Public version

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Public version

Business unit structure and its influence on the relationship

between managers and management accountants

C. Zijlstra

a, 1

, S2401487

a_{MSc Business Administration: Organizational & Management Control,}

Faculty of Economics and Business University of Groningen.

Supervisor: W.A. Moossdorff, MSc Second supervisor: Dr. B. Crom

Word count: 12,983 (excl. appendixes)

Abstract

In this study the influence of the business unit structure on the relationship between managers and management accountants has been studied. With the use of several case studies it was found that the business unit structure did not have a direct influence on the relationship between the manager and management accountant. However, it was seen that the business unit structure has an influence on the role of the management accountant. The business unit structure influences where the manager focuses on, and consequently what is expected from the management accountant. Furthermore, the findings show that the role of the management accountant has a large influence on the relationship between managers and management accountants. Therefore, the business unit structure is considered to have an indirect influence on the relationship between managers and management accountants, through the role of the management accountant.

Keywords: management accountants, managers, relationship managers and management accountants, business unit structure.

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1

Corresponding author. Tel +31 (0) 6 28 53 00 60.

E-mail address: c.zijlstra.1@student.rug.nl

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1 Introduction

Within organisations different roles are assigned to different people. For example, you can often find employees who are assigned the task of managing a department, the managers, and employees who have the role of a management accountant [MA]. The actual roles and tasks of the MA can vary throughout different companies (Friedman & Lyne, 1997; Lambert & Sponem, 2012; Paulsson, 2012). The most basic task of the MA is to keep track of the financial situation of a certain department/organisation and share this information with the manager(s). This information is, at least partly, a basis on which managers base their decisions (Hall, 2010). The fact that the MA has to share information with the managers implies that there is, according to the social network theory, a network between them. Therefore they have a relationship with each other (Granovetter, 1973).

Various studies suggest that the relationship between managers and MAs has to be ‘good’ (Burns & Baldvinsdottir, 2005; Paulsson, 2012; Lambert & Sponem, 2012), however the literature lacks further explanation on the actual relationship itself. Therefore, it is unclear how this relationship is influenced by various organisational factors which causes ambiguity in understanding the relationship between

managers and MAs. Different

organisational factors can be thought of that might influence this relationship, but this study focuses on the business unit structure. The business unit structure is considered to have an effect on, for example, how employees communicate with each other (Cameron & Brown, 2010) which will likely have an effect on the relationship. Since this study focuses on one factor, it is possible to study this factor in greater depth to get a better understanding of its influence on the relationship.

The goal of this study is to increase the understanding of the relationship between managers and MAs and how this relationship is influenced by the business unit structure. It is important to conduct this study because it provides insights into the relationship between managers and MAs. This increases the overall understanding of how organisations function and how the relationship between managers and MAs is influenced by the structure of the business unit. Various case studies were conducted in which the relationship between managers and management accountants was thoroughly studied and a better understanding has been developed

Based on the previous explanation, the following research question has been formulated: ‘How does the business unit

structure influence the relationship

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accountants?’ By answering this question,

part of the literature gap will be ‘filled’. The research question serves as a guideline to keep focused on the goal of this research.

The results of this study can be put to use in practice when the relationship between managers and MAs needs to be understood and analyzed. By having a better understanding of the relationship and in what ways it is influenced by organizational factors both parties are enabled to understand their position in the relationship and how it can be influenced.

The remainder of this study is structured as follows. In the next section the most relevant literature is described. This section is followed by a methodological section which describes how this research has been conducted. In the subsequent section the results are presented per case. In the second-last section the discussion of the results are presented. In the last section the conclusion is given which also provides a concise answer to the research question.

2 Theoretical framework

When searching the literature on research about the relationship between managers and MAs, results are limited. Few studies have directed attention towards this relationship, let alone which organisational factors influence this relationship and in what ways. Therefore a wide unexplored

field of literature still needs to be studied. Since no studies have been conducted in this field, the purpose of this theoretical framework is to describe the topics that are of interest to this study and highlight what has been studied regarding these topics. In this study these concepts are combined and the ‘black box’ is opened up that lies behind the relationship between managers and MAs.

2.1 Business Unit Structure

The structure is one of the most basic parts of an organisation that is related to how control is performed (Ouchi, 1977). Jones (2013) has defined organisational structure as: “The formal system of task and authority relationships that controls how people coordinate their actions and use resources to achieve organizational goals.” (Jones, 2010, p. 30). Following this definition the structure of an organisation is one of the most basic parts of the organisation that controls how people act and behave.

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3 2010; Choudhary & Vithayathil, 2013; Schmelzle, 2013; Shwayder, 2013). These are named as follows (Anthony, Dearden & Vancil, 1965):

 The Profit Centre: In this type managers are mainly evaluated based on profit measures. Managers have almost complete responsibility about the operational decision-making process, for example which products are being produced, their price, quality, etc., they have full responsibility about the production and sales. However, the manager does not have the authority to make decisions about the level of capital investments. This makes profit measures the most applicable performance measures.

 The Investment Centre: Managers who have the authority about capital investment decisions together with the above mentioned authorities run an investment centre. Performance measures are often measures where profits are related to the level of financial and physical assets employed, for example return on investment (ROI).

 The Standard Cost Centre: Here, the manager does not have a say about how much inputs are needed and how much outputs are to be produced. The job of the manager of a cost centre is to

produce what is asked from him. Performance measures are often based on variance analyses where actual performance is compared to budgeted performance.

 The Revenue Centre: This centre is responsible for selling finished goods. The revenue centre can set its own selling price and therefore they are often evaluated based on gross revenues.

 The Discretionary Expense Centre: These are departments which are often staff units and marketing departments. Outputs of these departments are quite difficult to measure, since the relationship between inputs and outputs is not very strong. These centres are often given a budget and their performance is measured based on their actual costs compared to the budget. When examining the literature, the profit centre and standard cost centre have been studied most often and are most widely used in various industries (e.g. Smith & Pretorius, 2003; Basu, et al., 2010; Choudhary & Vithayathil, 2013; Schmelzle, 2013; Shwayder, 2013).

2.2 The roles of Management

accountants

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4 Kozmetsky, Guetzkow & Tyndall, 1955; Friedman and Lyne, 1997; Siegel, 1999; Burns and Baldvinsdottir, 2005; Byrne and Pierce, 2007; Järvenpää, 2007). In 1955 Simon et al. (1955) already recognised that different roles were assigned to MAs. They described these roles as: scorekeeping, attention-directing, and problem-solving. The first two roles focus on compliance reporting and issues regarding control, the third role also focuses on providing managers with information on which they can base their decisions. Various authors have argued that nowadays MAs have a more strategic position within companies and are more involved in decision-making processes. This position is referred to as ‘the business partner’ (Goretzki, Strauss & Weber, 2013). This is in stark contrast with the passive role which MAs were assigned in the past. This role was referred to as ‘the bean counter’, meaning that the MA was only there to keep the books and pass that information on to the managers (Granlund & Lukka, 1997). Opinions differ on why this change has occurred. Burns and Baldvinsdottir (2007) have, for example, stated that this change has been due to accounting scandals and shifts that have happened in technology and globalization. Another author has stated that this shift has been a consequence of the decentralization of the accounting function, that reporting systems have been developed, and that new

management accounting tools have been introduced (Järvenpää, 2007). Byrne and Pierce (2007) argue that the role of a MA is the result of various antecedents and characteristics, whereby one of the antecedents is the organisational structure. In their study they have described how they believe the actual role of a MA is determined and what the consequences of these roles are.

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high-5 performing and sustainable firms have assigned this role to their management accounting function.

Consequently, managers had to think more thoroughly about the financial implications of their decisions because the MAs did not do it for them. This should make them more creative and innovative. This has also been offered as a reason why these firms would assign a ‘discrete’ role to the MA. Lambert and Sponem (2012) have stated that MAs that have a ‘discrete’ or ‘safeguarding’ style do want to become more active as a business partner. However the managers within those company are reluctant to accept that because they have the feeling that their freedom is being limited and that it will waste their time to interact with the MA (Lambert & Sponem,

2012).

Lambert and Sponem (2012) have empirically shown that the MA as a business partner does not occur as often as implied by various authors. However MAs do have the ambition to become more actively involved in the business (Lambert and Sponem, 2012). But it is still up for debate to what extent the roles of MAs have actually changed.

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6 company. Next to that they found that MAs in dependent companies are less involved in decision-making processes and are not as involved in the business operations compared to MAs of independent companies. Following their results, MAs in subsidiaries are (most of the time) assigned the discrete or safeguarding style, and MAs working in independent companies are assigned a partner/omnipotent style (Lambert & Sponem, 2012).

2.3 Relationship between managers

and management accountants

In the previous paragraph it is shown that different roles can be assigned to MAs. Therefore, it could be argued that the relationship between the manager and MA also differs. Unfortunately, this has not been the main topic of a study in the literature yet. Therefore, not a lot can be stated beforehand about this relationship. Lambert and Sponem (2012) have shortly addressed this relationship. They have stated that too much distance between the manager and MA will distort the process of exchanging information and that both parties have to agree on the role which the MA will play. If there is no agreement on the role of the MA, there is a potential for a role conflict (Siegel, 2000). Lambert and Sponem (2012) propose to increase the ties with the managers by participating in the process of setting budgets and managing earnings. So

there is still a lot of ambiguity surrounding the relationship between managers and MAs.

One concept that is considered important within any relationship is the concept of communication, for example the frequency of communication, in what ways the communication takes place, etc. This concept is interesting for this study because communication is an important part of any relationship (Eğeci & Gençöz, 2006; Doloi, 2009; Radhaswamy & Zia, 2011). The idea of communication is connectedness, two parties have to be connected to each other if they want to share information and cooperate (Brink, 2010, p. 722). The structure of an organization also has an influence on how communication between organisational members takes place (Cameron & Brown, 2010; Hopper, 1980). Following this reasoning, the business unit structure, and therefore the way in which communication takes place, might have an influence on the relationship between managers and MAs. This should be considered while examining the relationship and how it is influenced by the business unit structure.

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7 distance and the overall impression of the relationship.

2.5 Linking the concepts

In this paper the concepts of business unit structure and the relationship between managers and MAs will be combined keeping in mind the different roles that can be assigned to MAs, as depicted in figure 1.

In figure 1 it is shown that a relationship exists between managers and MAs. The arrow in between the manager and MA illustrates that a relationship exists between the two parties. Next to that it is illustrated that the structure of the business unit has an influence on this relationship, however if this is true and to what extent will be revealed during this study. Another concept which is considered important is the role of the MA. Following the reasoning of Byrne and Pierce (2007) the structure of an organisation is one of the antecedents that determines (to some extent) how the role of a MA is perceived and positioned

within a company. The structure of the business unit is part of the organisational structure and is therefore used in this framework. This is illustrated by the arrow that is drawn in between the business unit structure and the role of the MA. The role that the MA is expected to fulfil influences the MA as an individual because the role determines which tasks he has to fulfil and which skills he has to apply (or learn when he does not master them yet). This is depicted by the arrow in between the role of the MA and the MA himself.

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3 Methodology

To provide a comprehensive answer to the research question, the following methods have been used which have given guidance to the process of defining questions until the actual drawing of conclusions. Between these two states of the research several steps have been taken. In this chapter these steps are presented with the goal of giving more insight into the research and to provide controllability. In the last section of this chapter a description is given of the case companies where the research is conducted.

3.1 Research Design

This study can be placed into the explanatory paradigm, since the aim of this study was to produce explanatory and descriptive knowledge. Therefore this study followed the empirical cycle (Aken, Berends, & Bij, 2012). The empirical cycle consists of 5 steps, namely:

1. Observation;

2. Induction (developing theory); 3. Deduction(generating

hypotheses/proposition); 4. Testing (of hypotheses); 5. Evaluation.

The aim of this research was to find out how the relationship between managers and MAs managers is influenced by the business unit structure. The research in this field is scarce. The focus is on opening up a small part of this black box and develop an

understanding about how the business unit structure influences the relationship between managers and MAs.

Consequently, the appropriate research approach is theory development (Eisenhardt, 1989). The use of this approach means that theory has to be developed because no theory is readily available which can explain this relationship. Therefore the first 3 steps of the empirical cycle were addressed in this study (Aken, et al., 2012), where the proposition of this study is the answer to the research question.

To gather data for providing an answer to the research question, a case study has been carried out. According to Yin (2009) the most appropriate study design is a case study when ‘how’ questions are posed, this is applicable to this study. The goal of doing a case study in this research was to gather data from the empirical world and using that data to provide a credible answer to the research question. This way of collecting data was most appropriate in this research, because no data is available yet (Eisenhardt, 1989).

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9 multiple-case study a replication logic was used. This means that cases were treated as a series of independent experiments and comparisons had to be made across the cases (Yin, 2009). The strength of a multiple-case study approach can be found in the fact that a deeper understanding emerges since results can be compared across cases (Cooper & Schindler, 2008).

Semi-structured interviews were held to gather data, in the next section this will be explained more thoroughly. After the data had been collected the technique of cross-case synthesis was used (Yin, 2009). In this research this technique was helpful because several business units have been studied and ultimately it had to be concluded how the relationship is influenced by the structure of the business unit. The next step was to compare the cases and identify differences and similarities.

To get more comprehensive findings and additional insights an extra case study has been conducted at a comparable company. Following the example of Jansen, Merchant & Van der Stede (2009), this case study has been added to compare the initial findings and to add to those findings. Next to that, the initial case company lacked enough findings regarding profit centres to draw conclusions on. By adding a case company the findings have become more comprehensive, convincing and generalizable.

In order to interpret the findings of the study, the results have been compared to existing literature to enhance the findings and build more strong arguments for the final conclusions.

3.2 Data collection

Data has been collected with the use of structured interviews. By using semi-structured interviews the interviewees were enabled and encouraged to extensively explain their answers to the questions that were posed to them (Myers, 2008). If any additional information was needed extra questions were asked for further clarification. By doing this, a good overview is developed of the relationship between the manager and the MA. To gather the relevant information three departments have been studied at Company A which is located in the Netherlands. At every department two types of employees have been interviewed; managers and MAs. By interviewing both the manager and the MA of a department, both sides of the story were explained, increasing the reliability of the findings. Next to that it helps to see whether there are discrepancies present between the points of view.

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10 added to extend the findings and compare the findings from Company A with another company to increase the generalizability, and thus external validity, of the study. Since both companies are large, operate internationally and hire a large amount of foreign people, the findings are more generalizable since they are not bound specifically to the Dutch culture.

To gather the appropriate data interview questions have been developed. The interview questions have been thoroughly analysed by the participants of the master thesis’s theme and the supervisor to make sure that the interviews covered all the important aspects. By doing this it was made sure that the right questions were asked and that the right constructs were measured, increasing construct validity.

Two different guides have been used to conduct the interviews. The first guide was used for the interviews with managers, the second guide was used for the interviews with the MAs. The interview guides are provided in appendix I. The interview guides are in Dutch, since the interviews have been conducted in Dutch as well. Both interview guides followed the same structure. The first part of the interview was meant to ‘break the ice’ and was mainly used as an introduction, the second part focused on the structure of the department, the third part focused on the role of the MA, the fourth, and concluding

part, focused on the relationship between the management and MA. The interview guide for the managers mainly focused on explaining the structure of the department, how the manager sees the role of the MA and his relationship with the MA. The interview guide of the MA focused on what his role was, what his tasks were and how he saw the relationship with the manager. In both guides open questions were asked to allow the interviewee to explain as much as possible and to get better insights. If the answers to the open questions were not satisfactory, probing questions were asked to let the interviewee think more thoroughly about the issues presented (Remillard, 2012). The different sections of the interviews were related to each other, as much as possible, by encouraging the interviewee to make the connection between the different parts of the interview. By doing this the interviewee made various connections himself and conclusions could be based on the input from the interviewee. By doing this the internal validity of the findings has increased. During the interviews notes were made about topics that needed further clarification and these topics have been clarified accordingly. After every interview initial ideas and impressions have been noted about that specific interview, without influences from other interviews.

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11 conducted. Table 2 gives an overview of the interviews that have been conducted. On average an interview lasted a little over 1 hour. All the interviews were taped and transcribed, the transcription was send to the interviewee for conformation in order to make sure that the correct interpretation was made. Every transcription has been returned with an approval to use it for further analysis.

When all the data was gathered, the cases were written down independently from each other. In these case write-ups as much relevant information as possible is concisely written down. When these write-ups were finished they were checked by the interviewees where the data had been gathered. By doing this it was made sure that the gathered data has been understood in the right way, increasing the reliability of the findings.

3.3 Data analysis

In inductive research it is typical to first build case studies individually and after that analyse the data by making cross-case comparisons (Eisenhardt, 1989).

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12 After the cases were written down individually an analysis was made with the use of cross-case synthesis (Yin, 2009). When using this approach every case is treated is if it were an individual study. Consequently the findings of each ‘study’ are compared across the various cases. In this study this has been done by comparing the individual case write-ups and interview reports. The cases have been compared by analysing the data that has been gathered within the various cases. When analysing the different cases patterns, similarities and differences have been recognized and noted. They have been identified by analysing the codes that were present in various interviews and interpreting whether the same codes were present within certain section or different codes. When, for example, a similarity was recognized, its causes were tried to be found and explained with the use of the interview reports.

The interview reports have been analysed in a structured way in order to make them as useful as possible for the case analysis. The interviews have been analysed using codes. Some deductive codes which were used are for example: ‘role conflict’, ‘communication type’, ‘business unit structure’ and ‘role of MA’. Using these codes, and more, provided insights into what was said and how certain quotes related to other parts of the interview (Yin, 2009). The code book that has been used

can be found in appendix II. To keep a consistent way of analysing the data, the gathered data is analysed in the same way for every interview.

3.4 Case descriptions

The main case environment is Company A which is situated in the Netherlands. Company A is a joint venture with two partners who both have equal shares. In this study 3 departments have been studied within this company, two service departments and one production departments

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4 Results

In this section the results are given. For every individual case the findings are presented.

4.1 Case 1

The first case describes the relationship between the general manager of a business unit and his MA, the manager of the financial department.

4.1.1 Business unit structure.

The structure of the business unit can be typified as a standard cost centre. The manager made this unquestionable:

“This department is clearly a cost centre”.

The MA confirms this business unit structure by explaining the following:

“This department performs interventions where this is necessary. When we are requested to do an intervention, we go to that location, perform an intervention and, when ready, leave again. During that process we do not make any revenue, our jobs will only cost money to the firm.”

The various jobs within this business unit can be regarded as different projects. A project consists out of a working order, the execution of that working order and when it is finished the next project is taken on.

Regarding the measurement of performance the MA stated the following:

“At the beginning of a project we have to develop an investment proposal and we need an approval from the partners involved. When the investment proposal is approved I have to report on a monthly basis about the performance regarding costs and what the expectations are. When performance is lacking behind on schedule or we need additional investments we need an approval for an additional investments from our partners.”

So the main task of the MA is to provide insight into the development of the costs of the project in comparison to the initial plan/budget. Based on that information the manager/business unit is evaluated.

4.1.2 Role of the management

accountant. Within the financial

department changes were made to make it possible for the MA to develop a one-on-one relationship with the manager of the business unit. The advantage of this new relationship is explained by the MA as follows:

“We want to become more involved with the actual business and create a more forward-looking approach. We want to be more like a business partner instead of providing merely transactional support.”

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14 “We are currently trying to give a clearer definition to the role of the MA. His role can be entirely process orientated (pay the bills, make sure everything is entered into the systems, etc.) but that is not how I want to see it. I would prefer to see a more active role in which a more forward looking approach is established. At the moment there are still some improvements to be made.

The reason that the role is not as active as desired yet is mainly because the department is going through a face of transition, however the goal is clear; a MA who provides transactional support and has a proactive attitude in helping the manager with various issues. It is mainly the task of the MA to put this concept into reality, as illustrated by the following quote from the manager:

“I explain to the MA what I expect from him. Subsequently, it is his job to see how he fulfils this requirement.”

The previous quote indicates that the MA has a lot of authority in defining his own role. The manager stated:

“I expect from the MA that he takes stock of what the operational managers and team leaders need in order to get more insights into the financial aspects of their operations. Consequently, I expect him to implement these wishes into the process.”

The manager has the ultimate right to make decisions in the decision-making process for operational activities. However, advices from the MA are explicitly taken into account.

The other important aspect for defining the role of the MA is, according to Lambert & Sponem (2012), who the client of the MA is. In this case the MA works next to the manager and has a one-on-one relationship. The manager stated the following:

“The MA is part of my management team. He reports to me about his tasks and his department. If he wants to make changes he also reports that to me. He has a functional line towards his executive, but his executive has delegated him to my team. The daily tasks of the MA are mainly guided by me.”

However, some of the reports that the MA writes go towards the headquarters [HQ], in that way independence is ensured. Therefore, the client of the MA is twofold. He is confronted with both the local manager and the HQ, however the manager is considered to be the main client because he directly supervises him.

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15 facilitator instead of someone where power is centralised since the manager is the one who has the ultimate decision right.

4.1.3 Relationship between

manager and management accountant.

The relationship between the manager and the MA can be regarded as good. The MA stated the following:

“The relationship is good. I support the manager but I also have a challenging role. I do not report directly to him, you need that independence in order to get a discussion going. You need to have the ability to say no and challenge him.”

The manager stated the following regarding the relationship:

“I have too few contact moments with the MA. The contact that we have is very good. We do not have a lot of conflicts. We help each other where we need to. I see him as a team member.”

The fact that they do not have many conflicts was explained by the MA in the following way:

“We are both directed at similar things, we often have similar points of interest. This makes our relationship easier and it provides support when changes need to be made.”

Next to that, both the manager and MA agreed on the fact that the MA needs to

have some knowledge of the actual business process to be of much help in giving advice. The manager stated the following:

“Regarding technical issues the MA needs to know where I am talking about. He has to have some ideas about the risks that are accompanied by certain projects. He needs to know roughly what a project is about and what kinds of costs can be expected.”

The MA stated the following regarding this topic:

“It is important to know where you are talking about. If you are not familiar with the processes, than you are running the risks of failing in the execution. It is the role of finance to make sure that the execution of a project is within the limits of what has been agreed upon with the contractor. To be able to test that, they need to know how the operations are being performed.”

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16 knowledge of the business process in order to give suitable advice and perform his tasks.

4.1.4 Summary case 1. The

business unit structure in the first case is typified as a cost centre. Because of this structure the MA has to focus on the budgets and how costs develop compared to the budget. Next to that he is also expected to become more involved with the actual business. The authority of this MA is high since he is expected to fill in his own role and manage the financial department. Therefore, the role of the MA can be typified as a partner. At this high hierarchical level within this company it is very common that the MA is assigned this role. The manager and the MA have quite a lot of face-to-face contact because the MA is quite involved with both the actual business and the manager. Next to that, the MA and the manager have similar interests and they are able to challenge each other. This leads to the fact that their relationship is good. Those are the main antecedents that influence their relationship. It did not become clear that the business unit structure influences this relationship because the manager and MA do not feel constrained by the business unit structure. It is, however, seen that the business unit structure influences the role of the MA. Since this department is a cost centre, the manager wants insight into the development of the

costs compared to the budget at every moment. This influences the tasks of the MA and what is expected from him by the manager, and therefore what his role is.

4.2 Case 2

In the second case, the same MA was present as in case 1, however the manager in this case is one level lower in the hierarchy compared to the manager from the first case.

This business unit works for a small part on a project basis. These projects are called capital expenditure (CAPEX) projects. These projects are relatively large, there is a clear budget available and it is clear how many days should be needed to complete the job. However, a large part of the jobs this business unit has to fulfil consists of maintenance. These jobs are relatively small and cost control is harder, these projects are called the operational expenditure (OPEX) projects. For these projects a cost estimation is made based on the expenses from the previous year, based on those results a budget is requested. The manager mentioned the following regarding these OPEX projects:

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17 of how much budget we expect to be needing during the next year/period.”

For OPEX projects the following philosophy applied:

“The more money is spend, the better it is for the company because the jobs that are performed make sure that the company makes more revenue.”

So, the reasoning is that the money which is being spend, is spend effectively. However, it is acknowledged that cost control still needs to be improved to make actual costs more transparent.

In this department, again, evaluation is based on budgets, since there are no revenues. Next to that, the manager has to perform the activities that are demanded by the other departments. So the department can be regarded as a standard cost centre.

4.2.2 Role of the management accountant. The manager stated the

following about the role of the MA:

“For me the MA is more like a bean counter. He gives a lot of support to the general manager, but at the moment he has limited time to put a lot of time and effort into a lower level. Currently he makes sure that everything runs smoothly within this department. He has not yet come to me to talk about changes that have to be made within this department.”

The MA stated that the following:

“I have a one-on-one relationship with the general manager, next to that I also have some contact with the managers at a lower level.”

From these quotes it can be derived that the role of the MA mainly consists out of making sure that ‘everything runs smoothly’ and that all the costs are up-to-date and filed in the appropriate systems. The MA does give advice when the manager has to make certain decisions and gives support when needed, however this currently mainly concerns cost control. The manager said:

“I would like to cooperate more. If we are able to cooperate more, we are able to work more efficiently. I do hope we are able to reach this when the transition process is ready and everyone has found his appropriate place.”

The MA also thinks the business partner role is important because it can add more value to the organisation. The only disadvantage the MA mentioned was the following:

“It is a new role. The traditional role is well-known, that is what you have been taught in school. This new role still has to be explored and the organisation has to change accordingly.”

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18 client of the MA is not the local manager, but the manager at a higher hierarchical level. His authority cannot be regarded as high towards this manager. The advice of the MA is taken into account, but the advices of all the other departments are also important. In the previous subparagraph a reason for this can be found. There it was explained that the costs of the small jobs are not very important, since more costs meant more revenues.

This manager and MA do not have contact very frequently, but the MA does a good job at what he currently does. The manager stated the following:

“It is also important to look at the priorities of the MA. The MA first looks at the departments where most money is spend/earned, which makes sense. This department is relatively small and therefore does not have the highest priority.”

However, the relationship between the MA and the manager is regarded as good. Although there is no frequent contact, the manager does get feedback from the MA, which provides stability and calmness for the manager.

The manager, like the MA, thinks that it is important that the MA has at least some basic knowledge about the activities of the department.

“The MA does not have to know all the technical details. He does have to know how the processes, in general, evolve and what the cost drivers are. He needs to have a feeling for the business, especially regarding the financials.”

So, all in all, the relationship is good but rather distant. The MA is not actively involved in day-to-day activities. He does have an advising role, however most technical decisions are made based on advices from other technical managers. The main reason for this is because the money which is spend is considered a good expense.

4.2.4 Summary case 2. The

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19 MA is rather distant. They do not have a lot of contact, although they do want to increase that over time. Because of the role the MA has, their contact moments are limited. The structure of the business unit influences what his role is because it influences where the manager focuses on, and consequently which data the MA has to deliver. The relationship between the manager and MA can be directly linked to the role that the MA is assigned. Because the MA has a safeguarding role and is mainly focused on top management, the relationship with this manager is rather distant. The manager and MA do not see how the structure of the business unit has a direct influence on their relationship. The MA stated:

“I think that the relationship does not so much depend on the structure of the business unit. I think it depends more on whether targets are met, those could be either profit measures or whether the business unit stays within their budget or not.”

So, the MA thinks the relationship depends more on whether targets are met, and not so much on how the business unit itself is structured.

4.3 Case 3

The third case is a description of another business unit, its manager and the MA.

The evaluation of the business unit manager is two-fold:

“I am assigned a certain budget, within that budget I have to produce certain results. I am evaluated based on whether I have delivered that result within the assigned budget. The overall accountability of the business unit is my responsibility.”

The results of this business unit are not expressed in monetary terms. In this company confidentiality is very important and to avoid conflict of interests prices are kept confidential. Therefore, results have to be seen in terms of production volume instead of money. Cost effectiveness plays an important role in this business unit:

“For every unit of money spend, we want to know how much production is being delivered”

The manager of the business unit has the responsibility of the decision-making process:

“Most of the times I am the decision executive regarding the projects of this business unit. I have to make the decisions, although I do receive support from a decision review board.”

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20 need during a certain period, the finance manager also has to sign it. Consequently it has to go to our partners in order to get approval.”

We can recognize that this business unit develops its own revenues, although these revenues are not expressed in monetary terms. This means it is not possible to evaluate the manager based on profit measures. Therefore the main indicator of the performance of the business unit is based on cost effectiveness and the amount of volume produced. The manager is also responsible for the decision-making process but he has to stay within a certain budget. Although profit measures are not used to evaluate the manager, the most applicable business unit structure is the profit centre.

4.3.2 Role of the management accountant. The MA performs various

tasks. The MA explained the following tasks:

“I support the budget holders in managing their budget. I keep track of what they can spent. In that process I try to give as much support as possible.”

“I also look at which processes are most important and which processes turn over enough production in comparison with the budget.”

“I also keep track of the way money is spent and that no mistaken belief exists. I help with thinking along in these processes as good and proactive as possible.”

The MA states that it is very important that the people from the finance department have a proactive attitude. He is convinced that is the role he currently fulfils and that this role is very much appreciated by the managers:

“We are business partners. As a MA we are really into the business and that is why I think we really have to be a business partner.”

However, the manager of the business unit stated the following:

“It would be useful if the MA would have a more active, business partner-like role. However, currently that happens rarely.”

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21 “The business partner role is something that we see more often at the corporate level. At the level of the business unit the bean counter role is more applicable.”

All in all, it can be stated that the authority of this MA is quite low. His advice is important, but does not have a decisive role. The client of the MA is the manager of the business unit himself. Therefore, the role of the MA can be regarded as discrete.

The relationship between the manager and the MA is not very close, according to the manager. Once a month they have a planned meeting (together with other parties) in which the current state of the business unit is being explained and clarified. Next to that, they can have contact throughout the month to discuss various ad hoc issues, mostly through a digital communicator. The manager stated the following about this:

“I do not think I need to have a more close relationship because of the role he has.”

From this quote it can be derived that the manager is satisfied with the relationship as it is, mainly because the MA is not very much involved with the day-to-day activities. Because of this role the manager also beliefs that the MA only needs general knowledge of how the business unit

performs its activities. However, the MA stated something different:

“I have to have feeling with the business and know how much certain jobs will cost. If you have more feeling with the job, you are enabled to estimate what a job will cost and you can make challenges.”

“It is very important that I have knowledge of the processes and projects. Our ambition is to come very close to the business and give the people from finance the opportunity to see which activities are being performed and how.”

So there is a discrepancy between the beliefs of the extent to which the MA should

be knowledgeable about the

processes/projects of the business unit.

It is seen that the relationship between the two parties is not very close. The manager explains what he needs from the MA and the MA will deliver that data accordingly. In that process the MA does have an advising role but not very explicitly.

4.3.4 Summary case 3. This

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22 from the data he has to deliver. The structure of the business unit makes clear which data the MA has to deliver to the manager. Next to that, it becomes clear that the manager of this profit centre has a lot of knowledge about the business processes and expected costs. His main concern is that the technical parts of the jobs are performed well. The manager does not think it is highly necessary for a MA to be involved with those technical processes. The manager stated:

“I wonder whether it has to be someone from the finance department who gives me various insights. Maybe it is enough when the technical staff knows the financial data and based on that knowledge, and their technical knowledge, we can make decisions.”

Therefore the role of the MA is less involved with the day-to-day activities and he is not seen as a business partner.

The relationship between the MA is indicated as ‘good’ by both parties, although it is not a very close relationship. They have only one planned meeting a month. Both parties are satisfied with this relationship and, as the manager indicated, because of the discrete role of the MA there is not an urge to have contact on a more regular basis.

The manager does not believe that the structure of the business unit has an influence on his relationship with the MA. He stated the following:

“I do not think that the business unit structure has an influence on that. I think it is more a result of the business itself. We are more focused on cost-effectiveness and whether our money is well spend.”

According to the manager the relationship between him and the MA is more a result of the business itself, and where the company as a whole pays attention to. The MA stated the following regarding his relationship with the manager:

“The business unit is responsible for making clear what everyone his role is. It has to be clear who is expected to do which tasks”

According to the MA it is important that it is clear which role everyone has. This division of the roles is a result of the business unit structure. Consequently, the role that everyone is assigned determines how much interaction is needed and therefore how the relationship between the various parties is, including the manager and MA.

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23 The fourth case diverges somewhat from the first three cases because the case study has been conducted in a different company.

The structure of the business unit in this case can be described as a profit centre. The following quote from the manager illustrates how the business unit is structured:

“We are almost completely evaluated based on our results (net profit). I am responsible for making the decisions, and I have to be able to show why I made certain decisions. When making certain (small) decisions the MA does have an advising role.”

“Every week I report to the top management team what my results have been for the forgoing month/quarter and what the expectations are for the upcoming month/quarter. If it is necessary they will adjust the targets.”

The MA stated the following:

“We purely evaluate business units based on their results.’

These quotes make clear that this business unit is structured as a profit centre. In this case evaluation of the manager is based on the net profit he manages to generate. Next to that the manager is responsible for the operational decision-making process, but top management does guide the process of

setting targets to keep the manager on track. The business unit manager mentioned that

top management is exploiting

micromanagement:

“At this moment a lot of micromanagement is used. All the figures are 24/7 accessible.”

Some managers might experience the use of micromanagement as ‘suffocating’ (White, Jr., 2010). The business unit manager also wonders whether this is the most suitable strategy for this business.

“It is difficult to adjust the course of the business unit within three months. When the forgone months have been disappointing but the upcoming months look promising, you may wonder if direct actions are needed. In our field it happens fairly regularly that jobs are being delayed, which consequently means that income is delayed.”

“Sometimes the MAs do not have enough knowledge of the business, which is often why they want to see immediate action when results are behind on schedule. However, I do not think that is always necessary and even possible.”

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24 that MAs have to be more involved with the actual business to understand which targets they can set.

4.4.2 Role of the management accountant. Within the aforementioned

structure the MA works mainly next to the HQ:

“The MA explains his vision to the HQ, consequently top management comes to me and explains what they want from me. So the MA does not directly advise me. The advice that the MA gives to top management does have influence, although it does not prevail.”

Following the previous quote, the client of the MA is the HQ. The authority of the MA is not very high, although it is also not absent. The following quote makes this clearer:

“We (business unit manager and MA) communicate, through the phone or digital communicator, three to four times a week. During those conversations the MA does not direct me about what I have to do. These conversations are merely about what has happened.”

The MA does have a saying in the direction the manager of the business unit has to go, however he does not report this directly to the manager. The MA gives advice to top

management, consequently top

management gives directions to the

manager. Therefore the role of the MA can be classified somewhere in between the safeguarding and omnipotent style.

The relationship between the manager and MA was classified as ‘good’ by both parties. They both indicated that they think it is also necessary to have a good relationship. Because the MA mainly reported to the HQ, the business unit manager stated the following:

“The relationship is somewhat distant. We do have regular conferences, but he does not tell me what to do, and I do not have to tell him exactly what I do. The top manager is the one who knows exactly what I do and guides me in the process, probably with the use of advices from the MA.”

The MA stated that:

“We are more involved with day-to-day operations, (…), but we do not work on the same location so I am not able to see what happens on the site every day.”

Next to that the MA stated the following:

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25 It was made clear that the relationship is quite distant, the reason for this is two-sided; the MA works mainly next to HQ and reports to them, and the MA is not physically present on the site.

4.4.4 Summary case 4. This case

can be described as a profit centre, where the manager is evaluated based on the net profit he generates. In this case the MA works next to the HQ, which is located far from the manager. Therefore the physical distance is high and communication mainly takes place through the phone or over the internet. The MA does have authority although he does not use it directly towards the manager, therefore his role can be classified somewhere in between the safeguarding and omnipotent role. The structure of the business unit makes clear which information the manager needs to base his decisions on. Consequently, the MA is expected to deliver that information. Next to that, the manager is very knowledgeable about the business process and expected profits. Therefore, he does not need a MA who is more involved with the day-to-day activities. The only reason why the MA needs to have more knowledge about the day-to-day activities is because that would help him to set appropriate goals.

The relationship between the manager and MA is classified as ‘good’. They have regular planned contact

moments (3 – 4 times a week) in which the manager explains to the MA what happened. However, the MA does not give advice to the manager, this is the task of top management. Because of the role that the MA had he does not need to give advice to the manager.

The structure of the business unit is, according to the manager:

“a way to do it, and I think it is efficient”.

However, the manager has problems with the fact that the MA does not have enough knowledge of the business processes, although they do have to set goals (by advising top management). So, the role of the MA is not clear enough which has a negative influence on the relationship. The role of the MA is mainly a consequence of how top management wants to see the results, and which results are needed from that particular business unit. The information that is needed from the business unit is mainly determined by the structure of the business unit. So an important influence on the relationship is, first, determined by the physical distance between the manager and the MA and, second, because it is not very clear to the manager what the role of the MA is. The structure of the business unit is not considered to have an influence on the relationship.

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26 Table 3 gives an overview of various aspects that were encountered in the different cases.

5 Discussion

This section starts with addressing and discussing the first three cases. The main findings will be discussed and how these findings can be explained. The next step is to compare these insights with the fourth, additional, case study to see how the findings relate to the extra case study that has been conducted.

5.1 The first three cases

Table 3 shows that two cost centres have been studied and one profit centre. Although the business unit structures were different, it was recognized that the managers of the business unit structures had one overarching goal which goes unmentioned in previous literature (e.g.

Anthony, et al., 1965). The managers wanted to add as much value to the company as a whole by working as cost efficient as possible. They were not merely concerned about their own business unit. Within these structures the MAs had similar goals, they had to keep track of the income and expenses and give advice where needed. However, in line with what the literature to date has already taught us, their roles differ (e.g. Baldvinsdottir, Burns, Nørreklit, & Scapens, 2009; Lambert & Sponem, 2012; Goretzki, et al., 2013).

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27 explained by the fact that the case company is a joint venture. The roles of MAs in joint ventures has not been a topic of study in the literature yet. Yazdifar, et al. (2008) did study MAs in subsidiary companies, however those companies are only dependent upon one partner (the parent company) (Yazdifar, et al., 2008). A joint venture is a joint undertaking by two, or more, businesses, where risk, profit, management and control is being shared (Prescott, & Swartz, 2010, p. 1). In joint ventures control is very challenging (Pingli, Guliang, & Okano, 2011), because there are different parties involved and therefore also different perspectives. This might cause the role of the MA to change because top level management needs to be able to explain clearly what the performance of the joint venture is towards its different partners. This might imply that the MAs that are situated higher in the hierarchy have a more partner-like role which enables them to develop a more close relationship with the managers and give advice on various strategic aspects where this is needed. This is in line with the findings of this study. In these cases the place of the MA and the manager within the hierarchy (at the top or bottom) had an influence on the role of the MA. Byrne and Pierce (2007) have revealed various antecedents that influence the role of a MA, however the hierarchical position of the MA/manager was not

considered. As already stated, it was seen that the higher up the hierarchy, the more the MA had a partner-like role. This could be because top management is often concerned with strategic issues (Carpenter, & Fredrickson, 2001; Dewett, 2004). Strategic decisions are the most important and most difficult decisions (Rosenzweig, 2013) and top management needs as much information as possible. Here, the MA can play an important role when he is enabled to share his thoughts and knowledge about the business. This might imply that a more partner-like role is applicable. Here it was also seen that the relationship between the manager and MA was closer. In the lower parts of the hierarchy managers are often concerned with operational issues which they have a lot of knowledge about. Here the MA might be more useful when merely providing transactional support. In this study it was seen that the relationship between the manager and the MA was more distant when lower in the hierarchy.

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28 occur, for example: lower job satisfaction (Igbaria & Guimaraes, 1993), lower performance (Jermias & Yigit, 2013), or even depression (Schmidt, Roesler, Kusserow & Rau, 2014). In the long run this will also influence the relationship between the manager and the MA since the manager and/or the MA have expectations of the relationship that cannot be justified.

However, it was not seen that the structure of the business unit had a direct influence on the relationship between the manager and the MA. There were no obvious patterns apparent that enabled us to conclude that this influence was present. The structure of the business unit did not influence the way in which communication took place. It only influenced the topics that the manager and the MA had to talk about. The interviewees already indicated this and they mentioned different antecedents that had, according to them, an influence on the relationship between the manager and the MA. They mentioned for example; the role of the MA, the independence of both parties, the type of business, the degree to which targets are met, how results have to be justified, how reporting lines are organised and how top management wants to see the results. The main reason why the structure of the business unit did not have an influence was because the managers and MAs had one overarching goal, as previously mentioned. The goals of the

business units were considered important, since this is where their evaluation is based on, but overall performance was considered more important.

In the profit centre it was recognised that the manager was very knowledgeable about the business processes regarding potential profits. The business itself was highly profitable which made the manager less dependent on the results of the MA. Therefore the MA did not have a partner-like role since the manager did not need extra insights. In the cost centres the budgets were very important but it was difficult to estimate how much a project would cost. Therefore more help and advice from the MA was needed. This resulted in a role which was more close to the manager when the MA worked next to the manager and where the MA gave more advice. When the MA did not work next to the manager a more partner-like role was desired.

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29

5.2 Comparison with an additional

case study

In addition to the three case studies, a fourth case study has been conducted in a different company. The purpose of this extra case study was to compare the findings of the previous cases with an external case. In this way the findings can be examined in another environment. In the fourth case it was seen that the physical distance between the manager and the MA was large, in contrast with the other three cases. In conflict with what Byrne and Pierce (2007) found, but in line with other research (Hopper, 1980; Siegel, 1999) the physical location did influence the role of the MA. In addition to that, the physical distance had an influence on the relationship because communication between the two parties was more difficult. In the fourth case the MA was situated at the HQ which was over 1000 kilometres away from the manager. Because this distance was large, the MA mainly cooperated with HQ, which influenced its role. Due to the physical distance the two parties were forced to interact via mail, phone or other digital communication devices, which they found less effective. This is in line with what Warkentin, Sayeed and Hightower (1997) and Winger (2005) found regarding the effectiveness of communication. They made a comparison between digital and

face-to-face communication. It was found that teams that are limited to digital communication cannot outperform teams that use face-to-face communication as well. In the other three cases communication was mainly face-to-face which resulted in a more effective way of performing the tasks. The barrier that the physical distance created in the fourth case had a negative influence on their relationship because they did not meet face-to-face very often.

In this case the MA had a safeguarding/omnipotent role. In line with what Lambert & Sponem (2012) have shown us, this role was present throughout the company for every MA, at least at that particular hierarchical level. In this company the MAs were situated at the HQ, and from that position they cooperated with the business units. The main difference between the two companies was that this company was not a joint venture but an independent company, comparable to the companies that Lambert & Sponem (2010) studied.

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30 fact, together with various other factors, influenced the role of the MA. Because the MA worked next to the HQ (far away from the actual operations) and the safeguarding/omnipotent role of the MA, the relationship between the manager and the MA was quite distant.

5.3 Revised theoretical framework

The previous discussion implies that the theoretical framework, as provided in figure 1, does not hold. However, as explained, the structure of the business unit had an influence on the role of the MA. The role of the MA consequently had an influence on the relationship between the manager and the MA. Therefore, in figure 2 a revised framework is provided which is based on the findings of this study.

5.4 Implications

This research adds to our knowledge about the relationship between managers and MAs. There seems to be no clear pattern apparent between the business unit structure and the relationship between the manager and MA. It was seen that the role of the MA is directly influenced by the business unit structure. Furthermore, the role of the MA has a direct influence on the relationship between managers and MAs. Therefore the business unit structure should not be regarded as uninfluential, since it does have

an indirect influence on the relationship. Regarding managerial insights, this paper provides insights as well. Once again, in this paper it becomes clear that role ambiguity can cause misunderstanding. In that particular case the role of the MA was not defined clear enough which led to different expectations of the role. Therefore, it is important to make clear what the roles are within a company and it has to be made sure that the roles are communicated clearly. Next to that it was seen that the business unit structure does not directly influence the relationship between the manager and MA. However, there are various other antecedents, some revealed by this study, that do influence the relationship and should therefore be considered when managing this relationship. The antecedents that were found in this study are as follows:

 Role ambiguity.

 Hierarchical position of the manager/MA.

 Organisation of reporting lines.

 Independence of the manager and MA.  Whether targets are achieved.

 Personal interests of both parties.  Knowledge of the MA about the

business processes.