A Synergistic Approach to Planning and Control Using a Stakeholder Based Strategy

No tool embodies the key role of management accounting in the activities of planning, organizing and control as the budgeting function. Yet, a dissonance between strategy and budgets handicaps organizations when responding to the changing environment (e.g., Gray 1986; Hope and Fraser 2003) and particularly the needs of stakeholders. Increasingly, management accounting has found a role in supporting the implementation of operational management techniques and strategy, particularly with the emergence of the BSC and developments in information technology. This paper integrates strategic mapping with ABC and EVA to provide an alternative to the traditional budgets for planning and control using stakeholder management as a sensory system to monitor and adapt to changes in the environment. Specifically, principles underlying stakeholder theory of management combined with the management accounting tools results in a synergy that complements the features of the tools while addressing the weakness of discrete application, thus supporting strategy in an evolving environment. This generalized representation of an integration approach can be more responsive to the changing environment that is consistent with the literature in management accounting developments. The paper illustrates this approach using a case study where a stakeholder engagement approach enables the firm to monitor and adapt to the environment and changing needs of stakeholders. The integrated approach complemented with the stakeholder feedback enables the firm to overcome some limitations of the applying the techniques individually; for example, for example, the “Cause-effect relationships in the BSC is more effectively managed with appropriate stakeholder feedback. Additionally, it enables the optimal use of information technology.

[1]  J. Mouritsen,et al.  Management Accounting and Operations Management: Understanding the Challenges from Integrated Manufacturing , 2006 .

[2]  R. Kaplan,et al.  Using the balanced scorecard as a strategic management system , 1996 .

[3]  D. Larcker,et al.  Innovations in Performance Measurement: Trends and Research Implications , 1998 .

[4]  Robert D. Macredie,et al.  IT-enabled change: evaluating an improvisational perspective , 1999 .

[5]  Mary A. Malina,et al.  Communicating and Controlling Strategy: An Empirical Study of the Effectiveness of the Balanced Scorecard , 2001 .

[6]  Hanne Nørreklit.  The Balance on the Balanced Scorecard: A Critical Analysis of Some of Its Assumptions , 2000 .

[7]  E. V. Mcintyre.  Accounting choices and EVA , 1999 .

[8]  R. Edward Freeman,et al.  Divergent Stakeholder Theory , 1999 .

[9]  Robert S. Kaplan,et al.  The evolution of management accounting , 1984 .

[10]  Robert N. Anthony,et al.  Management Accounting: A Personal History , 2003 .

[11]  R. Kaplan,et al.  The strategy map: guide to aligning intangible assets , 2004 .

[12]  D. H. Gray.  Uses and misuses of strategic planning , 1986 .

[13]  Albert L. Lederer,et al.  Critical Dimensions of Strategic Information Systems Planning , 1991 .

[14]  R. Banker,et al.  An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures , 2000 .

[15]  H. Thomas Johnson,et al.  Relevance Regained: From Top-down Control to Bottom-up Empowerment , 1992 .

[16]  Jeremy Hope,et al.  Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap , 2003 .

[17]  Varun Grover,et al.  A Framework for Examining the Interface between Operations and Information Systems: Implications for Research in the New Millennium* , 1999 .

[18]  Jan Mouritsen,et al.  Management Control of the Complex Organization: Relationships between Management Accounting and Information Technology , 2006 .

[19]  George S. Day,et al.  Market Driven Strategy: Processes for Creating Value , 1990 .