Issues in designing appropriate management accounting systems

Management accounting systems are built to suit the particular needs of an organization's managers. The information provided and the manner in which it is provided should ideally be customized. This view is consistent with contingency theory, but some propose that certain systems can be applied to specific firms. Probably the most important information is that which allows management to evaluate performance (Hayes, 1977). While contingency theory can flow from this -- that different managers and different companies will have different needs -- it is reasonable that certain such performance measures are relatively consistent across companies.

I would argue, however, that while there is some consistency in the measures management uses, each firm has a unique position with respect to its structure and environment. The acceptance of the hypothesis that some management accounting systems automatically lend themselves to certain types of organizations demands that we accept that the usefulness of the information provided transcends the differences between those organizations. I believe that this may be true to some extent. We have certain systems and measures that have entered into popular usage because they generate valuable information. However, this does not inherently mean that the information is perfect. It certainly does not imply that the management accounting system in question could not be improved upon, with regards to the information generated.

Each firm, even those of very similar type, has certain similarities but also certain differences. When firm's have different structures, different cultures, different operating environments, and different objectives, they will need different management accounting systems. These variables impact, among other things, managerial preference for information type (Chennall & Morris, 1986). This finding lends itself to broad-based consistency among management accounting systems in similar types of organizations. However, the choice of managers to adopt consistent approaches is not by design -- each manager makes this decision independently. Often, there are other criteria involved in the decision-making process than simply the effectiveness of the system.

Consistency in vague terms, however, does not imply that consistency in specific terms is desirable. The broad system can be inherently suited to firms of a given type, but from there the firm must adapt the system to its own specific circumstances in order to achieve maximum effectiveness. This is consistent with contingency theory -- not only must the managerial system be broadly appropriate for the firm type, but is must also be fine-tuned to meet the specific structural and environmental needs of the firm. The subsystems must be congruent with the firm's objectives, and firms of the same type do not necessarily have the same objectives (Wade & Schneberger, 2006).