Management Accounting System Design in Manufacturing Departments: an Empirical Investigation Using a Multiple Contingencies Approach

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Accounting, Organizations and Society 30 (2005) 99–126

Management accounting system design in manufacturing departments: an empirical investigation using a multiple contingencies approach Jonas Gerdin
€ € Department of Business Administration, Orebro University, SE-701 82 Orebro, Sweden

Abstract This paper proposes a multiple contingencies model that examines the combined effect of departmental interdependencies and organization structures on management accounting system (MAS) design. The model was tested by means of empirical data collected from a questionnaire addressed to 160 production managers. The response rate was 82.5%. The findings provide some support for the notion that organizations adapt their MAS design to the control requirements of the situation. Furthermore, the study offers some empirical support for the existence of suboptimal equifinality. That is, in situations which lack of a single dominant imperative, several alternative, and functionally equivalent management control system (MCS) designs, may arise. Ó 2004 Elsevier Ltd. All rights reserved.

Introduction Since the mid-eighties, there has been a trend in manufacturing towards customization and novel approaches to organizing production, including JIT/TQM models of control (Schonberger, 1986; Womack, Jones, & Roos, 1990). The pursuit of such strategies poses significant challenges for the management since they typically imply intensified interdependencies among functionally differentiated departments and new means of managing the workflow (Bouwens & Abernethy, 2000; Kalagnanam & Lindsay, 1998). As organizations adapt to these developments, they must make sure that

the MAS is designed congruent with the new control requirements (Chenhall, 2003). Drawing on contingency-based approaches, it is argued that the study of appropriate MAS designs in these new settings can be enhanced by considering the fit between the MAS, departmental interdependencies 1 and organizational structure (Chenhall & Morris, 1986; Hayes, 1977; Macintosh & Daft, 1987; Williams, Macintosh, & Moore, 1990). This study adds to research in this area by proposing a multiple contingencies model that examines the combined effect of departmental interdependencies


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1 Departmental interdependencies are defined here as the extent to which departments need to rely on other departments for resources, such as materials and knowledge, to accomplish their respective tasks (Thompson, 1967).

0361-3682/$ - see front matter Ó 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.aos.2003.11.003


J. Gerdin / Accounting, Organizations and Society 30 (2005) 99–126

and organization structure on MAS design. Fig. 1 outlines the proposed model. The multiple contingencies model stems from recognition that the demands placed on MAS design by multiple contingencies may conflict (Fisher, 1995), i.e., attempts to satisfy one demand may mean that other demands cannot be satisfied. It is also explicitly assumed that the need for coordination and control can be met by several alternative, and equifinal, management control system design strategies. The assumption is justified by the long-held view that management control subsystems may not only complement each other but also substitute for each other (Fisher, 1995; Galbraith, 1973; Mintzberg, 1983). Finally, the current study contributes to the management control literature by adopting a more holistic approach than has typically been the case. It is true that a so-called systems approach has been used for some time in the organization design literature (see e.g., Drazin & Van de Ven, 1985; Miller & Friesen, 1984; Mintzberg, 1983). However, very few researchers have looked on the MAS as a system with internal consistency among multiple structural characteristics (see e.g., Chenhall & Langfield-Smith, 1998a; Greve, 1999)....
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