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
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.
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.
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
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
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.
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.
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
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
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.
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).
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?
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?
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
‘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?
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.
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
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).
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)
“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.
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)