles, and
more face-to-face contact, will necessarily alter embedded negative perceptions. In a study of six
US companies, they found that although accountants generally regarded themselves as business
advocates (with a business support and team orientation), most non-accountants regarded their
accounting colleagues as corporate policemen (with a command, control and conformance
orientation). As the Pharmaceuticals case illustrates, it is essential that there is more than just a
superficial change. Assimilation within the process team (which may be closely linked to
physical location) was essential to enable the process accountants to build the relationships and
trust that were needed for a meaningful dialogue with other process managers (see Burns and
Baldvinsdottir, 1999). As one Supply Chain Manager (a CIMA member) at Techno commented:
I’ve been with [Techno] just coming up to five years. And I was certainly very aware,
soon after I joined, that it was not an accounting department that sat in a corner of a
building and never saw anybody. Everybody in the accounting department, whatever level
they were at, went off and had meetings with other people all around the site. And, the
Controller says that he’s happiest if he can stand up in the accounting department and he
can’t see anybody - because that means that they’re all out where they should be, having
meetings with non-finance departments.
V. Some Survey Evidence
12
To assess the extent of recent changes in management accounting practices and the changes
expected in the future a questionnaire was sent to CIMA members – this was the second mail
survey mentioned earlier. This questionnaire asked respondents about their experiences over the
period 1995-2000 and their predictions for the period 2000-2001. The first question asked
respondents to indicate the factors believed to be driving change in the tasks and roles of
management accountants in their organisation. The subsequent questions asked about the
management accountant’s key tasks; the tools and techniques needed to fulfil these tasks; and
the skills required by the management accountant.
• Change Drivers
Table 1 shows the change drivers that were regarded as vitally important. These results reflect
the impact of the external factors discussed in section II above.
Table 1 Advances in information technology

Factors believed to have been vitally important in and new accounting software are
driving change in the tasks and roles of management major drivers of change, as also is
accountants (1995-2000). organisational restructuring.
Customer-oriented initiatives and
Change Drivers n % globalisation are important, but not as
Information technology 189 73 widespread as in our case studies.
Organisational restructuring 139 53 This may be because the case
New accounting software 109 41 organisations were generally large
Customer-oriented initiatives 103 39 companies operating in international
New management styles 94 36 markets.
E-Commerce/electronic business 83 32
External reporting requirements 63 24 Some of the relatively lesser cited
Core competency aims 61 23 factors are also very interesting. For
Globalisation 60 23 instance, take-overs and mergers are
Take-over/merger 54 20 not a significant driver of changes.
Quality-oriented initiatives 48 18 This would seem to suggest that
New accounting techniques 42 16 acquired companies do not inevitably
External consultants' advice 32 12 have new accounting rules and
Production technologies 20 8 routines imposed on them. And,
consultants may be disappointed to
observe the comparatively limited influence that they seem to have on the tasks and roles of
management accountants. The limited impact of new accounting techniques is also likely to be
disappointing for the advocates of such techniques as, activity-based costing, the balanced
scorecard, and so on.
• Management Accountants’ Key Tasks
The respondents were asked to identify the tasks that were important for management
accountants in the period 1995-2000, and the tasks likely to be important in the period 2000-
2005. Table 2 highlights the 10 top tasks deemed to be vitally important in the first period.
13
Table 2 The important message to draw

Top ten tasks that were vitally important for management from these results is the range of
accountants in the period 1995-2001 tasks that were being undertaken
in the late 1990s, although they
Tasks n % could all be considered to be
Business performance evaluation 221 84 quite traditional management
Cost/financial control 213 80 accounting tasks. For example,
Interpreting/presenting the management 197 74 business performance
accounts evaluation, cost and financial
Planning/managing budget 190 72 control, interpreting and
Interpreting operational information 175 66 presenting the management
Profit improvement 153 58 accounts, and planning and
Implementing/designing new information 152 57 managing the budget all
systems appeared high on the list.
Implementing business strategy 149 56 However, although not explicitly
Cost cutting 141 53 conveyed in the table, the survey
Capital expenditure evaluation/control 131 50 results confirm the point made
earlier that many routine
accounting tasks, such as transaction processing and financial reporting, are either computerised
or undertaken by small specialist groups, and in some cases out-sourced.
Table 3 highlights the top ten replies for the current five-year period (2000-2005). However,
different the selection criteria were used for the results in Tables 2 and 3. For Table 2,
respondents were asked to indicate the relative importance of each task. Whereas for Table 3,
respondents were asked to select only 5 tasks. Consequently, the absolute values and the
percentages in the two tables cannot be directly compared – both sets of results should be
considered in their own right, although the relative positions in the two tables is indicative of the
importance attached to each task. (The same caveat applies to Tables {4 and 5} and {6 and 7},
respectively).
Table 3 Again the apparently traditional

Top ten tasks that are expected to be vitally important for management accounting tasks
management accountants in the period 2000-2005 scored highly. Performance
evaluation remains at the top of
Tasks n % the list. But it is likely that such
Business performance evaluation 145 58 evaluation increasingly
Cost/financial control 100 40 incorporates non-financial
Interpreting/presenting the management 88 35 indicators, alongside the
accounts financial indicators. Other
Profit improvement 87 35 traditional management
Planning / managing budgets 83 33 accounting tasks, such as
Strategic planning / decision making 80 32 cost/financial control and
Implementing business strategy 72 29 interpreting/presenting the
Generation / creation of value 64 25 management accountants,
Implementing/designing new information 64 25 continue to be important.
systems However, a number of
Interpreting operational information 58 23 newer management accounting
tasks, such as strategic planning
and decision making, implementing business strategy, the generation and creation of value,
14
implementing and designing new information systems and interpreting operational information
are also on the list. Several were also on the list for the earlier period, but cost cutting and
capital expenditure evaluation/control have been replaced by generation/creation of value and
interpreting operational information
• Management Accounting Tools and Techniques
The questionnaire also asked the respondents to indicate the tools and techniques that were, and
that are likely to be, vitally important in undertaking the tasks identified in Tables 2 and 3.
Table 4 contains the top ten for the period 1995-200.
Table 4 Traditional tools and techniques

Top ten tools and techniques that were vitally appear to have been popular with
important for management accountants (1995-2000) management accountants in the late
1990s. Budgets were by far the most
Tools/techniques n % important, while variance analysis was
Budgets 218 82 also high up the list. Several of the
Variance analysis 133 51 new techniques, such as EVA , the
Rolling forecasts 127 48 balanced scorecard and activity-based
Strategic management accounting 98 37 costing were relatively low on the list.
Standard costing 66 25 Nevertheless, other new techniques,
Total quality management 50 19 such as rolling forecasts and strategic
Value added accounting 44 17 management accounting were
Economic value added 41 16 comparatively highly placed. Such
Balanced scorecard 35 13 techniques, however, are likely to be
Activity-based costing 30 11 used alongside traditional management
accounting tools, rather than displacing them.
Table 5 indicates the top ten tools and techniques that the respondents believe will be vitally
important in the period 2000-2005.
Table 5 Again budgeting and variance analysis

Top ten tools and techniques that will be vitally are high on the list, but the latter has
important for management accountants (2000-2005) been overtaken by strategic
management accounting. Thus, rather
Tools/techniques n % than abandoning traditional budgets
Budgets 187 76 altogether, the respondents seem to be
Strategic management accounting 161 65 suggesting that many organisations are
Variance analysis 153 62 likely to supplement them with rolling
Rolling forecast 145 59 forecasts and more strategic
Value added accounting 96 39 information. Finally, Table 5 indicates
Activity-based costing 95 39 that some of the new techniques, in
Total quality management 81 33 particular, value-added accounting,
Balanced scorecard 76 31 activity-based costing and the balanced
Standard costing 65 26 scorecard, may become more
Economic value added 60 24 important. However, such predictions
have been made in the past –
prediction and intention do not necessarily lead to implementation.
15
• Skills required of management accountants
The final set of questions asked about the skills that were required of management accountants
in the period 1995-2000, and the skills that are likely to be required in 2000-2005.
Table 6 Table 6 lists the skills that were

Top ten skills that were vitally important for management considered most important in the
accountants (1995-2000) period 1995-2000. In short, these
skills are indicative of the
Skills n % management accountants who are
Analytical/interpretive 216 81 working “out in the field”,
Broad business knowledge 173 65 supporting their business
Teamwork 166 62 managers. As indicated earlier,
Oral communication 159 60 such management accountants
Integrating financial and non-financial 155 58 require analytical and interpretive
information skills, broad business knowledge
IT/systems knowledge 145 55 and the ability to work as part of a
Professional/ethical 145 55 team. Such management
Interpersonal 134 51 accountants, who were described
Presentational 122 46 in Pharmaceuticals as hybrid
Commercial 120 46 accountants (see Appendix C),
must be able to work alongside
and support their managerial colleagues, and be able to integrate strategic, financial and
operating dimensions of the business.
Table 7: Finally, Table 7 indicates the

Top ten skills that are likely to be vitally important for skills that are expected to be most
management accountants (2000-200) important for management
accountants in 2000-2005. The
Skills n % responses are very similar to those
Analytical /interpretive 156 61 of the period 1995-2000.
IT/system knowledge 119 47 However, it should be noted that
Broad business knowledge 112 44 IT/systems knowledge is
Integrating financial and non-financial 104 41 becoming more important for
information management accountants, as also
Teamwork 84 33 is strategic thinking. However, the
Change management 81 32 absence of oral communication
Strategic thinking 81 32 from Table 7 is somewhat
Commercial 73 29 surprising. This might be the
Decision-making 66 26 case, for example, because more
Presentational 55 22 information in the future may be
communicated electronically. But
this seems at odds with the fact that teamwork remains important.
• Summary
Comparing the two periods, 1995-2000 and 2000-2005, the respondents to this mail survey do
not see major changes in the coming years. Rather, they seem to be suggesting that the changes
that had been taking place during the 1990s will be consolidated in the early years of the twenty-
first century. Although it is expected that the new “advanced” techniques will become more
16
important, the traditional techniques of budgeting and variance analysis will continue to be used,
but supported by rolling forecasts and strategic management accounting. However, the skills
required of management accountants in both periods support the picture of modern management
accounting practice that emerged from the case studies. Here we see management accountants
working alongside managers, in cross-functional management teams, using their analytical and
interpretive skills, together with broad business knowledge to provide general business support,
and using both financial and non-financial measures to integrate operational, financial and
strategic understandings of the business. In fulfilling this role, management accountants often
use traditional management accounting tools and techniques, but in new ways to help managers
control their business. However, this entails a quite different notion of “control” from that
which underpinned the “controllership” view of management accounting.
VI. Towards New Forms of Control
The traditional focus of management accounting has been on control and accountability - with
particular emphasis on budgeting, cost control and product costing. This has largely been
achieved through systems of responsibility accounting, which divide the business into
responsibility centres that can be monitored separately, with individuals given incentives for
meeting the budget and/or other goals for their area of responsibility. This notion of individual
responsibility, together with the use of incentives, is an essential feature of responsibility
accounting. It emphasises the role of individual business units, departments, sections, and
groups, as well individual personal responsibility and accountability for the activities of the
business.
For example, the head of a business unit is personally responsible for the unit’s performance.
This individual will then have subordinates who are individually responsible for the performance
of their departments and/or functions; and so on down the hierarchy. As such, this form of
responsibility accounting has an individualising effect; dividing the business into separate areas
of responsibility, each of which is accountable for its own performance. This is frequently
reinforced by the creation of formal (or informal) competition between the various responsibility
centres – using such tools as league-tables and performance ladders.
This traditional “controllership” role involved accountants monitoring the performance of each
area of responsibility, and producing financial reports to be transmitted up the organisational
hierarchy and ultimately consolidated to produce financial reports for the business as a whole.
Within such a role, we can see the potential impact of external financial reporting, and the
financial accounting mentality that Johnson and Kaplan criticised in Relevance Lost.
Underpinning this traditional model is the principle that there should be someone who is
accountable (as an individual) for every area of the business, and whose performance can be
quantified so that an incentive system can be applied. Such incentives are likely to be financial;
but the essential feature is the linking of incentives to individual performance. This approach is
grounded in a narrow (economic) view of rationality and motivation (see Scapens and Arnold,
1986). In practice, it can have significant individualising effects – with everyone focussing on
their own area of responsibility and competing against their colleagues (see Atkinson et al.,
1997).
However, the “new” management accounting described in this report, and reflected in the survey
findings set out in the previous section, is concerned with decision support and teamwork, with
management accountants working alongside managers, and integrating operations, financial
17
performance and company strategy. New theories of control are needed to recognise these
developments in management accounting practice.
Where there is a focus on business processes, responsibility for the performance of each process
may cut across the traditional functional areas of, say, procurement, operations and sales.
Managers (and others) in those functional areas will be jointly responsible for the performance
of the process as a whole. This approach is linked to the idea of empowerment, and as such
relies on notions of trust, teamwork and co-operation, rather than on dividing the business into
individual areas of responsibility for the purposes of monitoring and control.
For effective empowerment, managers and other employees have to be given the information
and other resources they require, and be trusted to perform their tasks effectively. However, this
does not mean an absence of control. Senior management still need to be in control of their
company – they cannot simply delegate responsibility to suitably empowered employees and
expect the entire business to function efficiently. But, controls will be exercised at different, and
possibly higher levels, than under traditional systems of responsibility accounting. For example,
cross-functional teams have to be controlled, rather than individuals. But this can create
problems – particularly for traditional control systems, which are grounded in ‘narrow’
assumptions of individual responsibility. Thus, more team-based performance measures are
needed, and accounting information should encourage co-operation, rather than competition.
However, this will require broader-based knowledge of the business and of how the various
processes and functions interact, and an emphasis on integration rather than individualisation. It
will require an understanding of all aspects of the company, from its day-to-day operations to its
corporate strategy. Furthermore, it will require a redesign of incentive systems – from
individual-based to team-based reward schemes.
Accompanying such changes we are beginning to see a redesign of the accounting function
(Sheridan, 1998). On the one hand, there is the increasing centralisation of routine accounting
tasks, into so-called “centres of excellence”, with the possibility of them being outsourced, while
on the other hand, management accounting is becoming increasingly decentralised. Thus, we see
management accountants in the business processes, working alongside managers, and meeting
only occasionally with their accounting colleagues working in other processes. The decentering
of accounting knowledge, discussed earlier, and increasing recognition of the financial
consequences of management actions at all levels, has made such change broadly acceptable. As
illustrated by the Pharmaceuticals case, locating the process accountants within the processes is
generally regarded as desirable by process managers. However, the Office Planning and Services
Manager for a large car plant, himself an accountant, argued that many management accountants
lack the necessary depth of understanding of business processes:
A lot of people in accounting don’t understand the processes that they’re looking at. And
they don’t understand the industry that they’re in. I mean, there are a lot of people in our
Head Office who are, in inverted commas, “accountants”. But they’ve never been to this
plant! We might as well be making tin boxes. I really don’t see how they can do an
effective management accounting job unless they understand the product.
Management accountants who fulfil the “hybrid” role, which is undertaken by the process
accountants in Pharmaceuticals, will be in a position to help managers to interpret the financial
and non-financial information that is available to them, and also to evaluate both the operating
and strategic consequences of alternative courses of action. A broad-based knowledge of the
business, reinforced through interactions with accounting colleagues in other parts of the
business, puts the management accountant in a position to recognise the wider impacts of
18
decisions taken in specific areas of the business. Such a role for the management accountant is
important as it integrates the various activities of the business in a seamless information and
communication system.
VII. Future Direction: The Challenges Ahead
In an important sense the future is already here. Significant areas of accounting work, including
some of the traditional roles of the management accountant have disappeared, or are much
reduced in scale and require far fewer qualified accountants. For example, the spread of
integrated information systems makes it much easier for routine tasks, such as transaction
processing, clerical forms of financial control and, to some extent, external financial reporting,
to be centralised. In the BM Inc. case, the European division of a US multinational, with plants
in various European countries, used SAP to centralise all transaction processing in just location.
In this case and in all the companies studied there have been substantial reductions in the
numbers involved in the accounting function. Anticipating this reduction, some qualified
accountants interviewed during the case studies and the field survey have decided that “not to
wait for it to happen”, and have moved into new areas, such as IT design, supply chain
management and marketing.
However, the computerising/centralising of routine tasks provides the space for the management
accountants who remain, to undertake other, and possibly more important roles; such as
interpreting financial and non-financial information, and integrating operational, financial and
strategic understandings of the business. As such roles require the management accountant to be
a member of the management team, rather than part of a functionally separate accounting group,
they represent a decentralisation of management accounting. It has been suggested that the
centralisation (and possible outsourcing) of routine accounting activities, coupled with the
decentralisation of management accountants into management teams will mean that by the year
2010 the “finance [or accounting] department will no longer exist” (KPMG, 1998, p.4). There
will be small, centralised specialist groups dealing with routine accounting tasks and maintaining
the associated computer systems, and there will be accounting/finance experts within the
individual management teams. But even if this prediction is correct, there will be a continuing
role for qualified management accountants within the management teams. Thus, despite
suggestions of crisis, there will continue to be a significant role for management accountants in
the future – albeit in less numbers than in the past.
• Implications for Management Accountants
This continuing role for management accountants cannot be taken for granted, however. The
opportunity is there, but there are also challenges and threats. For example, managers who have
received formal management training, including financial literacy, through an MBA degree,
could present a threat to management accountants in the future. As mentioned earlier, in
Pharmaceuticals the process accountants were described as “hybrid accountants”, because they
combined financial and accounting skills with a broad-based understanding of the business.
However, a financially literate engineer or production manager might also fill such a role.
Professional accounting bodies, especially CIMA, may be well placed to provide such people
with the necessary financial expertise to supplement their already well-developed business
knowledge.
IT specialists, also, pose a potential threat to management accountants, as they could become the
information specialists of the future. The new integrated information systems provide accounting
19
information, along with many other forms of management information. For many management
accountants, designing and implementing these new information systems is a daunting prospect.
But as Christiansen and Mouritsen (1995, p.216) point out, accountants have the advantage that
“their intellectual technology focuses on how organisational decisions and processes can be
integrated... [whereas] …information systems specialists’ competence concerns the relationships
between technologies, rather than those between technologies and organisational processes”. It
is the management accountant’s ability to link accounting information to operational
performance measures, and to relate financial and non-financial information to corporate
strategy, which is a particular advantage, but it is one that may not last.
In any event, it will be essential for management accountants to provide value for money in the
services they offer to the business – whether it is transaction processing, processes accounting,
business support, or even external financial reporting. This may not be achieved simply by
redesigning the accounting function. As information becomes more accessible at all levels of
the organisation, and as business managers have greater financial knowledge, they are
increasingly likely to question the internal charges for the management accountants working in
their area. In other words, through its own decentering and dispersion around the organisation,
accounting is becoming increasingly transparent and, hence, it has to be more accountable (see
also Ezzamel et al., 1997).
• Implications for the Profession
As mentioned at the outset, the genesis of this research project was Johnson and Kaplan’s claims
that management accounting had lost its relevance. Our findings clearly indicate that CIMA
should not be concerned about the relevance lost thesis. It may have had some validity in the
1980’s when US and UK businesses had a distinct financial orientation. But in the 1990s, for the
reasons outlined earlier, the role of the management accountant has undergone considerable
change. For CIMA, the challenge now is to ensure that its members are capable of taking a much
broader role within business. Some clearly are, as was observed in the case studies. But the issue
for CIMA (and other professional accountancy bodies) is whether both student education
programmes and post-qualification training activities are sufficiently focussed on this broader
role.
In the future, management accounting practice and the role of management accountants are
likely to be continually redefined with changing organisational structures and new working
patterns. It is, thus, essential that management accountants receive broad education and training,
so that they can adapt to changing patterns of work. Furthermore, if management accountants
are to be more directly involved in the management process, they need to understand the
complexities of the business process, and to possess the capabilities of interacting with people
from all parts of the business. The case studies provided illustrations of individuals who were
excellent at handling financial numbers, but who could not relate them to the operations of the
business. Such individuals are being replaced by others who are able to see through the numbers
to the actual operations of the business. In addition, management accountants in the future will
need interpersonal skills, together with their technical financial skills, if they are to work closely
with other members of the management team.
Thus, the professional accounting bodies, and especially CIMA, need to ensure through
continuing education and training that their members and students have the knowledge,
capabilities and interpersonal skills required for the new emerging and increasingly key roles of
the management accountant. CIMA’s new syllabus and practical experience requirements
20
introduced in 2000 move significantly in this direction. They broaden the scope of the formal
examinations, and provide three groupings of practical activities. But individual employers have
to design the training plans so that student management accounts receive the necessary broad
business training through their on-the-job experience. Thus, it is very important for employers
to design training plans that enable the students to gain wide experience of all areas of the
business. This could include periods in, for example, the operations and marketing functions –
thereby giving the students experience outside the accounting function. Consideration might
also be given to providing similar experience to qualified management accountants who do not
currently possess sufficiently broad-based understanding of the business. Extending such
experience should be regarded as, at least as important, for career development and continuing
professional education, as learn about new management accounting techniques
• Implications for Management Accounting Educators
Management accounting educators, particularly those at universities, also have a role to play in
the process of (continually) redefining management accounting. First, university accounting
programmes need to provide broad-based business knowledge – including subjects such as
change management, systems design and implementation, and strategy. Then, within individual
accounting courses, there needs to be an emphasis on the interpretation of financial numbers –
not just focusing on the numerical techniques per se, but also on how those techniques impact on
and relate to other dimensions of the business. Finally, in addition to accounting and business
knowledge, management accounting students need to develop their personal and interpersonal
skills. Such development could be encouraged, for example, through teaching cases and
interactive learning techniques with, for example, students role-playing and participating in
management games.
However, what is currently portrayed as management accounting practice in most textbooks is

only a small fraction of the knowledge and skills that management accountants will need in the
21st century. The role of the management accountant is changing, and if new textbooks are to be
produced and new education programmes updated to reflect these changes, researchers need
access to companies to conduct research. The present authors are very grateful to all the
contributors to this research project, and would urge others to make similar contributions in the
future, as it is only in this way that the changing nature of management accounting will continue
to be understood.
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Manufacturing: A Case Study”, Management Accounting Research, Vol.10.3, pp263-301
Johnson, H. and Kaplan, R. (1987) Relevance Lost: The Rise and Fall of Management
Accounting, Boston Mass: Harvard University Press.
Kaplan. R. and Norton, D. (1992) "The Balanced Scorecard - Measures That Drive Performance,
Harvard Business Review, (Jan-Feb), pp. 71-9.
KPMG Management Consulting (1998) ‘Finance of the Future: a guide for business users’,
internal publication, London: KPMG.
Matthews, S. (1998) ‘The Changing Role of the Management Accountant: And its implications
for qualification development’, Management Accounting, September, pp.68-9.
Scapens, R. W. and Arnold, J. (1986) “Economics and Management Accounting Research”, in
M. Bromwich and A. Hopwood (eds.), Research and Current Issues in Management
Accounting, Pitman, pp. 78-102.
Scapens, R., Jazayeri, M. and Scapens, J. (1998), ‘SAP: Integrated Information Systems and the
Implications for Management Accountants’, Management Accounting, September, pp. 46-
48
Scapens, R., Turley, S., Burns, J., Joseph, N., Lewis, L. and Southworth, A. (1996) External
Reporting and Management Decisions: A Study of their Interrelationship in UK
Companies, London: CIMA.
Sheridan, T. (1998) ‘The Changing Shape of the Finance Function’, Management Accounting,
February, pp.18-20.
22
Siegel, G. and Sorensen, J.E. (1999) Counting More, Counting Less:Transformations of the
Management Accounting Profession, Montvale, NJ: The Institute of Management
Accountants.
Smith, M. and Briggs, S. (1999) ‘From Bean-Counter to Action Hero: changing the image of the
accountant’, Management Accounting, January, pp.28-30.
23
Appendix A: List Papers Published from Project
Professional Journals (and other media for professional accountants):

John Burns, Robert Scapens and Stuart Turley, “The Crunch for Numbers” Accountancy, May
1997, pp.112-113.
John Burns, Mohmoud Ezzamel and Robert W Scapens, “Management Accounting Change in
the UK” Management Accounting, March 1999, pp.28-30.
John Burns and Hasan Yazdifar, “Trick or Treat”, Financial Management, March 2001, p.33-35.
Also appeared in Insider March 2001, pp14-16.
Cristiano Busco, Angelo Riccaboni and Robert W Scapens “Culture Vultures” Financial
Management, March 2001, pp.30-32
John Burns and Robert W Scapens, “The Changing Nature of Management Accounting and the
Emergence of ‘Hybrid Accountants’” (November 2000) Article published on internet by
IFAC – www.ifac.org/Library/
Robert W Scapens, Recorded interview for Business Essentials – journal on audio cassettes for
CIMA members, July 1999.
Papers in Academic Journals:

John Burns and Robert W Scapens, “Conceptualising Management Accounting Change: An
Institutional Framework” Management Accounting Research, Vol.10 No. 1, March 2000,
pp.3-25.
John Burns “The Dynamics of Accounting Change: Inter-Play Between New Practices,
Routines, Institutions, Power and Politics”, Accounting, Auditing and Accountability
Journal, Vol. 13.5, 2000 pp.566-596.
Robert W Scapens, “Management Accounting and Strategic Control: Implications for

Management Accounting Research” Bedrijfskunde: Tijdschrift Voor Modern
Management, Vol.70 No.1 1998 pp.11-17.
Robert W Scapens, “Broadening the Scope of Management Accounting: From a Micro-

Economic to a Broader Business Perspective” Maandblad voor Accountancy en
Bedrijfseconomie, December 1999, pp640-651.
Academic Book:
Robert W Scapens and John Burns, Towards an Understanding of the Nature and Processes of
Management Accounting Change, Uppsala, Sweden: Acta Universitatis Upsaliensis,
No.47, 2000
Chapter in Academic Book:

John Burns, “The Institutionalization of Accounting Routines: Keano Ltd.”, in Berry et al. (eds),
Beyond Constraint: Exploring the Management Control Paradox, Management Control
Association, 1996.
24
Appendix B: Case Study Companies
Company Name* Duration Details

Chemicals 5 years Small privately-owned chemicals company
BM Inc. 5 years European division of US multinational producer of

building materials
Retail Co. 3 years Large UK publicly-quoted high-street retailer
Techno 3 years US-owned multinational producer of PC-related

technologies
Pharmaceuticals 3 years UK-based multinational producer of pharmaceutical
drugs
Components 3 years Small US-owned producer of automobile
components
Utilities 1 year Large group of recently privatised UK-based utility
companies
Electrics 6 months European multinational producer of electric
generators
* For reasons of confidentiality, the company’s names cannot be disclosed and they are
identified only by their industry.
25
Appendix C: Case Summary6 – Pharmaceuticals Plc
Background:
Pharmaceuticals Plc is a large UK-based multinational pharmaceuticals company, which until
relatively recently was in a quasi-monopoly position (due to the ownership of the patents on
several very profitable medicines). But during the 1990s a number of significant external factors
lead to major changes in the company. These factors included:
(1) the ending of 2 of its most profitable patents;
(2) increasing government restrictions on health spending in the UK; and,
(3) substantial increase in international competition, following mergers between some of its
major competitors.
The company’s response to these external factors was a substantial change programme,
implemented in the period 1994-98; including business process re-engineering, various IT
projects, new product innovation, and activity analysis (but not the introduction of activity-based
costing). Some key elements of this programme were a 25% cost reduction target by 2000, the
implementation of MRPII for all its production processes, continuous improvement programmes
and introduction of process ways of working (PWW). All had impacts on management
accounting, but probably the most significant was PWW.
Process Ways of Working:

PWW involves the reorganisation and realignment of products from order to delivery on
individual sites, each under the control of a process leader. Previously, Pharmaceuticals had
been a functionally-based organisation, with the various functions located at different sites
spread across the UK. Following the introduction of PWW individual products are now
processed (where possible) on one site, from receipt of the original order to the final delivery to
the customer. As a result many functional departments have been disbanded, and their staffs
incorporated into the ‘product streams’. All products are now processed (from order to delivery)
in these product streams. Only three functional departments have retained their former
(independent) status, namely Finance (accounting), IT and Quality. These three departments
make a monthly charge to the product streams for the services they provide.
Management Accounting Change:

Although the finance (accounting) department remains a separate functional area, there have
been significant changes in recent years, including a decline in numbers of staff from 120 in
1990 to 60 in 1997. This reduction has largely been in the people directly involved in transaction
processing and reporting.
During the 1980’s, Pharmaceutical’s accounting function was quite centralised, with most
accountants performing duties such as transaction processing, statutory (and/or group) reporting,
and “clerical-type financial management”. But with the introduction of PWW the nature of the
accounting function and the role of the accountants has changed. In particular, apart from a
small group who remain responsible for statutory (and/or group) reporting, most of the
accountants now work within the product streams. As such people combine knowledge of
accounting and finance with a detailed understanding of the process in which they are working,
they were described by some people in the company as “hybrid” accountants. These
accountants advise process stream leaders on strategic issues, as well assisting other managers
with day-to-decisions and performance measurement.
6
For a more detailed case description see J. Burns and G. Baldvinsdottir (1999).
26
Much of the data (both financial and non-financial) used by the “hybrid” accountants is
maintained within the product streams. One of their primary tasks is to collate such data in a
form that satisfies the process managers’ informational requirements. Particular emphasis is
given to rolling forecasts – and the feed-forward of information. Budgets remain important as
an overall guide for the year, but it is the rolling forecast, generated within the product stream,
which receives most management attention. Further, as the forecasts are generated internally,
rather than imposed from outside, there is a greater feeling of ownership of this information and
commitment to its achievement.
Despite such a substantial change in the role of accountants within Pharmaceuticals, there has
been very little change in the management accounting techniques that are used. Within the
company, management accounting systems are described as “antiquated”. However, there have
been many other innovations, including the implementation of MRPII and data warehousing.
Although there has been some discussion of activity-based costing, it was not introduced, even
though there were some managers who wanted it so that they could challenge their product
costs. Nevertheless, it was not considered a priority initiative; many other changes were taking
place that were regarded as potentially more beneficial for the company.
Accountants Location:
Within Pharmaceuticals, however, there were differences over the physical location of the
“hybrid” accountants. At site W, they spend at least 3 days working within the product streams –
alongside the process managers. But, in addition, they have an office/desk in the accounting
department. Nevertheless. it is their office in the product streams which they regarded as their
“home”.
This contrasts with site B, where the “hybrid” accountants are located centrally, alongside the
other accounting staff. If they want to talk to process managers they have to walk over to the
plant. This location seemed to be perpetuated by the desire, on the part of the senior accountant
at site B, for the accountants to remain independent. Whereas at site W, the senior accountants
were adamant that PWW required their staff to be working predominantly “out in the field”.
Within Pharmaceuticals generally, the “hybrid” accountants have direct functional responsibility
to their senior accountant, and only indirect (dotted-line) responsibility to their product stream
managers. At site W, however, their day-to-day responsibility is (directly) to the product stream
leaders, and they are beginning to question the importance of their functional responsibility.
While at site B, the senior accountant considered that personal relationships were far more
important than location, and that good relationships need not come from being physically
located in the same building. Process managers at site B generally supported this view.
Nevertheless, it was a widely held view at the site that when the existing senior accountant
retires, the accountants will spend much more time in the product streams.
Changed Perceptions:
Within Pharmaceuticals the “hybrid” accountants are seen as different from the more traditional
accountant, and are called finance analysts, not accountants. As such they are regarded as
providing a service for process stream managers, and part of the process team. The demands for
the information they provide come from the process managers themselves – but this also means
that these accountants have to provide a cost-effective service to the process stream.
27

The Future Direction of UK Management Accounting Practice

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The Future Direction of UK Management Accounting

The Results of a Research Project funded jointly by

John Burns, University of Manchester

Mahmoud Ezzamel, University of Cardiff

Robert W. Scapens, University of Manchester

REVISED DRAFT: November 2001

Recent environmental, organisational and technological developments suggest that change is

II. The Changing Nature of Management Accounting

• Globalisation and customer focus: There is much rhetoric about globalisation,

• Changing Organisational Structures: Whereas the 1970s witnessed a wave of

Another significant effect of such technological developments is in the way in which

• Decentering Accounting Knowledge: Another consequence of the advances in

• Forecasting: The comparison of actual against the forecast is an increasingly important

III. Non-Financial Performance Measurement and the Management Accounts

In view of the increasing importance attached to non-financial performance measures – together

IV. The Role of Management Accountants in the 21st Century

In a number of the cases, we observed management accountants becoming increasingly involved

V. Some Survey Evidence

Table 1 Advances in information technology

• Management Accountants’ Key Tasks

Table 2 The important message to draw

Table 3 Again the apparently traditional

• Management Accounting Tools and Techniques

Table 4 Traditional tools and techniques

Table 5 Again budgeting and variance analysis

• Skills required of management accountants

Table 6 Table 6 lists the skills that were

Table 7: Finally, Table 7 indicates the

VI. Towards New Forms of Control

VII. Future Direction: The Challenges Ahead

• Implications for Management Accountants

• Implications for the Profession

• Implications for Management Accounting Educators

However, what is currently portrayed as management accounting practice in most textbooks is

Appendix A: List Papers Published from Project

Professional Journals (and other media for professional accountants):

Papers in Academic Journals:

Robert W Scapens, “Management Accounting and Strategic Control: Implications for

Robert W Scapens, “Broadening the Scope of Management Accounting: From a Micro-

Chapter in Academic Book:

Appendix B: Case Study Companies

Company Name* Duration Details

BM Inc. 5 years European division of US multinational producer of

Techno 3 years US-owned multinational producer of PC-related

Appendix C: Case Summary6 – Pharmaceuticals Plc

Process Ways of Working:

Management Accounting Change:

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