The impact of ICT developments on the role of the management accountant a comparative study

Marcel van Wijk Lindorff

Arco van de Ven (corresponding author) TiasNimbas Business School Tilburg University Mail : a.vandeven@tiasnimbas.edu

Ivo De Loo Nyenrode Business University

Work in progress, please do not quote Februari 2011

The impact of ICT developments on the role of the management accountant a comparative study

Abstract This study was designed to assess the impact of ICT-developments in the control system of an organization on the role of management accountants. The existing literature shows that there is conflicting evidence on the impact ICT has. We conducted a longitudinal case study at two sales organizations of an international manufacturing organization using questionnaires and face-to-face interviews with the management accountants involved to contribute to this literature. In one organization, the implementation actually occurred. In the other, it was postponed. The study focuses on three aspects of the role of management accountants before and after the (postponed) implementation of the ERP-system. Firstly, we analyze the extent to which they are involved in different activities. Secondly, we look at the time spent on these activities. Taken together, this gives us an impression of management accountants roles. The third aspect is which management accounting methods, concepts and techniques are used before and after the implementation. We conclude that ICT impacted on the role of the management accountant. In the subsidiary that started to use the ERP-system, that the role of the management accountant changed significantly, while in the sales organization that postponed the implementation, the role did not change. Furthermore, new management accounting techniques were not only introduced as an outgrowth of the implementation of the ERP-system, but also as a consequence of the learning process associated with the preparation for the system. This study provides evidence that an ERP implementation can trigger a significant change in the role of a management accountant in a short period of time (eleven months) and adds empirical evidence on the relationship between ICT-developments and the role of the management accountant.

1.

Introduction

Management accountants perform a lot of different activities or combinations of activities (Jablonsky, Keating et al. 1993, Sathe 1983 Hopper 1980). It has been widely acknowledged that the boundaries of these activities are undergoing considerable changes (Mouritsen 1996; Burns and Baldvinsdottir 2005). Several factors are said to underlie these changes (Hunton, Wier et al. 2000; Verstegen, De Loo et al. 2007), among which are ICTdevelopments (Friedman and Lyne 1997; Caglio 2003; Scapens and Jazayeri 2003; Verstegen, De Loo et al. 2007).

This study sets out to substantiate the impact of ICT-developments in the control system of an organization on the role of management accountants. The existing literature shows that there is conflicting evidence on the impact ICT has. Some researchers claim that there is an impact on the role of management accountants (Friedman and Lyne 1997; Caglio 2003), while other studies cannot find such evidence or argue that the impact is indirect through changes in the control system (Jack and Kholeif 2008; Scapens and Jazayeri 2003). We will focus on the introduction of an ERP-system as a manifestation of ICT-developments in this paper. An ERPsystem will be defined as a common database that links up systems in all parts of an organization, including its capital budgeting, inventory, sales, etc. systems. ERP-systems are said to allow an organization to handle its operations holistically (Spraakman 2007). We conducted a longitudinal case study at two sales organizations of an international manufacturing organization (Muller Martini) that decided to implement a specific ERP-system, using questionnaires and faceto-face interviews with the management accountants involved. In one organization, the implementation actually occurred. In the other, it was postponed. The study focuses on three aspects related to the role of management accountants before and after the (postponed) implementation of the ERP-system. Firstly, we analyze the extent to which they are involved in different activities. Secondly, we look at the time spent on these activities. Taken together, this gives us an impression of management accountants roles. Finally, we determine which management accounting methods, concepts and techniques are used before and after the implementation. This research fuels the scientific debate about the changing role of management accountants within evolving management control systems in organizations (Byrne and Pierce 2007, Verstegen, De Loo et al. 2007). Given the disagreement in the literature and the fact that we conduct a case study in a single company means that we cannot provide conclusive evidence on the way the aforementioned relationship works (if such proof can be given in the first place see for instance Popper 1972). However, the major strength of this research lies in its construct and internal validity. Construct validity entails finding suitable operational measures for the concepts under study. This is the case when various sources of information are used in their construction, highlighting different aspects of the same concept (Smith 2003). In case of internal validity, all observed changes in a case can be attributed to identifiable causes. This is especially important for explanatory case research (Yin 2003). Since we studied two subsidiaries of the same company, facing identical environmental conditions and fairly similar internal conditions, we think we can make such an explanatory claim here, or at least have clearly tried to move towards one (Popper 1972).

The paper is structured as follows. It starts with a review of the literature on the role of management accountants and the impact of ICT-developments on this. After the literature review the method of analysis used in this study

is discussed. Next, the analysis itself is presented. The paper ends with a discussion and conclusions, highlighting the contributions and drawbacks of this research.

2. The (impact of ERP-systems on the) role of management accountants Russell, Siegel and Kulesza (1999) present the outcome of a large, continuing analysis of the management accounting and finance profession in North-American firms. One of the outcomes of their analysis is that there seems to be a shift from traditional accounting activities to newer, more value-adding activities in management accountants work. As a consequence, it is asserted, a transformation of corporate accountants from financial historians to business partners can be witnessed: Increasing numbers of management accountants spend most of their time as internal consultants or business analysts. Many have moved from the accounting department to be physically located in the operating departments they service. They work on cross-functional teams and are actively involved in decision making (ibid., p. 40).

There are more studies that make these claims. Examples include Cooper (1996 a; 1996 b) and Kaplan (1995). A major setback of research of this type is that it either has little empirical foundation (like the latter two studies) or that management accountants, and/or their managers, are asked to look into a (highly uncertain) future and make predictions (like in the first paper mentioned above). It is not untypical for people, under these circumstances, to paint desired, wishful pictures of the future that have little in common with what actually happens (Jrvenp 2007, Riedijk, Tillema et al. 2002). This is substantiated by the aforementioned authors after a case study in ten different types of organizations in the Netherlands: the development path from traditional accounting activities to more business partner oriented activities of management accountants has not yet materialized in practice. Many management accountants still hold a financial-economic position and their role consists mainly of supporting and advising internal parties (Jack and Kholeif 2008). Burns and Bladvinsdottir (2005) basically conclude the same, although they do present a hybrid accountant, performing both management and financial accounting activities. Van Helden (1998) underlines the continuous importance of scorekeeping activities as well, after an examination of the demands in employment advertisements for management accountants in Dutch profit and non-profit organizations. The same holds for Byrne and Pierce (2007), who conclude that the adoption of a business partner model for MAs (Management Accountants) is found to be ambiguous, conditional and uncertain (p. 469).

Thus there is conflicting evidence about the current stance of the management accounting profession. Verstegen, De Loo et al. (2007) is, according to ten Rouwelaar (2006), one of the very few empirical studies after Sathe (1983) that actually tries to assess what controllers do in practice today and what roles can be distilled from this. After an extensive literature review, they decide to use activities to base their role classification on, this being the common denominator in many studies following role theory (Katz and Kahn 1978). Using a survey that is in line with a large number of previous studies and applying factor, cluster and regression analysis techniques, they find two distinct roles for Dutch management accountants: information adapters and watchmen. Watchmen mainly perform scorekeeping and risk-monitoring activities (Simon, Kozometsky et al. 1954). Information adapters acquire, analyze and manage information on the basis of organizational needs, focusing on 3

organizational change processes (Sathe 1983). 55% Of the controllers in their sample could be classified as information adapters and 45% as watchmen. In many ways their classification is similar to Sathes (1983) distinction between independent and involved management accountants in the US, the main difference being that external reporting activities are primarily assigned to involved management accountants in Sathes classification, whereas they belong to watchmen in the Verstegen, De Loo et al. (2007) study.

In several other studies factors are listed that (may) lead to changes in the role of management accountants. Examples include Ahrens and Chapman (2000), Cohen and Paquette (1991), Cooper (1996a; 1996b), Kendall and Sheridan (1991), van der Meer-Kooistra (1999), Mouritsen (1996), and Vaassen (2002). These factors may be subdivided into factors stemming from outside an organization (like legislation), inside an organization, but outside the personal realm of a management accountant (like the size of an organization), and management accountants personal factors (like their creativity or financial expertise) (Sathe 1983).

Among the second type of factors is the impact of ICT-developments, like the introduction of ERP-systems. The effects hereof have been examined by Caglio (2003), Friedman and Lyne (1997), Granlund and Malmi (2002) and Scapens and Jazayeri (2003) among others. Caglio (2003) asserts that in general, external organizational factors are important determinants of management accountants work. Friedman and Lyne (1997) sketch several scenarios of the future of the management accounting profession when new ICT-applications facilitate the introduction of different management accounting techniques. The authors argue that three scenarios are possible: a scenario in which management accountants change from bean counters to business-oriented management accountants, a no change scenario as new techniques turn out to be a passing fancy, and a scenario in which accountants are replaced by engineers, leaving a remnant management accounting function. Scapens and Jazayeri (2003) find that although there are no fundamental changes in the nature of the management accounting information used following the implementation of a specific ERP-system in an European division of a large US multinational, changes in the role of management accountants may well occur in the future through the elimination of routine jobs. However, the authors assert that the ERP-system is not necessarily the driver of these changes. That there are no fundamental changes in management accounting and control procedures when ICTdevelopments occur, is also a conclusion drawn by Granlund and Malmi (2002) in their research in Finnish organizations. Jack and Kholeif (2008) study the implementation of an ERP-system in an organization funded by the EU and Egyptian government. Although management accountants were deemed to be forward-looking and thought they could actually have a role as business partner in their organization after the introduction of the ERP-system, their role remained very traditional instead, focusing on collecting and providing cost information.

There are other studies that address ICT-developments and the effects hereof on organizational conduct, which are either linked to the role of management accountants or not. Xiao, Powell and Dodgson (1996) for instance claim that ICT use is very likely to improve corporate financial reporting efficiency and effectiveness (p. 213). But they also mention that previous studies of the impact of information technology on accounting suffer from a lack of theoretical guidance (p. 203). Spathis and Constantinides (2004) conclude that a number of changes in the accounting process will be introduced with the adoption of an ERP-system: Overall, the benefits achieved by ERPS adopters strongly influence accounting information and practices (p. 241). Dechow and Mouritsen

(2005) state that a trade-off between traditional management control based on accounting numbers and a system of management control based on operational non-financial data can take place when ICT-developments occur. They illustrate that management control, in an ERP-setting, is not necessarily limited to the accounting function and that some ERP-configurations may even lead to a separation of management accounting practices from financial reporting. Oude Vrielink and Verbeeten (2004) report their findings of a survey among management accountants of the profit centres of a Dutch multinational. They focus on the influence of the introduction of an ERP-system on the time allocation of management accountants. It is asserted that the implementation leads to the fact that the controller [management accountant] can spend more time on activities that support decision making so that less time can be spend on routine activities such as reporting and consolidation and, to a lesser extent, transaction processing (p. 147). Verdaasdonk (1999) concurs that ERPS have a significant influence on controller [management accountants] roles and, by doing so, on the tasks he or she performs (p. 463). On the contrary, Bormann-Rutte, Grumbkow and Herst (2005) demonstrate that the roles of management accountants do not change as fast or as much as is sometimes suggested, following their analysis of twenty management accountants employed in mid-sized Dutch companies that had implemented an ERP-system.

Therefore, in all, the existing literature shows conflicting evidence on the impact ICT has on management accountants roles. Some researchers claim that there is an impact on the role of management accountants, while others studies cannot find such evidence or argue that the impact is indirect through changes in the control system. To summarize, the differences in views in the literature on the (alleged) relationship between ICT-developments and the role of management accountants are apparent. Of course, these differences will at least partly be related to the use of different settings, time periods, etc. In order to get further understanding of the impact of ICT on the role of management accountants, we will examine a longitudinal case study in a particular organization in the following sections. The aim of this research is not to settle to issue of the impact of ERP-systems of management accountants roles once and for all (which is not possible on the basis of one case study anyway see Popper 1972 and Yin 2003 for details), but rather to provide further insights into the issue, while trying to safeguard the studys construct and internal validity in particular as far as possible. As will be explained in the upcoming sections, various measures have been taken to accomplish this.

Three main topics will be addressed. Firstly, we will analyze the extent to which management accountants are involved in different activities, this being, as stated, the common denominator of studies that focus on management accountants roles (Verstegen, De Loo et al. 2007). Secondly, we will look at the time spent on these activities. Taken together, this gives us an impression of management accountants roles, following the approach of the Verstegen, De Loo et al. (ibid.) paper. The third topic that will be studied is which management accounting methods, concepts and techniques are used before and after the implementation, which was analyzed by Scapens and Jazayeri (2003) among others.

3. Method To get a better understanding of the impact of ICT on the role of management accountants, we conducted a longitudinal case study at two sales organizations of an international manufacturing organization (Muller Martini

 to be called MM from here onwards) using questionnaire data and face-to-face interviews with the management accountants involved1.

The main activities of MM are the development, production and distribution of technologically demanding products and services for the print processing industry. MM operates in five different business areas: print finishing, bookbinding, newspaper mailroom systems, web offset printing and binding on demand. There are four thousand employees working in nine production facilities in Switzerland, Germany, Denmark, China and the USA and in thirty sales companies. The decision to implement an ERP-system at MMs sales companies was initiated by the management of two of the sales companies who informed the board of the parent company about the weak condition of their ICT-systems, which were, among others, hardly interrelated. The board then assigned the company KOI (Group, Staff, Organization and ICT) to analyze the need for an ERP-system at some of its sales subsidiaries. KOI was asked to summarize the ensuing requirements. After MMs top management decided to implement the ERP-system MBS Navision using the requirements KOI found significant, the implementation was followed by one of the researchers at the UK and French subsidiary. This took approximately 18 months. The implementation at the French site was postponed, which gave us the opportunity to see if roles changed because of the implementation itself or because of the learning process triggered by the preparation for the implementation of the ERP-system. Throughout the research period, semi-structured interviews were held with both management accountants at regular intervals to get more insights into changes that might have occurred in between meetings, focusing on what and how-like questions (Yin 2003). We also visited the sales companies a couple of times so that the dynamic nature of ICT-developments and their impact could be accommodated. Our site visits began in December 2004 and continued until May 2007. In contrast to a more static approach, this type of study provides the opportunity to explore change processes as they occur (Quattrone and Hopper 2001). It allows us to see how various factors interact in producing a trajectory of change (Burns and Scapens 2000).

MM was chosen, because one of the researchers worked for the company, which gave us the opportunity to follow the ERP-implementation at close range. The two sales organizations were chosen because of reasons of similarity (same vision, mission statement, market, products and size) and because of similar timings of the ERP-implementation. Because of the aforementioned researchers working relationship with MM (being the management accountant at the Dutch site), we had to address participant observation issues. In such a case, Friedrichs and Ludtke (1975) advise, among others, a standardisation of observation activities to achieve more objectivity in the research findings. That is why we used a specific case study protocol that is introduced below (Yin 2003).

We also resorted to other measures described by Yin (2003) to enhance the validity and reliability of our research. We used multiple sources of evidence, had our key informants review the draft case study reports, and tried to establish a (preliminary) chain of evidence during data collection. The fact that the two subsidiaries faced
Some may argue that case studies and quantitative research cannot be combined. However, Howe (1988), among others, clearly demonstrates that quantitative and qualitative methods are not necessarily founded on distinct epistemologies. Besides, case studies have been said to be open to both a quantitative and qualitative and approach, and even mixtures hereof (Yin 2003). Such a mixture is applied here. It is nevertheless acknowledged that we use a comparative static approach in this paper (see also below) hence its subtitle.
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identical environmental, and partly also, internal circumstances in the specific context of the development of the new ERP-system2, helped to prepare such a chain of evidence, given that this helped to enhance the internal validity of this study (Smith 2003). The use of multiple sources facilitated the validation of data through triangulation (Denzin 1970). Apart from interviews/questionnaires, we also used information drawn from the external financial reporting package of the parent company and the internal reporting package of the management of the subsidiaries. This yielded (additional information about) job descriptions, project minutes, project intermediate reports and organisational charts.

We specifically tried to address rival explanations and performed pattern-matching when examining what was already said to be known in the subsidiaries about the impact of ICT-developments on the control system and the role of the management accountant. Visiting the sales companies at frequent intervals and having key informants fill in questionnaires in both the pre and post implementation phase, also increased the validity of our research.

To enhance the studys reliability we used a case study protocol describing the data collection plan, the documents to be reviewed and the procedural reminders, and we developed a case study database during data collection. Finally, we evaluated the questionnaire by letting various researchers check it for consistency and completeness (given the four main topics we wanted to address), while a pilot test of the questionnaire took place with the help of MMs Belgian management accountant to see if the questions we had developed were meaningful. A couple of changes were made after these evaluations. Then it was sent to the management accountants of MM France and MM UK. Both the management accountants completed the questionnaires in the presence of one of the researchers. The first questionnaire, the pre-implementation questionnaire, was filled in in London and in Paris in July/August 2006. The second questionnaire, the questionnaire for the period before and during the preparation for the period of the implementation period for MM France and the post implementation for MM United Kingdom respectively, was filled in in May 2007 on both locations. The post-implementation questionnaire is shown in appendix 13. It was created with two existing questionnaires in mind. The first one is the questionnaire developed by Verstegen, De Loo et al. (2007) and the second the questionnaire used by Spathis and Constantinides (2004). The latter studied, via an exploratory survey in 26 companies, the reasons why companies chose to convert from conventional information systems to ERP and the changes that subsequently occurred, particularly in the accounting process. 4. Case description The two sales companies

Muller Martini United Kingdom MM UK was founded in 1972. Currently, it has 77 employees. The tailor-made ICT-systems that were present before the ERP-system was introduced were fragmented in proprietary modules of different suppliers and did not
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A problem is formed by the fact that MM France was not involved in the development of the new ERP-system like MM UK was, as will be acknowledged in the studys limitations. 3 The pre-implementation questionnaire hardly differed from this, expect for the way in which certain questions were formulated. It has, therefore, not been included.

work from a central database. Since, except for spare stock and general ledger, the systems had no user-friendly interfaces, a lot of data was redundant and had to be re-entered into different systems. The supplier of the service system did no longer support the software, and the software lacked detailed reporting facilities, which were required to manage the engineering cost and capacity plan. Besides, the existing business processes were insufficiently reflected in the architecture of the software systems, and the functionality of the applications was low.

Muller Martini France MM France was founded three years earlier than MM UK, in 1969. Currently, it has 63 employees. MM France faced the same problems as MM UK with respect to its ICT-systems. Their systems, however, had no interfaces at all. As a consequence, a lot of data was also kept on paper as a back-up. The supplier of the service system was not capable to support the software anymore. The existing business processes at MM France were insufficiently reflected in the architecture of the software systems.

The ERP-system MM chose to introduce an ERP-system of the Microsoft Corporation, Microsoft Business Solutions Navision in its sales companies, because MM Spain had already successfully implemented some of its modules a couple of years before. Also, MM had been told by KOI that the interface between this system and the system used by the factories (SAP) would be relatively easy to create, and that the system would, with all its similarities to other Microsoft software, relatively easy to learn and user-friendly.

In August 2004 a steering committee was formed, and soon after that the first coordination meeting was called. This meeting was attended by the parent company, MM UK, MM Netherlands, MM Spain and MM Italy.

The objective of the meeting was to discuss the possibility of a coordinated introduction of what became known as the Kernel. The Kernel can be described as a standard MBS Navision system that is modified to the needs of a specific MM sales company, with the already existing MM Spain modifications included4. It was decided to designate MM UK and MM Netherlands as the pilot companies to create the Kernel, and the management accountants of both companies as project managers. This process started in December 2004 and ended in September 2006, and incorporated several coordination meetings. In August 2006, the final coordination meeting was held. Not only the parent company, MM Netherlands, MM UK, MM Italy, MM Spain and MM France attended this meeting, but also MM Singapore, MM Canada, MM Japan and MM Hong Kong, all showing interest in the Kernel. The steps that the various sales companies had to undertake to start using the Kernel were defined at that time, like the rollout planning and the future cost distribution.

All this was followed by the local implementation at MM UK and the preparation for the implementation at MM France.

MM Spain had worked with the modules Finance and Sales since 2000.

The local projects5 After the Kernel was ready, the local implementations could start. Each localization was performed by a project team of an MM sales company, together with the ICT-partner (KOI) that had also helped to create the Kernel.

For MM UK, under leadership of the Sales Administration Manager, the localization project, which started in January 2007, consisted of some settings for fiscal purposes and the linking of the computerized banking system, together with the creation of manuals and the end user training. The go-live date was March 2007.

For MM France the implementation and adoption started somewhat differently. Since they, unlike MM UK, were not involved in the creation of the Kernel, their understanding of the system was initially not as thorough as it was in the UK. Therefore, it was expected that the duration of the localization project would be longer than at MM UK. This was not acceptable for the general manager of MM France, since they had an immediate need for a system to create quotes for their machine sales. This resulted in the idea to start with a partial implementation, led by the general manager himself, so that at least a part of the ERP-system could be implemented at short notice. Unfortunately, implementing only a part of the ERP-system turned out to be not as fruitful as expected. One of the often mentioned strengths of an ERP-system, the integration of accounting modules with the other modules and a common database ensuring consistent information for all purposes (Scapens and Jazayeri 2003; Granlund and Malmi 2002) could not be reached. In fact, it was very likely that disintegration would involve considerable costs. Therefore, the general manager of MM France decided not to start with a partial implementation, but to postpone the implementation of the ERP-system as a whole for a couple of months. The kick-off meeting for the localization project for MM France was held in June 2007.

Data collection protocol

Analyzing activities of management accountants We used the Verstegen, De Loo et al. (2007) paper to collect information about the first two research issues we want to address: specific activities that management accountants undertook before and after the (postponed) ERP-implementation and the amount of time spent on these activities.

Following Katz and Kahn (1978), the abovementioned authors distinguished 37 activities of management accountants taken from a variety of scientific publications. They then segmented them in activity-related groups. They did not impose or favour a segmentation of management accountants in advance. A factor analysis was applied to order and abridge the set of activities taken from the literature, as activities might well be interconnected (for example, preparing and presenting budget analyses). Thereafter, a cluster analysis was performed. From this, coherent, activity-related group of management accountants followed, and it could be determined how many groups there were, as well as what their characteristics in terms of activities were. Subsequently, cluster membership was regressed on 31 variables that allegedly affect management accountants functioning. These were also taken from the existing literature. Among the significant variables finally found was, as mentioned previously, the impact of ICT-developments on the control system of an organization.
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A summary of the basis characteristics of the two local projects can be found in appendix 2.

We had access to the original data of the Verstegen, De Loo et al. (2007) study (which we had to, since we could not perform a similar analysis ourselves given that we only had two management accountants in our entire population), and could therefore compare our results with them. The 37 activities they used were grouped in five factors, which they labelled as follows: 1. 2. 3. 4. 5. Risk management Accounting information systems Launching and supporting changes in control systems External reporting Internal reporting.

First, we standardized our data on the 37 activities used in our questionnaire (see appendix I), as they were obtained from the management accountants of MM UK and MM France. We then multiplied the data from before, during the preparation phase or after the adoption and implementation phase by the factor loadings from the rotated factor pattern matrix of the research of Verstegen, De Loo et al. (2007), following the procedure by Hair, Black et al. (2006). By summing the multiplied factor loadings across all questions for all five factors, the factor scores per respondent were calculated for the periods analyzed.

In order to determine if a change in the extent to which the management accountants were engaged in the 37 activities took place, we compared the factor scores for the five factors for MM UK of the period before with the mean factor scores of the period after the adoption and implementation period, and for MM France of the period before with the mean factor scores of the period during the preparation for the period of the adoption and implementation. We analyzed the factor scores for a possible change in the signs of the factors, since on each factor positive signs signify the variables are positively related, and opposite signs signify the variables are negatively related (Hair, Black et al. 2006).

For our research, we related the factor outcomes to the two roles of management accountant found by Verstegen, De Loo et al. (2007). Subsequently, we analyzed our data by means of a paired sample T-test. We performed this test in order to assess the statistical significance of the difference between the data obtained from the two questionnaires per respondent. We then checked whether the respondents concurred with the (in)significant changes found in the analysis. We performed four paired samples T-tests, namely: 1. 2. 3. the activities (in terms of the 37 underlying activities of the abovementioned five factors) of the management accountant of MM UK for the period before and after the adoption and implementation; the activities of the management accountant of MM France for the period before and during the preparation for the period of the adoption and implementation; the difference in the activities of the management accountants of MM UK for the period before and after the adoption and implementation, and the difference in the activities of the management accountant of MM France for the period before and during the preparation for the period of the adoption and implementation; the activities of the management accountants of MM UK and MM France for the period before the adoption and implementation period.

4.

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The third test was performed to provide insights into the outcome of the first two, for it analyses first differences between the two sites, thereby looking at relative shifts in importance of the 37 activities mentioned in the Verstegen, De Loo et al. (2007) study. This last test was performed because we wanted to know if there was a difference in management accountants roles before the adoption and implementation period, since there is the possibility that a difference in these roles could signify a potential explanation for the results of the research.

Analysis of time spending of management accountants To determine if a change in the role of the management accountants in our case study took place, it would not be sufficient to only investigate changes in the importance attached to each activity, as we did above. After all, it is not inconceivable that the perceived importance does not change, while the time spent on the activities does change (and visa versa). For this reason, we asked another question, the question concerning the time spent on the activities (see appendix I for details). With 37 activities, this would mean that the two respondents in our research would have to fill in a timesheet with activity registration over a longer period of time. In the test phase of the questionnaire, it was pointed out to us that this approach would cost too much time. We then decided to take another approach, and simply use the five factors of Verstegen, De Loo et al. (2007), as stated in appendix I. In order to report the outcome of this part of our study, we used a bar diagram for both periods. Again, we checked thereafter if these results could be corroborated, using different sources than the respondents themselves (project minutes, internal reports on the ERP-system, etc.).

Accounting methods/concepts used To be able to register a possible change in the control system of the two respondents, we asked them to answer a question concerning the management accounting methods/concepts used. We then analysed if a change took place in the periods under investigation. In order to compare the results, we used a table showing per accounting method/concept used one of two colours (red for not in use, green for in use) for both periods. We left it to the respondents to mention other than the management accounting methods/concepts included in the questionnaires. Since none of the respondents mentioned another method and we ourselves did neither find other methods in use at the case study sites nor found indications about this in the controlling manuals, we think that the list was sufficient.

5. Case study results

Activities of management accountants As explained above, we performed two analyses to determine if a change occurred to the extent the management accountants were engaged in the 37 activities taken from the Verstegen, De Loo et al. (2007) study.

In the first place, we searched for a change in the signs of the factors, since on each factor positive signs mean the variables are positively related, and opposite signs mean the variables are negatively related. The factors of Verstegen, De Loo et al. (ibid.) were: 1. Risk management 2. Accounting information systems

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3. Launching and supporting changes in control systems 4. External reporting 5. Internal reporting

The results of the abovementioned analysis is shown in the next graphs

Figure 2

Figure 3

What we can observe here, is that for MM UK a change occurred in the signs of three of the five factors, while for MM France no change occurred in any of the signs.

The factors of which the signs changed for MM UK are the factors launching and supporting (changes in) control systems, external reporting and risk management, and the factors of which the signs did not change are the factors internal reporting and accounting information systems. If we compare the signs of the factors of the period after the adoption and implementation, we can conclude that these now correspond to the signs of the factors that Verstegen, De Loo et al. (2007) relate to the label information adapter, whereas for the period before the adoption and implementation they did not correspond to any of the two combinations of factor signs for the groups of management accountants they discerned. For MM France, the signs did not correspond to any of the two combinations of signs that Verstegen, De Loo et al. (2007) labelled watchman or information adapter for both periods under investigation.

The second analysis we performed was meant to assess if the outcomes of our first analysis were statistically significant. As mentioned before, we performed four paired samples T-tests to assess this. In the first test, we compared the means of the activities of the management accountant of MM UK for the period before and after the adoption and implementation of the ERP-system. Our first analysis showed a change in the signs of three of the five factors, and the second analysis confirmed the former results since the paired samples T-test found significant differences between the two periods under investigation. More specifically, the t-statistic for the comparison of the values of the 37 activities listed by Verstegen, De Loo et al. (2007) before and after the implementation of the ERP-system was -1,03 for MM UK, with a p-value of ,000, thereby rejecting the standard null hypothesis of equal scores across all activities.

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In the second test, we compared the activities of the management accountant of MM France for the period before and during the preparation for the period of the adoption and implementation. Our first analysis did not show a change in sign, and the second analysis confirmed these results, since the paired samples T-test did not find significant differences between the two periods under investigation. The corresponding t-value here was -,14, with a p-value of 0,453.

In the third test, we compared the difference of the activities of the management accountants of MM UK for the period before and after the adoption and implementation period, and for MM France for the period before and during the preparation for the period of the adoption and implementation. Our first analysis showed that there was a difference between MM UK and MM France, since a change in signs occurred for MM UK while no change occurred for MM France. Our second analysis confirmed these results, because the paired samples T-test did suggest significant differences, yielding a t-statistic of ,892 and a corresponding p-value of ,003..

The fourth test also confirmed our findings that the activities of the management accountants of MM UK and MM France for the period before the adoption and implementation were significantly different. This test resulted in a t-statistic of -1,03 and a p-value of ,000.

Time spending of management accountants For the second analysis we performed to determine if a change in the role of the management accountants in our case study took place, we analyzed the time spent on the activities grouped by the abovementioned factors of the Verstegen, De Loo et al. (2007) study.

The result of this analysis is shown in the two graphs below. T0 depicts the period before the implementation of the ERP-system, and T1 the period after (the preparation for) the systems implementation.

Figure 4 Change in time spending for MM UK

13

Figure 5 Change in time spending for MM France

If we compare these findings with the outcomes of the former analysis, the change in time spending for the management accountant of MM UK on internal reporting and accounting information systems, while no change occurred in the signs of these factors, is especially important. Although time spending altered, this did not happen in such a way that a statistically significant change in the work package of the management accountant occurred. Internal reporting and accounting information systems remained an important aspect of his work.

Nevertheless, the results do show that the management accountant of MM UK spends less time on internal reporting after the ERP-implementation. This extra time mainly seems to be devoted to launching and supporting changes in control systems, and also some extra time has been devoted to risk management and accounting information systems. When asked about the change in time spending, the management accountant of MM UK described the change as follows: I do not need to spend so much time extracting base information as this is now available in one location. This gives me more time to analyze the data, and approve of and report on the information thus gathered.

For the management accountant of MM France nothing changed in the time spending. Likewise, no change occurred in any of the signs. This was confirmed in one of our interviews with the management accountant.

Accounting methods/concepts used The answers of the respondents concerning the management accounting methods/concepts used are presented in figure 6, showing per accounting method/concept used a red (not in use) or a green (in use) colour for both periods under investigation.

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Figure 6 Management accounting methods/concepts used in MM UK and MM France. T1 again depicts the period before the implementation of the ERP-system, and T0 the period after (the preparation for) the systems implementation.

The above table shows that the management accountant of MM UK used more management accounting methods/concepts at the start of this study than the management accountant of MM France (ten and seven respectively). It also shows that there have been some changes in the management accounting methods/concepts used in the periods under investigation for both MM UK and MM France.

The first thing to notice is that there has been no situation where a management accounting method/concept used in the period before the adoption and implementation, was not used anymore in the period during the preparation for and after the adoption and implementation of the ERP-system.

Secondly, both the management accountants of MM UK and MM France started to use more management accounting methods/concepts, four by the management accountant of MM UK and four by the management accountant of MM France. Both management accountants started to use non-financial performance indicators. An analysis of the Controlling Manual of MM Sales Companies learned that the parent company introduced a new report6 to be created every month, shortly after the first questionnaire was held, showing time spending of the service department. Both management accountants confirmed that they referred to this report when answering the question at hand. Therefore, this change in the management accounting methods/concepts used is not connected with the ICT-development. This leaves three new management accounting methods/concepts used by both management accountants. Besides the use of the non-financial performance indicators, both management accountants started to use financial ratio analysis. This change was not connected with a new demand from the parent company. The management accountant of MM UK started to work with profit centres and got involved in internal audits and the management accountant of MM France started to work with profitability analysis by

The report Benchmark Customer Service.

15

customer and performance management, methods already in use by the management accountant of MM UK. They both deemed this a direct consequence of being involved in the ERP-process.

6. Discussion and conclusion Let us now compare our findings with the findings of the existing literature. We will follow the same structure used in the former sections.

Activities of management accountants When comparing our research findings regarding a possible change in the activities of a management accountant with the existing literature on the impact of ICT on the role of the management accountant, we can confirm the findings of Verstegen, De Loo et al. (2007), because we found statistical significance of the difference between the data obtained from MM UK in both periods under investigation.

We can also say that the higher degree of standardisation of accounting activities and practices had at least some impact on the management accountants practices as Caglio (2003) mentioned, since the management accountant of MM UK stated that the involvement of different members of the organisation in the process of the ERPsystem implementation led to a better understanding of accounting concepts. Also he believed that, as a consequence of having only one instead of more databases, the information produced would no longer show any differences in outcomes.

The case study does not corroborate the findings of Bromann-Rutte, Grumbkow and Herst (2005), who claim that the management accountant role and the tasks he performs in practice do not change so quickly and strongly as some authors argue. They mention that it is more a matter of a gradual shift. In MM, changes occurred rather rapidly after preparations for the ERP-system had begun, both in MM UK and MM France.

In our case study, the management accountant role for MM UK changed in a period with a maximum length of eleven months. This does not correspond to a gradual shift, especially with our findings with regard to MM France in mind. We learned that in the period during the preparation for the adoption and implementation, nothing changed in the management accountants role, so there is a possibility that the period in which the change took place for the management accountant of MM UK was even shorter than eleven months.

When comparing our research findings with Scapens and Jazayeri (2003), and specifically focusing on their findings with regard to the changes in the role of management accountants, our study confirms that an elimination of routine jobs took place. We do not find evidence that line managers developed accounting knowledge, that more forward-looking information became available and that the management accountant got a broader role.

None of the respondents acknowledged the findings of Spathis and Constantinides (2004), who mentioned that accountants need to have good ICT skills to apply their knowledge in the new ICT-led work environment. It could help of course, but I can always rely on the expertise of the ICT-department, one of the respondents said.

16

Time spending of management accountants We observed that in MM UK, less time is needed for internal reporting after the adoption and implementation of the ERP-system. The statement of the management accountant of MM UK mentioned in the previous section confirms the findings of Oude Vrielink and Verbeeten (2004), that the implementation makes it possible to spend less time on routine activities such as reporting and consolidation and, to a lesser extent, transaction processing, so that more time can be spent on activities that support decision-making.

In line with the above, this study supports the results of Granlund and Malmi (2002), who allege that for management accountants, ERP-systems have in some cases left more time for analysis instead of routine tasks (p. 299), since data integration has meant a decrease in multiple data entries and the work involved in consolidation, leading to an elimination of internal transactions, or to an increase in the automation of these internal transactions.

Accounting methods/concepts used When comparing our research findings with the existing literature on the impact of ICT on the control system, our results tend to disagree with Scapens and Jazayeri (2003) and Granlund and Malmi (2002), who found no fundamental changes in the nature of the management accounting information used. Although not every change in the management accounting methods/concepts used in the case was a result of ICT-developments, three management accounting methods/concepts were added to the management accountants tool box, even for the management accountant of MM France who was only preparing for the implementation of the ERP-system.

Given that MM France has not yet actually implemented the ERP-system and MM UK is still in an early stage after the implementation, it is possible that more changes in management accounting methods/concepts will follow, as Scapens (1994) suggests. As mentioned by the management accountant of MM UK, most time has been spent on assuring that the day-to-day operations are not hindered, and only after that, time was spent on improving other aspects. Furthermore, it is very well possible that besides the changes in the management accounting methods/concepts used, there was also a change inside one or more of the management accounting methods/concepts. This we did not set out to uncover and, therefore, no claims can be made about this.

The trade-off between traditional management control based on accounting numbers and a system of management control based on operational non-financial data as suggested Dechow and Mouritsen (2005) was observed in our study, although not to a large extent (as indicated in figure 6).

When referring to the fact that there has been no situation where a management accounting method/concept used during the beginning of our research was not used anymore in the period during the preparation for and after the adoption and implementation of the ERP-system, one should keep in mind that the management accountants in our case study sites are not authorized to change some aspects of the control system since some accounting methods/concepts are prescribed by the parent company.

17

Limitations This study is subject to a number of limitations. First, it should be clear that our results are only valid for the time frame under study. This means that we could have received quite different responses if we would have studied the adoption and implementation impact over a longer period, say a few years. This is a constraint, because there is a danger that the ICT potential may not have been exploited yet (Xiao et al., 1996, pp. 209).

One should on the other hand realize that if the period under investigation is too long, the research runs into practical problems such as data availability, since, for instance, certain reports may not be available anymore. Besides data availability, a period too long could also cause the problem that it will be more and more difficult to leave aside other possible influences that just the ICT impacts, which is difficult enough by itself, as mentioned by Xiao et al. (ibid., pp. 209). The value added of this study particularly lied in its construct and (relatively large) internal validity, the following drawback notwithstanding (Popper 1972).

Our findings might also have been affected by that fact that MM France was not involved in creating the Kernel, while MM UK was. It is therefore likely that the knowledge of the ERP-system of the management accountant of MM UK is better than that of the management accountant of MM France, facilitating its implementation and use. Another effect could have been caused by the fact that the ICT-applications of MM France were somewhat less sophisticated than those of MM UK at the beginning of our research. Difference in staff size may have affected our results as well, as well as the possible differences in culture among the two sales companies, despite them having the same parent company, may have been an issue too.

Thirdly, although all methodological limitations were certainly considered when obtaining and interpreting the results, it should be clear that a researcher can never escape some form of subjectivity bias, especially with one of the researchers working relation with the MM in mind (Hopper and Powell 1985).

Fourthly, the results of the study may have been influenced by cultural differences between the UK and the French site. The French culture is regarded as more feminine, more collectivistic and has higher levels of uncertainty avoidance and power distance than Great Britain (Hofstede, 1991). The stability of the role of the management accountant of the French site could be partly influenced by these cultural aspects.

Finally, the longitudinal case study offers the possibility to witness the changes of the individual roles of the management accountants over time, however the design limits the external validity.

Notwithstanding these limitations, this study does add to our understanding of the impact of ICT developments on the control system and the role of the management accountant in the ways mentioned above, without however, settling the issue once and for all which some claim is impossible anyway (Popper 1972).

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Quattrone, P. and T. Hopper (2001). "What does organizational change mean? Speculations on a taken for granted category." Management Accounting Research 12(4): 403-435. Riedijk, F., S. Tillema, et al. (2002). "De ontwikkeling van de controller in Nederland." Maandblad Accountancy en Bedrijfseconomie 76: 337-347. Russell, K. A., Siegel, G.H. and Kulesza, C.S. (1999). "Counting More, Counting Less." Strategic Finance 81(3): 39-44. Sathe, V. (1983). "The Controller's Role in Management." Organizational Dynamics 11(3): 31-48. Scapens, R. and M. Jazayeri (1998). "SAP: Integrated information systems and the implications for management accountants." Management Accounting: Magazine for Chartered Management Accountants 76(8): 46. Scapens, R. W. (1994). "Never mind the gap: towards an institutional perspective on management accounting practice." Management Accounting Research 5(3-4): 301-321. Scapens, R. W. and M. Jazayeri (2003). "ERP systems and management accounting change: opportunities or impacts? A research note." European Accounting Review 12(1): 201-233. Simon, H. A., G. Kozometsky, et al. (1954). Centralization vs. Decentralization in Organizing the Controllers Department: A Research Study and Report,. Houston TX, Scholars Books Co. Smith, M. (2003). Research Methods in Accounting, London, Sage Publications. Spraakman, G. (2007). Current Trends and Traditions in Management Accounting Case Analysis. Concord, Captus Press,. Ten Rouwelaar, H. (2006). Balancing the Roles of Business Unit Controllers: An Empirical Investigation in the Netherlands, SSRN. Vaassen, E. H. J. (2002). Accounting information systems: a managerial approach. Chichester, John Wiley & Sons. Verdaasdonk, P. J. A. (1999). "ERP-systemen en de rol van de controller." Tijdschrift voor Bedrijfsadministratie 103: 462-468. Verdaasdonk, P. J. A. and S. W. T. Rossieau (2000). "Het effect van ERP-systemen op de rol van de management-accounting functie." Tijdschrift voor Bedrijfsadministratie 104: 450-456. Verstegen, B., I. De Loo, et al. (2007) "Classifying Controllers by Activities: An Exploratory Study.", Journal of Applied Management Accounting Research 3(2): 1-23. Verstegen, B. H. J. and I. De Loo (2007). "Gedragspatronen van Nederlandse controllers: een analyse aan de hand van interpretatief interactionisme." Maandblad Accountancy en Bedrijfseconomie(1/2): 19-27. Xiao, Z. Z., J. R. Dyson, et al. (1996). "The Impact of Information Technology on Corporate Financial Reporting: A Contingency Perspective." The British Accounting Review 28(3): 203-227.

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Appendix 1: Post implementation questionnaire

Question 1: After reading the definition of a controller below, can you then consider yourself in your current profession being a controller? A controller supports and advises the management of an organization in reaching its economic, public and/or financial goals. Management includes planning, control and decision-making. Support is interpreted in terms of the design and maintenance of accounting information systems and the procurement and distribution of information. Yes No continue with question 2. what is the reason for not considering yourself a controller anymore since the first questionnaire?

Question 2: In your daily work we can distinguish between the activities you perform, the way you do this, and the sources and techniques you use for this purpose. The list below contains an overview of these activities, sources, techniques and the ways of doing these things. We do not profess to be complete, and it is very well possible that certain items look the same at first site or even overlap. Please consider every item as exclusive of the preceding ones. Please indicate on the scale ranging from 1 to 6 for each item to which extent you, on an average, are engaged in it in your daily work in you current function. This question takes up 4 pages. Activities 1 not 2 rarely 3 now & then 4 frequen t 5 very frequen t 6 constantly

1.

Reporting information about the past (retrospectively). Changing the control system of the organization (like its the budget cycles). Supporting the goals of the top management of the organization. Maintaining accounting information systems (including financial systems).

2.

3.

4.

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Activities

1 not

2 rarely

3 now & then

4 frequen t

5 very frequen t

6 constantly

5.

Exchanging information vertically (up and down in the hierarchy). Presenting reports for third parties (for example auditors, treasury, shareholders, etc.). Providing information on a need to know basis. Protecting organizational assets through internal control. Reporting financial information.

6.

7.

8.

9.

10. Giving advice in case of problems (proactively). 11. Reporting information prospectively (before the fact control). 12. Maintaining the control system of the organization (like the budget cycle) without making changes. 13. Processing information from formal, financial systems. 14. Preparing reports for third parties (for example auditors, treasury, shareholders, etc.). 15. Supporting change processes. 16. Interpreting analyses of factors influencing the business result. 17. Supporting the goals of the line management of the organization. 18. Designing control systems of the organization (like the budget cycle). 19. Exchanging information horizontally (between hierarchical equivalent managers).

22

20. Leading the administrative department of the organization.

23

Activities

1 not

2 rarely

3 now & then

4 frequen t

5 very frequen t

6 constantly

21. Providing information to those who may be interested. 22. Preparing reports for responsibility accounting purposes and organizational control. 23. Reporting non-financial information (like stock-rotation, days sales outstanding, etc.). 24. Constructing accounting information systems (including financial systems). 25. Processing information from formal, nonfinancial systems (like operational systems). 26. Presenting reports for responsibility accounting purposes and organizational control. 27. Leading change processes. 28. Analysing of factors influencing business results. 29. Supporting the goals of external parties (auditors, shareholders, stock exchange analysts, the government, etc.). 30. Making recommendations for the improvement of internal control in case there are no problems (proactively). 31. Exchanging information with third parties (for example with auditors, investment analysts, treasury, etc.). 32. Processing information from informal systems (social systems, like corridor chat and gossip). 33. Managing the risks connected with business conduct (risk management).

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Activities

1 not

2 rarely

3 now & then

4 frequen t

5 very frequen t

6 constantly

34. Negotiating with auditors about proposed changes in the control system(s) as a result of a changed vision from stakeholders (top management, customers, etc.). 35. Strategy formulation for the organization. 36. Performing audits in the organization. 37. Discussing strategy of the organization.

Question 3: time analysis If you divide the above mentioned activities into five groups of activities, the next categories can be distinguished: internal reporting, external reporting, launching and supporting (changes in) control systems, accounting information systems and risk management. Could you give an estimate, as a percentage, of the time you spend on these groups of activities? Note: the total time spend should be 100%. Factors Internal reporting activities: - Reporting information retrospectively (after the fact control), - Providing information on a need to know basis - Reporting financial information - Processing information from formal, financial systems - Preparing reports for responsibility accounting purposes and organizational control External reporting: - Presenting reports for third parties (for example for accountants) - Preparing reports for third parties (for example for accountants) - Supporting the goals of external parties - Exchanging information with third parties Launching and supporting (changes in) control systems: - Changing the control system of an organization (like its budget cycles) - Supporting change processes - Designing the control system of an organization - Constructing accounting information systems (including financial systems) - Leading change processes Accounting information systems: - Maintaining accounting information systems (including financial systems) - Leading the administrative department of an organization % % % of total time

Risk management: - Negotiating with auditors about proposed changes in the control system(s) of an

25

organization - Leading strategy formulation processes %

Question 4: Management accounting methods/concepts Which of the following accounting methods and practices do you use? Accounting methods 1. 2. 3. 4. 5. 6. 7. 8. 9. Activity based costing Cost centres Profit centres Profitability analysis per product Profitability analysis per product group Profitability analysis per division Profitability analysis per customer Production of master budgets Production of cash budgets Yes No

10. Production of capital expenditure budgets 11. Financial ratio analysis 12. Non-financial performance indicators 13. Internal audit 14. Balanced scorecard 15. Performance measurement 16. (Rolling) Forecasting 17. Beyond budgeting 18. Others, ..

Question 5: Time analysis Looking back at question 3, did you notice a change in the time you spend on those groups of activities during the period after the first questionnaire but before the implementation of the ERP system?

If so, could you describe the change(s)?

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If not, could you give a reason for this?

Question 6: benefits after the implementation In your opinion, to what extent has the introduction of the ERP helped your organization to achieve the following? Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. Reduction of time for closure of monthly accounts Reduction of time for closure of quarterly accounts Reduction of time for closure of annual accounts Reduction of time for transaction processing (input time) Reduction of time for issuing of nonstandard reports Improved quality of reports Improved decision-making process Improved internal audit function Improved working capital management not at all low degree average high degree perfect

10. Increased use of financial ratio analysis 11. Reduction of time for payroll activities 12. Reduction of personnel of accounting department 13. Increased flexibility in information processing 14. Increased integration of accounting applications 15. More timely accounting information 16. More reliable accounting information

I would like to thank you for your cooperation.

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Appendix 2: Basic characteristics of the ERPS projects studied

MM UK Project launched Dec. 04 (Kernel project) Jan. 07 (local project) Project ended Dec. 06 (Kernel project) March 07 (local project) Duration of the project 25 months (Kernel project) 3 months (local project) Questionnaire 1 Questionnaire 2 ERPS Main modules: Financial management Sales and Marketing Purchase Warehouse Manufacturing Resource Planning Service Human Resources Administration Accounting sub-modules: Yes Yes Yes Yes No Yes Yes No Yes General Cash management Receivables Payables Fixed Assets Inventory Other accounting tools Spreadsheets Frango Consolidator Impact on control system Impact on controller role Yes Yes ledger 18 of July 2006 25th of May 2007 MBS Navision
th

MM France June 07 (local project)

Unknown at the time this study ended (local project) Unknown at the time this study ended (local project) 4th of August 2006 21st of May 2007 MBS Navision

Spreadsheets Frango Consolidator Yes No

28