JAMAR Vol. 11 · No.

2 2013

Editorial  Introduction

Management Accounting The 2011 Survey of Management Accounting

Roles and Trends conducted for the Institute
in the 21st Century: A found that management accounting skills were
Profession for which the going to continue to be highly demanded.i The
reasons for this increasing demand for
Time Has Come professionals with the skills and capabilities of
a management accountant lie in the dramatic
Garry Marchant* transformation occurring in the global
economy. This is of course not the first time
Abstract management accounting has transformed itself
to meet the demands of a newly reshaped
The 21st Century has seen the economy. Indeed since the industrial
emergence of the information age and the revolution management accounting has in
resulting economy driven by knowledge as response to the changing nature of the global
a source of competitive advantage. economy reinvented itself many times over.

Critically the most significant change The 21st Century has seen the emergence of
occurring in the information age is the the information age and the resulting economy
dramatically changing nature of driven by knowledge as a source of
competition with the blurring of traditional competitive advantage. The drivers of this
industry boundaries and the emergence of fundamental shift in economic activity are
whole new sectors. The drivers of this leading to a new wave of innovation in
fundamental shift in economic activity are management accounting and a new level of
leading to a new wave of innovation in demand for the skills and capabilities of
management accounting and a new level today’s professional management accountant.
of demand for the skills and capabilities of
today’s professional management An Historical Perspective
accountant.
Management accounting emerged from the
Management accountants will increasingly industrial revolution and the rapid
find themselves as core members of the development of modern manufacturing in the
strategic team using their skills and 19th Century. During this period the
capabilities in information management separation of home office from production
and analytics to develop and maintain the facilities and the grouping together of multiple
distinctive capabilities of their processes on an integrated factory floor drove
organisations. Survival will be to those the development of systems designed to
with the best analytical capabilities. measure the efficiency of internal processes.

As more complex manufacturing occurred

Keywords with a wide variety of finished products each
of which consumed different resources at
Information Age different rates a new approach was needed.
Innovation In Management Accounting This void was filled by the scientific
Strategic Teams management movement. The scientific
Analytical Capabilities management movement focused on
developing detailed standards for processes
around time and material use. This of course
led to the development of standard costing and
of overhead allocation to products on the basis
of labour consumed. Management accounting
once again adapting to changed circumstances.

* Charles Sturt University, Australia

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Later in the 20th Century a new prototype for 1. Convergence of transport,

the business organisation emerged, the communications and trade
diversified corporation. Much of the 2. Changing environmental priorities and
accounting innovation that emerged in the concerns
early part of the 20th Century as a result of this 3. Declining importance of the nation state
new organisational form is associated with 4. Demand pressures on food, energy and
DuPont and General Motors Corporations. In raw materials with an expanding global
this period the use of ROI as a key component population
of organisational performance and decision 5. The growing importance of women as
making was developed, budgeting and customers and in business and politics
forecasting processes were developed and 6. The ubiquitous nature of communications
overall management accounting played a key technologies
role in the development of coordination and
control mechanisms that allowed the large The resulting 21st Century economy is
multinational to emerge as the dominant dominated by services as opposed to
corporate form. manufacturing. Indeed manufacturing is
becoming itself more service driven focussed
The second half of the 20th Century saw little on design, marketing and customer support
management accounting innovation as the e.g. Apple. The new information/knowledge
focus shifted to the production of financial economy is changing the capabilities
statements and the development of cost landscape in a number of ways the full impact
information that would satisfy generally of which will only be known in the years to
accepted accounting principles. The last come. Technology and the rapid pace of
decade of the 20th Century saw the emergence change is one of the key pillars of the new
of a real debate about the lost relevance of economy. The Internet with its global reach
management accounting and the need for re- and its almost universal adoption is producing
invention.ii entirely new businesses and transforming a
number of traditional sectors e.g. retail, media
The last decade of the 20th Century return to its and communication.
cost management roots and there was a re-
focusing of management accounting on Globalisation and the free flow of money and
strategic decision making with developments information has in many ways shrunk the
based on Activity Based Costing, Balanced world. Global marketing has to some extent
Scorecard, and Customer Profitability led to homogenous consumer behaviour e.g.
Analysis etc. McDonalds is recognised wherever there are
golden arches. Outsourcing has become easier
This historical review highlights the continued in a world where information is key and the
evolution of management accounting and information can be transferred across the globe
development of new innovations in line with quickly and at low cost.
innovations occurring in production,
marketing and organisational design. As the Critically the most significant change
economy has evolved and reinvented itself so occurring in the information age is the
management accounting has evolved and with dramatically changing nature of competition
it the skillsets and capabilities required of with the blurring of traditional industry
professional management accountants. boundaries and the emergence of whole new
sectors. Underlying this change in the
The Information Age and the competitive dynamics is the emergence of
Emerging Competitive Dynamic knowledge and information as the key driver
of competitive advantage. The key questions
The first decade of the 21st Century has been facing managers is then:
characterised by the end of the industrial age
and the emergence of the information age. The 1. How do you use knowledge,
drivers of these changes include a number of information/data to create a competitive
key factors that have emerged over the last 20 edge?
years: 2. What skills and capabilities are required to
make this happen?

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Building Distinctive Capability in 4. Ability to understand the business and

the New Economy relate analytics to the business

In the information age competitive advantage 5. Trusted partner of the business

is derived from the knowledge inside of
systems, processes, databases and capabilities. These should all seem very familiar to those in
The key to building distinctive capability is the the management accounting profession.
use of data, quantitative analysis and other Research over the last decade has consistently
analytics to drive decisions and actions. In shown that the contemporary management
many industries the traditional bases for accountant has strong analytical skills, broad
competition have disappeared with the rapid IT and data management knowledge, deep
adaptation of technology and innovation and business understanding and the capability to
the increasing difficulty of developing integrate financial and non-financial
breakthrough product innovation that will not information.iv
be quickly imitated.
Management accountants are of course
This leaves the option of using data, perfectly prepared to slip into the role of
information and knowledge in a smarter way strategic analytics team member and to
then your competitors. That is finding through provide the core analytical capabilities
analytics ways to be more effective and required to compete in the information age.
efficient and to make optimal decisions.
Analytics can take available information and Management Accounting: A
knowledge and add value by developing Profession for which the Time has
distinctive capability through actions Come
supported by analytics. Existing capabilities
can through analytics be elevated to strategic Serendipitous convergence or thoughtful
differentiators through the use of the evolution the management accounting
appropriate analytic tools and techniques.iii profession has over the last twenty years
evolved its skill set and capabilities away from
Many analytical applications will be familiar the financially driven 20th Century to a more
to management accountants: activity-based strategic focus at exactly the same time as the
costing, yield analysis, performance global economy has evolved and with rapid
management and scorecards, lifetime value technological change has left competitive
analysis and price optimisation. It is clear that advantage in the hands of those who can best
those organisations that emerge with distinct take advantage of the available data and
analytically derived competitive advantage information through the use of analytics.
have built an enterprise wide capability and
routinely reap the benefit of this capability. Management accountants will increasingly
The key question is how do you develop an find themselves as core members of the
analytical capability? strategic team using their skills and
capabilities in information management and
Developing an Analytical Capability analytics to develop and maintain the
distinctive capabilities of their organisations.
The key to developing an analytical capability Survival will be to those with the best
is a team of people who make analytics work. analytical capabilities.
What is the skill set of such team members:
i
1. A degree in an analytical discipline – 1. See Management Accounting as a Profession in
accounting, finance, economics, Australia: Role and Trends in the ICMA Year
mathematics or statistics. Book 2011, ICMA 2011.
ii
2. Experience in data analysis For a full discussion of this historical context and
the relevance debate see “Relevance Lost: The Rise
3. An understanding of the core issues of and Fall of Management Accounting” H Thomas
data management related to data Johnson and Robert S Kaplan (Harvard Business
relevance, data sourcing and data quality School Press, 1987)

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iii
For a detailed description of competition driven
by analytics see ‘Competing on Analytics” by
Thomas H Davenport and Jeanne G Harris
(Harvard Business School Press, 2007)
iv
“Reinventing the Management Accountant”,
Professor Lee Parker University of Adelaide,
CIMA Address, University of Glasgow 1`5 March
2002.