Robert H. Chenhall

Management control systems design within its organizational context: findings from contingency-based research and directions for the future

Abstract Contingency-based research has a long tradition in the study of management control systems (MCS). Researchers have attempted to explain the effectiveness of MCS by examining designs that best suit the nature of the environment, technology, size, structure, strategy and national culture. In recent years, contingency-based research has maintained its popularity with studies including these variables but redefining them in contemporary terms. This paper provides a critical review of findings from contingency-based studies over the past 20 years, deriving a series of propositions relating MCS to organizational context. The paper examines issues related to the purpose of MCS, the elements of MCS, the meaning and measurement of contextual variables, and issues concerning theory development. A final section considers the possibility that contingency-based ideas could encompass insights from a variety of theories to help understand MCS within its organizational context.

The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach

Abstract The study examines how combinations of management techniques and management accounting practices enhance the performance of organizations, under particular strategic priorities. Companies were identified as emphasizing product differentiation, low price strategies or a combination of both. Management techniques included in the study were improving existing processes; quality systems; manufacturing systems innovations; integrating systems; team-based structures and human resource management policies. Management accounting practices important in assisting managers implement management techniques were traditional management accounting techniques; activity-based techniques; balanced performance measures; employee-based measures; benchmarking and strategic planning. A systems approach, using cluster analysis, was used to examine hypothesized associations between performance and a range of management techniques and management accounting practices, under various strategic orientations. This provided a method to examine the way in which the entire range of variables combined to affect performance.

The usefulness of management accounting systems, functional differentiation and managerial effectiveness

Abstract This study examines the role of broad scope information, made available by management accounting systems (MAS), in enhancing managerial performance. It is proposed that differentiation of activities into areas such as marketing and production is an organizational response to manage uncertainty. The paper argues that such differentiation of activities moderates the association between the extent to which managers use broad scope MAS information and performance. A study of 75 managers indicated that the association between the extent of use of broad scope MAS information and performance was stronger for managers of marketing than production activities.

The issue of endogeneity within theory-based, quantitative management accounting research

Abstract A current issue of potential concern in theory-based management accounting research is the extent to which endogeneity limits the validity of empirical testing of models. This paper aims to stimulate debate as to the meaning of endogeneity as it applies to (management) accounting research. The paper explains what endogeneity is, its causes and consequences, and potential ways of managing the problem. Specifically, the paper argues that an econometric definition of endogeneity clarifies its meaning in empirical research. A series of basic issues that concern endogeneity and theory construction are presented. These include omitted variables, simultaneity, equilibrium conditions and issues concerning choice variables. Finally, possible approaches for dealing with endogeneity are presented.

A Review of IT Governance: A Taxonomy to Inform Accounting Information Systems

ABSTRACT: This paper reviews Information Systems (IS) literature that is relevant to Information Technology Governance (ITG) and examines how it informs Accounting Information Systems (AIS). We present a taxonomy of research encompassing the focus areas identified by the IT Governance Institute (ITGI), namely Strategic Alignment (SA), Risk Management (RK), Resource Management (RM), Value Delivery (VD) and Performance Measurement (PM). Based upon 496 papers in ten IS/AIS and two Management Accounting journals over the period 1998–2008, we discuss research perspectives and identify avenues for future research. Results revealed a lack of integration between focus areas, with little about ITG as a whole.

Strategies of manufacturing flexibility, manufacturing performance measures and organizational performance: an empirical investigation

Presents a study which seeks to add to the body of knowledge that relates strategies to organizational performance. Examines the role of manufacturing performance measures to evaluate managers’ performance for firms pursuing strategies of manufacturing flexibility. Proposes that enhanced performance will be associated with the interaction between manufacturing flexibility and use of manufacturing performance measures. Sets out the results of a survey of 37 organizational units to provide support for this proposition. Concludes that the performance of entities that had a high degree of manufacturing flexibility were positively associated with the extent to which managers were evaluated using manufacturing performance measurements.

Endogeneity: A Reply to Two Different Perspectives

In this paper, we provide a short reply to Larcker and Rusticus (this issue) and van Lent (this issue), both of whom comment on the Chenhall and Moers (this issue) paper (hereafter ‘CM’) on endogeneity issues in (management) accounting research published in this issue of European Accounting Review. The primary aim of CM is to stimulate debate in the area of endogeneity. We therefore appreciate that the Editor (Kari Lukka) has invited the authors of both papers to comment on CM and that the authors have accepted this invitation. It is clear from reading the papers by Larcker and Rusticus (this issue) and van Lent (this issue) that each paper provides interesting and thought-provoking insights into the issue of endogeneity. Each paper has a different perspective on endogeneity and therefore, at least implicitly, offers different advice on how to move the literature forward. Our goal is not to evaluate the relevance and validity of each individual argument made, as readers should do this for themselves. Rather our goal is to evaluate, from our perspective, the main messages that stem from these papers as to how to move forward. To reiterate, the main message of CM is that endogeneity is an issue we cannot ignore and that the crucial starting point in addressing this issue is theory development. We argue that without articulating the structural model of interest, which lies at the heart of theory-based research, it is difficult to make much progress in understanding the research issues being studied. We elaborate on the importance of theory throughout this reply. European Accounting Review Vol. 16, No. 1, 217–221, 2007

Target costing: first and second comings

Contrary to the conventional wisdom that target costing (TC) was a 1960s’ Japanese innovation, it is argued that the same concept, albeit then labelled ‘product tailoring’, first appeared in the 1950s’ Anglophone managerial-economics literature in works linked to economist–consultant Joel Dean. These sources describe a range of North American applications of TC which clearly predate Japanese implementations. It is further argued that in the specifically accounting literature, Gordon Shillinglaw (1967) – a one-time employee of Dean – provided the first description of the TC concept. To support these propositions, the post-1990 TC literature is analysed to determine the key characteristics of TC. These phenomena are then shown to be present in the earlier works of Dean and his followers in an oeuvre which can be regarded as the ‘first coming’ of the TC concept. The diffusion of TC concepts is then analysed from two perspectives: as between the USA and Japan at the enterprise level and within and between the economics and accounting literatures. Explanations are then offered for the diffusion patterns identified and for the neglect of the first-coming TC works.

Managing Identity Conflicts in Organizations A Case Study of One Welfare Nonprofit Organization

How nonprofit organizations manage multiple and conflicting identities is not well understood. In a case study of a nonprofit welfare organization, we use Pratt and Foreman’s (2000) framework of identity management responses to illuminate different ways that nonprofit organizations can seek to manage and potentially resolve identity conflicts. We focus on the actual practices nonprofit organizations use to manage multiple identities and, in particular, reveal the important role of organizational routines and artifacts in facilitating or constraining particular identity management responses.

Accounting for the Horizontal Organization

Abstract There have been many approaches that have sought to identify the principles of best practice organizational management. The horizontal organization (HO) has been proposed as a method that draws on ideas from marketing, production, organizational behaviour and human resource management. It identifies specific value propositions with a customer-oriented focus and then develops process efficiency and continuous improvements, flattened structures with a team-based focus, human resource policies concerned with empowerment, and a supportive and committed culture to help institutionalize change. The key distinguishing feature is to move away from traditional vertical, functional structures to lateral structures, processes and information to support the HO. This chapter reviews three approaches which, when taken together, distil the key elements of the HO. These are Ostroff (1999) The Horizontal Organization , New York, Oxford University Press; Schonberger (1996) World Class Manufacturing: The Next Decade , New York, The Free Press; and Galbraith (2005) Designing the Customer-centric Organization: a Guide to Strategy, Structure and Process , San Francisco, Jossey-Bass. How these authors envisage a role for management accounting in the design and application of the HO is of particular interest. The chapter will review the essence of HO and critically examine the extent to which there have been complementary developments in management accounting, and how effective practice and research have been in developing a horizontal dimension to management accounting. It is concluded that innovations in management accounting, such as activity-based accounting and holistic performance measurement like balanced scorecards, have not had any significant effects on those developing ideas related to HO. Reasons why this is so are canvassed and areas where accounting innovations may provide valuable input to implementing the HO are discussed. Recent developments in management practices that elaborate on HO and implications for a horizontal dimension to accounting are examined.