Management Accounting and a Strategy As Practice perspective

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1. Introduction

In the 1980s strategists were talking in terms of strategic management. This had evolved from financial planning in the 1950s, through long range planning in the 1960s, to strategic planning in the 1970s and arrived at strategic management in the 1980s (Nixon and Burns, 2012). There had been a shift towards a focus on external factors and their potential impact on the firm. Management accounting, however, had not kept up. In the 1980s management accounting was criticised for being internal, short term, historic, predisposed to financially oriented information, and operationally focused (Johnson and Kaplan 1987; Bromwich and Bhimani 1989). The management information provided was said to be of little use for strategic decision making. The term strategic management accounting (SMA) was introduced by Simmonds (1981) which suggested that management accounting needed to pay more attention to external factors, specifically competitors. A decade later books appeared titled Strategic Management Accounting (Ward 1992; Smith 1997; Hoque 2003). Research papers were published investigating the usage, or non-usage, of SMA techniques? Papers reported on the techniques used in different sectors such as manufacturing, service and state-owned organisations; different countries, such as Bangladesh, Malaysia, the UK and USA; and specific instances, such as new product development. 

    There has been debate about whether a practice of strategic management accounting exits, or whether it is ‘but a figment of academics’ imagination’ (Lord 1996, p.364). Do accountants participate in the strategic management process? Lord (1996) suggests that they don’t. Dixon (1998, p.276) investigated a case where ‘the management accountant had always been a strategist ...’. Some years after Simmonds first used the term Langfield-Smith (2008) determined that SMA was little used in organisations and with limited appreciation of its meaning. More recently Jorgensen and Messner (2010), Nixon et al. (2011), and Pitcher (2015) found that although management accounting was supporting strategic decisions, SMA was not a term that occurred in the communication lexicon within the case organisations being studied. The apparent paradox of strategic management accounting was discussed by Nixon and Burns (2012, p.229) in the context of the evolution of strategic management literature, and suggested that SMA has a future if the bundle of techniques that usually constitute SMA are ‘integrated into a coherent, cohesive framework to compliment strategic management’. 

    Research in to how management accounting is supporting the strategic management process, irrespective of whether the techniques being used would be regarded as conventional or strategic management accounting techniques, has been undertaken (Pitcher 2015), and as previous research has reported, management accounting does indeed support the strategic management process. Also, authors such as Ahrens and Chapman (2005), Hansen and Mouritsen (2005), Tilman and Goddard (2008), Skærbæk and Tryggestad (2010), Fauré and Rouleau (2011), Carlsson-Wall et al. (2015) have published examples of management accounting research that could be said to be using a strategy as practice perspective. The concept of strategy as practice views strategy as something that people ‘do’, rather than something that an organisation ‘has’ (Whittington 1996). The use of the word strategise is used to indicate the dynamic nature and practical activities that take place within the strategic management process (Whittington et al.  2006; Jarzabkowski 2005). It could be argued therefore, that rather than categorising management accounting techniques as conventional or strategic, it would be more helpful to practitioners to focus on how management accounting can, and is being used, to support the strategic management process.

    This article briefly discusses the development of strategic management accounting and relates the work of the accountant to the 3Ps framework of strategy as practice (Whittington, 1996). Its purpose is to provide some background and context to studying how management accounting can support the strategic management process.