Advances in Management Accounting: Volume 33

This study examines challenges to the retrospective financial evaluation of continuous improvement (CI) activities. Through a review of the literature and active engagement with CI implementations, we identify several issues that may lead to divergence between operational and financial assessments. Out of this conflict emerges a set of concepts that we find important − the delineation of soft versus hard capacity benefits, the distinction between capacity used and capacity paid for, and the data gaps that relate to these benefits – and recognize operational improvement and financial improvement as distinct, yet interrelated, theoretical constructs. This study helps explain a series of persistent gaps in the management accounting literature: Conflict between operations and accounting managers, the divergent perspectives of Johnson and Kaplan after their publication of Relevance Lost (Johnson & Kaplan, 1987), and the need for both operational control (including detailed capacity control) and accounting control in CI firms. Instead of one control system being at odds with the other, or co-existing despite each other, each of these systems support a different component of the financial improvement process. Operational control systems in CI firms emphasize non-financial information and social and behavioral controls that empower decision-making by employees, while accounting control systems seek to motivate and translate operational gains into financial gains. Soft and hard benefits linked to capacity play an integral role in understanding the difference in focus of each control system, while data limitations help to explain why these systems remain loosely coupled in practice (or absent, as seems to be the case with detailed Capacity Management Systems).

This study investigates the relationship between lean manufacturing practices, management accounting and performance measurement (MAC & PM) practices, organizational strategy, structure, and culture, and facility performance. We extended past research by examining the relationships between lean manufacturing, MAC & PM practices and performance in a broader organizational context. Our study was performed using survey data provided by managers and executives at 368 facilities that had contacted the Shingo Institute for information or that had entered a Shingo Prize competition. Consistent with past research we found a significant positive association between lean manufacturing practices and lean MAC & PM practices. We found that greater employee empowerment, use of process performance measures, and use of lean accounting practices were driven primarily by lean strategy and secondarily by the extent of lean manufacturing practices. We also found that changes in organization structure to support lean are driven primarily by lean strategy and secondarily by lean manufacturing practices. Change toward lean culture, on the other hand, is driven by the extent of lean manufacturing practices. Further, we found that emphasizing process performance measures does not reduce emphasis on results performance measures and emphasizing results performance measures leads to improved financial performance. Process and results measures are being used in tandem and value stream costing has not replaced traditional accounting. The results of our study provide important insights for managers of companies engaged in lean transformation and for academics who teach or research lean accounting.

Collaborative relationships (CRs) in supply chains have become central in international business. Strategic performance measurement systems (SPMSs) establish a causal chain of performance measures that can be aligned with strategic goals and can link performance measures with business processes and suppliers. This study investigates whether CRs in supply chains positively affect buyer competitiveness by using SPMSs. Firm competitiveness is described in terms of product cost-price, delivery, as well as flexibility. We demonstrate through the use of SPMSs that CRs indirectly and positively influence the competitiveness of delivery and flexibility. This chapter contributes to the growing literature on the role of SPMSs in linking the relationship between CRs and competitiveness.

The aim of this chapter is to investigate the relationship between the uses of budgets with financial performance in start-ups’ business environment. For this reason, an empirical survey was carried out, using a questionnaire in 134 start-up companies, which are based in 10 different European countries. Results show that there is a positive association between the use of budgets for planning, resource allocation and performance evaluation with financial performance. The CEO’s business educational background, as well as CEO’s beliefs about planning, has a strong influence in the use of budgets in start-up firms. We also concluded that there is a positive association between perceived environmental uncertainty (PEU) and the use of budgets for planning and resource allocation and a negative association between PEU and the use of budgets for performance evaluation.

This study contributes to the management accounting (MA) literature by exploring the effect of managers’ perception of justice in the budgeting process (as a subsystem of MA) on their satisfaction and motivation to achieve organizational objectives. Drawing on the Habermasian concept of deliberative democracy, which underscores the importance of gaining legitimacy to achieve desirable outcomes, our analysis focuses on seven constructs related to situational and intrinsic participation, procedural and distributive justice, and attitude on two outcome constructs: satisfaction and motivation. We surveyed managers with an accounting background who are directly involved in the budgeting process and analyzed our data using partial least squares-based path analysis–structural equation modeling (PLS-SEM). The results of this study indicate that both dimensions of justice – distributive and procedural – are positively associated with participation, and in turn, positively impact satisfaction and motivation. Contrary to expectations, managers’ influence on the final budget does not seem to be as important as we expected. Budgeting is an important managerial function that involves setting targets based on an organization’s strategy and allocating resources for its execution. Such a fundamental process requires managers’ participation at various levels to ensure that the process is fair and just. Our study’s findings imply that justice perceptions are an essential fabric of organizational processes that drive human behavior. Specifically, our findings reveal that perception of justice influences participation and satisfaction and motivation.

This study examines how budgetary support (BS), teamwork, and organizational commitment to employees (OCE) affect firm performance across two countries, Malaysia and the United States. By surveying senior managers of 165 small and medium enterprises, this study finds that teamwork and BS each has a direct effect on OCE and firm performance. Further, results indicate that OCE mediates the relationship between BS, teamwork, and firm performance. In Malaysia, but not in the United States, we find that teamwork affects performance directly. In the United States, but not in Malaysia, we find that BS affects performance, and there is an interaction effect between BS and management influence. We attribute the effects to the different national cultures and social-exchange relations and highlight the contributions to the budgeting research, organizational commitment literature, and to practice.

This study examines the impact of environmental activity management (EAM) on triple bottom line (TBL) performance and the role that sustainability strategies play in mediating these relationships. Data were collected using a survey of Australian managers and analysed using structural equation modelling (SEM). The findings indicate that each of the three levels of EAM – Environmental Activity Analysis, Environmental Activity Cost Analysis, and Environmental Activity Based Costing – influence-specific aspects of performance, either directly and/or indirectly through environmental and social sustainability strategies. The findings suggest that managers could enhance their use of EAM practices through the use of sustainability strategies in order to enhance performance. This study provides empirical insight into the impact that EAM practices and environmental and social sustainability strategies have on all three aspects of TBL performance.

Research on weighting of measures often examines only one incentive at a time (usually bonus) and provide mixed findings regarding the relevance of non-financial performance (NFM) measures to evaluate and reward long-term time horizon employees. Using proprietary data from an auto dealership organization, we show that financial measures (FM) are weighted more for bonus than they are weighted for merit raise and promotion but NFM are weighted more than FM for merit raise and promotion. Thus, the temporal orientations of the measures and incentives seem to be aligned: the short-term (long-term) nature of FM (NFM) parallel’s the time horizon of the incentives. Next, our exploratory research questions find that for bonuses, both FM and NFM exert similar levels of significant and positive influence on junior and senior managers. But for promotions, the influence of FM is insignificant for both groups. In contrast, the influence of NFM on promotions is not only significant for both groups but is significantly greater for junior managers than it is for senior managers. That is, the evaluations of NFM for senior managers are less influential on their promotion than they are for junior managers suggesting that promotions for senior managers are often based on factors other than their formal performances.