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The Involvement of Strategic Management Accounting

Free Management Essays
Management in an institution is important because it creates a broad platform for the generation of ideas and concepts aimed at running corresponding organization. An institution under a responsible management possesses higher probability of succeeding in its activities as compared to the one with a reckless management. Therefore, managing a company is an important aspect for most organizations. Strategic management is one of the crucial elements of management that involves formulation and implementation of the main targets, goals and initiatives that an institution’s top directors take on behalf of its owners. Strategic management in the company is based on the consideration of resources and the assessment of internal and external environments, in which the respective institution competes.

Theory of Management Accounting

Strategic management is classified into various categories. These categories include the strategic planning, strategic management accounting, strategic management financing, strategic management marketing, and the strategic management organisation. The most sensitive part of strategic planning is the strategic management accounting because it provides the financial control in any organisation under consideration. Strategic management accounting is a practice of merging the business objectives with the management accounting information. Its main aim is to provide a forward-looking model that assists the organisation’s management in making decisions. Strategic management accounting is important for a business because it improves the flow of activities in a company through coordinating the respective objectives with the management accounting information.

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Elements of Strategic Management Accounting

Strategic management accounting has been emphasised in different articles and books specifying its need to be involved in the organisations. Strategic management accounting has been experienced to have high returns to a company through its creation and internal coordination. Therefore, the authors of strategic management accounting use the successes of the corresponding accountant to illustrate how it should be involved in the management of the organisation (Pettersen, 2004). The article “Strategic Management Accounting and Sense-Making in a Multinational Company” by Tillmann and Goddard has broadly applied the elements and concepts of strategic management accounting. This has been broadly provided in relation to the strategic management accounting context. The main elements in the article are the sense making attributes of the strategic management accounting. The elements involved in the realisation of the latter are the methodology of policies application around the accounting management platform. The methodology of strategic management accounting in an organisation includes the approaches for the implementation of the respective policies (Tillmann & Goddard, 2008).

The methodology presented by Tillmann and Goddard in the article is the grounded theory methodology that creates a basic approach method for the strategic management accounting. The grounded theory methodology focuses on description of the field members’ sense providing activities and interactions. In addition, the grounded theory aims at incorporating the researchers understanding through developing explanatory theory frameworks that represent the structures and processes observed (Isyaku & Tabari, 2009). The grounded theory method of strategic management accounting is based on the participants in the policy responsibility of interpreting data. The interpretation of data in the theory is connected with the foundation of the ability to generate the theory itself and the ability to ground it on the provided data. The grounded theory methodology intensively reviews the research of the strategic management accounting policy whereby the complex human interactions in the organisation are presented in a more simplified manner (Seal, 2001). Therefore, that facilitates the organisational settings. The article presents the grounded theory methodology as an element in the strategic management accounting that is capable of capturing complex social phenomenon. This capability of the theory is made possible because it emphasises the need for developing many concepts and linkages.

Tillmann and Goddard have also presented the element of research methods. The concept behind the research methods in strategic management accounting is supportive power while upholding the effectiveness and efficiency of the corresponding policy. The research methods in an organisation are sensitive issues because they help in the development of new ideas behind the strategic management accounting. In addition, they assist in determining the evolving relationship in an organisation (Tillmann & Goddard, 2008). In addition, the research methods increase the levels of trust between the organisational gatekeepers and the researcher. Moreover, due to these methods, the organisation is based on the foundation of rich information. The applied research methods have also helped to develop a number of strategies that “address issues of validity and reliability during the process of data analysis” (Ratnatunga & Alam, 2011). This improves the confidentiality of applying the strategy management accounting due to the valid atmosphere created within the organisation. The element of research methods in the company is enhanced through the availability of numerous internal and publicly available documents. Therefore, the research conducted in an organisation is important in ensuring the continuity of the strategic management accounting within the institution (Nixon & Burns, 2012).

Sense making is another element presented in the article of Tillmann and Goddard. This component “refers to the mental activities that the management accountants in an organization have resorted to in a strategic context when attempting to understand the situation they are faced” (Ratnatunga & Alam, 2011). According to the article, the sense making concept in strategic management accounting is presented as a core phenomenon that is elemental in enhancing organisation’s success (Tillmann & Goddard, 2008). Core sense making in an company refers to the need of participants to increase their understanding of the strategic situations. It also helps in enhancing organisational transparency through the strategic management accounting role while influencing the sensitivity of the company (Granlund, 2011). Mutual understanding within the organisation is also enhanced through the sense making concept as a core phenomenon. Therefore, the managing accountants are in a position of approaching the institution’s complexities through the external and the internal contexts of the strategic situations (Bisai, Chatterjee, Khan & Barman, 2014). Therefore, the mapping of complex causes effect relationships that underpinned organisational action. Sense making element in the company is related to the strategic management accounting policy due to the fact that it creates a suitable environment for the application of the corresponding practice in the organisation (Lapsley, 2000).

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Strategic management accounting is an integrative process whereby the activities within the organisation are improved through the evaluated role of the policy. Strategic management accounting focuses on both the internal and external aspects within company. Specifically, the policy is involved in the improvement of the internal accounting metrics. This creates a broader environment within the organisation for the accounting diversification whereby the involved aspects of accounting are intensified (Seal, 2001). Strategic management accounting also helps in evaluation of external information regarding trends in costs, prices, market share, and cash flow. The policy also aims at impacting the role of the resources while determining the appropriate tactical response. The strategic characteristic of the strategic management accounting requires the intelligence of the competitors, suppliers, and technologies (Ratnatunga & Alam, 2011). Therefore, strategic management accounting is more beneficial to the organisation whereby it helps in the evaluation of different trends in the market.

Reliability and Validity of Data Analysis

The article by Tillmann and Goddard has presented the issue of validity and reliability of data analysis, which is a crucial step in strategic management accounting whereby the data is presented in form of accounting record kept in the organisation. Validity of data in the strategic management accounting is the degree of reality that has been portrayed by this data (Carr & Garcia, 2003). Reliability is the degree of confidentiality that is granted to data in an institution. Therefore, reliability and validity of information in the data analysis procedure of strategic management accounting is important in the planning management arm of the policy. The article of Tillmann and Goddard has adequately and broadly addressed the issue of validity and reliability of information in the data analysis procedure (Tillmann & Goddard, 2008). The authors of the article insists that the collection and analysis of data enhances the validity and reliability of information involved in the strategy management accounting policy. The two concepts of validity and reliability of data have been presented through the grounded theory methodology. This theory enhances data validity and reliability through the data collection, coding and analyses whereby the process is related to the nature of data that is involved in the analysis role of strategic management accounting. The grounded theory is enhanced to facilitate the validity and reliability of data in its analysis through the feature of constant comparison. The grounded theory insists that data ought to be regularly compared in order to ensure that the data in the institution is valid to be applied in the accounting management. This contributes to a rigorous research process whereby the events, incidents and different behaviours in data create the categories and emerging theoretical explanations (Pettersen, 2004). Therefore, the grounded theory methodology helps in upholding the validity and reliability of information in data analysis of strategic management accounting.

Reliability and validity of data analysis is important in strategic management accounting where it involves both the internal and external factors within the organisation. Internal factors in an institution are crucial for ensuring the continuity of the data analysis concept in strategic management accounting (Ratnatunga & Alam, 2011). Internal validity provides that the variables within the accounting management process are upheld hence creating a favourable environment for strategic management accounting. External validity of data analysis ensures the generalisability of the process creating a solid background for the realisation of the strategic management of accounting (Roslender & Hart, 2003). In addition, reliability of data analysis is crucial for the strategic management accounting whereby it acts as a prerequisite for validity of the data analysis process. Therefore, the reliability and the validity of data analysis are two concepts which are interrelated and must function jointly for the realisation of the strategic management accounting policy in an institution.

Integration of the Sense Making Model in Sensitivity and Reliability of Data Analysis

The validity and reliability of the data analysis process is integrated in the paradigm model of sense making in the strategic context. The model of sense making in the strategic context portrays the process of sense making in an institution. It requires that the data analysis is reliable and valid. The process of sense making is sensitive and, consequently, it is dependent on the data analysis correct results (Zhao, 2013). Therefore, the validity and reliability of data analysis in the paradigm model of sense making. The sense making model consists of the structuring and harmonising, compromising and balancing, bridging and contextualising elements. The elements apply the data analysis where the respective process requires validity and reliability (Roslender & Hart, 2003). For example, data analysis is involved in the paradigm model of the sense making where the data to be used in the process need to be reliable and valid. Therefore, the validity and the reliability of the data analysis process are integrative concepts in the paradigm models of sense making (Ratnatunga & Alam, 2011). The integration of the reliability and validity of data analysis with the sense making model is important for the success of the strategic management accounting policy in an organisation.

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Sense Making in Strategic Management Accounting

The strategic management accounting policy is realised in the through the sense making role in the policy. It is an approach in the strategic management accounting policy, which ensures understanding in the activities undergoing in a company by reflecting the work, to which the managing accountants resort in a strategic context. The sense making process in the strategic context consists of various elements due to which the sense making process has a management approach in an institution (Watts, Yapa & Dellaportas, 2014). The elements include structuring and harmonising, bridging and contextualizing, compromising and balancing as well as sense communication and decision. These principals are crucial for creating the efficient environment within the organisation’s strategic management accounting. Each of the elements plays an important role in the sense making process, hence providing its efficiency (Frezatti, Braga de Aguiar & Jos? Rezende, 2007). These components function jointly in order to ensure that the strategic management accounting is upheld through the accountants’ skills profile. Therefore, the elements of the sense making process in an organisation are important due to their positive influence on the strategic context.

The principles of the sense making process in the organisation are the interactional strategies for sense making. These elements contribute to the determination of interaction in the strategic management accounting environment. The basic components of the sense making process are the structuring and harmonising, bridging and contextualising, compromising and balancing. Structuring and harmonising are the principles, which contribute both directly and indirectly to the sense making efforts (Nixon & Burns, 2012). The element itself consists of two aspects such as structuring and harmonisation. Structuring is the most important aspect in the organisation and it contributes to the basic approach towards the complexity of issues within corresponding institution. Structuring helps in rating the complexity levels within the sense making process. Harmonisation concepts involve the unification of the complexities in the sense making process (Guilding, Cravens & Tayles, 2000). Management accountants apply the structuring and harmonisation strategies when the information initially is not compared and presented to them, and analysis of the information cannot be easily conducted (Isyaku & Tabari, 2009). Therefore, the role of the element in the sense making process is improving the core search of transparency and understanding. Communication of sense is also realised through the structuring and harmonisation elements in the sense making process.

Bridging and contextualising is another element in the sense making process. The strategies of the element involve such process as bridging of information across time and contextualising ensures transmission of information across space. The strategies create sense of the phenomenon through comparisons made within the company and relative to other companies. Contextualising is provided by comparing data set with similar information (Modell, 2013). Therefore, bridging and contextualising is an important element for creating coordination in the sense making process. Compromising and balancing element provides the auxiliary services to the sense making activities (Jacobs, 2012). Compromising and balancing involves the considerable judgment, which is characterised by complexity and lack of relevant and reliable information. It creates suitable atmosphere in the sense making process whereby there is acceptance of the impression of data (Carr, Kolehmainen & Mitchell, 2010). Therefore, compromising and balancing is an important element of the sense making process that provides its efficiency.

Impacts of the Elements on the Study

The impacts of the sense making elements on the strategic management accounting are immense. Moreover, the elements of the sense making process help in the attainment of an efficient sense making process that eventually leads to strategically managed accounting development. Due to this influence, the strategic management accounting study is efficient. The elements of sense making process are responsible for the sensitisation of data in the strategic management accounting (Watts, Yapa & Dellaportas, 2014). The data presented in the sense making process needs to be of high sensitivity through the data analysis. Therefore, the components of the sense making process result in the reliability and validity of data in the strategic management accounting. In addition, the elements of sense making help in the strategic management accounting providing simplification of the decision making process in the policy (Zhao, 2013). Decision making process is also important, which becomes efficient through the analysis of the elements of the corresponding process. The sensitisation created by the elements leads to the adoption of better decisions, hence improving decision making for the strategic management accounting study. Therefore, the elements of the sense making process in the strategic management accounting study simplify the involved activities.

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Conclusion

In conclusion, strategic management accounting is a crucial process in an organisation because it ensures the effectiveness of the management in the organization. The elements involved in strategic management accounting are crucial for ensuring that the strategic management process is effective. In addition, the validity and reliability of the data analysis process is important in strategic management accounting study where the sensitivity of data is required in management. The sense making process creates a good platform for the realisation of strategic management accounting. Therefore, the concepts involved in the strategic management accounting are important for ensuring the successful management of an organisation. Strategic management is also important because the sensitivity of the process of management should be enhanced to ensure that reckless errors are not present. In case of a reckless error in the strategic management of an organisation, the negative consequences are experienced. Therefore, strategic management accounting should be adopted in a keen manner in order to ensure high output performance in the organization.

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