THE ROLE OF THE MANAGEMENT ACCOUNTANT AND ITS INFLUENCE ON THE MANAGER- MANAGEMENT ACCOUNTANT RELATIONSHIP

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THE ROLE OF THE MANAGEMENT ACCOUNTANT AND ITS

INFLUENCE ON THE MANAGER- MANAGEMENT ACCOUNTANT

RELATIONSHIP

by

LIEKE VAN DEN LANGENBERG

S1805991

MSc BA Organizational & Management Control

University of Groningen

Faculty of Economics and Business

June 2014

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ABSTRACT

The goal of this study is to enhance understanding on the linkages between three concepts: (1) the management accountant’s role, (2) the relationship between the manager and the management accountant, and (3) the interaction between the manager and management accountant. This is done by conducting five case studies in the health care sector. Different roles of management accountants were encountered and the partner role was seen to have an influence on the relationship between the manager and management accountant. With regard to the other roles, results were inconclusive. The second link that was studied was the link between the role of the management accountant and the interaction between the manager and management accountant. Again, the partner role seemed to be linked to the interaction between the manager and management accountant, but the other roles were not. The last link studied was the link between the interaction of the manager and the management accountant and the relationship between the manager and the management accountant. The findings show that there is a positive relationship between both concepts. Relationships benefit when there is more frequent interaction between the manager and the management accountant.

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PREFACE

Dear reader,

Five months of work have resulted in this Master thesis for the study Business Administration: Organizational & Management Control at the University of Groningen. I can say it has truly been a learning experience. Not only did I gain more insight on the management accountant role, but I gained insight on how to do scientific research as well. Some phases of the research, for example conducting the interviews, were very pleasurable, whereas others, for example transcribing the interviews, were a lot harder to set my mind to. However, overall I learned to work independently, how to do a case study research and how to conduct interviews, so it certainly have been useful months.

This research could not have been performed without the three organizations which have opened their doors for my research. I would like to express my gratitude to all managers and controllers who were willing to answer all my questions. I really enjoyed speaking with you all and hearing how enthusiastic you were about your jobs and also the health care sector that you are working in. You certainly inspired me to think about organizations in the health care sector as future employers. Thank you all for your valuable time and insights.

Moreover I am grateful to my first supervisor Wouter Moossdorff for providing feedback during all phases of the research process and helping me to get the most out of this thesis. Besides, I would like to thank Ben Crom for co-reading my thesis as second supervisor. Lastly, many thanks go out to the other participants of the Master thesis theme ‘Network Ties’. I’ve enjoyed exchanging views with you and benefited greatly from your feedback during the writing process.

I hope you will enjoy reading this thesis. Yours Sincerely,

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1. INTRODUCTION

A vast amount of literature has studied the different roles of management accountants in organizations, but despite this abundance of studies, there is still much debate about the current stance of the management accounting profession and the roles management accountants perform in their organizations (Burns & Vaivio, 2001; Byrne & Pierce, 2007; Järvenpää, 2007; Ten Rouwelaar & Bots, 2008). Even though there is no consensus on the current stance of the profession, most findings indicate that the management accountant is experiencing a broadening of his role (e.g. Järvenpää 2007; Byrne & Pierce, 2007; Goretzki, Strauss & Weber 2013). Due to their role change, management accountants are increasingly expected to work as financial advisors (‘business partners‘, ‘business advocates’), management accountants nowadays often have a more substantial and direct impact on managers’ decision-making than any of the other service functions within a corporation. This makes the close relationship between a manager and a management accountant unique in comparison with other working relationships (Merchant & Van der Stede, 2011).

Although a diversity of studies have explored the changing roles of management accountants, research on the relationship between the manager and management accountant remains scarce. Baldvinsdottir, Gudrun, Hagberg, Johansson, Jonäll and Marton (2011) claim they cannot identify any paper that focuses on the relationship between a manager and a management accountant. This lack of knowledge about their relationship is a problem because of the influence management accountants have on management. Management accountants have the opportunity to deliver or hold back information and to report information in a specific manner to guide managers’ decision-making (Nitzl and Hirsch, 2013). Therefore, it is important to gain more insight on this relationship.

The goal of this study is to enhance understanding on the linkages between three concepts: (1) the management accountant’s role, (2) the relationship between the manger and the management accountant, and (3) the interaction between the manager and management accountant. It does this by answering the following question:

How does the role of the management accountant influence the relationship and interaction between the manager and management accountant and how is the interaction between the manager and management accountant of influence on their relationship? Three sub-questions are posed to facilitate answering the main research question. The first sub question examines the roles of the management accountant within the organizations. These roles will be determined using the Lambert and Sponem (2012) analytical framework, which classifies the management accountant on three dimensions: (1) the management accountant’s activities or tasks, (2) the management accountants positioning in terms of authority and (3) the client of the management accountant.

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sub-2 question. It makes intuitive sense that when the management accountant moves from a role with weak authority to a partner role with higher authority in the decision-making process, there will be more interaction between the manager and management accountant. More interaction can have positive consequences for the relationship, such as the value that managers attach to the information provided by and the management accountant (Byrne & Pierce, 2007). But managers do not always seem to welcome interaction that seeks to serve a monitoring, information gathering or interfering function for the management accountants, so also negative consequences, such as conflict, can arise from more interaction (Byrne & Pierce, 2007). Previous research on the influence of interaction has shown is scarce and inconclusive, therefore it is important to do more research to gain enhance understanding on the influence of interaction between managers and management accountants.

To answer all questions, data has been collected in three health care organizations in the Netherlands. Through in depth interviews with managers and management accountants more insights on the relationship as well as their interaction was obtained. This multiple case study design allows recording interesting patterns and confirming or disconfirming them between cases (Yin, 2003). In the third chapter, the methodology of this study, including the data collection process, will be discussed more thoroughly.

From a theoretical perspective, this study is of value because it enhances understanding on the relationship between managers and management accountants. So far, studies on dyadic relationships have often been embedded in the context of intimate personal relationships or manager-subordinate settings (e.g. Ruiz, Ruiz & Martínez, 2011). Results from such studies cannot easily be translated, because the close relationship between a manager and a management accountant is unique in comparison with other working relationships (Merchant & Van der Stede, 2011). This study also deepens understanding on how the role of the management accountant is of influence on interaction between managers and management accountants. This is of importance because previous results showed contingencies as well as conflicts with regard to the role influence of management accountants on interaction (Byrne & Pierce, 2007). Furthermore, gaining insight on interaction processes is important because interaction between managers and management accountants is an essential element of the management accountant’s role in the organization (Byrne & Pierce, 2007), and insight on interaction processes is limited. For the field of practice, gaining more insight on the relationship and interaction between managers and management accountants can help improve the effectiveness of the working relationship between them both. An effective management accounting system is essential to organizations, because potential control failures have significant adverse consequences (Merchant & Van der Stede, 2011). With the help of this study’s insight, managers can take into account role influences on interaction processes and try to steer the relationships with management accountants in such a way that they obtain stronger working relationship. This is important to ultimately meet the organization’s end goals, for example in terms of profit.

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2. LITERATURE REVIEW

This chapter starts with discussing literature on the role of the management accountant and the second subsection will elaborate more on the management accountant – manager relationship and role influence on this. The third part of this chapter dives into the literature that touches the subject of interaction of management accountants, and the chapter ends with a research framework which links all concepts.

2.1 The role of the management accountant

One of the first to study the roles of management accountants were Simon, Kozmetsky, Guetzkow and Tyndall in 1955. Their article claims that management accountants have played three roles: scorekeeping, attention directing and problem solving. The difference between the roles is the focus of the management accountant. From the late 1980's onwards, literature on the roles of management accountants has been blooming (Byrne & Pierce, 2007). Scholars suggest that scorekeeping and attention directing roles typically focus on compliance reporting and control-type issues, while the problem solving role is focused on providing business-unit managers with relevant information for decision-making (Järvenpää, 2007; Lambert & Sponem, 2012). In other words, the focus on compliance is associated with the bean counter and the focus on problem-solving with the business partner. The beancounter does not interfere with the business and operations and is focused on the past, while the business partner is involved in decision making and is more focused on the future. (Granlund & Lukka, 1997). Even though there is no consensus on the current stance of the profession, most findings indicate that the management accountant is experiencing a broadening of his role. Management accountants are increasingly expected to work as financial advisors (‘business partners‘, ‘business advocates’, etc.) for management (e.g. Järvenpää 2007; Byrne & Pierce, 2007; Goretzki, Strauss & Weber 2013). However, Lambert and Sponem (2012) conclude from their multiple case-study that not all firms yearn for business partners.

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Discrete Safeguard Partner Omnipotent

Tasks and activities Discrete control of operational management behavior Socialization of operational management Facilitating decision-making Centralization of power

Authority Weak Weak Strong Strong

Client Local Headquarters Local Headquarters

TABLE 1: Four styles of management accountants. Adapted from Lambert and Sponem (2012).

So management accountants in this study are classified in one of these four roles using their distinctive characteristics on the three dimensions. The next section of this chapter elaborates on theories about manager-management accountant relationships and how the management accountant role can be of influence on this relationship.

2.2 The manager- management accountant relationship

Various studies suggest that the working relationship between management accountants and managers has to be ‘good’ (Burns & Baldvinsdottir, 2005; Lambert & Sponem, 2012). However studies which research this relationship are almost nonexistent. This paper uses Social Network Theory to classify the relationship. This theory is developed by Granovetter (1973) and entails the description of relationships (ties) between individuals. Different characterizations of these ties are possible; they can be either (1) weak, (2) strong, or (3) absent. A method to operationalize tie strength that is the method of Capaldo (2007). He used intensity, frequency and duration as indicators of tie strength. A stronger tie will have a higher degree of intensity, a high frequency long duration of contact. It depends on the environmental context if weak or strong ties are beneficial for performance. The findings of Rowley, Behrens and Krackhardt (2000) indicate that strong ties can improve performance in a relatively stable environment, while weak ties were more beneficial in a more dynamic one. The organizations which are researched in the current study are all active in the health care sector. Although the health care sector is seen as a stable industry, the working environment of the management accountant in the health care sector has become more dynamic in recent years. There has been increasing pressure on health care institutions to become more efficient and effective while maintaining volume and quality of services supplied to the public (Brignall & Modell, 2000).

A limitation of social network theory is that it only classifies relationships into either weak or strong, but does not say anything about the character of the relationship. For example, a relationship can be strong (high intensity, high frequency and long duration) but there can be a high level of conflict and consequently the relationship can be seen as negative by the manager and/or management accountant. Therefore it is important to not only use social network theory, but also incorporate other factors when describing the manager- management accountant relationship.

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5 when a manager trusts his management accountant can an accounting system work effectively (Nor-Aziah & Scapens 2007). What Nor-Aziah and Scapens (2007) encounter is that management accountants are generally not knowledgeable about operations. They are perceived as lacking understanding of operational procedures to enable them to incorporate the financial needs of operational managers into their budget allocations. This can create tensions in the relationship. Therefore, I expect to see less trust and more conflict when management accountants are in a role with lower understanding about operations (discrete or safeguarding role), and a higher level of trust and less conflict when management accountants are in a business partner or omnipotent role. So when moving to a ‘higher’ role, it is expected that the relationship between the manager and management accountant will improve.

Besides its influence on the relationship, the role of the management accountant can also be of influence on interaction between managers and management accountants, this is the subject of the next subsection. This subsection also looks at how interaction has an influence on the manager-management accountant relationship.

2.3 Interaction

In the first section of this chapter, the roles of management accountants in an organization were elaborated upon. According to Goretzki et al. (2013, p45), roles, ‘define social relationships, help define who occupies what position in those relationships and guide interaction by giving actors cognitive frames or sets of meanings to interpret the behavior of others’. So the role of the management accountant is expected to have an influence on the interaction process between managers and management accountants. This interaction between managers and management accountants is an essential element of the management accountant’s role in the organization (Byrne & Pierce, 2007).

Interaction is a broad concept and can be defined in multiple ways. What most definitions have in common is the focus on the communication in the interaction process (Lechler, 2001; Glaeser & Scheinkman, 1999). Therefore, in this research paper, interaction and communication will be used interchangeably when describing interaction between the two parties involved. In his article from 2001, Lechler studies the quality of team communication, and claims that this quality depends one four different dimensions: (1) frequency, (2) formalization, (3) structure and (4) openness of the information exchange. The frequency refers to how often and extensively the manager and management accountant communicate and formalization relates to how much preparation is required before communication can occur (Katz, 1982). Furthermore the structure of communication depends on whether direct communication between both parties is possible or if the information exchange occurs through mediators. And lastly, openness refers to how openly and sincerely information is shared (Lechler, 2001). In this paper, the four dimensions of Lechler will be used to determine the quality of interaction between a manager and management accountant.

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6 managers attached to it. However, managers do not always seem to welcome interaction that seeks to serve a monitoring, information gathering or interfering function for the management accountants. So also negative consequences, such as conflict, can arise from more interaction.

2.4 Research Framework

The goal of this study is to fill the gap in the literature on how the role of the management accountant can be linked to the relationship between a manager and a management accountant and the interaction between them both. It answers the following research question: How does the role of the management accountant influence the relationship and interaction between the manager and management accountant and how is the interaction between the manager and management accountant of influence on their relationship? The research question is visually depicted in in FIGURE 1. The role of the management accountant has an influence on his working relationship with the manager. For example, whether the management accountant has the headquarters of local business unit manager as primary client is of influence how the both will work together. This makes intuitive sense.

A link is also expected between the management accountant’s role and his interaction with the manager. It is expected that roles with higher authority (partner or omnipotent) will require more and a different form of interaction between the manager and management accountant. The management accountant has to be more aware of the daily business of operations, and this requires a more intensive interaction process between manager and management accountant.

Lastly, this research will focus on the link between interaction and the relationship between the manager and management accountant. Previous research has been inconclusive about this relationship. Interaction can either improve the working relationship or be a source of conflict (Byrne & Pierce, 2007).

FIGURE 1: Research Framework

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3. METHODOLOGY

3.1 Research Design

The aim of this study is to develop theory about the relationship between management accountants and managers. The research at hand adopts a qualitative research approach to do so. This approach is chosen because there is not much knowledge about the relationship between managers and management accountants. Qualitative analysis is well suited for understanding phenomena within their context, uncovering links among concepts and behaviors, and generating and refining theory (Miles & Huberman, 1994).

3.2 Data sample

To keep data as comparable as possible, the three organizations in this study are all companies with more than 700 fte employees and active in the health care industry in the Netherlands. Management accounting in the health care sector is characterized by multiple stakeholders with complex, heterogeneous, intangible services delivered in circumstances of high uncertainty about means–ends relationships, and can be especially difﬁcult (Brignall & Modell, 2000). This task has been further complicated by the fact that in recent years many public services have come under pressure to become more efﬁcient and effective, while maintaining the volume and quality of services supplied to the public (Brignall & Modell, 2000). This has put pressure on the management accountant role, and presumably the manager– management accountant relationship. It is therefore an interesting sector for research on the management accountant’s role and the manager-management accountant relationship.

In each of the three companies, in depth interviews took place with a manager as well as a management accountant. Management accountant is not a job title that is often used in the Netherlands, so it is important to clarify what is meant by this. Following Verstegen, De Loo, Mol, Slagter and Geerkens (2007, p11), the management accountant is defined as follows:

‘A management accountant supports and advises [the management of] an organization in realizing their economic, public and/or financial goals. Support is interpreted in terms of the design and maintenance of management control and accounting information systems, and the procurement and distribution of information.’

In the Netherlands, this job description will often coincide with the job description of ‘controller’, but a comparable job can also have other titles. To be sure that our interviewees could be classified as management accountants, they were asked beforehand if their job description matches the one we use to define a management accountant.

3.3 Data collection

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8 The first part of the interview was aimed at grasping the background of the organization as well as the role of the respondent in the organization. The questions of the second part of the interview were developed according to the framework of Lambert and Sponem (2012) in order to classify the management account in a role. Their framework classifies the management accountant using 3 dimensions: (1) the management accountant’s activities or tasks, (2) the management accountants positioning in terms of authority and (3) the client of the management accountant. Multiple questions were asked regarding to these dimensions to get a comprehensive idea of the role of the management accountant.

The third part of the interview guide examines interaction as well as the relationship between the manager and management accountant. These two concepts are taken together in one interview part because they relate very closely and sometimes overlap. For example Lechler’s theory as well as Social Network Theory uses ‘frequency of contact’ to make the classification. Interaction will be measured using the dimensions of Lechler (2001) which are (1) frequency, (2) formalization, (3) structure and (4) openness of the information exchange. The frequency refers to how often the manager and management accountant communicate, this was measured as the frequency of scheduled meetings between the manager and management accountant. The level of formalization relates to how much preparation is required before communication can occur (Katz, 1982). Furthermore the structure of communication depends on whether direct communication between both parties is possible or if the information exchange occurs through mediators. And lastly, openness refers to how openly and sincerely information is shared (Lechler, 2001). Open end questions are asked about the communication process, to be able to scale the communication process on the four dimensions.

To classify the relationship as either a weak or strong tie, Social Network Theory was used. Answers on intensity, frequency and duration of the relationship between the manager and manager define if the tie is either weak or strong. The intensity is measured as the amount of contact moments a manager and management accountant need to have between their scheduled meetings. With respect to the frequency, according to Granovetter (1973) weak ties are those who meet more than once per year and less than twice per week, whereas strong ties are those who interact at least twice per week. For the specific manager-management accountant relationship, the cutoff point is adapted, because we will measure frequency by using the frequency of scheduled meetings, and an average of at least one scheduled meeting per week seems more appropriate to use as strong tie. Parties with weak ties will have scheduled meetings less than once a week. The relationships duration is measured as the overall time-span between the start of their relationship until now (Capaldo, 2007).

To gather further insight on how the respondents perceive their working relationship, open end questions are asked about strong as well as weak points of the relationship. The interview ends with asking the respondents if and why they think their role is of influence on their relationship and/or interaction processes. In this way, all concepts are linked by the respondent, and is linking by interpretation, which is subject to researcher’s bias, not needed.

3.4 Data analysis

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9 easier to analyze data and find patterns in the individual case studies. For each manager-management accountant couple, a separate case study was built, including all concepts. As is typical in exploratory research, after the individual case studies were built, comparisons across cases were made to reveal recurring patterns, as well as for unique aspects for each case. Recurring patterns were only sought for after all five case studies were built around each interview couple, to maintain the independence of the replication logic (Eisenhardt, 1989).

3.5 Issues of reliability and validity

To manage the quality of this research, some issues of reliability and validity were dealt with. To ensure instrument reliability, some questions were asked twice in a different way, and a process of triangulation also took place. Organizational charts and field notes on informal talks with other employees (e.g. secretaries, director) were used to further enhance understanding of the positioning of the management accountant in the organization and the manager-management accountant relationship.

To limit researcher’s bias, a process of standardization was adapted. All interviewees were sent the same information before the interview, and the interview took place using an interview guide. Furthermore, a code book was used to code the interviews and interpret the data. To increase reliability, after transcribing, interviews were send back to the respondents to enhance the reliability of the data interpretation. To limit respondents’ bias, interviews with the manager- management accountant couple were held separately. In this way they answered questions independently from each other and results become more reliable.

Internal validity of the study is established in this paper by linking different concepts in interview questions. Furthermore, in the analysis, quotes of interviewees were relied upon as much as possible instead of a more interpretative way of using the interview data. Also, before the interview took place, the respondents were asked if they matched a certain job description to make sure the interviewees could be classified as manager or management accountant as defined in this study. Regarding external validity, as with most case studies, the goal of this paper is not statistical generalization, but theoretical generalization. The focus is on differences between the data and existing theory and it therefore aims for theory development, based on a real organizational context (Eisenhardt, 1989).

4. RESULTS

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4.1 Case 1 – Organization A

This case describes the relationship between the facility manager and a management accountant in organization A. The management accountant has multiple managers to serve, but the facility department is one of the bigger departments he supports.

4.1.1 The role of the management accountant

The management accountant indicates that his main client is the local business unit manager: When problems arise, I first have contact with the manager, and perhaps also with other members of that department if necessary. Eventually we arise at an advice we give to the director, a total package from me and the manager together.

As the results above indicate, the tasks of this management accountant are directed towards the facilitating of decision-making for the manager. Although the management accountant remarks that this has not always been the case:

I think my tasks are about 40% advice and 60% control tasks. This is changing rapidly to more advice tasks in the last couple of years. To cope with changes in health care regulations, responsibilities are shifting in the organization. This leads to the need for a more advising role of the management accountant.

Furthermore the management accountant has a high influence on the decision-making process. This is shown by the following quote of the manager:

The management accountant certainly has an influence on my work. When I ask him for advice, I don’t ignore it, but I take it very seriously. On all business cases, the management accountant and I work together.

So with the local manager as client, a high influence on decision-making and tasks that facilitate the manager with decision making, the management accountant can be described as a partner management accountant. The management accountant links this role to his relationship with his manager:

When you have to provide more advice to the manager, you will have a totally different cooperation than when you just meet to discuss the quarterly numbers. Because with tight budgets, […] you have to have some serious conversations about those. While with advice type of problems, you work together with the manager to get to a solution. This is more positive. It shouldn’t have to necessarily be that way, a more negative feeling with control and more positive with advice, but in practice it sometimes is.

So he thinks that his partner role has a positive influence on his relationship with the manager. 4.1.2 The relationship between manager and management accountant

The frequency of meetings between the manager and management accountant varies, but on average they meet once a week. In between meetings they have frequent contact, almost every day, via e-mail, telephone or quick face-to-face moments, so this is quite an intense relationship. The overall time span that they have worked together is about 4 years. The management accountant says the following about this:

We have a good relationship that has developed over time. As you do things for your manager that work out well, the relationship grows. You should not betray the trust they put in you.

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11 It’s important to have empathy for each other’s situation and respect each other’s function. As a controller, you can be purely about the numbers, but is important that you have some kind of understanding about the daily activities. You also have to trust each other and do an extra step for each other when necessary. Only then you can speak of a good working relationship.

So concluding, the relationship between the manager and management accountant can be characterized as strong, and good. Trust is seen as an important factor in the relationship. And as indicated in the previous section, both the manager and management accountant believe that the partner-role of the management accountant has had a positive influence on the relationship. 4.1.3 The interaction between manager and management accountant

As mentioned earlier, the contact between the manager and management accountant is frequent. The management accountant says the following about this:

That we meet frequently has to do with the fact that there are a lot of interesting questions and projects in his departments at the moment. It also has to do with the background of the manager. A manager with a more financial background has fewer questions about the numbers.

So the background of the manager is explanatory according to him. But the manager also thinks that the frequency of the interaction is a consequence of the role that the management accountant has:

To give sound advice, the controller has to have insight into the daily operations so that they are not only cold numbers that he analyses from behind his desk. The higher frequency of meetings ensures that he has a better understanding of what I do.

Furthermore, the meetings can be characterized as informal, as shown by the following comment of the manager:

We have contact via e-mail or phone, but preferably it is face to face contact. His office is on the ground floor; so on my way in in the morning, I just stick my head around the door and ask if he has some time for me, perhaps later that day.

The meetings between the manager and management accountant can include other lower level employees, but they are mostly one on one. They can be characterized as having a high level of openness, as is indicated by the manager:

I can tell the management accountant everything honestly. That has probably also to do with the underlying relation between him and me. We are both quite open and have the same style of working with the budget.

So the interaction between the manager and management accountant can be characterized as frequent, informal, mostly one-on-one and open. Furthermore, the management account also links the interaction process to the relationship:

It’s positive to have a lot of [face to face] interaction, also out of the work sphere. It is positive when the controller is not only consulted for advice, but is also asked things from an informal sphere. For example, when he is asked to join on a departmental outing. This is beneficial for the relationship.

So the interaction, also outside of the working environment, is seen to have a positive influence on the relationship between the manager and management accountant.

4.1.4 Case Summary

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12 he is classified as a partner management accountant. Due to the fact that the partner role is associated with the more ‘positive’ advising tasks, this role has a positive influence on the relationship between the manager and management accountant. Furthermore this role asks the management accountant to dive deeper into the daily operations. Therefore a higher level of interaction between the manager and management accountant is necessary.

The tie between the manager and management accountant can be classified as strong and good; both parties are satisfied about their working relationship. This has again to do with the higher understanding that the partner management accountant has over daily operations. Besides that, it is also very important for both manager and manager to trust and respect each other and both parties also indicates that the relationship has grown stronger over the last four years of working together.

The interaction between the manager and management accountant can be characterized as informal and is mostly face-to-face. Furthermore, no or not much preparation is needed before interaction can take place and the information exchange can be characterized as being honest and open. This is caused by the fact that both parties trust each other. The high amount of interaction is thought to have a positive influence on their relationship. Especially when there are talks on a personal level or the management accountant is also included in not-work related events, this is experienced as positive.

4.2 Case 2 – Organization A

The second case study in organization A describes a health care management accountant and a manager of a separate health care business unit. Recently, many structural changes have been taken place in this organization. Business units have merged to cut costs, but maybe more important, the management accountants are placed in a separate control unit. The case study shows the influence of these changes on the manager and management accountant.

The management accountant perceives herself as being at the service of the local manager. But it is important to note that organization A has just instituted changes with regard to the place of the management accountant function in the organization. Whereas the management accountant first was a part of the department, recently, the management accountant has been placed in a central control unit together with the rest of her management control colleagues. The manager is critical about this new position of the controller:

First she was our controller and part of our department, but now she is stationed in a central control group. Even though she still is the controller of division, due to the structure change, I expect that she will give more priority to headquarters. Although I don’t see this happening right this instance, she already feels further away.

With regard to authority in decision making, the management accountant has limited authority and is not involved in issues managers deem strategic. This is shown by the quote of the manager:

The manager is the one responsible for the results and strategy of the division. The management accountant should not be saying ‘this and this is happened, and we advise to follow this and this direction’. That is the role of the manager.

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13 We spend a great amount on time on generating the right information for managers. We are not enough involved in advising managers, our job is really about the numbers at this moment.

This matches the tasks of the discrete management accountant. So from the results it is clear that this management accountant has adopted a discrete management accountant role. When asked if she thinks that her role is of influence on the working relationship with the manager, the management accountants comment the following:

I don’t think it is really of influence. I think this is more dependent on the background of the manager. For example, some managers have a background as health care employee, and don’t have any financial knowledge. Then you will have a different kind of relationship. So she does not think that her role has an influence on their working relationship, neither does she think that her role influences interaction between them:

Of course you have to know what you need from each other and communicate. But our interaction… no, I don’t think my role is really relevant.

So the discrete management accountant role does not seem to have an influence on either the relationship or interaction processes between the manager and management accountant. 4.2.2 The relationship between manager and management accountant

With the regard to the intensity and frequency of contact, the management accountant says the following:

We have monthly scheduled face-to-face meetings, and we also have contact over e-mail of phone. It’s possible for us to just walk into each other’s office, which makes it easy.

So the manager and management accountant have frequent small interactions to discuss things, which are supported by the fact that they work near t each other. Scheduled meetings take place around once a month, which is quite low. They have worked together for about one and a half year, but they both indicate that recently, the development of their relationship has suffered from changes in the departmental and organizational structures.

All the stuff that the reorganizing brings with it hinders the relationship and time you have to develop it together (manager).

Combining all these results, we can characterize the relationship as more weak than strong. Furthermore, both parties are positive about their relationship, although the manager makes a critical remark:

She is very loyal, informal and willing to help me with things. We can find each other easily if there are any problems. She is content focused and has an eye for details. But what I would like for her is to be in a more advising and investigating role, to be less involved in the hard-core number crunching.

This problem of the manager wanting more, and the management accountant not being able to deliver, has caused friction between them both, as is showed by the quote of the management accountant:

We had a kind of bumpy relationship at first. He wanted more information on the lower level to help employees understand the business, which is essentially a good thing, but I could not deliver everything he wanted from me. Therefore we sometimes had a little crash in the beginning.

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14 4.2.3 The interaction between manager and management accountant

With regard to the formalization and formality of their interaction, these are low. The management accountant says the following about this:

There is a low threshold to contact me. I am available most of the time, and because we are situated at the same location, we can also do a quick face to face contact.

Concerning the structure of the meetings, the management accountant indicates the following: Interaction between me and the managers is most often one on one, but it can also be that other people are involved. For example when I join the meeting of the management team, or when there is some specific case where also the team leader is involved.

So although sometimes other people are involved in the interaction process, most of the time they have bilateral meetings. The last indicator of interaction refers to openness of interaction. Both manager and management accountant say that communication is very sincere, but that this is also a necessary condition for the manager-management accountant relationship to function.

We have to share information honestly en openly, because in the end, together you have to make sense out of the numbers, and act on those numbers. It is really important that the communication with the management accountant is good, otherwise you will have a hard time in your job (manager).

The link between interaction and the relationship of the manager and the management accountant is not directly mentioned by the manager or management accountant, but the manager remarks the following:

Ideally, I would have her in the room next to me so we can interact regularly. Unfortunately, she has a number of managers to support and only a limited amount of time. I would like her to have more time to provide me with more detailed information. This quote shows the intention of the manager to have more frequent interaction with the management accountant. So concluding it can be stated that the interaction between the both is informal and can be face to face or take place over phone or via e-mail. Furthermore, it has a simple structure, where no or not much preparation is needed beforehand, and the information exchange can be characterized as being open. The manager would like to have it if the management accountant would have more time to prepare more detailed information for him. 4.2.4 Case Summary

The management accountant in this case study has the manager as her prime client, a low authority over decision-making and mostly number crunching tasks. Therefore she is classified as a discrete management accountant. Both manager and management accountant do not think that this role is of influence on their relationship. The relationship between her and the manager can be characterized as being a weak tie, but relatively good. There are some underlying frustrations regarding to both the role the management accountant has and the information that the management accountant delivers. The manager would like to see the management accountant to be even more involved in the number crunching to be able to steer at lower levels, but the management accountant cannot deliver this due to time pressure. On the other hand, he also wants her to be less involved in the numbers and to take a more advising role. For her to not only present the numbers, but also help interpreting them and building advice based on them.

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15 being open. Again, both manager and management accountant do not feel as if their interaction processes are of influence on their relationship.

4.3 Case 3 – Organization B

The third case describes the role of the management accountant of two districts and his relationship with one of his district managers.

The management accountant in this case study has responsibilities towards managers as well as the board of directors, he formulates this as follows:

On the one hand I have a very clear working relationship with the manager, I support him […] on the other hand I have to be able to take my distance. Because in the end, I have to report objectively to the board of directors, so they can assess the work of the manager.

When the manager is asked about the position of the controller, he mentions that the controller has a high influence on his work:

He is certainly of influence on my work. The management accountant is one of my most important colleagues. The work that we do is collegial and equal.

From this quote we can derive that the manager has an influence on the decision making process. Furthermore this equal relationship is something that is connected in the literature to the partner management accountant role (Lambert & Sponem, 2012). The tasks of the management accountant also match the partner role, as is shown by this quote of the management accountant:

I think that my tasks are more advising compared to controlling. The financial department and my management accountant colleagues are the ones who do most of the number crunching. I think my role is around 70% advising the managers.

So although the management accountant also clearly feels that he has responsibilities towards the board of directors, his tasks consist for a great deal of advising the manager and his influence on the decision-making process is high. Therefore this management accountant is classified as the partner management accountant.

Both manager and management accountant acknowledge that the role of the management accountant has an influence on their relationship. According to the manager, the relationship has deepened due to the more advising role of the management accountant:

You have a different kind of relationship when you both reason from your own area of interest, compared to when you have a complementary collaborative relationship. We are in the latter situation nowadays. We do more things together instead of thinking ‘this is yours and this is mine’. Cooperation between us is very good.

The management accountant also acknowledges that he has gained more knowledge about the organization and operations. They both also indicate a link between the management accountant role and their interaction process:

Contact between us is intensive. His role requires him to also work with the employees just beneath me in the hierarchy, the cluster managers. We talk about that, it’s important that we stay in touch and keep having contact about that. (manager)

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16 manager can reason from a shared understanding instead of two separate mindsets. To create and maintain this deeper insight, it is important that the manager and management accountant have frequent contact.

4.3.2 The relationship between manager and management accountant

The manager and management accountant meet very frequently. As the management accountant comments:

We have our regularly monthly meetings, but also triangle meetings with a cluster managers, a district meeting with all district managers, and also every quarter with the board of directors, a meeting with the service team. So I see him in a lot of different settings. I see him at least once a week, but there are weeks when we meet up to five times. In between meetings there is also frequent contact, mostly over e-mail or phone, but sometimes also face to face, so the relationship can be characterized as intense. The overall time span that they have worked together is about 6 years; the last five years really one-on-one in the manager-management accountant relationship. So taking this high frequency, intensity and duration of the relationship into account, it can be characterized as a strong tie.

Both parties are positive about the relationship, when both are asked about improvements for the relationship, comments are as the following:

We have our contact moments and we have the meetings that we need to have. I cannot think of any improvements. For me, everything is organized in such a way that I can do my job optimally, and I think that the manager can also function optimally in the current situation (management accountant).

The manager mentions some key components of the relationship:

Collegial, open, sharp if necessary. A lot of trust in each other’s knowledge and expertise. There is a high level of professionalism in our work, and that’s the key. It’s nice to have an amicable relationship, but that the content is good, that’s the most important.

So the manager is of opinion that professionalism and quality comes first, and an amicable relationship comes only second. Furthermore, he mentions trust and openness as being important. This matches with what the management accountant mentions:

We both respect each other’s role, are both open to each other’s opinion and knowledge. We complete each other. He is really strong in improving the quality of the health care, and for the financial part, he leans on me.

All in all, this relationship between the manager and management accountant can be characterized as strong and very good.

4.4.3 The interaction between manager and management accountant

As mentioned in the relationship section, there are frequently scheduled meetings; the manager and management accountant meet each other at least once a week. And although they meet each other in various situations, both manager and management accountant indicate that their contact is mostly one on one:

We have different type of meetings, but most of our meetings are definitely one on one. Furthermore, the relationship can be characterized as quite informal; there is not much preparation needed before contact can take place. Assuring that the management accountant is approachable is a conscious choice of the management control department:

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17 knowledge about what happens in the workplace, but you are more approachable. The managers can see you and just walk-in. I experience this as positive.

By working at the same location as the manager, the management accountant makes himself more easy approachable for the manager. Lastly, concerning the openness of the relationship, the manager says the following:

I share information and ideas always easily and openly with the management accountant. This is possible because we both have the same scope: we do not only want what is the best for our district, but also both think about what is best for the entire organization.

So the interaction can be characterized as being open. As seen in the first section of this case study, the manager and management accountant indicate that the partner role of the management accountant requires interaction to take place more frequently. With respect to the link between interaction and the relationship between the manager and management accountant, they both indicate that they do not see a direct influence.

4.4.4 Case Summary

The management accountant in this case study has a high authority over decision-making and is involved in decision-making facilitating tasks. Therefore he is classified as a partner management accountant, even though he sees the manager as the board of directors both as his main clients. Due to the more advising role of the partner management accountant, the relationship has deepened. This is due to the fact that the manager and the partner management accountant reason from a more shared mindset instead of their both separate ideas. They both also link the management accountant role to their interaction process. The advising role of the manager requires him to gain more insight in the daily operations. Therefore a higher level of interaction is necessary.

The relationship between the manager and management accountant can be classified as strong and very good; both parties are satisfied about their working relationship. Apart from each other, they think they function optimally in the current situation and cannot think of any direct improvements. Their high level of professionalism, combined with respect for and trust in each other’s knowledge and expertise are explanations for their well-functioning relationship.

The interaction between the manager and management accountant can be characterized as informal and is mostly face-to-face. Furthermore, no extensive preparation is needed before interaction can take place. The management accountant works one day a week at the location of the manager, which makes it easy for the manager to keep in contact with him on an informal basis. Furthermore the information exchange can be characterized as being open. Both parties feel as they can share everything honestly, because they have the same scope of interest. The frequency of interaction between the manager and the management accountant is high. But they do not link their interaction directly to their relationship.

4.4 Case 4 – Organization B

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18 4.4.1 The role of the management accountant

The main client of this management accountant is the board of directors. He describes himself as follows:

I am the navigator for the entire organization on policy related to financial or economic matters. I am the sparring partner for the board of directors on those subjects.

So he works at the same hierarchical level as the board of direction, in a high position in the organization. His tasks entail the managing of the entire management control department, with amongst others 6 other (lower level) management accountants, and to keep track of budgets and financial matters which are organization-wide. With regard to his contact with managers, the management accountant mentions the following:

What is important is that we tackle problems as sharply as possible. Make sure that the managers have to embrace it and do something about it. In this way we manage change. So this indicates that he is not there to support the managers, but that managers become providers of the figures on which the management accountant bases his managerial decisions. The managers have to follow these decisions. This is also in line with what the manager mentions about the tasks of the management accountant:

He guards the organization-wide financial and economic policy. He supports the board of directors and also has some executive tasks. For example, in a process of reorganization, he will take an important role in discussing this with the board of directors as well as all the managers.

As can be inferred from the quotes above, as well as the following quote by the management accountant, the management accountant has a high authority in decision making:

When a business case is set up, my department and I have to provide a ‘go’ or ‘no go’. My advice is very important. Also because we are not just the financial control, but a wider management control department. All things are connected together.

So with tasks that enable him to control costs across the entire organization, loyalty to head office and a high authority over decision-making, this management accountant classifies as an omnipotent management accountant.

The manager and management account have fortnightly scheduled meetings, and sometimes they meet each other in other settings about information- or financial policy. Other communication between meetings is scarce, as the quote of the manager indicates:

When there something has happened and it is urgent, we send each other a quick message or get in touch over the phone, but most things are saved up for our fortnightly scheduled meetings.

So the relationship can be characterized as having a low intensity. With regard to the duration of the relationship, they have worked together for 2 years now, as long as the manager has been an employee of the organization. Taking all these factors into account, the tie between the manager and management accountant can be characterized as weak. The manager says the following about the relationship:

Our relationship is good. I find it pleasurable to work with someone who encounters problems in the same way, from the same [educational] background. We respect each other’s work and expertise.

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19 That we work well together also has to do with her substantial knowledge of matters. But furthermore, it’s important that you also can talk about things which are in the private sphere, for example talk about the kids. Then you know that you are both willing to do that extra step for one another. […] Of course this also has to do with trust. There should be trust between the manager and management accountant.

With regard to the role of the management accountant and the influence on their relationship, both parties don’t seem to think that this is of influence.

4.4.3 The interaction between manager and management accountant

As mentioned in the section above, the contact between the manager and management accountant is at least fortnightly. Meetings have to be planned well beforehand due to the busy schedule of the management accountant. But the contact itself is quite informal, as the management accountant indicates:

Our interaction is formal in the sense that we are professional and both know which goals we have to reach. But we can talk about informal things as well, so in that sense you could call it informal as well.

Contact between both parties is direct and often one-on-one. With regard to the openness, it can be characterized as very open, for which the manager the following reason provides:

I can always share everything honestly with the management accountant or management control. But maybe I am in a unique situation in that sense. Before I started this function, I was a (management) accountant myself. I’ve been on the other side of the table.

So the interaction between the management accountants is regularly, meetings have to be scheduled beforehand and contact between both parties is quite informal. Due to the fact that the manager has an accountancy background herself enables her to share everything honestly with the management accountant.

Both manager and management accountant do not mention explicitly that they feel their interaction process is related to the role of the management accountant. What they do mention is that their relationship is ‘unique’ in regard to the other manager-management accountant relationships that can be found in the organization, due to the fact that they both manage a financial department. The management accountant states the following:

Because our organization has become really big, the decision has been made out of governance reasons to split the operational financial and administrative tasks from the management control function. She [the manager] manages the departments which have financial and administrative operational tasks, and I manage the management control department. We have to have close contact because our departments work together on for example the preparation of the annual account.

So their interaction is directed towards ensuring that cooperation between their departments goes fluently. The way they interact is seen to have an influence on their working relationship. As both indicate, they had some struggles in the beginning in how to do so, but now they form a united front:

In the beginning, we sometimes had employees who said, ‘but the manager wants A, and the management accountant says B’. That is something we want to prevent. Therefore nowadays, we communicate very clearly, and when we disagree, we solve this inside close doors, so that we form a united front to both our employees.

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20 4.4.4 Case Summary

With the headquarters as primary client, a high level of authority and tasks directed to control cost across the entire organization, the management accountant classifies as an omnipotent management accountant. The tie between the manager and management accountant can be classified as weak, but good; both parties are satisfied about their working relationship. This has again to do with the high financial expertise of the manager, and the fact that they both have the same (educational) background as accountant. Furthermore, respect for each other’s opinion and trust in that both will do an extra step if necessary are also important factors which ensure a good working relationship.

The interaction between the manager and management accountant can be characterized as informal and takes place via face-to-face meetings. Urgent problems are tackled via e-mail or phone. Fortnightly meetings are scheduled, which is important because due to the busy schedule of the management accountant, it is hard to schedule a last minute meeting. Both manager and management accountant do not mention explicitly that they feel their interaction process is related to the role of the management accountant. They do not feel as if the role of the management accountant is of influence on their relationship. Although they do mention that their relationship is ‘unique’ due to the fact that although there are quite big differences in hierarchical level of them both, they still have to cooperate quite often. This is caused by the fact that they both manage financial departments. Because those departments are tightly linked, the manager and management accountant must form a united front. Therefore it is important that they have a clear line of interaction.

4.5 Case 5 – Organization C

This fifth case describes the relationship between the overarching manager of all support departments (e.g. HRM, marketing, management control etcetera) and the head of the management control department, the lead management accountant. The management control department, and therefore the management accountant, falls within the operations that the manager is responsible for. The manager is positioned higher in the hierarchy than the management accountant.

The client of the management accountant is his executive manager, who is part of the central management team. So his main client is the headquarters and not a local business unit manager. The management accountant explains:

I rapport to my executive, who is a member of the management team. But I also advise and rapport to other members of the management team, or directly the board of directors, but this is rarely.

With regard to the tasks of the management accountant, the manager says the following:

He is the manager of the lower level management accountants. He is my direct contact line for those management accountants, who have the traditional ‘bean counter’ tasks, not he. It is his role to support me and the management team on the financial matters, keeping the strategic frameworks of our organization in mind.

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21 The first part of my tasks is managing the control department; the second part is more financially oriented: Advising, analyzing and the signaling of developments, deviations or differences, which are on the organization-wide level. My tasks are focused on the organization-wide level, with some specific areas of attention as financing, treasury and taxes.

It is clear that these tasks are focused on the organization-wide level, and not the local business units. Furthermore, the management accountant also indicates that his tasks are mostly advising tasks. With regard to the influence of the management accountant the manager remarks that the management accountant has an influence on decision-making and that he expects that this influence will grow in the upcoming years.

Financial information becomes more important due to the changes with regard to the financing of our organization. Nowadays the management accountant in the health care sector is a different kind of management accountant than you will find in the manufacturing sector for example. There, management accountants are more eager and management accounting information is used more intensively. In the health care sector, we haven’t made this next step yet. We are not used to deal with all the information that a management accountant can provide us with. But this will become more and more important

The manager clearly states that the management accountant is important:

The management accountant is my colleague with regard to the budget, and together we have the shared responsibility for the financial administration and the annual account. So we can conclude that the manager has some authority over decision making, which is likely to grow in the next years. His tasks are mostly advising, but directed at the organizational wide-level, which matches the omnipotent management accountant. With his responsibility clearly directed towards the headquarters, this management accountant can be classified as having the omnipotent management accountant role.

Meetings between the manager and management accountant are scheduled frequently. A regular meeting as well as a meeting with all other heads of departments are both planned every fortnight. In between there can be meetings about specific subjects. The duration of their relationship is around 3,5 years, as long as the management accountant has been involved in the organization. In between meetings, there is frequent contact. The management accountant indicates the following:

Although the manager has a busy schedule, I can always reach him. We have contact over the e-mail, or phone. We have contact intensively, this is necessary because of the high amount of changes in the health care sector. We have to keep informing each other about what is happening.

So these frequent contact moments are important according to the management accountant. Combining this with the long duration and weekly meetings, the tie between the manager and management accountant can be characterized as strong. Because of the important role of the management accountant in the organization, it is important that the relationship between the manager and management accountant is good, as is remarked by the manager:

THE ROLE OF THE MANAGEMENT ACCOUNTANT AND ITS INFLUENCE ON THE MANAGER- MANAGEMENT ACCOUNTANT RELATIONSHIP