A mind mapping-based literature review (MMBLR) on the “relevance
debate of Management Accounting (MA)”
Joseph Kim-keung Ho
Independent Trainer
Hong Kong, China
Abstract: The topic of “relevance debate of Management
Accounting” is widely recognized as made prominent by the work of Johnson and
Kaplan called “Relevance Lost: The Rise and Fall of Management Accounting”.
Consequently, the debate has tremendous influence on the development of the
strategic management accounting subject. This paper conducts a mind
mapping-based literature review (MMBLR) on the “relevance debate”. It renders
an image of the knowledge structure on the relevance debate theme. The
literature review findings offer useful academic and pedagogical values on the
subject of management accounting and MMBLR.
Keywords: management accounting (MA), mind
mapping-based literature review (MMBLR) approach, relevance debate, strategic
management accounting (SMA)
Please cite the paper as: Ho, J.K.K. 2016. “A mind mapping-based
literature (MMBLR) on the “relevance debate of Management Accounting (MA)”” Joseph KK Ho e-resources September 24
(url address: http://josephho33.blogspot.hk/2016/09/a-mind-mapping-based-literature-review_24.html).
Introduction
The discipline of contemporary management accounting (MA) has been
significantly informed by the relevance debate of management accounting in the
mid-80s. The relevance debate is made prominent by the book of Johnson and
Kaplan, first published in 1987 (Johnson and Kaplan, 1991). The literature on
the relevance debate is also essential readings on the subject of strategic
management accounting (see Ho, 2016a). This paper presents the writer’s
findings from a mind mapping-based literature review (MMBLR) (Ho, 2016b) on the
“relevance debate of management accounting”. Specifically, the study aims are:
Aim 1: to illustrate how to employ the mind mapping-based literature review
(MMBLR) to examine an academic topic of interest, in this case on the
“relevance debate of management accounting”;
Aim 2: to render an image of the knowledge structure on the theme of
“relevance debate of management accounting”.
By meeting these two aims, the paper offers some academic and
pedagogical values to the subjects of the mind mapping-based literature review
(MMBLR) approach and management accounting (MA), especially on the strategic
management accounting (SMA) topic. The rest of the paper is an account of the
application of the MMBLR approach by the writer.
On the mind
mapping-based literature review (MMBLR) approach
The mind mapping-based literature review (MMBLR) approach was formulated
by the writer as a type of diagramming-based literature review (Ho, 2016b). The
approach involves 2 steps. Step 1 is a thematic analysis on the
literature of the topic under study. For this paper, the topic is the
“relevance debate on management accounting”. The output from the thematic analysis is a set
of themes with associated points (i.e., viewpoints, theories and empirical
findings) gathered from the literature. The output from step 1 is then employed
to construct a mind map to portray the knowledge structure of the topic. This
mind mapping makes up step 2 of the MMBLR approach. The
benefits of the MMBLR approach are the learning gained from the process as well
as production of a set of literature review findings that have academic and
pedagogical values. To carry out the MMBLR approach, the writer needs to
conduct a literature search to gather some scholarly works from the writer’s
own library, universities’ e-libraries and via Google Scholar. It also requires
spare time and effort to perform the literature review. From the writer’s
experience, a typical literature search takes 1 to 2 days while the literature
review exercise requires 4 to 5 days. Having introduced the MMBLR approach, the
writer is going to present the MMBLR approach step 1 findings in the next
section.
A thematic analysis on the
management accounting (MA) literature on the “relevance debate”
The dedicated
literature on the “relevance debate of management accounting” is modest in
size. They were mainly published in the mid-80 and early 90s. There are also
sporadic academic publications discussing the relevance topic of management
accounting practices and research, some of which are also examined in this
thematic analysis. The findings from the thematic analysis are as follows:
Theme 1: Traditional management
accounting thinking
Point 1.1.
“….…Vatter (1950)
strongly advocated “different costs for different purposes,”……” (Johnson and
Kaplan, 1991);
Point 1.2.
“…each operating
division required its own staff functions to support its activities. Thus,
central managers were now in the position of providing capital to diverse
operating units and attempting to coordinate, motivate, and evaluate the
performance of their divisional managers. The ROI measure played a key role in
permitting this internal market for managers for capital to function….”
(Johnson and Kaplan, 1991);
Point 1.3.
“…The priorities made by
textbook authors indicate that the single most important area is theories
concerning calculations…” (Bredmar, 2011);
Point 1.4.
“…why university
researchers failed to note the growing obsolescence of organizations’
management accounting systems and did not play a more active or more
stimulative role to improve the art of management accounting systems design. We
believe the academics were led astray by a simplified model of firm behavior.
Influenced strongly by economists’ one-product, one-production-process model of
the firm…………” (Johnson and Kaplan, 1991);
Point 1.5.
“…The organization’s
management accounting system serves as a vital two-way communication link
between senior and subordinate managers. ….” (Johnson and Kaplan, 1991);
Point 1.6.
“…Accounting systems for managerial decisions and control can be traced
back to the origins of hierarchical enterprises in the early nineteenth
century…” (Johnson and Kaplan, 1991);
Theme 2: Traditional management
accounting practices and their criticisms
Point 2.1.
“…The early management
accounting measures were simple but seemed to serve well the needs of owners
and managers. They focused on conversion costs and produced summary measures
such as cost per hour or cost per pound produced for each process and for each
worker….” (Johnson and Kaplan, 1991);
Point 2.2.
“…...To an economist, the most important
aspect of cost behavior was the extent to which costs changed with output. But,
the cost accountant’s books allocated periodic fixed costs to products so that
it became impossible to decide which products were most profitable to produce…”
(Johnson and Kaplan, 1991);
Point 2.3.
“…Accounting systems have properties which
extend beyond their conventional roles and which may inhibit easy change. They
give structure and support to the formal and informal pattern of managerial
responsibilities; they provide information configured in a way that supports
the existing organizational structure…….” (Bromwich and Bhimani, 1994);
Point 2.4.
“…Drucker
P.F (1990) mentions that traditional cost accounting hardly provide the information
to justify “a Product’s improvement, let alone a product or process
innovation”…” (Talha, Raja and Seetharaman, 2010);
Point 2.5.
“….…perhaps the most damaging dysfunctional behavior induced by a
preoccupation with short-term profit center performance is the incentive for
senior managers to reduce expenditures on discretionary and intangible
investments…” (Johnson and Kaplan, 1991);
Point 2.6.
“….Some of the problems perceived as not yet
satisfactorily dealt with in management accounting include: 1. The alleged subservience
of management accounting to external financial accounting requirements; 2. The
lack of strategic considerations in management accounting and project
appraisal; 3. The reliance of management accounting on redundant assumptions
concerning manufacturing processes. This is reflected in an over concern with
direct labour and components produced within the firm, rather than overheads
and brought in components…. 4. The maintenance of traditional assumptions in
performance evaluation and the continued short-term orientation of this
process…” (Bromwich and Bhimani, 1989);
Point 2.7.
“….When senior
management no longer receives accurate information about the efficiency and
effectiveness of internal operations, the organization becomes vulnerable to
competition from smaller and more focused organizations…” (Johnson and Kaplan,
1991);
Theme 3: Business trends that further
aggravate relevance loss of traditional MA theories and practices
Point 3.1.
“… The dynamics of today’s business landscape have provided a
fertile environment for the renewed interest and focus on the role of
management accounting in business…” (Talha, Raja and
Seetharaman, 2010);
Point 3.2.
“…...as product life
cycles shorten and as more costs must be incurred before production begins ….,
so that directly traceable product costs become a much lower fraction of total
costs, traditional financial measures such as periodic earnings and accounting
ROI become less useful measures of corporate performance….” (Johnson and
Kaplan, 1991);
Point 3.3.
“…Companies which
seek to compete globally are continually seeking the right balance between the
advantages of economies of scope and encouraging worthwhile interrelations
between often widespread elements of the organization…. This and other
processes require the accountants to revise both corporate accounting
information systems and local systems to reflect these changes…” (Bromwich and
Bhimani, 1994);
Point 3.4.
“…Even without
significant innovations in organizational forms, however, the diversity of
products and complexity of manufacturing processes continued to increase in the
decades after 1920. Thus, the need for accurate product costing and effective
process control should have imposed new demands on organizations’ management
accounting systems….” (Johnson and Kaplan, 1991);
Point 3.5.
“…Many firms are
adopting innovative production systems and advanced manufacturing technology.
As a result of these recent changes, some managers, accountants, and
commentators believe that management accounting is in a crisis and have voiced
calls for altering management accounting practices…..” (Bromwich and Bhimani,
1989);
Point 3.6.
“…the need for
management accounting to react to the increasing globalization of business.
Pressures towards globalization …include the perceived need to use leading edge
methods utilized by competitors wherever they are located…” (Bromwich and
Bhimani, 1994);
Point 3.7.
“In this time of
rapid technological change, vigorous global and domestic competition, and
enormously expanding information processing capabilities, management accounting
systems are not providing useful, timely information for the process control,
product costing, and performance evaluation activities of managers…” (Johnson
and Kaplan, 1991);
Point 3.8.
“….the increased
demands for excellent management accounting systems occur at a time when the
costs for collecting, processing, analyzing, and reporting information have
been decreasing by orders of magnitude…” (Johnson and Kaplan, 1991);
Point 3.9.
“…With many
production processes under direct control of digital computers, information can
be recorded in real time for analysis of operating performance…” (Johnson and
Kaplan, 1991);
Point 3.10.
“…Today’s designers
of management accounting systems can combine such sophisticated electronic
technology with improved software technology to devise reporting and control
systems that are more accurate, more timely, and, hence, more effective than
those designed by their predecessors….” (Johnson and Kaplan, 1991);
Theme 4: MA relevance debate and
responses
Theme 4.1: Related to general theories
and viewpoints
Point 4.1.
“….The relevance debate is usually identified with Robert
Kaplan ….and with Johnson wrote the seminal text: Relevance Lost: the Rise and
Fall of Management Accounting (1987)…” (Roslender,
1996);
Point 4.2.
“….Management
concepts in general and management accounting in particular may be studied in
three contexts: practical, textbook and research…” (Bredmar, 2011);
Point 4.3.
“….The adoption of any accounting or related
technique from a foreign context is not straightforward….” (Bromwich and
Bhimani, 1994);
Point 4.4.
“….In the UK, no one
school of opinion yet dominates views on the nature of reforms which might be
appropriate for management accounting. The case for wholesale reform has not
been accepted in practice…” (Bromwich and Bhimani, 1994);
Point 4.5.
“……For Ezzamel et al.
(1990) managing by the numbers is a sine qua non of modern
organisational life. There is no mystery about cost and management accounting’s
lost relevance; things were always intended to be this way….” (Roslender,
1996);
Point 4.6.
“..…In line with the theory – practice divide,
management accounting has a theoretical scientific character, i.e. a scientific
character, and a practical character, which reflects what happens to
management-accounting related in practice and how practitioner apply and
utilise management accounting information….” (Al-Htaybat and Alberti-Alhtaybat, 2013);
Point 4.7.
“…“Theory is always there in practice, regardless of how
implicit or commonsensical it may appear. Likewise, practice is always present
in the theory, no matter how thinly disguised.” (Macintosh, 1994)….” (Bredmar, 2011);
Point 4.8.
“…….What is at stake for the profession is the
generation of intangible managerial innovations…..in a bid to keep pace with
the ‘progress’ (technological? Managerial? Financial?) of the organizations it
seeks to serve…” (Ball, 2001);
Point 4.9.
“……large
decentralized organizations require systems to motivate and evaluate the
performance of their managers. The systems should provide appropriate
incentives and signals to managers working in different functions, with diverse
products and processes, amid globally dispersed operations…” (Johnson and
Kaplan, 1991);
Point 4.10.
“……to gain and maintain relevance with regard to
practice, the theory needs to be built based on empirical input from practicing
accountants…” (Al-Htaybat and Alberti-Alhtaybat, 2013);
Point 4.11.
“…Management
accounting has always appropriated new techniques or ‘solutions’ from extant
managerial ‘disciplines’; this is part of the way the craft legitimates,
perpetuates, and, at times, extends itself….” (Ball, 2001);
Point 4.12.
“…Our research can only be relevant to
practitioners if we address issues that are their foremost concerns, and if we
provide them with practical solutions, although we must take care to not fall
into the consultancy trap…” (Malmi and
Granlund, 2009);
Point 4.13.
“…….A genuinely critical
accounting project must focus on the big picture, and it must do so with the
objective of changing it for the benefit of those who are presently
disadvantaged within it….” (Roslender, 1996);
Point 4.14.
“…….critical accounting can extend the existing technical
critique of accounting for strategic positioning through its behavioural and
organizational dimensions to its (critical) social theoretic consummation….” (Roslender,
1996);
Point 4.15.
“……Recently, publications address the role of
management accounting beyond the managerial interests and seek to determine its
societal relevance. Societal relevance suggests that the application and use of
management accounting extends beyond organisations and their primary economic
interests to include individuals, groups and organisations that have interests
beyond economic and financial position…” (Al-Htaybat and
Alberti-Alhtaybat, 2013);
Theme 4.2: Related to responses associated
with specific MA practices
Point 4.16.
“….Concerns
about the relevance of management accounting in the face of the demands of the
global market place quickly gave way to the making of a new project, that of
accounting for strategic positioning, resulting in a sea change in the meaning
and mode of accounting to management…” (Roslender,
1996);
Point 4.17.
“..“The role of the management accountant
across a wide variety of organizational contexts has expanded greatly since the
mid-1980s. Benchmarking has emerged as a central process through which
management accounting systems and specific types of information used and
generated by the system can be compared and improved.” (Elnathan et al.
(1996:50)…” (Ball, 2001);
Point 4.18.
“….. The number of
opportunities for the profession offered by these current concerns about
management accounting are very wide….
Included in these opportunities are: 1. The accounting and control of
materials and subcomponents and the evaluation of sub-contractors… 2.
Management accounting in the new environment facing the service sector
generally and especially the financial sector; 3. The development of strategic
management accounting and strategic investment appraisal…” (Bromwich and
Bhimani, 1989);
Point 4.19.
“….…Scapens and Bromwich (2010) provide us with an overview of what
type of studies have been published in Management Accounting Research in the
last 20 years, subsumed under relevant headings. These include, amongst others,
activity-based costing, capital budgeting, budgeting and standard costing, cost
accounting systems, management control systems, management accounting practices
and management accounting change, performance measurement, strategic management
and risk management..” (Malmi and
Granlund, 2009);
Point 4.20.
“….Berliner and Brimson (1988) explored several new avenues
for accounting to management including a concern with the value-adding process,
life-cycle costing and the market-driven, target cost philosophy. Their outward
looking or ’strategic’ approach to management accounting was shared by Bromwich
and Bhimani (1989)….” (Roslender, 1996);
Point 4.21.
“….…non-financial
information ….may be the only way to deal with ‘difficult to manage’ costs such
as R&D and corporate costs …. in planning and controlling discretionary or
decision driven costs….” (Bromwich and Bhimani, 1994);
Point 4.22.
“….monitoring
performance and indeed the planning of performance may be improved if non-financial
information is utilized together with financial information….” (Bromwich and
Bhimani, 1994);
Point 4.23.
“…Life cycle costing has been urged as a way
of overcoming some short-termism problems. However, there is little evidence
that such methods are used in practice rather than by very few firms…”
(Bromwich and Bhimani, 1994);
Point 4.24.
“……ABC, and its
variants should be welcomed as a new and important tool for accountants and for
management for certain types of overhead costs…..” (Bromwich and Bhimani,
1994);
Point 4.25.
“….…the breakdown of rigorously functionalized
management and its replacement by cross-functional informal teams positioned as
near as possible to the market place emphasizing frequent and rapid informal
communication. This may yield many new opportunities to the management
accountant and allow responsibility for many of the accountant’s planning and
control functions to be shared more widely amongst the whole management
team…..” (Bromwich and Bhimani, 1994);
Point 4.26.
“……there is a need to
determine the costs associated with strategies employed by the firm and to
monitor the cost structures of competitors….” (Bromwich and Bhimani, 1994);
Point 4.27.
“…Challenges:….
considering how to account for ‘green’ issues and for the regulatory
requirements faced by firms….” (Bromwich and Bhimani, 1994);
The findings reveal
four main themes on the “relevance debate of management accounting”, namely,
“traditional management accounting theories” (theme 1), “traditional management
accounting practices and their criticisms” (theme 2), “business trends that
further aggravate relevance loss of traditional management accounting theories
and practices” (theme 3), and “MA relevance debate and responses” (theme 4).
Theme 4 is further divided into two sub-themes, i.e., “related to general
theories and viewpoints” (theme 4.1) and “related to responses associated with
specific MA practices” (theme 4.2). The thematic analysis is interpretive in
nature, which means that different reviewers could come up with different ways
to categorize the viewpoints, theories and empirical findings (called points in
this analysis exercise) from the literature studied. With this set of findings,
the writer now moves on to the MMBLR approach step 2 (mind mapping) in the next
section.
A mind map on the “relevance debate of management accounting”
Producing
a companion mind map for the thematic analysis makes up step 2 of the MMBLR
approach. This step is a quite speedy mapping exercise. To draw the mind map,
the topic under investigation is located at the centre of the mind map as a
blob with the topic as its label. This is shown in Figure 1.
Referring to Figure 1, the blob at the centre of the mind map is
labelled with “Relevance debate of management accounting”. Four main branches
are attached to it, corresponding to the four themes identified in the thematic
analysis (step 2 of the MMBLR approach). Likewise, the branch of “relevance
debate and responses” (corresponding to theme 4) fork into two branches,
namely, “general theories and viewpoints” and “specific MA responses”. They
represent themes 4.1 and 4.2 recognized in the thematic analysis. The various
links and ending phrases in the mind map represent the various points
identified from the thematic analysis. Overall, the mind map on the “relevance
debate of Management Accounting” renders an image of the knowledge structure on
the topic under review based on the findings from the MMBLR approach step 2. Drawing
the mind map is a stimulating learning experience and the resultant mind map
also serves as a useful material for presentation and teaching purposes.
Readers interested in the MMBLR approach are referred to Ho (2016b) for further
information.
Concluding
remarks
The
paper illustrates how to carry out the MMBLR approach to study the topic of the
“relevance debate of Management Accounting”. The analysis involved is not
sophisticated and the MMBLR approach was also not cumbersome to conduct.
Nevertheless, the paper offers some academic and pedagogical values to those
who are interested in the topics of the MMBLR approach and management
accounting (MA), notably on strategic management accounting. Since this writer is the initiator of the
MMBLR approach and a teacher of strategic management accounting, this study is
particularly valuable to the writer, and most likely, to his students.
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