The Changing Organizational Structure And Individual Responsibilities Of Managerial Accountants: A Case Study [*].

This study examines organizational structural changes within the finance and accounting function following the adoption of a new information system. Many accounting researchers have predicted a changing environment and role for management accountants resulting from competition, regulation, and manufacturing and information technology (see Baker, 1992; Cooper, 1996; Cox, 1992; Drucker, 1990; Elliott, 1992; Epstein, 1993; Ezzamel, 1994; Flamholtz, 1992; Johnson and Kaplan, 1987; Kaplan, 1984, 1986; King et al., 1991; Madden and Holmes, 1991; McNair, 1996; Siegel et al., 1997; Shea and Kleinsorge, 1994; Spicer, 1992; Tyson, 1996; Weaving, 1995). Disagreement exists regarding the nature of the changes, and whether change is actually taking place. Cooper (1996) foresees an increased need for management accounting, but a decreased need for management accountants. He predicts the management accounting function will be decentralized to those on the shop floor. After new management accounting systems are in place, "m uch of the day-to-day management accounting can be transferred to the workforce" (Cooper, 1996: 36). Elliott (1992) also predicts an increased reliance on blue-collar workers as they become knowledge-workers, and a part of the aggregate brainpower of the organization; they are supposed to help figure out how to improve quality, speed production, and contribute to customer satisfaction. The management accounting department may adopt a supportive and monitoring role rather than a more proactive decision-making role, as advocated by Kaplan (1995) and Boer (1995), among others.

In a study of the evolving role of management accountants, King et al. (1991) report that "a sea of change" is taking place as management accountants become more proactive in the decision-making process. McNair (1996) disagrees with the premise that management accounting has become more relevant. "In general, we see a desire for change, but little evidence that management accounting has had the courage to let go of its ties to financial accounting and external reporting requirements" (McNair, 1996: 40). According to McNair, there has been much discussion about a changed emphasis in management accounting, but she describes the changes as "old wine in new bottles."

Since the early 1980s, numerous research projects have been conducted to gain a better understanding of the management accounting function in organizations (Keating, 1995) and to develop a theoretical basis for management accounting research in the future (Kaplan, 1986). This article seeks to add to that literature by identifying changes taking place in accounting functions as hypothesized by a set of literature-based expectations.

The most significant finding of the study is support for flattening the organizational hierarchy and developing a networked organization within the accounting function. The levels of management within the accounting function at one site were reduced from four to two over the course of five years; accountants began reporting to supervisors located at sites worldwide. At the second site, shared services activities were centralized at one location for the North American continent. The centralization resulted in a reduction of accounting function costs from 1.7 percent of sales to 1 percent of sales. Our study reveals that accountants became less involved in many routine tasks of cost accounting and began providing a support role both to plant personnel and to business managers in making strategic decisions.

The remainder of the article is divided into four sections. The next section develops three research propositions for fieldwork, based on a review of the accounting, information technology (IT), and organizational change literature. Then we consider research design issues including site selection, field research, and data sources. After this we present the field research findings in relation to our research propositions. The final section discusses conclusions, limitations, and opportunities for future research.

RESEARCH PROPOSITIONS

A general proposition for this project is that changes are taking place in the manner in which accounting departments and accounting personnel are utilized within organizations. These changes are associated with several factors, including improvements in IT. Several authors have cited and predicted the impact that information technology will have on organizations and the accounting function in general (see Elliott, 1992; Tyson, 1996). In this article, we present specific propositions from IT and organizational change literature, as well as predictions and research findings related to the changes taking place when advancements in IT are present. Two propositions related to the organizational structure of an accounting department and one proposition related to the responsibilities of accountants are presented. The purpose of the propositions was to focus the fieldwork portion of the study and to determine if predicted organizational changes occur for accountants within an organization implementing new IT.

P1 The Accounting Organizational Hierarchy Changes as Companies Adopt New Information Systems.

Support for this proposition is derived from the literature hypothesizing organizational hierarchy changes associated with the introduction of information technology. Elliott (1992), Ezzamel (1994), Ferioli and Migliarese (1996), Fiedler et al. (1996) Gurbaxani and Whang (1991), Hitt and Brynjolfsson (1997), Huber (1990), Lucas and Baroudi (1994), Markus and Robey (1988), and Pinsonneault and Kraemer (1993) are among those discussing changes in organizational hierarchy and information technology. Most of the literature predicts a flattening of the organizational chart or the emerging of a network organizational form as a result of changes in information technology. Pinsonneault and Kraemer (1993) and Huber (1990) describe a flattening of the hierarchy because the need for information intermediaries is reduced. One role of a middle manager is to serve as an information supervisor. However, better information technology permits upper management to provide desired information without middle management. Huber (1 990) suggests the decision-making process will involve fewer levels of the organization because access to information is greater with improved information technology.

The movement from traditional hierarchical organizational structures to networked structures is facilitated by new systems that permit greater information flow (Elliott, 1992). Network organizations may emerge because IT eliminates the need for physical proximity with respect to grouping tasks, functions, or people (Lucas and Baroudi, 1994). A traditional model of organizational hierarchy groups employees first by geographic region and then by function within the organization. As computer processing becomes more centralized, computers support freer communication between sites and data passage or sharing between common application programs becomes more prevalent. Thus, the organizational forms of companies utilizing new IT may change toward a matrix design whereby employees are grouped first by product type and then by functional expertise (Fiedler et al., 1996).

P2 The Number of Accountants Decreases as Companies Adopt New Information Systems.

Aside from the downsizing associated with economic forces, a reduction in the number of employees is also attributed to advancements in information technologies. Different reasons exist for reduced employment numbers for firms implementing new IT. Brynjolfsson et aL (1994) cite a labor substitution motive as a chief factor in reduced headcounts for firms implementing new IT. By utilizing IT for tasks formerly done by employees, companies can speed up certain processes, improve productivity, and reduce costs and headcount. Huber (1990) and Pinsonneault and Kraemer (1993) discuss a reduced need for information intermediaries, resulting in fewer employees. Since information technology advances improve the flow of data and communication within organizations, fewer middle-managers are needed to serve as intermediaries between top management and front-line employees.

Advancements in IT also are expected to impact the accounting function within organizations, leading to a reduced number of accountants in the organization as well. King et al. (1991) report the time savings realized by implementing IT to reduce the routine tasks of accounting has resulted in fewer accountants, rather than expanding services offered by accountants. Ezzamel (1994) also reports that a goal of implementing IT at some locations was to reduce headcount in certain departments, including the accounting department. Cooper (1996) predicts fewer accountants will be needed as the process of cost management is pushed to the shop floor and more of the data gathering process is automated. As new IT systems continue to incorporate all functions of an organization, fewer accountants will be needed for clerical activities normally regarded as strictly accounting activities. Front-line employees will be initiating accounting entries during the course of their everyday activities and accountants will monitor t he output rather than operate the accounting information system.

P3 The Orientation of Management Accountants is Shifting from Scorekeeping to an Active Role in the Decision-Making Process.

Much has been written about how management accountants must change to meet customer needs. Most authors advocate more participation by management accountants in proactive activities, such as membership on strategy- and decision-making teams. As many of the traditional accounting tasks are automated, an increased emphasis is placed on predicting future activities. Thus, management accountants must become part of the management team to retain importance in the organization (Cooper, 1996; King et al., 1991; McNair, 1996; Shea and Kleinsgorge, 1994). Siegel et al. (1997) document an expectation among accounting executives for more involvement in activities that focus on customer and product profitability rather than on the traditional costing activities of the past.