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J. Global Business Advancement, Vol. 3, No. 1, 2010

Management accounting change: a comparative study of Indian and UK organisations Saeed Akbar Management School, University of Liverpool, Chatham Street, Liverpool L69 7ZH, UK E-mail: [email protected] Abstract: In the last two decades, management accounting research has received considerable attention. The research findings highlight a significant role for management accounting systems in modern organisations due to which management accounting information is now used in planning, decision making, control, performance measurement and business strategy in most organisations. However, as a result of the changing business needs, increased global competition and rapidly changing production technology, the internal management accounting systems of companies face severe challenges. This study, therefore, explores the changes in management accounting systems with respect to a number of change drivers and evaluates those changes in relation to the changing needs of different organisations in India and the UK. Two main drivers of management accounting system change are revealed: increased competition and changes in production technology. It is concluded that changes in management accounting systems attributed to change drivers have considerable effects on organisational performance in both Indian and UK organisations. Keywords: management accounting; management accounting change; change drivers; organisational performance. Reference to this paper should be made as follows: Akbar, S. (2010) ‘Management accounting change: a comparative study of Indian and UK organisations’, J. Global Business Advancement, Vol. 3, No. 1, pp.1–27. Biographical notes: Saeed Akbar holds a PhD from Manchester Business School, and is presently working at the University of Liverpool Management School. His main research interests include: market-based accounting research, financial accounting and reporting, management accounting, auditing, intangibles and the financing and accounting regulation of SMEs in the UK. He has supervised a number of PhD students and is currently involved in six other research projects with PhD students. He has published a number of research papers in internationally reputed journals like Journal of Business Finance and Accounting, Int. J. Management Reviews, Int. J. Accounting, Applied Financial Economics, International Entrepreneurship and Management Journal, Int. J. Entrepreneurship and Innovation Management, etc. He has received a number of awards during his career.

Copyright © 2010 Inderscience Enterprises Ltd.

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Introduction

Over the last two decades, management accounting systems have received considerable attention in modern organisations. Keeping in view the increased importance of the information generated in these systems, they are now used as means for improving the efficiency and effectiveness of employee activity together with the economy as a whole around the world. The theme of management accounting change procedures and outcomes has hence been a central issue of many studies over the last few decades (Baines and Langfield-Smith, 2003; Granlund and Lukka, 1998). This study, therefore, examines the management accounting change in the Indian and the UK organisations. An attempt is made to compare and contrast the various steps involved in the change process and to explore the outcome of change in both of these countries. This study further focuses on change in the management accounting practices in Indian organisations in response to the country’s economic reforms of 1991, which brought global competition and technological advancements in India. Similarly, in the UK context it examines the changes faced by organisations across the country in order to seek increased benefits from management accounting systems. Therefore, we adopt the change definition by Macy and Arunachalam (1995), which describes management accounting change as the “ability of management accounting systems to adapt to change in the business environment inside and around organizations”. A comparison between an emerging economy, India, and a developed economy, the UK, would help to show the differences in their focus and outcome on change. The change process in the developing economies is seen to be predominantly a change in the broad political and economic systems, regarded as the key driving forces causing change in management accounting practices (Anderson and Lanen, 1999; Haldma and Laats, 2002). Moreover, a universal feature of transitional economies is the fact that traditional management accounting practices are still dominant in most organisations. Also, in transitional economies little or no emphasis is placed on advanced management accounting systems, such as activity-based costing (ABC), total life cycle costing, the balanced scorecard, etc. This study therefore makes an attempt to investigate the management accounting systems in Indian organisations and explore the reasons behind this trajectory. This study also examines changes in management accounting practices in relation to changes in the business environments of both countries. In addition, this study also aims to analyse the impact of management accounting change on organisational performance. Thus, the main concerns explored here include the types of organisational and environmental factors that have a direct impact on changes in management accounting practices, along with the exact nature, extent and outcome of those changes. The remainder of this paper is organised as follows: Section 2 presents a review of the existing literature, Section 3 discusses the research methodology and data, Section 4 presents the results of the questionnaire survey and finally, Section 5 concludes the study.

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Literature review

In recent years, management accounting practices have received significant visibility and perceived importance. This has resulted in an unrelenting challenge for change in management accounting systems due to changes in the business environment in which

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different organisations operate. Researchers around the world have identified this and have provided recommendations for innovations in cost and management accounting practices used by organisations in different sectors. In this regard, Vieira and Hoskin (2005) argue that like other organisational systems, management accounting practices in firms play an important role in visualising, analysing, measuring and questioning implemented strategies in the public and private sector organisations. It has been argued in the latest research that internal and external organisational changes have a direct impact upon management, accounting for management and the environment in which the institutions operate (Lapsley and Pettigrew, 1994). We, therefore, argue that both internal and external changes in the business environment act together in order to contribute changes in the management accounting practices of organisations. Similarly, Kaplan (1985) describes change as a cause–effect relationship, stating that management accounting systems have to, and will, change whenever there is a change in the business environment of the organisations. This view is supported by Macy and Arunachalam (1995) who describe change as the management accounting system’s ability to adapt changes in the internal and external environment of the firm. Wijewardena and De Zoysa (1999) also argue that if the changing accounting practices were to contribute more efficiently towards the success of organisations then accountants will be making timely changes in their systems and the ability to adapt to such changes can be met if they respond instantly to changes in their environment. It can be therefore, argued that management accounting practices and the business environment are correlated within the context of change. Critics on the theory of management accounting change as a correlation of business environment change, however, argue that management accounting does not always change or respond instantly to change in other business trends. Kaplan (1984) and Johnson and Kaplan (1987) claim that despite immense changes to the business environment, such as rapid progress in product and process technology and increased competition, there have been no significant changes in the management accounting systems since 1925. A number of other empirical studies such as Scapens and Roberts (1993), Horngren (1995), Dugdale and Jones (1997) and Burns et al. (1999) evidently conclude that traditional management accounting techniques are still widely used worldwide. Theses studies further argue that new systems like ABC have not been successfully implemented as had been anticipated. Similarly, other researchers such as Dury and Tayles (1995) argue that traditional management accounting practices such as full costing system are still widely used for decision making in organisations. They further highlight that procedures employed for external reporting are also used for internal reporting. This implies that management accounting functions are still dominated by the financial accounting. They conclude that very few organisations have successfully employed ABC and the use of non-financial measures. The summary of the findings suggest that most organisations in the industry are yet to make any significant changes to their management accounting systems. It is clear from the above discussions that researchers have differing opinions about the implementation of new management accounting systems. Such differences in opinions could be attributed to the differing perspective from which change is considered. In this context, Horngren (1995) argues that “management accounting concepts and techniques are neutral devices and their effectiveness depends on how they are used”. Similarly, Scapens and Burns (2000) assert that management accounting is still in its early stages despite some major advances (such as advances in information technology,

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more competitive markets, etc.) in the business landscape. They further assert that traditional accounting techniques are still dominant in many organisations, despite the move towards the use of advanced techniques, such as ABC, balanced scorecard and target costing among others. However, most organisations have adopted some variation of these techniques by changing their management accounting systems without fully incorporating all these techniques. Burns and Vaivio (2001) highlight that the adoption of new management accounting techniques or implementing complete changes to the accounting procedures are not always a positive observable fact. They claim that adoption of entirely new techniques of accounting may cause substantial problems to the organisations that can then become associated with negative development in the organisation. It is therefore, suggested that management or cost accounting changes can be better understood by taking into account three perceptions of change: the epistemological nature of change, the logic of change and the management of change. Burns and Vaivio (2001) provide a detailed commentary on all three perceptions of change. About the epistemological nature of change, they suggest that a distinction should be made between the normative claims of change and change as an evidenced phenomenon. Similarly, with respect to the logic of change, they state that change can be implemented and managed effectively with clear goals, organised to avoid potential obstacles and by providing a clear framework. However, a reverse impact of change implementation, as mentioned earlier, can lead to it being unmanageable as various implicit pressures to change may inadvertently congregate and shape informal management accounting routines. With respect to the managing of management accounting change, they assert that change can be driven and managed entirely by the top management. They further highlight that organisations may start from recognising the need for the change and should plan, organise and control the entire process. It is also possible that top management may not be able to identify the need for change and lower level managers might be the key players in the change process. In line with the above discussion, it has now become vital to explore the drivers of management accounting. In this regard, previous studies on management accounting change by researchers such as Thomas (1989), Sharma (2001), Burns and Vaivio (2001) and Waweru et al. (2004) have identified the importance of analysing management accounting practices in the context of internal and external business environment of the organisation. This will help in a better understanding of the change process. In the existing literature, different environmental and organisational factors that directly correlate to the design of management accounting systems are; competitive environment, technology, organisational design and size, etc. (Haldma and Laats, 2002; Libby and Waterhouse, 1996). The change factors can be further classified individually into internal and external factors. In this regard, researchers such as Thomas (1989), Burns et al. (1999), Burns and Vaivio (2001) and Clenhall and Euske (2007) have recognised some internal and external factors. They highlight product differentiating strategy (product customisation), organisational structure, organisational know-how, etc. as the internal factors and industry structure (competitive strategy), and competitive and dynamic markets and technology, etc as the external factors. Therefore, we explore these broad categories of management accounting change drivers in further detail below. Macy and Arunachalam (1995) define the external environment as “a phenomenon that is external and have either potential or actual influence on organisations”.

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As demonstrated by Fisher (1995), the external business environment of organisations can be “static or dynamic, certain or uncertain, and turbulent or calm”. Nonetheless, organisations do not exercise any control over such factors but are required to take them into consideration and to recognise them for their survival. In line with this, Otley (1980) classifies an operating business environment to be either tough or liberal. He further argues that the former situation is rather difficult one for unit managers to show accounting profits and the latter is one where it is relatively easy to show and maintain profitable operations. Within the same context of external environmental factors, Ginzberg (1980) links control system in organisations to technological routines environment stability. This study further claims that firms that operate in a stable environment with routine technology tend to use bureaucratic control systems for achieving better performance. Other researchers, like Fisher (1995) also observe that the external environment primarily characterises a level of uncertainty where organisations operate. In line with this, Macy and Arunachalam (1995) regard uncertainty as the difference between the amount of information required and the amount available to perform a particular task by organisations. Similarly, Mia and Clenhall (1994) and Mia and Patiar (2001) recognise the need for organisations to possess more sophisticated management accounting information in order to operate in uncertain business environments. Otley (1980) correspondingly notes that the level of sophistication of accounting and control systems in organisations is influenced by the intensity of competition faced by these organisations. Thus, market competition in, for example, prices, product differentiation, advertising, technology etc. has impacts on control systems, especially for manufacturing organisations (Chong et al., 2005). Contradicting the above view of management accounting systems being directly influenced by external environmental factors, researchers such as Bruggeman and Slagmulder (1995), Chapman (1997), Scapens and Burns (2000) and Baines and Langfield-Smith (2003) claim that uncertainties in organisations are not necessarily caused just by factors external to businesses. Chapman (1997), for instance, reports that uncertainty can be led by the interaction of a number of internal and external factors. In support of this view, Scapens and Burns (2000) argue that management accounting is not affected entirely by competition, but mainly by how competition is perceived by internal managers and accountants. Macy and Arunachalam (1995) argue that for meeting the requirements of the operating competitive environment, organisations have to choose different types of competitive strategies. In this regard, Miles and Snow (1978) state that in order to establish a niche in the market, organisations tend to organise themselves as ‘defenders’, ‘prospectors’, ‘analysers’ or ‘reactors’. They define defender organisations as those which operate in moderately stable markets with regards to price differentiation, product differentiation and the like. Such organisations are more content with the way they operate and hence do not need to grasp new opportunities or adjust their methods of operation, organisational structure or technology. These organisations tend to concentrate their awareness on financial measures for managerial purposes and maintain their respective market shares. Miles and Snow (1978) explore prospectors, as those organisations that are always on the look out for new opportunities. Fisher (1995) describes that such organisations tend to search for “potential responses to emerging environmental trends” and are often the creators of change and uncertainty. In this regard, Ittner et al. (1997) argue that such

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organisations tend to use more of non-financial measures. The analysers are regarded by Miles and Snow (1978) and Fisher (1995) as organisations which tend to operate in two diverse markets, one being reasonably stable and the other being variable. Organisations in the former space operate efficiently and consistently by using formal structures and processes, whereas organisations operating in the latter tend to be driven by their competitors. Such organisations constantly keep changing their processes to try and achieve the most appropriate model. Finally, the last category, the reactors are those organisations which adjust their processes only under environmental pressures, because they are unable to respond effectively to change unless forced by their operating environment. Fisher (1995) simplifies the categories of organisations into low-cost strategy focused and product-variety oriented. The study regards, low-cost strategy focused organisations as those which try to capture the market niche by making low-priced products as compared to their competitors. The product-variety-oriented organisations, on the other hand, are those which try to capture the market niche by differentiating their products such that customers perceive them to be unique. It is further argued that the strategy an organisation adopts the type of control system implemented by that organisation. Clenhall and Langfield-Smith (1998) further recognise that high performance organisations that adopt low-price strategies have a propensity to benefit by improving their existing practices, innovating traditional accounting methods and activity-based techniques. In addition, technology always plays a big role which is highlighted below. Otley (1980) regards technology as an important aspect related to production and information in organisations. The author claims that organisations have demonstrated the use of production technology in the process of transforming inputs to outputs for decades. Such transformations can be assumed to be the longest established procedure used for the purpose of management accounting. In support of this, Fisher (1995) argues that over the years the distinction between different types of production techniques has influenced the design of internal accounting systems. In line with this the recent developments in information technology like computerised systems, has not only influenced the flow of information in organisations but also the nature of work as a whole. By means of technology, information can now be interpreted and put to use differently, suiting the needs of its target users, unlike before when accounting data had to be processed under the direct control of designated accountants (Scapens and Burns, 2000). To summarise the above, Scapens et al. (2002) identify five main factors that have affected management accounting in the last three decades. Firstly, the customer-oriented companies emerged due to the increase in global competition; secondly, there has been a swift pace of change in production and information technology; thirdly, there have been increased changes in management and organisational structures due to mergers and demergers; fourthly, requirements of information as a result of changing market conditions and business strategies have increased with increased competition; and finally, there is a notably amplified contribution of professional bodies, representing an important part of the business environment, for the development of management accounting. In addition to external factors, internal factors also provide grounds for change in management accounting systems. Fisher (1995) and Mia and Patiar (2001) highlight that organisations use different management accounting practices in accordance with the nature and industry of their business (e.g. manufacturing firms differ in the types and ranges of their accounting practices as compared to service or trade-related firms). Also,

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the range and sophistication of management accounting practices tend to be more in larger firms (Ezzamel, 1990; Libby and Waterhouse, 1996; Merchant, 1981). In the same context, Fisher (1995) and Scapens and Burns (2000) state that management accounting practices tend to be more sophisticated in large organisations due to more managerial levels and greater numbers of divisions, hence making it more difficult for large companies to deal with changes in their organisational structure. Organisational knowledge and know-how spanning the organisations thus helps them efficiently and effectively to change their management accounting and control systems. Thus, Fisher (1995) argues that it is vital for employees to possess knowledge of the transformation processes, as their predictions of the change outcome are imperative for the accounting systems to be suitably operational. In light of the above discussions, we now explore the main reasons for the management accounting change in both the emerging and advanced economies. In this context, Innes and Mitchell (1995), Scapens et al. (1998), Innes et al. (2000), Burns and Yazdifar (2001) and Burns et al. (2003) highlight the changes in the environment within and around organisations in the developed economies around the world. Burns et al. (2003) argue that the debate over the extent of management accounting change is much directed towards the environment in which management accounting is practiced. They argue that significant advances in information technology, different organisational structures, more competitive markets and new management practices have evolved to keep pace with the changing needs of organisations operating in increasingly complex business environments like the UK. Atkinson et al. (1997) argue that recent years have observed momentous developments of new and advanced accounting techniques such ABC, balanced scorecards, economic value added (EVA) and strategic management accounting. The increasing use of such techniques has shifted the way in which management accounting practices are used, from a traditional monitoring and control perspective to a more business and support-oriented perspective. In support of this, Burns et al. (2003) argue that the role of management accountant has evolved to link financial considerations with both operating concerns and strategic priorities of businesses. Innes and Mitchell (1995) and Innes et al. (2000), however, disagree with the wide acceptance of such new techniques in the UK. They claim that various surveys conducted across the UK indicate that ABC is used by only 20–30% of companies as compared to the continued popularity of traditional management accounting systems and techniques. Burns and Yazdifar (2001) also argue that there is not much evidence of new advanced management accounting techniques being widely implemented in the UK. Similarly, Scapens et al. (2002) state that change in management accounting practices in the UK companies is directed mostly towards the manner in which traditional management accounting is used rather than adopting new management accounting systems and techniques. With respect to the emerging economies, Sinha (1995), Jaruga and Ho (2002) and Waweru et al. (2004) examine the changes in the environment within and around organisations which have resulted in changes in management accounting practices in transitional and emerging economies around the world. Sinha (1995) argues that the growth of privatisation, increase in international business activity, deregulation of the economy, global competition and most significantly new information and production technologies are the factors responsible for the change in management accounting systems. The author further comments that transitional economies are required to have

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exceptional implementations of such changes in order to, be able to, produce more transparent accounting methods for consistent interpretation by multinationals and joint ventures with developed countries. In this context, economic transition is examined by Jaruga and Ho (2002). They argue that economic transition often brings unfavourable experiences for organisations, such as inflation and loss of market share, thus compelling them to reformulate their management accounting systems in order to cope with the new conditions for their survival. The authors, however, note that although organisations in transitional and emerging economies have realised the need for more effective techniques that can provide accurate, timely and relevant information in order to improve performance, traditional accounting methods are still extensively used in such organisations. Similarly, Waweru et al. (2004) comment that emerging economies seem to have been lacking behind in implementing the advanced techniques of management accounting such as ABC and balanced scorecard. The authors further suggest that more attention should be devoted to the political, economic, social and cultural environment of organisations in developing and emerging economies. Similarly, Anderson and Lanen (1999) argue that the intensity of international competition has changed the needs of internal information required by Indian organisations since the liberalisation of the Indian economy in 1991. In light of the above discussions we can see that change is often seen to be a part of broader development in the management process rather than a makeover of the management accounting practices per se (Scapens et al., 2002). The nature of management accounting change, having stemmed from environmental changes coupled with the impact of integrated information systems and the availability of financial information, has been tremendous upon modern businesses (Burns et al., 2003). However, whether the concept of change in the UK organisations is of a similar nature to those of Indian organisations is a research question. Therefore, we examine and compare the process of management accounting change in both the Indian and UK organisations.

2.1 The research objectives and related hypotheses In light of the above discussions, it can be argued that management accounting systems of modern organisations are facing severe challenges in recent years in both the developed and emerging economies. Similarly, it is not very clear from the existing literature whether the concept of change in the UK organisations is of a similar nature to that of Indian organisations. We therefore investigate the management accounting system changes which has occurred in both the Indian and UK organisations and explore the impact of the change on the performance of the sample organisations. To achieve this purpose, this study aims to fulfil the following research objectives: 1

to explore the decisive factors leading to management accounting system change in organisations across India and the UK

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to examine the extent of change in organisational accounting practices of the two countries.

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to investigate the effect of management accounting changes on the performance of organisations across India and the UK.

Therefore, we set two research hypotheses for meeting the above objectives. The two hypotheses are highlighted below.

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The external business environment faced by firms in India and the UK has undergone considerable changes leading to changes in the way these organisations operate (Baines and Langfield-Smith, 2003). Some of the most attributable changes in the external environment have been increasingly active competitors, easier availability of information processing technologies and ever demanding customers (Hiromoto, 1991; Innes and Mitchell, 1990; Shields, 1995). Faced by the challenge of environmental changes, firms tend to develop different strategies that emphasise quality, flexibility and innovative products (Perera, 1989; Sim and Killough, 1998). In particular, such changes are bound to have a significant influence on changes to management accounting systems. In light of the above discussions, the following research hypothesis is formed; H1: The management accounting systems of different organisations have significantly changed in India and the UK in recent years. The second hypothesis explores the impact of changes in management accounting on organisational performance, depending on the corelationship between management accounting change and business environmental factors. In this regard, Mangaliso (1995) argues that top-level management information reporting has become one of the most important tools, substantially required to influence organisational wealth and performance. Therefore, as a result of environmental changes, management accounting systems face the challenge to provide up-to-date information. This information will help mangers and decision makers reach informed economic decisions and hence improve organisational performance (Horngren, 1995). Failure to adhere or trust appropriate accounting information may result in ineffective resource management, leading to a gradual decline in organisational performance. On the basis of the discussions in this paragraph, we form the second research hypothesis: H2: There is a positive relationship between changes in management accounting systems and organisational performance. The two research hypotheses highlighted above are formulated on the basis of information gathered from the background literature and other discussions.

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Research methodology and data

There are two research paradigms namely the positivist and the phenomenological approaches (Shaw, 1999). The former approach uses quantitative and experimental methods as a means of testing hypothetical generalisations (Burrell and Morgan, 1993). The latter, however, concentrates on qualitative research to understand human nature and experience (Cook and Campbell, 1979). Amaratunga et al. (2002) state, “The phenomenological (qualitative) approach thus tries to understand and explain a phenomenon, rather than search for external causes or fundamental laws”. In line with this, researchers such as Nachmias and Nachmias (1996), Remenyi et al. (1998) and Bryman (2002) classify qualitative and quantitative methods as two different ways of conducting research, each specifically appropriate for exclusive research agendas. The selection of research methods is though the most important ingredient of all research projects. However, it is evident from the literature that the choice of research methods is subject to controversy. In the existing literature, we can clearly see the dominance of quantitative methods of research, but this does not mean that they are

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applicable to all research scenarios. An integration of the two is also likely to be fruitful for specific management researchers (Hoskisson et al., 1999). However, Judge and Zeithami (1992) and Hitt et al. (1998) state that the choice of research objective and context is most relevant to dictate preference over the research method employed. Considering the nature and objectives of this study, a questionnaire survey has been used as the research method in this project. Hence, this method has been chosen to study the changes in management accounting systems with respect to a number of change drivers and evaluate those changes in relation to the changing needs of different organisations. This method is also useful for studying the characteristics and interrelationships between several variables. Hence, this method has been selected for the purpose of this study help to examine the impact of management accounting changes on organisations and also to analyse the change drives with relation to performance. The survey was conducted between June and September 2007. We have used the online questionnaire method for this purpose. The questionnaire was sent to 100 randomly selected companies in both countries. Out of the 100 companies only 20 responded to the questionnaire. This was only possible after sending reminders to the participants. The split of the sample suggest that 10 companies from India and 10 from the UK participated in this survey. The actual response rate is therefore 20%. Though, it is not a huge response rate, still it is big enough for fulfilling the purpose of this study.

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Analyses and results

Tables 1–6 present the results of the empirical analyses. Table 1 presents the background overview of the participants and their related organisations. One of the purposes of the questionnaire was to gain demographic knowledge of people participating in the research. This was done to get an overview of their background, organisational position, academic qualifications and experience. The information gathered helps to establish a more unambiguous view of the participants in the context of the questionnaire. Also, people from different roles in organisations view things differently and have their own opinion towards the role of management accounting systems. Detailed information about the questionnaire thus helps to establish more diverse opinions and broaden the perspective of the study. Table 1 suggests that a majority of respondents work in designated accounting positions in their organisations. With slight variations, the percentage rate of professional qualifications and academic qualifications held by respondents in India and the UK are quite similar to each other. However, there are differences between the professional experiences held by the Indian respondents with regards to respondents from the UK. It is revealed that the former have experience respondents than the latter. Table 1 further reveals that 100% of participating firms are privately owned. Therefore, this research is totally based on the viewpoint of private sector companies operating in India and the UK. Table 1 highlights that the majority of responses gathered from India are from the manufacturing sector which implies the growing role of management accounting in the Indian manufacturing sector. A similar response was gathered from the UK financial sector. In the case of India, however, feedback from the financial sector was low. This could be due to the fact that the popularity of management accounting in this particular sector is still relatively low. Furthermore, around 30% of

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respondents are from the retail sector in India while there was no response from the retail sector in the UK. Table 1

General information about the participants and their related organisations Job titles of participants

Job title

Management Cost Financial accountant accountant accountant India

Percentage (%) of respondents

Finance director

Internal auditor

Others

UK India UK India UK India UK India UK India UK

20

10

10



20

30

10

10

20



20

50

Academic qualifications of participants High School Level Percentage (%) of respondents

Bachelors

Masters

Others

India

UK

India

UK

India

UK

India

UK



10

40

20

30

70

30



Professional experience of participants Experience (years in %)

Less than 2 years India

3–5 years

UK

India

UK

6–10 years India

More than 10 years

UK

India

UK

Post-qualification

10

30

40

40

10

10

40

20

With the current business unit

10

60

40

20

10

10

40

10

In the current position

40

70

30

20

20

10

10



Ownership State owned

Privately owned

India

UK

India

UK





100

100

Percentage (%) of respondents

Industrial sector of the organisations Type of business Percentage (%) of respondents

Manufacturing

Retail

Financial

Services

Others

India

UK

India

UK

India

UK

India

UK

India

UK

40

10

30



10

40

10

20

10

30

Year of establishment Before 1980 Percentage (%) of respondents

1980–1989

1990–1999

After 2000

India

UK

India

UK

India

UK

India

UK

20

40

40

10

30

20

10

30

Number of employees Less than 50 Percentage (%) of respondents

50–100

100–500

More than 500

India

UK

India

UK

India

UK

India

UK

50

40

30

10

10



10

50

3.0

3.7

3.2

3.3

3.0

3.1

Providing information for top management decision-making

Controlling and evaluating performance

Provide information for decision making and control

Help coordinating activities

Help allocating resources to be used more effectively

Provide a tool of communication

India

1.8

2.9

2.0

3.5

2.7

3.3

3.0

3.0

3.3

2.0

3.6

India

3.5

1.0

3.0

1.0

4.0

4.0

4.0

UK

Manufacturing

UK

Mean

2.0

2.0

2.7

2.0

3.7

3.3

India













UK

Retail trade

4.0

4.0

4.0

4.0

4.0

4.0

India

2.5

2.8

2.0

3.0

2.8

3.0

UK

Financial

Industry

3.5

2.0

3.5

3.0

3.5

2.5

India

1.0

2.0

1.5

3.5

4.0

3.5

UK

Service

4.0

4.0

4.0

4.0

4.0

4.0

India

2.7

4.0

3.3

3.7

3.7

4.0

UK

Other

2.8

2.8

3.2

2.6

3.6

3.2

India

2.3

2.5

2.3

3.0

3.0

3.3

UK

Less than 50

2.7

2.7

3.3

2.7

3.7

2.3

India

50–100

Size

1.0

3.0

2.0

4.0

4.0

3.0

UK

3.5

3.0

3.0

4.0

3.5

3.0

India

2.0

3.2

2.0

3.6

3.8

3.6

UK

More than 100

Table 2

Objectives

Ownership: private organisations

12 S. Akbar Role of management accounting systems in the organisation

UK 2.4

2.1

2.1

2.2

1.6

1.8

1.7

1.7

1.7

1.7

Activitybased costing method

Lifecycle costing approach

Target costing approach

Activitybased management approach

Balanced scorecard approach to evaluate performance

Mean

1.7

1.7

1.3

1.7

2.0

India

1.0

3.0

3.0

3.0

3.0

UK

2.0

2.3

2.7

2.0

2.3

India

í

í

í

í

í

UK

Manufacturing Retail trade

1.0

2.0

1.0

1.0

1.0

India

2.5

2.0

2.3

1.8

2.3

UK

Financial

2.5

2.5

2.5

2.5

2.5

India

1.5

2.5

3.0

2.0

3.0

UK

Service

Industry

1.0

0.0

1.0

1.0

1.0

India

1.3

1.7

1.0

1.7

1.7

UK

Other

2.0

2.0

2.4

1.6

2.0

1.3

2.0

UK

2.0

1.6

2.0

India

Less than 50

2.7

2.0

2.3

2.7

2.3

India

1.0

2.0

1.0

3.0

2.0

UK

50–100

Size

1.0

0.5

1.0

1.0

1.5

India

1.8

2.2

2.4

2.2

2.6

UK

More than 100

Table 3

India

Tools

Ownership: private organisations

Management accounting change 13

Execution of management accounting tools in the sample organisations

17.1

6.7

6.7

Profitability and improving financial performance against competition

Other reasons for change 16.4

26.7

Relevance of 54.6 accounting information for managerial use

UK 14.3

25.5

India 17.1

15.0

Timing of accounting information

Accuracy of accounting information

Mean (%)

33.3

í

33.3

í

India 33.3

í

100.0

í

í

UK –

Manufacturing (%)

í

33.3

33.3

í

India 33.3

í

í

í

í

UK í

Retail trade (%)

í

í

í

100.0

India í

25.0

í

í

25.0

UK 50.0

í

í

100.0

í

India í

50.0

í

50.0

í

UK í

Financial (%) Service (%)

Industry

í

í

100.0

í

India í

í

í

66.7

33.3

UK í

Other (%)

20.0

20.0

20.0

20.0

India 20.0

í

í

50.0

í

UK 50.0

Less than 50 (%)

í

í

100.0

í

India í

í

í

í

100.0

UK í

50 –100 (%)

Size

í

í

50.0

í

India 50.0

40.0

20.0

20.0

20.0

UK í

More than 100 (%)

Table 4

Factors

Ownership: private organisations

14 S. Akbar Reasons for change in management accounting practices in the sample organisations

3.3

2.7

4.0

2.8

3.2

3.4

3.8

3.1

3.8

Changes in production technology

Dissatisfaction with performance measurement Effect of competition

Changes in attitudes of top management 3.0

3.3

3.2

3.3

Changes in organisational structure

3.5

3.0

3.8

3.4

Changes in state regulations

3.3

India 3.7

Increasing competition

UK 3.5

2.0

4.0

2.0

2.0

1.0

5.0

UK 5.0

3.0

2.7

2.7

4.0

1.3

2.3

India 2.3

í

í

í

í

í

í

UK í

Overall mean Manufacturing Retail trade

5.0

5.0

4.0

3.0

5.0

5.0

India 5.0

3.8

3.5

2.5

2.3

3.0

3.3

UK 3.8

Financial

1.5

3.5

2.5

3.5

2.5

2.0

India 3.0

3.0

3.0

3.5

2.5

3.0

4.0

UK 2.0

Service

Industry

5.0

4.0

4.0

5.0

5.0

5.0

India 5.0

4.3

3.3

4.3

3.7

4.7

3.7

UK 3.7

Other

3.8

3.2

3.2

3.8

2.4

3.0

India 3.2

4.3

3.5

3.3

2.8

3.8

3.8

UK 3.5

Less than 50

2.0

4.0

2.0

3.0

3.3

1.7

India 2.7

4.0

3.0

4.0

4.0

4.0

3.0

UK 3.0

50–100

Size

3.0

4.0

3.5

4.5

3.5

5.0

India 5.0

3.0

3.4

3.0

2.4

2.8

3.8

UK 3.6

More than 100

Table 5

India 3.7

Importance of

Ownership: private organisations

Management accounting change 15

Drivers of management accounting change in the sample organisations

16 Table 6

S. Akbar The outcome of change in the sample organisations

Ownership: private organisations Effects

(%) India

UK

Yes

No

Yes

No

Improving financial performance or increasing sales

70

30

100

0

Cope with increasing customer awareness

60

40

50

50

Recovering lost market shares

40

60

20

80

Reducing production costs

60

40

60

40

Improving the role of accountants

90

10

70

30

Others

50

50

80

20

It is again visible in Table 1 that many Indian organisations grew substantially during the period 1980–1989 with around 40% of the responding organisations having established their businesses in that period. This is also double the figure from the years before 1980. This vast increase in growth of organisations can be attributed to the economic transition in 1991. Hence, it can be contemplated that local industries that had foreseen the economic transition and its consequences timed their opportunistic entry into the Indian industry to benefit from low entry requirements and lower competition. Furthermore, the increased levels could also be accredited to the fact that organisations, especially those with interest in export and import, anticipated the opportunities to expand after the reforms. A similar amount (i.e. 40%) of growth in organisations in the UK is noticed during the period before 1980. However, the period is not constrained to base assumptions of any major economic evolution. Conversely, the UK also experienced a major growth in new organisations in the period after 2000 (30% of responding organisations). By contrast, only 10% of the responding organisations in India were established after 2000. Table 1 further highlights the number of employees in the responding organisations which describe the size of the organisations. In general, organisational size determines its operational capacity in the industry. It also justifies the need for implementing management accounting systems for enhancing organisational performance. Literature suggests that a greater range of management accounting techniques gets used in large firms as compared to the small firms (Hoque and James, 2000; Szendi et al., 1996; Szychta, 2002). The questionnaire survey is thus classified in three categories; small firms (with less than 50 employees), medium firms (with 50–100 employees) and large firms (with more than 100 employees). Table 1 also shows that most Indian organisations are quite small in size in comparison to the UK organisations. We know from the literature review that small firms are more reluctant to change as compared to large firms. Therefore, we would expect that Indian organisations would tend to be more reluctant in implementing management accounting techniques or changing their management accounting practices as compared to the UK organisations. This point is highlighted and discussed later. The importance of management accounting systems can be tested on the basis of certain evaluation criteria. These include their ability to provide information for decision

Management accounting change

17

making and control, performance evaluation, effective coordination of activities, more efficient use of resources and finally, as a more effective communication tool. The questionnaire reports all those factors where respondents are asked to rank the factors which in their opinion are important in the management accounting systems of the sample organisations. The participants’ responses are analysed and reported in Table 2. In Table 2, all the factors or objectives of management accounting systems included as part of the questionnaire have been voted equally important by the respondents. The average mean response received from India across all private sector industries considered in this study is 3.0. It is also logical to assume that the UK respondents place similar importance to most key system objectives as their Indian counterparts. However, a significant difference between the two sets of results describes the point that the UK organisations place less value on using the system as a communications tool or for coordinating activities. Also, according to the questionnaire analyses, the retail trade sector in the UK seems to place no importance on any of the factors considered as vital to management accounting systems. With a mean industry average of 3.7 (India) and 3.6 (UK), it can be safely concluded that the most critical objective of management accounting systems, as viewed by respondents of both locations, is its importance as a ‘controlling and performance evaluation’ tool. Table 3 reveals the results of the implementations of various management accounting tools in the sample organisations. It is visible in Table 3 that the chosen management accounting tools have generated a mix response from the survey respondents in both countries. The five main tools of management accounting system adopted in this study are ABC, life cycle costing, target costing, activity-based management and the balanced scorecard. The chosen answer by the respondents help us to identify the exact nature of the implementation of management accounting tools on a three-point scale. For each system type, the scale ranged from ‘never considered’, ‘considered to be implemented’ to ‘implemented’, in the responding organisations. The mean value of the implementation of the aforementioned management accounting system tools in India is 1.7. This confirms the notion that these management accounting techniques have either never been considered to be implemented in India or are still very much in their infancy. Background research shows that the Indian financial industry seems to be reluctant to implement any management accounting systems with the exception of activity-based management (Anderson and Lanen, 1999). This is further confirmed by the questionnaire survey results. The remaining industrial sectors in India also share this view. Furthermore, some small as well as large organisations surveyed in India claim to have never considered or are in early stages of considering adopting the balanced scorecard in their organisations. The mean score of implementation of such techniques by other large organisations surveyed is 2.8 denoting their final stages of implementation. The research findings are consistent with the observations by Anderson and Lanen (1999), Haldma and Laats (2002) and Waweru et al. (2004), who argue that the emerging economies are lagging behind in implementing advanced management accounting techniques, such as ABC and balanced scorecard. The analysis provides an insight into the level of importance and popularity of management accounting tools in India at present. As it stands, the maximum adoption rate of these tools is in the service sector in India. However, this sector is still half way through fully implementing some of the aforementioned management accounting techniques.

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S. Akbar

On the other hand, a descriptive analysis of the UK respondents shows that the manufacturing sector has the greatest variety of management accounting tools implementation, representing all except one the balanced scorecard approach. This is consistent with the results of most of the industrial sectors in India. The UK financial sector however, reveals a mean of 2.5 with regards to the implementation of the balanced scorecard approach. This implies that this method is quite popular in the financial sector in the UK. Overall, the financial sector in the UK shows consistent results with their implementation of all management accounting techniques. Also, the results are consistent with the previous literature on the adoption of implementing management accounting techniques in large firms (Szychta, 2002). In this respect, larger organisations in the UK reveal a mean of 2.3 with regard to implementing these tools.

4.1 Testing the research hypotheses The preceding discussions demonstrate that changes in the external environment had a significant impact on organisations’ strategy in all sectors of the economy in both India and the UK. Such changes are attributable to market and financial deregulations and the increased requirements of companies to compete in a single global market (Anderson and Lanen, 1999; Baines and Langfield-Smith, 2003). Increased globalisation has led to intensely aggressive competition, which is further increasing the level of customer demand and needs (Dent, 1990; Shields, 1995). It is also clear from the preceding discussions that changes in management accounting practices used by organisations in India and the UK are based on the well-established notion that an organisation’s strategy is a response to its environment (Burns and Stalker, 1961; Porter, 1980). These changes are formulated on the bases of transformations in environmental and organisational design. Management accounting and control systems have been defined as formal, information-based routines and procedures used by managers in order to maintain or alter organisational patterns (Simons, 1987). Implementing management accounting changes may have varied effects with regards to organisational performance. Organisations implement changes that are regarded as the ‘best fit’ by managers to help cope with environmental changes and at the same time address issues of improving organisational performance. To achieve the objectives of this study, predetermined reasons for change in management accounting systems have been incorporated in the questionnaire. A descriptive analysis of the sample helps to examine the relationship between the predetermined reasons and their influence in incorporating changes to management accounting practices. Table 4 provides evidence that the foremost reason for change in management accounting practices in India is due to the ‘relevance of accounting information for managers’. This is highlighted by the views of all the participants. Around 55% of participants, from all sectors of the Indian private-sector, describe this as the key reason for change in management accounting practices. The results further reveal that although small firms have placed equal importance on all factors resulting in management accounting change, medium and large organisations primarily support the view of its relevance to managers. Furthermore, investigation of the UK survey responses highlight that ‘relevance of accounting information for managerial use’ has been the most important factor in facilitating change, as in the case with India. In addition, another key reason highlighted by the UK organisations was the ‘timing of accounting information’ as an influential

Management accounting change

19

factor to management accounting change. Similarly, while the Indian financial sector reveals strong reservations for the ‘timing of change’ as a main factor for changes to management accounting practices; 25% of the financial sector and 50% of the service sector in the UK believe that all of the aforementioned factors have led them to change their management accounting practices. Also unlike Indian organisations, the large organisations in the UK put almost equal importance on all factors for implementing change. By contrast, the medium size firms completely support the importance of ‘timing of accounting information’ in management accounting change and consider it as the most important. Thus, it is apparent that organisations in both India and the UK place equal importance on the ‘relevance of accounting information’ when determining management accounting change. Two other factors that are also important for consideration are ‘accuracy’ and ‘timing of accounting information’. However, most surprisingly and almost contradictory to the literature was the notion of ‘improving organisational performance in wake of competition’, among the surveyed companies. The sectors surveyed in both countries have nearly disregarded ‘profitability and improving financial performance against competition’ factor as one that motivates change. On average only 7% Indian participants agreed with this idea with the response being a little better at 17% from the UK organisations. Summarising the above, it is obvious that organisations in both countries have regarded varying reasons, with more preference given to some than others, for influencing changes in their management accounting practices. However, despite the different factors that initiate change in management accounting practices, it is clearly evident that change in management accounting has occurred in all surveyed organisations. Thus, the first hypothesis (H1) holds true in the context of the sample organisations in India and the UK. The above discussion reveals that changes in management accounting practices can be attributed to a number of different factors. However, organisations can often face resistance from their members while provoking changes relating to organisational structure, performance measurements, budgeting systems, reward and capital approvals, etc. (Tuomela, 2005). The culture of organisations, which often constitutes the taken-forgranted assumptions of institutional theory, thus plays an essential role in shaping the knowledge of any organisation (Chung, 2001). Hence, it becomes imperative for top-level management and decision makers to set the right tone and provide commitment to transfer knowledge via communication channels while introducing any change to the accounting procedure. Chung (2001) claim that implementation of knowledge transfer is more likely to make the change procedure successful in organisations that encourage internal communication. On the other hand, severely guarded information may lead to failure in implementing the changed techniques thus hindering organisational growth. Thus, organisations may implement management accounting changes driven by the perceived importance of one or many predetermined organisational strategies in order to improve performance. Table 5 reveals seven major predefined drivers for the purpose of this study. Survey responses on the importance of each driver is analysed and highlighted in Table 5. The first driver highlighted in the questionnaire is that of ‘increasing competition’ in the corporate world and its driving influence on organisations to change their management accounting methods. The outcome of the Indian sample reveals that ‘increasing competition’ has started to speed up the process of change in management accounting

20

S. Akbar

systems. The financial sector of India for example, totally agrees with the fact that ‘increasing competition’ has totally sped up the process of management accounting change. In comparison to the above, the UK sample presents a similar view of the importance of management accounting change drivers. However, unlike somewhat similar distribution of perceived importance of ‘increasing competition’ by all sectors of the Indian industry, only the manufacturing sector of the UK seems to have been impacted more by the ‘increasing competition’ in its process of management accounting change. This could be attributed to the changing nature of the manufacturing sector in the UK where survival of this sector has become eminent in the last 40 years or so. Furthermore, looking at the size of the responding organisations, it is evident that larger companies in both India and the UK consider ‘increasing competition’ as one of the most significant drivers as compared to small companies. Another driver which has major impact in the Indian industry ‘changes in production technology’. It is strongly believed among the participants in India that ‘changes in production technology’ is becoming an important driver, especially among the financial and retail sector, influencing management accounting change. However, comparing this with the UK, it is apparent that this driver has little or no impact on the change process. Furthermore, very few sectors in India felt that ‘dissatisfaction from current performance measurement systems’ influenced their decision to change their management accounting practices. On the other hand, some sectors in the UK have a totally opposite view, stating that ‘dissatisfaction of performance measurement systems’ is one of the most significant reasons to change. Thus, it can be concluded that although all the predefined drivers of change have been deemed influential for change by the Indian industry, factors such as ‘increasing competition’, ‘changes in production technology’ and ‘effect of competition’ seem to have the greatest influence in driving management accounting change. However, the rate of influence from all the predefined drivers has been lower in the UK as compared to India. Nonetheless, the most important factors voted influential by organisations surveyed in the UK are ‘increasing competition’, ‘changes in state regulations’ and ‘changes in the attitude of top management’. Table 6 reveals the responses from participants in India and the UK regarding the impact of change on the sample organisations. The change outcome is measured by five main aspects highlighted in the table. The table also attempts to classify the outcome of change in the survey analysis. Each category of outcome shows the percentage of participants who feel that it has evolved in their organisation as a result of change and those who do not. Around 90% of the respondents from India agreed that a change in their management accounting practices is ‘improving the roles of their accountants’. In addition, 70% of the respondents also voiced their opinion that management accounting change helped in ‘improving the financial performance or increased sales’ in their organisation. A large proportion (50%) of the respondents also cited other outcomes of change as a possibility, with one organisation specifying that change in its management accounting practice has helped in improved data flow in the organisation. Similarly, in the UK 100% of respondents agree that change in management accounting practices has helped in ‘improving financial performance or has increased sales’ of their organisation. Another issue highlighted by the respondents was that ‘recovery of lost market share’ was not exactly a relevant outcome of the change process. In contrast, other possible outcomes, not predefined in the research seem to have had a

Management accounting change

21

considerable effect, of around 80%, on the responding organisations. One of the respondents specifies that the most important outcome of change in management accounting systems is an increased visibility of the sales cycle in the organisation. It is evident from the above discussions that the predetermined change drivers have influenced change, and the resulting changes in management accounting systems have considerable effects on performance. Hence, it can be summarised that a considerable positive relationship exist between management accounting change caused by the effect of change drivers and the outcome of organisational performance in both these countries. Thus, the second hypothesis (H2) is also supported within the research context of this study.

4.2 Discussion This section provides further insights into the relationship between variables for the various factors that drive change. These have been examined from the points of view of each of the two countries. The analysis so far, shows that there have been different drivers and reasons faced by organisations seeking to change their management accounting practices. However, implementing a new management accounting system or changing existing management accounting practices might not always prove beneficial in all organisations (Lapsley and Pettigrew, 1994). Some respondents from India reveal that in the past they have experienced failure while implementing changes in their management accounting practices. As stated by one of the responding organisation – the reason for failure was its inability to meet and cope with current organisational needs. The findings of the survey also confirm that the degree of competition faced by organisations implementing change in India has been significantly high, with 70% of the respondents in agreement. At the same time, other external environmental factors such as technological advancements have been effectively implemented in India with all participating organisations claiming to be either partly or fully computerised. Aside from technological advancements, previous research reveals competition as one of the most important factors causing change in management accounting practices (Innes and Mitchell, 1990; Jaruga and Ho, 2002; Libby and Waterhouse, 1996). This notion is confirmed by the survey analysis describing that changes in management accounting practices in Indian organisations can be largely attributed to the increasing levels of competition. Further analysis of the survey proves that ‘budget’ is one of the most common and widely accepted management accounting tools. All responding organisations have mentioned the use of budgets (alongside others techniques such as ‘break-even analysis’ and ‘standard costing’ in some instances) as tools of management accounting. The types of ‘budget’ implemented by the responding firms vary according to their specific needs. A breakdown of the budget types used reveals that 40% of the organisations use ‘separate budgets for each sub-unit’ in these organisations. A further 30% reveal that they prepare a ‘single budget for the whole unit’ and the remaining 30% state that their organisation incorporates the use of preparing separate budgets for each sub-unit and then integrating them together to prepare a master budget for the whole unit. The survey responses reveal that although the type of budget implemented in organisations can differ, budget as a tool of management accounting continues to be the most popular amongst organisations in all sectors of the Indian industry. The questionnaire survey also incorporated variables such as ‘estimated amount of sales’,

22

S. Akbar

‘estimated amounts of production’ and ‘production capacity’ as the starting points for preparing a budget. Of the three variables, 70% of the responding organisations claimed that their estimation of sales is the most important consideration while preparing budgets. The rest of the group claims that the production capacity of their organisation is their most important concern for budgets. The majority of the group also claims that top management is solely responsible for preparing the budget with only 20% claiming that all managerial levels actively participate in the process. Analysing the above from the UK perspective, the survey findings reveal that similar to organisations in India, UK organisations have also faced a considerable amount of failures while implementing management accounting change, with 70% respondents having reported failed attempts. Among other factors, one organisation specifies that the reason for failure in implementing change was its software glitches resulting in erroneous reporting. Competition levels faced by organisations in the UK have also been stated as significantly high by a majority of the respondents, which is again consistent with the observations of the Indian organisations. The survey reveals that ‘budgets’, ‘break-even analysis’, ‘return on investment’ and ‘net present value’ have all been voted as important tools of management accounting. Two organisations, however, state ‘internal rate of return’ and ‘product life cycle costing’ as viable tools of management accounting. The survey reveals that unlike Indian organisations, a majority of the UK organisations (60%) implementing ‘budget’ state that the type of budget they incorporate consists of preparing separate budgets for each subunit, which are then integrated into one master budget. The remaining respondents (40%) state that they prepare budget for the ‘business unit as a whole’. The starting point of budget preparation in the UK organisations is noted to be similar to the majority of responses from India. About 50% of the responding organisations in the UK stated their starting point to be ‘estimated amount of sales’. One organisation also specified factors such as combination of sales forecast and market and resource allocation to be the starting point of its budget preparation. However, the distribution of responsibilities of preparing budgets seems to be more decentralised in the UK with majority of organisations (50% as opposed to 20% in India) stating that all managerial levels are involved in the process and only 20% reporting that it is entirely the responsibility of top management. The various factors and concerns of management accounting discussed above clearly demonstrate that traditional management accounting systems are still widely used in organisations in both India and the UK. Moreover, although new management accounting techniques are being incorporated in both countries, the process of management accounting change is not entirely diverse in the transitional economy of India as compared to the developed economy of the UK. Apart from the few differences in the reasons, ways of implementation and drivers of changes, the overall outcome of changes in the surveyed organisations of both countries are similar. The greatest part of this is attributable to external business factors like competition and technological advancements affecting both countries. Increased globalisation also means that any economy, whether developing or developed, needs to meet changes in its external business environment with similar determination and pace in order to cope with the changing demand. Furthermore, the analysis also highlights the real differences faced by organisations operating in two different environments. However, even with stronger cultural and political factors and more centralised decision-making norms faced by Indian organisations, it is noted that

Management accounting change

23

the impact and outcome of management accounting change are quite similar in both countries.

5

Conclusion

This study examines the impact and outcomes of management accounting change that had occurred as a result of several factors in India and the UK in recent years. It analysed the process of change and stability of management accounting practices so that these divergent and often contradictory forces may be better understood in the context of both countries. A backdrop of management accounting change procedures and their outcomes is discussed extensively in the study which identify the procedures from an Indian and UK perspectives, respectively. The environmental factors explored range from political unrest to cultural aspects. However, the most palpable external environmental factors affecting management accounting practices in both countries are identified to be the technological advancements and increased competitive strategies. Furthermore, in an attempt to identify the concept and outcome of management accounting changes in a transitional economy like India and a developed economy like the UK, this study successfully compared the factors, drivers, barriers and tools of management accounting in the context of each country. The survey results revealed that considerable similarities exist in the management accounting change scenarios of both counties. It further identified that despite the apparent increase in management accounting practices adopted by firms in both countries, there is considerable evidence of continued use of traditional management accounting techniques such as budgets and standard cost systems. In line with the findings of Hoque and Hopper (1997), Anderson and Lanen (1999), Haldma and Laats (2002) and Waweru et al. (2004), the research analysis successfully demonstrated that the rate of usage of traditional accounting systems continues to be more dominant in India. Moreover, it is also apparent in these results that although the implementations of modern management accounting practices such as ABC and balanced scorecard is in its early stages in India, it does not seem to be lagging far behind from what has been observed in the UK.

5.1 Limitations and scope for future research Like any other research, this study had a number of limitations. First, the findings of the questionnaire survey, may not apply to all companies operating in the specified sectors in India and the UK. The chosen sample in general and the response rate in particular are not large enough. It would have been ideal to have a bigger sample, which could represent the full population in a more appropriate way. However, considering the limited resources available and the number of reminders sent, the complex nature of this study could be well understood. Thus, this research leaves room for further investigation and analysis in the area of management accounting change in India and the UK. Moreover, as the responses received from either country are solely from the private sector, future research could be based upon analysing the impact and outcome of management accounting change in state-owned firms of transitional as compared to developed economies.

24

S. Akbar

Acknowledgement I am grateful to Miss Preeti Aroora for conducting the survey for this paper.

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