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Weekly UpdatesFINDINGS
Propositions 1 and 2 The Accounting Organizational Structure Changes and the Number of Accountants Decreases as Companies Adopt New Information Systems.
Site A Divisional Findings
The Controller's Department Before SAP. The controller's function prior to the implementation of SAP included 38 employees organized within four reporting levels. These employees were involved in cost and general ledger accounting duties. General ledger duties included accounts payable, invoicing, property, and payroll. A division controller headed the department. This individual also was a member of the plant manager's staff and reported directly to the US controller at corporate headquarters. Two departments, cost accounting and general ledger accounting, existed within the controller's function; each department was headed by a manager who reported to the division controller (Figure 1). The controller's primary responsibilities were confined to the geographical area of the division.
The cost accounting group had 16 employees. A data coordinator, management reporting coordinator, and three cost supervisors reported directly to the cost accounting manager; ten cost accountants reported to three cost accounting supervisors. The data coordinator was responsible for the flow of information within the accounting system. The management reporting coordinator was responsible for divisional (geographical) reporting for both local and corporate requirements. Cost accountants and supervisors were responsible for providing cost accounting services to plants located at the division. Cost accountants were assigned to different areas of responsibility based on experience, workload, and plant groupings. The division had one general plant manager and several "major" managers. Each major manager was in charge of a group of plants or service functions. If possible, a major manager would have only one cost accountant responsible for all local accounting duties for his or her area. The size of certain areas required assigning more than one cost accountant to a major manager.
The general ledger group had 20 employees and included a manager, three supervisors, fourteen clerical employees, and two accountants. Divisional payroll and cashier duties were the responsibility of one supervisor and two clerical employees. The accounts payable supervisor managed eleven payable clerks who were responsible for keying vendor invoices into the payables system and coding each transaction with the appropriate cost center and account code. The general ledger supervisor was responsible for various functions, including property accounting and subsidiary accounting. One clerical worker and two accountants reported to this supervisor.
The Controller's Department after SAP. Figure 2 presents the restructured organizational chart after SAP containing two levels of responsibility. Eleven employees provide accounting services to the plant and to business managers located worldwide. Cost accountants are divided into two groups according to job responsibilities. Group one consists of the site accounting controller, office administrator, management reporting coordinator, and the site services cost accountants. Two cost accountants are responsible for cost accounting services for the service departments located at the division. These service departments include maintenance, environmental, utilities, engineering and other services located at the division. The third cost accountant provides cost accounting services for a joint venture and a subsidiary company located at the division.
The second group consists of four business cost accountants and a global security administrator. The cost accountants are responsible for cost accounting services to local plants and reporting responsibilities at both local and business-wide levels. These accountants report to business controllers at different locations around the world. The company has divided its products into 15 core businesses. A business may have operating sites at several different locations. Business controllers are responsible for accounting functions of their business units, and supervise business accountants at all manufacturing sites. The site accounting controller is not directly responsible for these business accountants, but serves as a source of technical support, mentoring, and communication.
Two of the accountants shown in Figure 2 have duties unrelated to the costing function at the division. The management reporting coordinator for the site oversees financial reporting responsibilities for the division. The amount of reporting at the divisional level has decreased significantly because of business realignment initiatives. Business reporting is now a responsibility of the cost accountants for the businesses. The management reporting coordinator also serves as a mentor to the newer accountants and site services accountants. The other accountant serves as a Global Subject Matter Expert (SME) for the costing function within the new system. This position is not related to any services offered at the plant site, but involves providing support for any employees (regardless of location) on questions involving cost accounting and the new system. The company has 13 Global SMEs. Ten of the 13 are located at headquarters, but all provide support for the entire company in their area of expertise. These acc ountants are on call 24 hours a day on a rotating basis. Both the SME and management reporting coordinator were cost supervisors in 1992.
The organizational changes hypothesized by propositions 1 and 2 were observed at the divisional level for Site A. Four organizational levels existed within the controller's function at the division prior to SAP. As illustrated in Figure 1, these included a divisional controller, section managers, supervisors, and accountants. As shown in Figure 2, only two organizational levels existed after SAP. Certain accountants employed in similar positions to those existing prior to SAP have no direct supervision at the divisional level. Accountants are part of a networked organization that allows their responsibilities to extend beyond geographical boundaries. Certain accountants at the site now service clients located in other geographical regions and report operating results on a business-wide basis.
The number of accountants employed at the site also has decreased. Specifically, 21 accountants were employed at the division prior to SAP compared to ten after SAP. The number of clerical employees also declined from 16 to one over the same time period.
Causes for Change. Two primary reasons are cited for the decrease in organizational levels at the controller's department. The company (1) centralized and standardized functional accounting operations, and (2) reorganized the controller's function by businesses. The centralization of functions resulted in a reduction of one organizational level in the controller's department. Because no general ledger duties remained at the plant site, the responsibilities of the division controller were reduced and combined with the cost accounting manager's position to create the site accounting controller's position after the implementation of SAP.
The reorganization from a functional alignment to a business alignment eliminated another level of management in the controller's function. Cost accountants now report either directly to the site controller or to a business controller located at another site. This arrangement eliminated the need for an additional level of supervision to coordinate the accountants; many responsibilities shifted from the accountant's geographical location to the business sub-unit. Coordination of efforts among business accountants now takes place by business controllers located at various sites around the world.
Three primary reasons are cited for the decline in headcount observed in the controller's department. The company (1) implemented a downsizing program, (2) centralized and standardized functional accounting operations, and (3) implemented a new information system. The downsizing program resulted in a decrease of approximately five employees (including three employees with cost accounting duties and two employees with general ledger duties). The exact number of employees leaving the department due to the downsizing effort is difficult to determine since some retired during the downsizing program.
Centralization of general ledger duties to headquarters was responsible for the largest decrease in employee count. Two supervisors and the general ledger manager were relocated to other sites and other positions within the company. The payables and payroll clerks (14 employees) were reassigned to positions with other departments of the same division. Savings associated with a central payables site and standardization of general ledger processes drove the payables restructuring process.
A decrease of five employees, all from the cost accounting department, is attributed to the implementation of the new information system. The new information system and the removal of responsibilities previously assigned to cost accountants permit each accountant to manage a broader area of responsibility. Prior to the realignment by businesses and after the centralization of general ledger activities, cost accountants served as the contact person for all accounting questions from the plants. Accountants were asked to familiarize themselves with payroll and property and plant issues, and other areas formerly handled by other local accountants. With the alignment by businesses, the role of the site accountants was reduced to responsibility for cost and property accounting duties. For example, prior to SAP, one cost manager, one data coordinator, one management reporting coordinator, three cost supervisors, and ten cost accountants provided cost services to 45 cost clients. A cost client could be either a plan t or a service area located at the division. Some clients required much more attention than others. Determining equitable workload distributions was difficult. Some accountants handled only two clients while others had five to nine clients. Alternatively, after SAP, one site accounting controller, one management reporting coordinator, and seven cost accountants managed the same workload.
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