Art of Msnsgement Accounting
Pushing the art of management accounting
Despite the many strides the profession has made over the years, some still believe that management accounting practices haven’t taken as strong a hold in organizations as they should. FCMA Alexander Mersereau describes the challenges that are slowing the adoption of critical management accounting tools in broader business
By Alexander Mersereau, CMA, FCMA
M
anagement accounting practice has developed substantially over the past century, but recent studies suggest that the practice is no longer making the strides that it once did. Unless management accountants take a hard look at the effectiveness of current practice, this situation isn’t likely to improve. In some companies, radical changes are needed to the structure of the finance function, the nature of the interactions management accountants have with other managers and the performance metrics used to guide the function itself.
CMA M ANAGE MEN T
The good news
The early part of the 20th century was a period of rapid development for the field, when scientific management sought to identify what costs should be and economic organizations began to use budgets and relate returns to levels of investment. However little development occurred in the following years and, by the early 1980s, management accounting had reached a point of stagnation. H. Thomas Johnson and Robert S. Kaplan, writing in 1987, declared:
22
February 2006
Today’s management accounting information, driven by the procedures and the cycle of the organization’s financial reporting system, is too late, too aggregated and too distorted to be relevant for managers’ planning and control decisions.... Management accounting reports are of little help to operating managers as they attempt to reduce costs and improve productivity.1 This call for renewal was widely heeded. Their book Relevance Lost: The Rise and Fall of Management Accounting became a best seller for the editor of Harvard Business
Despite the many strides the profession has made over the years, some still believe that management accounting practices haven’t taken as strong a hold in organizations as they should. FCMA Alexander Mersereau describes the challenges that are slowing the adoption of critical management accounting tools in broader business
By Alexander Mersereau, CMA, FCMA
M
anagement accounting practice has developed substantially over the past century, but recent studies suggest that the practice is no longer making the strides that it once did. Unless management accountants take a hard look at the effectiveness of current practice, this situation isn’t likely to improve. In some companies, radical changes are needed to the structure of the finance function, the nature of the interactions management accountants have with other managers and the performance metrics used to guide the function itself.
CMA M ANAGE MEN T
The good news
The early part of the 20th century was a period of rapid development for the field, when scientific management sought to identify what costs should be and economic organizations began to use budgets and relate returns to levels of investment. However little development occurred in the following years and, by the early 1980s, management accounting had reached a point of stagnation. H. Thomas Johnson and Robert S. Kaplan, writing in 1987, declared:
22
February 2006
Today’s management accounting information, driven by the procedures and the cycle of the organization’s financial reporting system, is too late, too aggregated and too distorted to be relevant for managers’ planning and control decisions.... Management accounting reports are of little help to operating managers as they attempt to reduce costs and improve productivity.1 This call for renewal was widely heeded. Their book Relevance Lost: The Rise and Fall of Management Accounting became a best seller for the editor of Harvard Business