1 Introduction
2 Institutionalization of the role of management accountant
2.1 Overview of the business partner and hybrid accountant literature
2.2 Institutional drivers and the role of the management accountant
Business partner drivers | Hybrid accountant drivers | ||
---|---|---|---|
Globalization | Halbouni amd Nour (2013) | Accounting regulation | Friedman and Lyne (1997) Byrne and Pierce (2007) De Loo et al. (2011) |
Decentralization | Internal performance monitoring policies and guidelines | Coad (1996) Friedman and Lyne (1997) Tuomela (2005) | |
Management accounting innovations | Endenich (2014) | Regularized tasks and responsibilities | Yazdifar and Tsamenyi (2005) |
Modern information technology | Halbouni and Nour (2013) | Financial control systems | Hartmann and Maas (2011) |
Cultural organizational norms | Järvenpää (2007) Endenich (2014) Hiller et al. (2014) | Professional accounting norms | Maas and Matejka (2009) |
Top management expectations | Windebeck et al. (2015) Eskenazi et al. (2016) Pietrzak and Wnuk-Pel (2015) | Operational management expectations | Lambert and Sponem (2012) |
Task changes | Vaivio and Kokko (2006) Jönsson (2009) Weber (2011) Cieslak (2011) Pietrzak and Wnuk-Pel (2015) | Task variety | Maas and Matejka (2009) Weber (2011) Rieg (2018) |
Human resource selection preferences | Lepistö and Ihantola (2018) | ||
Individual preferences and expectations among management accountants | Järvenpää (2007) Cieslak (2011) Lepistö and Ihantola (2018) | Management accountant attitude, personality, and initiative | Byrne and Pierce (2007) |
3 Methodology
3.1 An overall introduction to the case study company
3.2 Sources of empirical evidence and interpretations
4 Case study: the role of management accountants in a mining company and its institutional drivers
4.1 The management accounting function in the case company
4.2 Regulative drivers of the management accountant role
Management accountant work in practice meant that the management accountant was involved in the management process of different types of mining investment projects. Such projects ranged from mining for ore extraction, underground logistics, concentration plants, and pelletizing plants to logistics for shipping to the global market. When capital investment management accountant (A) from mining division south explained his view on the management accountant role, he related his explanation to the management accountant role areas presented in Fig. 1:This step entails the basic bookkeeping, which entails keeping a current recording of business transactions and coding expenses to the right accounts. We have a separate accounting department to assist with bookkeeping matters. All production managers and section managers are also required to carry out basic budgeting tasks. The goal is that the management accountants should leave such routine matters although we sometimes are involved as well.
The quotation above indicates that the management accountant saw reporting as a more traditional task, while analysis and strategy work were perceived as more qualified work. Here, the management accountant said that more qualified management accountant work demanded management accountants who would try out different scenarios and conduct what-if analyses. The most frequent task management accountants mentioned was the provision of financial information to project managers, top management, and the board of directors.The reporting step is traditional management accountant work of reporting, monitoring, and following up on historical budgets. On the analytical step, we have more qualified work that involves analytically trying out scenarios. The strategy step is even more analytical work.
Thus, the new top management expected the management accountants to work in a strategic and forward-looking manner. The management accountants, project managers, and top management all said that the management accountants had to understand the mining operations. The group CFO explained this in the following way:Top management has explicitly stated that we management accountants need to include strategic scenarios in our financial reports. We have to reflect over and discuss alternatives in the financial reports because that is what management considers quality and value.
The quotation above indicates that management accountants working with capital investment projects were expected to have competence in areas other than financial accounting. This type of competence allowed the management accountants to communicate with operating managers, which enabled them to produce relevant financial information to the board of directors.The management accountant must also gain an understanding of the operational activities. Many management accountants trust too much in guidelines. Top management wants to know what is real and the management accountants need to be a part of a team.
4.3 Normative drivers of the management accountant role
This statement indicates that the size of investment projects mattered. Apparently, management accountants needed to work more strategically, and business partnering became a more important aspect of management accountant practice when investment projects were larger in monetary terms and in capital intensity. The project manager from division south elaborated on the importance of management accountant assistance during large-scale investments:Within these large-scale mining investments, we management accountants support other managers with calculations and cost estimations. Much of what we do depends on the size of the investment projects. The really big investments, those costing billions, require us management accountants to be really involved as a part of the teams in charge of the investments. For smaller investments, we are basically reporters and creators of accounting information.
In this quotation, the project manager credits management accountants as being valuable and important actors, thus providing an overview of the investment projects by compiling significant investment costs. The project manager from division south provided his view on management accountant practice:The mining project costs are significant. If I just try to put it into perspective, then for a single new mining truck the costs are around 400,000 euros. A new mining level could cost from 1 billion euros or more. We need management accountants because they help us see that these costs are, in the end, necessary for maintaining profitability.
The project managers confirmed that they wanted the management accountants to perform accounting tasks which were not closely related to business partnering. The following quotation from investment management accountant (A) provides another example of why traditional accounting work remained part of management accountant practice:We are engineers who operate in the largest and most technically advanced underground iron ore mining operation in the world. Our job is technical and we provide cost estimations and feasibility reports of existing and new investments. But the management accountants do the accounting work involving interest, calculations, and financial predictions, while we provide the tangible costs that they can work with.
This quotation illustrates that accounting work can be seen as daunting for the engineering-focused project managers, leaving the management accountants no choice but to perform such accounting work themselves. The experienced capital investment management accountant (B) from mining division north explained this a bit further:The head of the management accountant department wants us management accountants to free up our time so that we can do more analytical strategic work. Therefore, the management accountant department produced a handbook, which the project managers can use as a guide and make their own basic accounting work. However, we still have to do this for them; the other managers do not want this extra work. They believe it is hard work and maybe they are a little afraid that they’ll make mistakes as well.
Top management also wanted the management accountants to visit the different mining sites to observe the mining operations with their own eyes. The financial management accountant explained this in greater detail:The new board of directors asked new types of questions. We could no longer just report financial information; the demand for more explanatory management accounting increased. This meant that we had to write more extensive memorandums to the board of directors, which included operational activities and forecasts.
This above quotation indicates that top management wanted the management accountants to do more analysis and strategy work, while the operations managers wanted them to work in a more traditional way (i.e., reporting financial facts in different types of reports). Top management also wanted the management accountants to present information other than financial reports. Top management requested oral communication and direct observations from the management accountants.We were supposed to do a progress report to the board of directors. However, the mining site was so far from the company headquarters that they wanted us to visit the mining site. In doing so, we management accountants learned from the operational work and got to talk with operational actors. By doing this, we could communicate a sense of the real world to the board and this was appreciated by them. For us, it related to a supportive relationship to both operational and top-level management.
This example suggests that operational actors had concerns that the management accountants should remain in their financial domain, thereby not infringing on their operational areas. The project manager in charge of feasibility studies and planning new mining levels provided another example of this line of reasoning:The operational actors mostly want us simply to do financial calculations. The operational actors might actually feel threatened and want management accountants to handle the compilation of financial information. The reason for this is that simpler financial work, budgets, and just compiling numbers is something that they can do themselves but they do not want more work. They also feel that we might infringe on their territory and by learning about operations gain more power through influence. It is a balancing act.
This indicates that operational actors thought that management accountants should work in a traditional manner. The management accountants said that they lived in a fast-changing world and needed to keep up with new information technology and styles. New information technology could help the management accountants customize the accounting information according to need. In the words of capital investment management accountant (C) from mining division south:I can do a lot of financial work myself, and I have done it. However, mostly the project managers need the management accountants to help them with financial numbers because they are the experts of such matters and we are experts at our specific operational areas. However, we both need to understand each other and that is why we need to meet and discuss such matters.
This quotation illustrates that the management accountants themselves welcomed new information technology (IT) and found it valuable because it could help them tailor the accounting information to the users. Capital investment management accountant (B) explained what newly implemented information technology meant to the management accountants:Payoff and return-on-investment calculations are easy; we management accountants want to automate such activities. Finding the right information and then presenting these calculations to other actors is the hard part. A business partner role means that we management accountants have to investigate, question, and also discuss these matters with other actors in the organization.
This quotation illustrates that even a large organization like the case organization had to keep up with globalization. Moreover, IT systems and globalization seemed to be triggers for business partnering among management accountants, driving them toward more interaction with other actors. Capital investment management accountant (E) from mining division north elaborated on the implementation of new information technology, which involved more people:For us management accountants, the new accounting systems called Movex meant more people to interact with, where we management accountants have to administer so that everyone understands the system. We management accountants coordinated other actors, consultants, project managers for how they should interact and use the accounting system. It was a massive project in itself; it took several years to get everyone on board. Nevertheless, we have to adapt; the world around us changes, and we have to keep up.
New information technology supported a business partner role in several ways. New IT systems allowed access by users from fields of expertise other than the financial and management accounting fields, wherein the management accountants are the experts. This created a demand for guidance among the users for how they were supposed to work with such systems, guidance that the management accountants provided. Capital investment management accountant (C) from division south also highlighted the importance of gaining an understanding of the operational activities to create relevant financial reports and analysis. He described it in the following way:Many times, the operational actors are highly educated specialists. They can do the calculations by themselves, but they might not have time to reflect upon them and do them properly. It is part of our role to ponder and reflect upon calculations. New IT means that we have to help other actors to use the systems because they still need to focus on their main areas of expertise. That makes us management accountants an asset.
This quotation also suggests that because of the visits, the management accountants could present more relevant financial information and conduct better analyses than if the management accountants had based their information only on financial facts. However, the project manager at division south stressed that:Instead of sitting in our office doing pay-off calculations for a new pelletizing plant, we go and visit the site and discuss the investment with the operational managers. This increases our technical awareness of how things are connected in the larger scheme, which has two advantages. First, it increases our business insights when doing calculations because a pelletizing plant is only one part in the entire value chain. Second, knowing the technical reality helps us to gain the operational manager’s trust, which is important for us management accountants. Trust eases the flow of financial information between operational actors and us management accountants.
The quotation above implies ambiguities regarding the management accountant’s role. The management accountants seemed to need a business partnering role to obtain important qualitative information from operations. However, the project managers pushed back by requesting traditional accounting work from them.As project managers we have an allocated budget that we are in charge of and held responsible for. There are so many ways that management accountants can present facts and information to us. To uphold our obligations is challenging and we need hard facts and numbers, even though they may be less informative sometimes. Accordingly, we demand accounting information presented in a spreadsheets format from our management accountants.
4.4 Cognitive drivers of the management accountant role
The quotation above indicates that the management accountants themselves regarded business partnering as something to strive for, and they considered a business partner role to involve more influencing and partaking in decision-making processes. The company guidelines provided a framework for the management accountants, promoted the business partner role, highlighted the responsibility areas, and stated what tasks the management accountants should undertake in investment projects. However, when interviewing the CFO, the project managers, and the management accountants themselves, they had expectations and views on the management accountants’ role in the case company that differed from those presented in the formal documents. The interview with capital investment management accountant (D) from mining division north provided an illustration of why the management accountants found it difficult to climb the steps, as presented in Fig. 1:I want to work more with operational actors and learn operations. This is how I get to do work that is more qualified and get more influence in our line of work. A business-oriented role is an interesting challenge where we have to be able to adapt to situations. It allows more freedom and reflective interpretations where we do not have to be so constrained by budgets and financial reports.
The quotation above is interesting because it contradicts what capital investment management accountant (G) previously said about business partnering being key to influence. Here, the management accountant instead suggested that the management accountants wanted to uphold traditional accounting work because otherwise they would forgo influence within the organization by losing instrumental control. The results show that knowledge of operations also meant more power in decision-making. As capital investment management accountant (D) from mining division north explained:We management accountants are an asset because we deliver financial reports to project managers, who are experts in their own right. They know how to do basic calculations which make up financial reports, so in a way by keeping the rather rational accounting tasks among our management accountant group we show them that we management accountants are necessary in the organization and that we deliver something tangible to them. Keeping such accounting tasks also lends a certain influence because we are the owners of the material that we produce.
This could be one explanation for why the management accountants wanted to be business partners, as it apparently gave them more influence in discussions with management. Capital investment management accountant (A) from mining division south stated:We management accountants are seldom questioned during our discussions with management. If we present several investment proposals and argue for one particular option, our know-how and expertise is not something management questions. We usually get our way.
The above quotation implies that to strengthen the quality of accounting information the management accountants had to be versed in mining operational areas.I want to speak with operational actors and see them face-to-face; actually, interpreting and reading body language helps in determining the quality in financial information. I value sitting down with operational actors over coffee and just listening in on conversations. Obtaining financial information is a bit like detective work because sometimes what is not said can be the most important area to focus on.
4.5 Facilitating and impeding institutional drivers in the mining company
5 Conclusions, limitations, and suggestions for future research
5.1 Hybrid accountants in the age of the business partner
5.2 Institutional drivers facilitating and impeding the business partner ideal
Institutional drivers | Facilitating | Impeding |
---|---|---|
Regulative (have to) | Board and top management requirements Business partner role description | Internal management accounting policies and guidelines |
Normative (ought to) | Top management expectations Operational management expectations concerning interaction and guidance Modern information technology | Cultural organizational norms Operational management expectations concerning scorekeeping |
Cognitive (want to) | Individual preferences and expectations among management accountants concerning autonomy and influence | Individual preferences and expectations among management accountants concerning core competencies |