Shahid L. Ansari

An integrated approach to control system design

Abstract Existing approaches to the problem of designing management control systems may be described as primarily structural or behavioral . The first approach is characteristic of the accounting literature. It takes a rational and mechanistic view of control and treats the control system design problem as one of designing an effective information structure. The behavioral approach, exemplified by the socio-psychological literature on performance, views control as a problem of designing social relationships which lead to high performance.

Symbolism, Collectivism and Rationality in Organisational Control

The results of a longitudinal field study (1967‐89) of International Foods, a holding corporation for a group of companies in Pakistan is presented. It focuses on the influence of societal culture on the development of accounting and control practices in the organisation. Four specific issues are examined: How do organisations initiate accounting and control systems? How do such systems evolve? What roles do they play in a crisis? How does organisational action become disconnected from such systems? National culture, particularly as it shapes the world views of individuals, greatly enhances our understanding of the dynamics of accounting and control systems in organisations. The local nature of rationality is demonstrated by showing how contextualising practices allow us to make sense of them.

Target Costing: Uncharted Research Territory

Abstract Target costing is a strategic weapon that is being increasingly adopted by a number of leading firms across the world. What first captured the attention of managers is the competitive advantage that target costing has given to the Japanese auto companies—the longest and most consistent users of target costing. Ironically, as Japan exported the technique to South Korea, a number of leading Korean firms such as Samsung and Hyundai have been gaining ground over their Japanese counterparts. In the US, Chrysler and Caterpillar attribute their financial turnarounds in the mid-1990s to the adoption of target costing. Despite a proven record of success, many managers often underestimate the power of target costing as a serious competitive tool. When general managers read the word “costing,” they naturally assume that it is a topic for their finance or accounting staff. They miss the fact that target costing is really a systematic profit planning process. Rather than the inward orientation of traditional cost methods, target costing is externally focused taking its cue from the market and customers. It is market-driven costing that develops new products that meet customer price and quality requirements as opposed to cost-driven development of products that are then pushed on to customers in the hope that they will buy the products. This chapter provides a review and analysis of the target costing literature produced in the last decade. It includes more than 80 major publications written in English and more than 100 publications written in Japanese. The review builds on a comprehensive bibliography of both the English and Japanese literature contained in Ansari et al. (1997). The history of Japanese target costing efforts is discussed in a separate chapter of this handbook. 1 To organize the literature and make sense of it for the novice reader, we use the life cycle of management practice as a framework. The framework equates the maturity of knowledge in a practice-based discipline with the various stages in the life of that practice. The discipline maturity framework is used to synthesize and organize the literature as well as develop areas for future academic research on target costing. For organization and synthesis, we populated a database with target costing literature coded by five stages of our knowledge progression or life cycle approach. In addition, we also coded the database on three additional taxonomic dimensions: intended audience, nature of study, and research method used. We used the knowledge progression framework to identify gaps in existing knowledge and new research topics in the area of target costing. We use the taxonomic approach to identify areas that can benefit from replication, corroboration, and further testing.

Towards an open systems approach to budgeting

Abstract The theory of open systems has been increasingly applied to the study of organizational planning and control systems. This is also true for the area of budgetary control. At present, however, there is a tendency for writers to treat the design problems as an either/or choice between an open or a closed system. This paper argues that the critical decision problem is where in a system closure can be most beneficially applied. It will show that the open systems view, with its emphasis upon the horizontal dimension in an organization, is better suited for designing effective budgetary control systems. The computation of budget variances is chosen as the key step at which the usefulness of this view can be fully appreciated. An alternative budget variances measurement scheme, based upon similar perspectives in the area of job design, is proposed. It is shown that variances computed under the proposed system more fully reflect the interacting nature of most organizations and provide better control information.

Intersubjectivity -- the challenge and opportunity for accounting

Abstract The purpose of this paper is to examine the origin, nature and intellectual character of the frameworks being used by the various critics of the public accounting profession. The paper looks at three major questions: (1) what are the frameworks critics are using to hold the profession accountable? (2) What does the response of the profession tell us about how it perceives the problem? (3) Where is the current mode of response likely to lead the profession? Our analysis identifies two different frameworks that underlie the criticism being directed at the profession. We label these the “rational scientist” and “humanist-philosopher” viewpoints. These frameworks differ in the way in which they approach intersubjective phenomena. The differences are especially sharp on the notion objectivity . The profession, thus, is caught between the crossfire of these views and is in the difficult position of responding to a set of critical standards for which there exists no consensual framework. Unfortunately, they seem to be moving more toward the “rational-scientist” position of objectivity which is likely to compound their difficulties.

Five easy pieces: a case study of cost management as organizational change

Purpose – The primary purpose of this paper is to merge two traditions in management accounting change – design theory and action research – to explain findings from a case study of introducing a cost leadership initiative.Design/methodology/approach – This paper is an example of action research in which design theory explains events related to the implementation of a strategic cost leadership initiative at Shell Gabon, a Royal Dutch Shell unit in West Africa.Findings – The evidence shows that technical accounting changes are, in the final analysis, change management exercises. Implementing change requires thinking as a designer and employing the logic of conjecture rather than scientific deductive or inductive reasoning. Successful implementation requires conjuring an image of a future reality that does not currently exist and making that image persuasive by connecting it with the values of the organizational participants.Research limitations/implications – This case study provides five key lessons for f...

MANAGEMENT SCIENCE AND THE DEVELOPMENT OF HUMAN RESOURCE ACCOUNTING

A common misconception about human resource accounting (HRA) is that it focuses narrowly upon financial accounting, that its purpose is to reflect the asset value of people on financial statements. The major purpose of HRA is to provide concepts and measurements to facilitate the effective and efficient management of human resources. It, therefore, represents a management accounting development. Management science has played an important role in facilitating the development of human resource accounting as a managerial tool. The theories underlying HRA are derived from and consistent with the concepts and philosophy of management science developed after WW II. The rationality and multidisciplinary problem solving approaches which characterize management science were applied to HRA and together with other economic and social factors of the 1960s produced human resource accounting.*

Using Simulation to Model Customer Behavior in the Context of Customer Lifetime Value Estimation

This article illustrates how simulation can be used in the classroom for modeling customer behavior in the context of customer lifetime value estimation. Operations research instructors could use this exercise to introduce multiperiod spreadsheet simulation models in a business setting that is of great importance in practice, and the simulation approach to teaching this subject could be of interest also to marketing and accounting instructors. At Babson College, the spreadsheet simulation exercise is part of an integrated one-case teaching day of the marketing, accounting, and operations research disciplines in the full-time MBA program, but the exercise is directly transferable to stand-alone courses as well. In our experience, students have felt empowered by the ability to incorporate their ideas about customer behavior directly into customer lifetime value models, and have appreciated the ease with which simulation enables them to obtain intuition about the sensitivity of their estimates to different assumptions.