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Understanding  the  leadership  role  of  management  accountants  as  business  partners:  

a  case  study  

 

  Floor  Rienks  

University  of  Groningen,  the  Netherlands    

Student  number:  s1776207  

Master  track:  MSc  BA  Organizational  &  Management  Control   1st  Supervisor:  dr.  E.P.  Jansen  

2nd  Supervisor:  W.A.  Moossdorff   Date:  14  January  2014  

Word  count:  12.315  (excluding  references  and  appendices)   Final  version           Abstract  

Many   papers   argue   that   there   is   a   shift   in   the   role   of   management   accountants   from   traditional   ‘bean-­‐counters’   to   ‘business   partners’.  Management  accountants  as  business  partners  act  as  co-­‐pilots  and  change  agents  for  executive  managers  by  providing   analyses   necessary   for   decision-­‐making.   Leadership   is   defined   as   the   (re)   structuring   by   one   group   member   of   the   perceptions,   motivation  and  competencies  of  others  in  the  group.  Although  the  link  between  management  accountants  as  business  partners  and   leadership  is  clear,  existing  research  does  not  address  this  relationship.  Therefore,  this  study  seeks  to  discover  and  understand  the   leadership   role   and   style   of   management   accountants   as   business   partners.   In-­‐depth   research   is   conducted   based   on   eighteen   interviews.   Results   show   that   (1)   management   accountants   as   business   partners   seek   to   exercise   a   leadership   role,   which   is   also   expected   by   the   organization,   (2)   the   transformational   leadership   style   of   management   accountants   contributed   to   the   business   partner  role,  (3)  those  managers  that  had  an  equal  hierarchical  level  did  also  perceive  management  accountants  as  business  partners   as  leaders,  (4)  a  strong  leadership  role  by  management  accountants  as  business  partners  affects  their  effectiveness  of  ensuring  a   specific   commitment   to   action   and   (5)   the   influence   of   the   management   accountant   on   the   decision-­‐making   process   can   be   described  as  ‘joint  decision-­‐making’.  The  results  have  several  implications  for  managers  of  organizations  and  recommendations  are   provided.  

 

Key   words:   roles   of   management   accountants;   business   partner;   leadership   roles;   transactional   leadership;   transformational  

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Preface  

Dear  reader,    

After  five  months  of  hard  work,  I  completed  the  ultimate  challenge  of  my  studies  in  Business  Administration   –  Organizational  &  Management  Control  at  the  University  of  Groningen.  Writing  this  thesis  was  a  valuable   and  learning  experience.  Some  stages  of  research  the  process  I  really  enjoyed,  for  example  conducting  the   interviews.   Other   phases   I   disliked,   for   example   transcribing   the   interviews.   Overall,   I   learned   how   to   do   research  independently,  how  to  employ  a  case  study  research  and  how  to  conduct  interviews.  

 

The  opportunity  to  conduct  eighteen  interviews  with  complete  freedom  at  D.E.  MASTERBLENDERS  1753  was   extremely  valuable.  Therefore,  I  would  hereby  like  to  thank  the  company  for  this  opportunity.  In  specific,  I   would  like  to  thank  all  the  interviewed  participants  in  this  research  for  their  time  and  valuable  insights.      

Moreover,  I  am  grateful  to  my  first  supervisor,  dr.  Pieter  Jansen  for  providing  feedback  during  the  research   process,  for  his  valuable  insights  and  for  challenging  me  to  get  the  most  out  of  this  thesis.  Besides,  I  would   like  to  thank  my  second  supervisor,  Wouter  Moossdorff,  for  co-­‐reading  my  thesis.    

 

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Executive  summary  

According   to   both   the   academic   and   professional   literature,   the   role   of   management   accountants   has   changed   from   traditional   bookkeepers   to   business   partners   (Granlund   &   Lukka,   1998).   Management   accountants   as   business   partners   act   as   co-­‐pilots   by   providing   analyses   necessary   for   decision-­‐making   (Lambert  &  Sponem,  2012).  Despite  the  fact  that  there  is  a  lot  of  research  about  this  business  partner  role,   the  question  whether  and  how  management  accountants  as  business  partner  behave  as  “leaders”,  i.e.  seek   to  (re)  structure  the  perceptions  and  motivation  of  managers  and  executives,  and  how  this  leadership  role   helps  to  (re)  structure  the  decision-­‐making  process  remains  unanswered.  Therefore,  this  research  explores   the   leadership   role   and   style   of   management   accountants   as   business   partners.   More   specifically,   it   addresses  three  questions:  (1)  how  the  leadership  role  and  style  of  management  accountants  as  business   affects   the   decision-­‐making   process   on   different   hierarchical   levels   within   an   organization,   (2)   how   the   leadership   style   of   management   accountants   contributes   to   the   business   partner   role   of   management   accountants   (3)   how   the   leadership   role   of   management   accountants   as   business   partners   affect   their   effectiveness  as  decision-­‐makers  on  different  hierarchical  levels  within  an  organization.  

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Table  of  Contents  

PREFACE  

2  

EXECUTIVE  SUMMARY  

3  

1.  INTRODUCTION  

6  

2.  LITERATURE  REVIEW  

8  

2.1  Roles  of  management  accountants   8

 

2.1.1  Changing  role  of  management  accountants   9

 

2.1.2  The  management  accountant  as  a  business  partner   10

 

2.2  Leadership  styles   11

 

2.2.1  Transactional  leadership   11

 

2.2.2  Transformational  leadership   12

 

2.2.3  Transactional  and  transformational  leadership,  which  one  is  more  successful?   12

 

2.3  The  decision-­‐making  process   14

 

3.  RESEARCH  METHOD  AND  CASE  BACKGROUND  

16  

3.1  Research  method   16

 

3.1.1  Chosen  research  method   16

 

3.1.2  Research  plan   17

 

3.2  Background  case  study   18

 

4.  RESULTS  

19  

4.1  The  role  of  management  accountants  within  DEP   19

 

4.2  The  leadership  role  and  style  of  management  accountants  as  business  partners   21

 

4.2.1  Leadership  role   21

 

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4.2.2  Strong  and  weak  points  in  terms  of  leadership  behaviour   23

 

4.3  The  impact  of  the  management  accountant  on  the  decision-­‐making  process   25

 

5.  DISCUSSION  

28  

5.1  Findings  in  relation  to  existing  literature   28

 

5.2  Theoretical  implications   30

 

5.2  Managerial  implications   31

 

6.  CONCLUSION  

33  

6.1  Limitations   34

 

6.2  Future  research  suggestions   35

 

REFERENCES  

36  

APPENDIX  A:  INTERVIEW  GUIDES  

40  

Version  1:  Management  accountants   40

 

Version  2:  Account  and  (field)  sales  managers   42

 

APPENDIX  B:  ORGANIZATIONAL  CHART  -­‐  FINANCE  DEPARTMENT  

44  

APPENDIX  C:  ORGANIZATIONAL  CHART  –  SALES  DEPARTMENT  

45  

 

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1.  Introduction  

In  the  21th  century,  leadership  has  become  a  well-­‐known  subject  in  most  research  areas.  In  psychology  for   example,  never  before  has  so  much  attention  been  paid  to  research  on  leadership  (Avolio  et  al.,  2009).  Bass   (1990a,  p.  19-­‐20)  defines  leadership  as  ‘an  interaction  between  two  or  more  members  of  a  group  that  often   involves  a  (re)  structuring  of  the  situation  and  the  perceptions  and  expectations  of  members.  (…)  Leadership   occurs   when   one   group   member   modifies   the   motivation   and   competencies   of   others   in   the   group’.   Bass   (1990b)   developed   the   widely   used   distinction   between   transactional   and   transformational   leadership.   Transactional   leadership   focuses   on   fulfilling   the   physical   needs,   whereas   transformational   leadership   focuses  on  fulfilling  socio-­‐emotional  needs.  Compared  to  research  areas  like  psychology,  management  and   economies,  the  role  of  leadership  in  the  management  accounting  literature  is  relatively  scarce.    

Nowadays,  management  accountants  must  be  both  strategically  aware  and  operationally  active.  The   function   of   the   management   accountant   (also   known   as   controllers   or   financial   managers)   is   to   provide   information  for  decision-­‐making.  Management  accountants  play  a  key  role  in  line  management  and  in  the   design  and  operation  of  the  management  control  system  (Merchant  &  van  der  Stede,  2012).    

Many  papers  have  been  published  that  contribute  to  our  understanding  on  the  roles  of  management   accountants   (for   example,   Granlund   and   Lukka,   1998;   Byrne   &   Pierce,   2007;   Jarvenpaa,   2007;   Lambert   &   Sponem,   2012).   Granlund   and   Lukka   (1998)   argue   that   there   is   a   shift   in   the   role   of   management   accountants   from   traditional   ‘bean-­‐counters’   to   ‘business   partners’.   The   general   operating   style   of   bean   counters   is   focused   on   collecting   and   processing   information   with   little   involvement   in   the   local   decision-­‐ making  process.  Contradictory,  the  general  operating  style  of  the  business  partners  is  being  a  member  of  the   management   team   and   a   change   agent   by   participating   in   both   the   operational   and   strategic   decision-­‐ making  process.  The  primary  aim  of  communication  of  the  business  partner  is  active  attention  attraction  in   order  to  get  the  message  through.  Though  Lambert  and  Sponem  (2012)  argue  that  not  all  firms  yearn  for   business   partners,   Jarvenpaa   (2007)   states   that   through   the   business   orientation   of   management   accounting,  management  accountants  can  add  value  to  the  decision-­‐making  process  within  organizations.    

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hierarchical  levels  within  an  organization.  Therefore,  the  purpose  of  this  study  is  to  discover  and  understand   how   the   leadership   style   of   management   accountants   as   business   partners   affects   the   decision-­‐making   process  on  different  hierarchical  levels  within  an  organization.    

Accordingly,  there  is  literature  about  the  role  of  management  accountants  as  business  partners,  but   not  about  their  leadership  style  and  role.  This  gap  in  existing  knowledge  about  the  leadership  behaviour  of   management  accountants  as  business  partners  is  surprising,  because  accounting  information  by  definition   concerns   and   influences   the   managers’   perceptions   of   performance.   Business   partners   use   accounting   information   to   (re)   structure   the   situation   and   the   perceptions   and   expectations   of   executive   managers.   Investigating   the   behaviour   of   management   accountants   as   business   partners,   as   key-­‐players   in   supplying   accounting   information   can   therefore   contribute   to   our   understanding   of   the   role   of   leadership   styles   of   management  accountants  in  controlling  organizations.    

From   a   practical   perspective,   it   is   important   to   investigate   the   leadership   style   of   management   accountants  as  business  partners  so  that  organizations  know  who  to  select  and  how  to  develop  management   accountants   as   business   partners   on   different   levels   within   an   organization   in   order   to   fit   the   desired   leadership  role  and  style  by  the  organization.      

Hence,  the  research  question  in  this  paper  is:  How  does  the  leadership  role  and  style  of  management  

accountants  as  business  partners  affect  the  decision-­‐making  process  on  different  hierarchical  levels  within  an   organization?   The   paper   is   based   on   a   case   study   of   a   Dutch,   international   company   that   processes   and  

trades  coffee  and  tea.  The  company  was  founded  in  1753  and  their  products  are  available  in  more  than  45   countries.  For  this  paper,   eighteen  in-­‐depth  interviews  were  conducted  with  management  accountants  as   business  partners  and  numerous  managers  and  executives.  

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2.  Literature  review  

As  stated  in  the  introduction,  in  the  management  accounting  research,  there  are  only  a  few  studies  on  the   relationship  between  leadership  and  management  accounting.  For  example,  Abernethy  et  al.  (2010)  found   that   control   choices,   i.e.   the   planning   and   control   system   and   performance   measurement   system,   are   determined   by   the   leadership   characteristics   of   senior   managers.   For   instance,   senior   managers   with   a   consideration   leadership   style,   i.e.   involving   others   in   the   decision-­‐making   process   and   considering   the   opinions   of   others,   interactively   use   the   planning   and   control   system   as   a   communicative   device.   Senior   managers   with   an   initiating   leadership   style,   i.e.   based   on   procedures,   roles   and   responsibilities,   use   the   performance  measurement  system  for  promotion  or  compensation  decisions.    

Since  the  role  of  leadership  in  management  accounting  research  is  scarce,  this  literature  review  is   based  on  three  major  key  concepts.  First,  earlier  studies  about  the  role  of  management  accountants  and  in   particular  the  role  of  management  accountants  as  business  partners  are  presented.  Second,  theories  about   leadership   styles   and   their   implications   for   management   accountants   as   business   partners   are   discussed.   Last,  the  decision-­‐making  process  is  described.  The  goal  of  this  section  is  to  get  insight  into  literature  about   leadership  styles,  the  role  of  management  accountants  and  decision-­‐making.  Based  on  the  literature  review,   sub  research  questions  for  this  paper  and  interview  questions  are  prepared.    

2.1  Roles  of  management  accountants  

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Sathe  (1983)  identified  four  ideal  types  of  the  role  of  management  accountants,  i.e.  the  involved,   independent,   split   and   strong   controller.   The   involved   management   accountant   is   actively   involved   in   the   decision-­‐making  process  and  the  essence  is  to  recommend  courses  of  action  and  to  challenge  the  plans  and   actions   of   managers.   The   strong   controller   is   actively   involved   in   the   decision-­‐making   process   but   also   preserves   a   sense   of   objectivity   and   independence.   Both   the   involved   and   strong   controller   can   be   categorized   as   the   business   partner   role.   Maas   &   Matejka   (2009)   found,   however,   that   strong   controllers   preferred   being   actively   involved   in   the   decision-­‐making   process   over   their   responsibility   to   facilitate   corporate   control.   As   a   result,   increasing   the   focus   on   fairly   and   objective   reporting   makes   it   harder   for   strong   controllers   to   reconcile   their   dual   role   of   being   both   independent   and   involved,   exposing   them   to   higher  levels  of  role  conflict  and  role  ambiguity  which  can  lead  to  data  misreporting  at  the  local  level.    

Building   on   contingency   theory,   Mouritsen   (1996)   argued   that   the   role   of   the   management   accountants   is   not   determined   by   the   management   accountants   themselves,   but   is   an   effect   of   the   interrelationships  between  top  and  line  managers  and  the  relational  context.  Correspondingly,  according  to   Lambert  and  Sponem  (2012),  the  role  of  management  accountants  is  largely  determined  by  the  positioning   of  their  function  within  the  organisation.  Contrary,  building  on  institutional  theory,  Goretzki  et  al.  (2013,  p.   59)  illustrate  that  the  role  of  management  accountant  is  “not  merely  ‘god-­‐given’  but  arises  as  a  product  of   purposive  actions  of  actors  that  have  particular  interests”.  

So,  the  business  partner  role  was  already  implicit  present  in  the  80s.  Below,  the  various  synonyms   for  the  business  partner  role  are  displayed  in  table  1.  

 

Table  1  Synonyms  for  the  business  partner  role  

Role   Developed  by  

Problem  solving,  attention-­‐directing   Simons  et  al.,  1964  

Service-­‐aid  role   Hopper,  1980  

Involved  controller,  strong  controller   Sathe,  1983    

2.1.1  Changing  role  of  management  accountants  

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decentralizing   management   accountants   more   to   the   business   creates   the   need   to   increase   the   business   orientation   of   management   accountants   (Granlund   and   Lukka,   1998;   Burns   &   Baldvinsdottir,   2005).   Hiromoto   (1991)   explains   the   need   for   the   change   of   the   role   of   management   accountants   from   bookkeepers   to   business   partners   by   highlighting   that   today,   the   source   of   global   competitiveness   is   continuous  innovation.  Therefore,  we  need  management  accountants  who  motivate  employees  towards  the   strategy  developed  by  the  top  management.  In  line  with  this  reasoning,  Emsley  (2005,  p.  171)  found  that  “a   management   accountant   with   a   business   unit   orientation   is   not   only   associated   with   a   greater   level   of   innovativeness  but  also  associated  with  more  radical  innovations”.      

The   above-­‐mentioned   researchers   look   from   the   environment   perspective   to   the   changed   role   of   management  accountants.  Conversely,  there  are  also  researchers  who  argue  that  the  change  in  the  role  of   management   accountants   is   due   to   the   organization   or   the   management   accountants   themselves.     According   to   Jarvenpaa   (2007)   the   role   of   management   accountants   is   deeply   embedded   in   the   organizational   culture.   The   changed   role   of   management   accountants   from   bean   counters   to   business   partners  includes  a  whole  range  of  different  cultural  change  interventions,  for  example  story  telling.  There  is   a  great  diversity  in  the  practices  comprising  the  business  orientations  of  management  accountants.    

2.1.2  The  management  accountant  as  a  business  partner  

Based  on  the  definition  of  Lambert  and  Sponem  (2012),  in  this  study  the  business  partner  role  is  defined  as   management   accountants   who   act   as   co-­‐pilots   by   providing   analyses   necessary   for   decision-­‐making.   In   addition,   management   accountants   as   business   partners   act   as   change   agents   and   members   of   the   management  team,  focuses  on  the  present  and  the  future,  and  communicate  in  order  to  attract  attention  to   get  the  message  through  (Granlund  and  Lukka,  1998).    

Management   accountants   as   business   partners   look   beyond   the   financial   figures,   ask   the   right   questions   and   are   skilled   communicators.   Management   accountants   as   business   partners   need   to   be   “all-­‐ rounders”   capable   of   being   sparring   partners   for   both   operational   managers   and   the   top   management   (Roozen   &   Steens,   2006).   According   to   Roozen   &   Steens   (2006),   management   accountants   as   business   partners  need  to  have  three  competencies;  cognitive,  procedural  and  social-­‐interactive  skills.  Cognitive  skills   are   needed   to   initiate   and   support   the   related   business   intelligence   and   the   decision-­‐making   process.   Procedural   skills   are   desirable   to   structure   the   strategic   and   operational   decision-­‐making   process.   Last,   social-­‐interactive   skills   are   necessary   because   management   accountants   as   business   partners   need   to   be   sensitive  in  order  to  influence  the  decision-­‐making  process  and  to  pose  the  right  questions.    

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accountants   as   business   partners   faces   this   dilemma   every   day;   either   they   choose   to   enforce   their   authority,   thereby   constraining   the   creativity   of   executive   managers   primarily   concerned   with   their   net   income,  or  they  can  co-­‐opt  with  executive  managers  to  manipulate  income  (Lambert  &  Sponem,  2012).    

In   line   with   this   finding,   Byrne   &   Pierce   (2007)   found   role   conflict   for   management   accountants   about   business   involvement.   It   appears   that   “managers   do   not   seem   to   always   welcome   interaction   that   seeks  to  serve  a  monitoring,  information  gathering  or  interfering  function  for  the  management  accountants.   Further,   managers   do   not   welcome   an   excessively   tight   approach   to   budgetary   control   but   value   a   more   flexible   approach”.   Nevertheless,   with   more   interaction   between   the   management   accountant   and   executive   managers,   the   use   and   quality   of   accounting   information   improved   as   well   as   the   value   that   managers  attached  to  it.  Through  involvement,  management  accountants  can  better  understand  where,  why   and  when  control  is  required.    

To  sum  up,  management  accountants  as  business  partners  co-­‐operate  with  other  departments  and   influences   both   the   strategic   and   operational   decision-­‐making   process.   Until   today,   no   research   has   been   done  about  the  leadership  role  and  style  of  management  accountants  as  business.  This  is  surprising,  as  it  is   clear  from  the  literature  review  that  there  is  an  interaction  between  management  accountants  as  business   partners   and   managers   and   executives,   where   management   accountants   use   accounting   information   and   their  cognitive,  procedural  and  social-­‐interactive  skills  to  (re)  structure  the  perceptions  and  expectations  of   managers  and  executives  in  the  decision-­‐making  process.    

2.2  Leadership  styles  

2.2.1  Transactional  leadership  

Transactional  leadership  is  based  on  the  transaction  between  managers  and  employees  where  the  promise   of  rewards  or  the  avoidance  of  penalties  motivates  the  employees  to  behave  in  a  certain  way.  Transactions   explain  what  is  required  from  the  employees  and  what  reward  they  will  receive  when  the  requirements  are   met.  Transactional  leadership  relies  on  management  by  exception  and/or  contingent  reward.  Leaders  who   use   management   by   exception   only   intervene   when   the   employees   do   not   meet   the   standards   for   accomplishing   their   tasks.   So,   as   long   as   employees   follow   the   standards,   the   leader   takes   no   action.   However,  if  the  employee  performs  below  the  standard,  the  leader  will  provide  the  manager  with  negative   feedback.   Contingent   reward   is   based   on   a   transaction   between   the   leader   and   the   executive   manager   where  the  executive  manager  agreed  on  rewards,  for  example  pay,  for  particular  achievements.  Contingent   rewards  clarify  expectations  and  offers  recognition  when  goals  are  achieved  (Bass,  1990b).    

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1976).  Bass  et  al.  (2003)  also  found  support  that  waiting  for  problems  to  occur  and  then  correcting  them  is   counterproductive  in  terms  of  predicting  unit  performance.    

2.2.2  Transformational  leadership  

Transformational  leadership  is  based  on  leadership  where  the  leaders  motivate  employees  to  look  beyond   their  own  self-­‐interest  for  the  good  of  the  group  and  where  leaders  generate  awareness  for  the  purpose  and   mission   of   the   group.   Transformational   leaders   inspire,   energize   and   intellectually   motivate   employees   to   behave  in  a  certain  way  (Bass,  1990b).    

According   to   Bass,   transformational   leadership   consists   out   of   three   characteristics:   charisma,   intellectual   stimulation   and   individualized   consideration.   The   purpose   of   charisma   is   motivating   followers   with  the  vision  of  the  leader.  Charismatic  leaders  inspire  their  employees  with  the  idea  that  the  employees   may   be   able   to   accomplish   great   things   with   extra   effort.   Intellectual   stimulation   encourages   followers   to   question  the  methods  in  use  and  to  improve  them.  Leaders  are  willing  and  able  to  show  their  employees  to   see  difficulties  as  problems  to  be  solved.  Individualized  consideration  focuses  on  understanding  the  needs  of   each  individual  follower  and  gets  them  to  develop  to  their  full  potential.  Here,  the  leaders  act  as  mentors  to   those   employees   who   need   help   to   grow   and   develop.   Although   this   kind   of   behaviour   characterizes   the   transformational  leader,  transformational  leaders  vary  widely  in  their  personal  styles.  

Feinberg   et   al.   (2005)   found   a   positive   relationship   between   within-­‐group   agreement   and   a   transformational   leadership   style.   That   is,   management   accountants   as   business   partners   who   engage   in   higher   levels   of   appropriate   leader   behaviours   are   more   likely   to   have   executive   managers   who   agree   in   their  perceptions  of  the  leader.  

2.2.3  Transactional  and  transformational  leadership,  which  one  is  more  successful?  

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goals   are   best   encouraged   by   a   transformational   leadership   style.   Hence,   when   learning   needs   in   an   organization   are   high,   management   accountants   as   business   partners   should   have   a   transformational   leadership  style.    

Furtner  et  al.  (2013)  found  that  if  one  is  able  to  influence  oneself  (self-­‐leadership),  there  is  a  positive   relationship  between  both  the  transactional  and  transformational  leadership  style.  For  this  study,  it  means   that  if  a  management  accountant  as  business  partner  is  not  able  to  influence  oneself,  the  executive  manager   will  probably  not  perceive  him  or  her  as  a  leader.  However,  if  the  management  accountant  as  business  is   able   to   influence   oneself,   both   the   transactional   and   transformational   leadership   style   could   be   effective,   depending  on  the  situation.    

 

To   conclude,   there   are   two   main   categories   of   leadership   styles,   transactional   and   transformational   leadership.   Transactional   leadership   focuses   on   fulfilling   physical   needs,   whereas   transformational   leadership   focuses   on   fulfilling   socio-­‐emotional   needs.   Both   the   transactional   and   transformational   leadership  style  could  contribute  to  the  business  partner  role  of  management  accountants.  However,  until   today,  it  is  unclear  if  and  how  the  leadership  style  of  management  accountants  contributes  to  the  business   partner  role  of  management  accountants.  Therefore,  this  research  addresses  the  following  sub  question:      

1.   How   can   the   leadership   style   of   management   accountants   contribute   to   the   business   partner   role   of   management  accountants?    

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2.3  The  decision-­‐making  process  

Management  control  systems  are  developed  and  implemented  to  serve  two  functions:  facilitate  managerial   decision-­‐making   and   control   the   manager’s   behaviour.   This   paper   focuses   on   the   first   function   of   the   management  control  system:  decision-­‐making.  In  this  paper,  a  decision  is  defined  as  “a  specific  commitment   to   action   (usually   a   commitment   of   resources)”   and   the   decision-­‐making   process   as   “a   set   of   actions   and   dynamic   factors   that   begins   with   the   identification   of   a   stimulus   for   action   and   ends   with   the   specific   commitment   to   action”   (Mintzberg   et   al.,   1976,   p.   246).   Management   accountants   as   business   partners   integrate   into   the   heart   of   both   the   operational   and   the   strategic   decision-­‐making   process   (Lambert   &   Sponem,   2012).   In   the   strategic   decision-­‐making   process,   decisions   are   most   of   the   time   unstructured.   Strategic  refers  to  important  decisions  in  terms  of,  for  example  the  actions  taken.   Unstructured  decisions   processes  are  defined  as  “processes  that  have  not  been  encountered  in  quite  the  same  form  and  for  which   no  predetermined  and  explicit  set  of  ordered  responses  exists  in  the  organization”  (Mintzberg  et  al.,  1976,  p.   246).    

   

Figure  1  The  relation  of  decision  styles  to  the  influence  continuum  (Heller    &  Yukl,  1969)  

           

In  this  paper,  the  amount  of  influence  the  management  accountant  as  business  partner  has  in  the   managerial  decision-­‐making  process  is  categorized  according  to  the  decision  behavioural  model  developed   by   Heller   &   Yukl   (1969).   According   to   this   model   (see   figure   1),   the   amount   of   influence   in   the   decision-­‐ making   process   can   be   viewed   as   a   continuum,   ranging   from   no   subordinate   to   complete   subordinate   influence.  According  to  this  model,  there  are  five  possible  decision  styles;  own  decision  without  explanation,   own  decision  with  explanation,  consultation,  joint  decision-­‐making  and  delegation.  ‘Own  decisions  without   explanation’   are   those   decisions   that   are   made   without   prior   subordinate   consultation;   it   purely   adds   a   formal   post-­‐decision   explanation   of   the   reasons   for   the   decision.   So,   in   this   case,   the   management   accountant   as   business   partner   is   not   involved   in   the   decision-­‐making   process   at   all.   ‘Own   decision   with   explanation’  refers  to  those  decisions  that  are  made  only  after  consultation  with  one  or  more  subordinates.   The  manager  takes  the  decision  himself  or  herself,  but  it  usually  reflects  some  subordinate  influence.  Here,   for  example,  management  accountants  provide  information  on  which  the  manager  will  base  their  decisions.  

Own  decision  without   Own  decision  with     Consultation   Joint  decision-­‐   Delegation                explanation                explanation                    making  

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‘Joint   decision-­‐making’   means   a   process   of   agreement   formation   in   which   one   or   more   subordinates   participate  and  some  determination  of  the  majority  position  is  made.  Now,  managers  discuss  the  situation   with   management   accountants   as   business   partners   until   they   arrive   at   a   consensus.   The   management   accountant  as  business  partner  and  the  manager  arrive  at  a  decision  together.  Last,  ‘delegation’  indicates   that  the  manager  allows  subordinates  to  make  decisions  on  their  own.  In  this  case,  it  is  not  the  manager  who   takes  the  decision  but  the  management  accountant  as  business  partner.    

According  to  Byrne  &  Pierce  (2007),  there  is  ambiguity  in  what  the  business  partner  actually  means   to   management   accountants   and   to   executive   managers.   Where   management   accountants   perceived   themselves   as   decision-­‐makers,   executive   managers   viewed   them   more   in   a   role   that   involved   making   suggestions,   recommendations   and   influencing   outcomes.   Consequently,   it   is   unclear   to   what   extent   management  accountants  as  business  partners  influence  the  decision-­‐making  process.  

To   conclude,   management   accountants   as   business   partner   provide   information   for   both   the   strategic   and   operational   decision-­‐making   process.   However,   it   is   unclear   how   the   leadership   role   of   management   accountants   as   business   partners   influences   their   effectiveness   in   influencing   decisions   and   how   the   decision-­‐making   process   between   management   accountants   as   business   partners   and   managers   and  executives  can  be  described.  Is  it  the  management  account  that  takes  the  decision?  Or  is  it  the  executive   manager  or  the  CFO  who  bases  their  decisions  on  the  information  provided  by  the  management  accountants   as  business  partners?  Moreover,  the  need  for  leadership  is  dependent  on  the  hierarchical  level  within  the   organization   of   management   accountants   and   managers.   Leadership   as   a   multilevel   phenomenon   means   that   “leadership   dynamics play   out   at   multiple   hierarchical   levels,   and   the   successful   organization   is   comprised   of   effective   leaders   setting   strategy   at   the   top,   mid-­‐level   leaders   coordinating   and   integrating,   and   bottom-­‐level   leaders   engaging   and   inspiring   their   immediate   work   groups”   (DeChurch   et   al.,   2010,   p.   1078).  So,  whether  management  accountants  as  business  partners  can  affect  the  decision-­‐making  process   may  depend  on  their  hierarchical  level.  Therefore,  this  study  addresses  the  following  sub  research  question:    

 

2.   How   does   the   leadership   role   of   management   accountants   as   business   partners   affect   their   effectiveness  as  decision-­‐makers,  i.e.  ensuring  a  specific  commitment  to  action  of  managers  and  executives,   on  different  hierarchical  levels  within  an  organization?  

 

 

 

 

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3.  Research  method  and  case  background  

In  this  section,  the  research  method  and  the  background  of  the  chosen  case  study  are  described.  Moreover,   the  justification  of  the  chosen  research  method,  a  basic  research  plan  and  the  data  collection  process  are   proposed.  

3.1  Research  method  

3.1.1  Chosen  research  method  

This  research  is  exploratory  since  little  is  known  about  the  relationship  between  leadership  style  and  the  role   of  management  accountants  as  business  partners.  It  is  clear  from  the  literature  review  that  there  is  a  lot  of   research  on  leadership  styles  and  the  role  of  management  accountants  as  business  partners  but  no  research   studies   the   link   between   the   two   subjects.   The   contribution   of   this   is   research   is   that   we   will   try   to   understand  the  leadership  role  and  style  of  management  accountants  as  business  partners  and  their  impact   on  the  decision-­‐making  process  within  an  organization.  Also,  several  researchers  pointed  out  the  importance   of   more   in-­‐depth   research   about   the   business   partner   role   of   management   accountants.   Chenhall   and   Langfield-­‐Smith   (1998,   p.   383)   demands   for   more   research   about   “the   dynamics   involved   in   ensuring   effective   interaction   between   operational   personnel   and   accountants,   the   latter   having   the   dual   role   of   gaining   acceptance   by   operational   personnel   and   of   liaising   with   senior   management”.   Jarvenpaa   (2007)   highlighted   the   fact   that   researchers   should   conduct   more   interpretive   studies   to   analyse   the   business   orientation   of   management   accounting   in   a   more   in-­‐depth   way.   For   these   reasons,   the   chosen   research   method  for  this  paper  is  a  case  study.    

A  case  study  is  “a  research  strategy  which  focuses  on  understanding  the  dynamics  present  within   single  settings”  (Eisenhardt,  1989,  p.  534).    Case  studies  offer  researchers  “the  possibility  of  understanding   the  nature  of  management  accounting  in  practice”  (Scapens,  1990,  p.  264).  The  purpose  of  this  case  study  is   to  understand  how  the  leadership  role  and  style  of  management  accountants  as  business  partners  affects   the  decision-­‐making  process  on  different  hierarchical  levels  within  an  organization.  Hence,  a  case  study  is   appropriate  because  we  cannot  understand  this  in  isolation  from  its  organisational  context.    

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This   research   is   located   below   the   left   of   the   interpretive   –   functionalism   axel   of   Burrell   and   Morgan’s  (1979)  model.  An  interpretive  approach  “emphasizes  the  essentially  subjective  nature  of  the  social   world  and  attempts  to  understand  it  primarily  from  the  frame  of  reference  of  those  being  studied”  (Hopper   &  Powell,  1985).  We  try  to  understand  the  leadership  role  and  style  from  the  frame  of  reference  of  both   management  accountants  as  business  partners  and  managers  and  executives.  In  line  with  Malmi  &  Granlund   (2009)  we  argue  that  theory  should  provide  explanations  for  those  we  study,  i.e.  management  accountants   as  business  partners  and  managers  and  executives.  The  goal  of  this  paper  is  not  statistical  generalization,  but   rather   theoretical   generalization.   We   will   focus   on   differences   between   observations   and   theory   and   therefore  aim  for  theory  development,  based  on  a  real  organizational  context  (Lukka  and  Kasanen,  1995).     3.1.2  Research  plan  

Based   on   Scapens   (1990)   the   main   steps   in   this   research   are   preparation,   collecting   evidence,   assessing   evidence,  and  identifying  and  explaining  patterns.  First,  in  the  preparation  phase  the  available  theories  were   reviewed  that  may  be  relevant  to  the  case  in  the  literature  review.  Second,  interviews  were  conducted  in   order  to  collect  evidence.  All  interviews  were  held  within  a  time  frame  of  one  and  a  half  month.  In  total,   eighteen  interviews  were  conducted,  all  of  which  have  lasted  approximately  half  an  hour.  The  interviewees   were  random  selected  in  order  to  ensure  that  the  results  of  this  study  are  independent  of  the  respondents   interviewed.  The  precondition  for  the  selection  of  the  interviewees  was  that  the  interviewees  were  either  a   management   accountant   as   business   partner   or   a   manager   or   executive   who   interact   with   one   of   the   interviewed  management  accountants.  Besides,  it  was  important  that  the  interviewees  could  express  their   view   clear   regarding   management   accountants   within   the   organization.   See   the   table   2   below   for   the   full   interview   schedule   and   red-­‐circled   functions   in   appendix   B   and   C   for   the   hierarchical   position   of   the   functions.    

 

Table  2  Interview  schedule  

Function   Date   Length  

Financial  Director   21  November  2013   45  minutes  

Marketing  Director   13  December  2013   30  minutes  

Commercial  Director   3  December  2013   30  minutes  

Commercial  Controller     11  November  2013   30  minutes  

Commercial  Controller   11  November  2013   45  minutes  

Commercial  Controller   14  November  2013   30  minutes  

Commercial  Controller   18  November  2013   30  minutes  

Commercial  Controller   21  November  2013   35  minutes  

Finance  Manager   20  November  2013   45  minutes  

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Account  Manager   14  November  2013   30  minutes  

Account  Manager   18  November  2013   30  minutes  

Account  Manager   21  November  2013   30  minutes  

Account  Manager   18  November  2013   30  minutes  

Field  Sales  Manager   29  November  2013   30  minutes  

Sales  Manager   29  November  2013   20  minutes  

Sales  Manager   4  December  2013   20  minutes  

 

The  interviews  were  based  on  the  three  key  concepts  in  this  paper;  the  role  of  the  management  accountant,   leadership  styles  and  decision-­‐making.  The  questions  about  leadership  styles  were  based  on  the  widely  used   questionnaire  developed  by  Bass.  By  doing  this,  the  construct  validity  (i.e.  a  measuring  instrument  measures   what   is   intended   to   measure)   is   guaranteed.   The   interviews   were   semi-­‐structured.   Depending   on   the   interviewees,   questions   around   these   topics   were   asked.   So,   separate   interview   guides   were   used,   depending   on   the   function   of   the   interviewees   (see   appendix   A   for   the   full   interview   guides).   All   the   interviews  were  recorded  with  the  permission  of  the  interviewee  and  transcribed.  After  the  interviews  were   transcribed,  the  interviewees  had  the  opportunity  to  adjust  the  transcribed  interview  for  any  comments.  In   this  way,  the  reliability  (i.e.  making  sure  that  the  results  are  independent  of  the  researcher)  of  this  study  is   guaranteed.   In   the   third   step   the   evidence   was   assessed.   All   interviews   were   coded   by   using   the   key   concepts  in  this  paper.    The  codes  were  used  in  order  to  analyse  the  data.  Fourth,  patterns  arising  from  the   case  were  identified  and  explained.  The  discovered  patterns  in  the  case  were  compared  with  prior  theories.    

3.2  Background  case  study  

D.E  MASTERBLENDERS  1753  is  an  international  coffee  and  tea  company,  headquartered  in  the  Netherlands.   With  annual  sales  of  €2.7  billion,  the  coffee  and  tea  products  are  available  in  more  than  45  countries  and   70%  of  the  revenue  come  from  markets  where  they  have  a  number  1  or  number  2  position.  The  business  is   organised   into   three   segments:   Retail-­‐Western   Europe,   Retail-­‐Rest   of   World   and   Out   of   Home.   Retail   sell   products  predominantly  to  supermarkets,  hypermarkets  and  international  buying  groups;  while  the  Out  of   Home  customers  range  from  multi-­‐national  organisations  to  small,  family  firms  that  are  supplied  directly,  or   indirectly   through   a   wide   network   of   distributors.   This   case   study   focuses   on   the   Out   of   Home   segment,   which  from  now  on  is  called  Douwe  Egbert  Professional  (DEP).  (http://www.demasterblenders1753.com).    

DEP   is   a   mature   organization   and   the   market   leader   in   a   declining   market.   DEP   is   a   finance-­‐sales   driven  organization.  Therefore,  finance  is  involved  in  all  kinds  of  decision-­‐making  processes.  The  strategy  of   DEP  can  be  described  as  cost-­‐driven  with  the  focus  on  adding  value  (Interview  Finance  Director).    

 

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accountants   within   the   organization   is   portrayed.   Second,   the   leadership   role   and   style   of   management   accountants   as   business   partners   is   described.   Last,   the   extent   to   which   management   accountants   as   business  partners  ensure  a  specific  commitment  to  action  of  managers  and  executives  is  described.    

4.1  The  role  of  management  accountants  within  DEP  

The   role   of   management   accountants   can   be   classified   as   the   business   partner   role.   The   business   partner   role   is   encouraged   within   this   organization   for   several   reasons.   First,   involvement   of   the   management   accountant  with  the  business  is  enhanced  because  the  management  accountant  is  partly  responsible  for  the   performance  of  the  business  unit.  Second,  there  is  no  contact  between  the  management  accountants  and   the  headquarters.  Therefore,  management  accountants  are  oriented  towards  the  business  unit.  Third,  there   are   separate   departments   for   financial   and   management   accounting   and   the   management   accounting   functions  are  decentralized.  As  a  result,  management  accountants  can  and  must  focus  on  the  business  unit   and   not   on   reporting   responsibilities.   Fourth,   the   career   of   a   management   accountant   is   made   through   several  functions.  So,  management  accountants  derive  broad  knowledge  of  several  departments.  Last,  the   financial  director  has  much  influence  in  the  preparation  of  plans  and  strategies  and  reports  to  the  general   manager  instead  to  stockholders  and  investors.    

 

The   interviewed   finance,   marketing   and   commercial   director   described   the   role   of   the   management   accountant   as   a   very   broad   role,   where   the   management   accountant   needs   to   train   and   trigger   the   corresponding   business   unit   whereby   the   business   unit   rely   on   management   accountants   to   provide   analyses   relevant   for   decision-­‐making.   The   “triggering”   of   management   accountants   as   business   partners   can  be  explained  by  constantly  motivating  managers  to  generate  awareness  for  the  overall  interests  of  the   organization.  For  example,  the  management  accountant  triggers  the  account  manager  to  incorporate  their   opinion  on  a  specific  problem  and  to  behave  in  the  overall  interests  of  the  business  unit.    

 

“The   role   of   the   management   accountant   within   this   organization   is   very   broad.   The   commercial   controller  should,  alongside  the  segment  manager,  constantly  trigger  account  managers  in  order  to   offer   the   client   a   deal   with   the   best   possible   outcome.   The   strength   of   a   good   management   accountant  as  a  business  partner  is  to  take  initiatives.”  (Financial  Director)  

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“The  management  accountant  should  educate  my  team  because  marketeers  are  often  not  financially   literate.  It  is  the  task  of  the  management  accountant  to  explain  to  marketeers  and  train  them  the   importance  of  finance  in  their  daily  decisions  and  behaviour.”  (Marketing  Director)  

 

“The   type   of   management   accountant   that   we   need   within   a   commercial   unit   would   be   less   of   a   typical   controller   and   more   of   someone   who   wants   to   achieve   growth,   but   approaches   this   from   another  perspective  than  Sales.”  (Commercial  Director)  

 

The  higher  the  position  of  the  management  accountant  in  the  hierarchy,  the  more  able  he  or  she  needs  to   be   to   develop   and   pick   up   initiatives   for   improvements   in   terms   of   growth   or   cost   reduction.   The   management   accountants   act   as   a   co-­‐pilot   and   sparring   partner   for   the   directors   and   employees   in   the   business   units,   depending   on   their   hierarchical   position   within   the   organization.   For   example,   the   commercial  controller  acts  as  a  sparring  partner  for  the  account  managers  whereas  the  senior  management   accountant   acts   as   a   co-­‐pilot   for   the   commercial   director.   The   management   accountants   give   advice   and   direction  and  tell  others  what  is  possible  en  what  is  not.  

 

The  role  of  the  management  accountants  is  partly  determined  by  their  position  within  the  organization  but   also   by   the   management   accountants   themselves.   The   organization   sets   targets   for   the   management   accountants  and  therefore  reveals  what  they  expect  from  them.  However,  because  of  their  very  broad  role,   there   is   plenty   of   space   for   the   management   accountant   to   fill   in   their   own   role.     All   the   management   accountants  interviewed,  denoted  that  their  role  is  mostly  influenced  by  whom  they  are.    

 

“The  organization  imposes  goals  and  targets  for  your  role  and  therefore  determines  the  role  of  the   management   accountant.   However,   your   own   personality   gives   value   to   your   role   and   determines   how  you  practise  your  role”.  (Commercial  Controller)  

 

Furthermore,   the   leadership   style   and   role   of   the   financial   director   influences   the   role   and   style   of   other   financials   within   the   organization.   The   current   financial   director   can   be   categorized   as   a   business   partner   whereas   the   previous   financial   director   was   more   a   traditional   accountant.   This   could   explain   why   the   business  partner  role  of  management  accountants  is  important  within  this  organization.    

 

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another   way   because   he   has   some   idea   what   the   role   of   management   accountants   should   be”.   (Commercial  Director)  

 

Both   the   management   accountants   and   account   managers   viewed   their   relationship   as   equivalent,   where   the   management   accountant   is   indispensible   for   the   account   managers.   Both   Sales   and   management   accountants   have   a   common   interest   but   also   a   conflict   of   interest.   Sales   serves   the   client   and   the   management  accountants  serve  the  business  unit  whereby  they  also  want  to  carefully  control  the  results  of   the  organization.    

 

“You  have  a  common  interest  that  sometimes  turns  into  a  conflict  of  interest.  I  serve  the  client,  not   the   management   accountant,   and   therefore   I   want   to   do   everything   in   order   to   keep   the   client   satisfied.   Together   with   the   management   accountant,   we   calculate   the   best   possible   deal   for   ultimately  the  organization.  Therefore,  I  would  describe  our  relation  as  equivalent.  I  think  it  is  very   good  that  there  are  two  different  perspectives  (Sales  and  Finance)  and  that  we  need  to  collaborate  in   order  to  ensure  the  best  possible  outcome”.  (Account  Manager)  

 

To   conclude,   the   role   of   the   management   accountant   within   DEP   can   be   defined   as   the   business   partner   role.   The   targets   set   by   the   organization,   the   role   and   background   of   the   finance   director   but   mostly   the   management   accountants   themselves   determine   this   role.   The   relationship   between   the   management   accountant  and  Sales/Marketing  is  seen  as  equal.    

4.2  The  leadership  role  and  style  of  management  accountants  as  business  partners  

4.2.1  Leadership  role  

First,  it  is  found  that  DEP  expects  from  management  accountants  as  business  partners  to  fulfil  a  leadership   role.    

“The   management   accountant   has   an   important   leadership   role   in   creating   more   support   for   the   financials  (i.e.  focus  on  the  financial  results  and  profits)  within  marketing.  Moreover,  I  assume  that   the  management  accountant  allows  the  marketeers  to  understand  why  this  is  important.  Therefore,   the  management  accountant  must  influence  the  motivation  and  perceptions  of  marketeers  about  the   importance  of  finance  in  their  daily  decisions”.  (Marketing  Director)  

 

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