It has been a while since my last post, busy times. I hope to be able to get back to more regular posting now.
When I teach accounting to students for the first time, I typically draw on definitions which used words like “economic” and “communication”. Such definitions are of course a bit dated, and I typically provide more current insights on what accounting actually is, bringing in accounting for non-financial items and accounting for resources. I am always keen to emphasise the communicative element of accounting – it is after all data, transposed to information, and information is of less value if not communicated.
Recently Carnegie et al. (2021) published a really great commentary on what accounting is. As well as giving some very useful historic background, they provide a definition of accounting as follows:
Accounting is a technical, social and moral practice concerned with the sustainable utilisation of resources and proper accountability to stakeholders to enable the flourishing of organisations, people and nature.
Hats off, I cannot argue with the above, it captures what accounting is, or perhaps should be. I have been lucky enough to hear Gary Carnegie speak about the above definition, and he really presents a great case. The paper also poses the definition as something for debate and future work.
For what it is worth, my contribution to the debate is a simple one. The definition is fine, but let us not forget the word communicate and/or communication. Decisions in business can only be made on the basis of information, which should imply communication. Thus, perhaps as part of the operationalisation of the above definition, some notes or comments could re-affirm that communicate/communication is a must for accounting. It could of course be argued that “accountability” in the above definition implies communication. However, as a management accountant I can recall times from industry when communication could have led to accountability. A chicken and egg point perhaps, so let me put it another way. Accounting is a (not the) language of business, and while languages and meaning of words evolve (like accounting), they die out if not used to communicate.
Thanks to Garry Carnegie, Lee Parker and Eva Tsahuridu for kicking off what is an interesting and worthy debate.
I recently published a paper in Accounting History Review about a company called Bennett’s and their accounting in the early 1900s. This company provided malt, mainly to Guinness in Dublin. In the research for the article, it became apparent that producers of malt did not do very much management accounting. Bennett’s, for example, seemed not to cost their production process very often and seemed to accept the market price offered by breweries like Guinness.
One would thus think Guinness may have been in a strong position to dictate the price of malt, but this seemed not to be so. In an official corporate history of Guinness, a note is made of the fact that the malt providers should make a “living profit”. What this means is not defined, but when I read this I could only think of the contemporary idea of a “living wage”. This latter concept is to pay staff more than the minimum legal rates of pay (if there is one) and give them enough income to live – but not too much. I did a Google search for the term “living profit” and surprisingly – at least to me – there are no explanations or mentions. I cannot help but think that today the idea of a living profit could be applied in many supply chains, and indeed companies (and their shareholders) could ask themselves do they really need to make so much profit – think Apple, for example. I firmly believe history can teach us a lot, and this is one good example where some altered thinking might benefit society as a whole.
Over the last year or two I have done some research on changes to management accounting practices over a century or so at the Guinness cooperage. This work is now available as a an article in Management Accounting Research see here
Personally, as someone who has implemented and worked with several accounting and business information systems, I would say information systems are vital to accountants. Without them, financial accountants and auditors get no financial statements; without them, managers get no information to make business decisions. But that is the practical me. And I suppose the academic me too. However, if the recent European Accounting Association (EAA) annual conference is anything to go by, the academic community does not share my view. The EAA is a great conference, and brings together about 1,500 academics from all over Europe and beyond. Now, what I am about to say is not at all intended to be negative against the EAA, rather a reflection on the possible lack of focus by accounting academics on the ongoing effects of information systems on accounting and accountants. Of about 900 papers at the 2013 EAA conference in Paris, only 9 were presented under the title “information systems”. I did a quick check to see if papers were not categorised correctly and I only found 2 or 3 papers which I personally might classify as information systems papers.
So what does this mean? I don’t know to be honest. Maybe it’s a temporary blip. Having said that, the previous conferences were not teeming with papers on the things that drive accounting work on a daily basis i.e. information systems. The only thing I can say to my fellow academics is that information systems and technology is not a “black box” any more, it really does affect how we behave and how we do things – think of a smart phone for a moment. Technology does more now that just automate what we as accountants do – it can analyse data better and faster than us and deliver results directly to managers. I don’t think accountants are a redundant commodity yet, but as academics we need more detailed inside the box research to figure out what the accountants of the future will actually do. Well, that’s what I think at least?
As part of my research work, I like to study how organisations and their management accounting practices change over time. And, I particularly like to frame my research as a story of change. I like the stories of how things change (or don’t) as these stories quite often get to the bottom of things quickly, or summarise everything that happened in a brief and concise way. Of course, when I am in research mode, there are often many thoughts flying around in my head. Recently, I was doing some work on how technology has changed the role of management accountants. I put on an old CD I had from Dire Straits (Love over Gold, 1982) and as I was listening to the first track, I realised, hang on this is a story of change. The song is Telegraph Road, here are the lyrics:
Telegraph Road lyrics
Songwriters: Knopfler, M;
Telegraph Road is nowadays US Route 24 in Michigan. The song tells the story of how what was once a dirt track, became a telegraph line route, and ultimately a highway with all the associated development. When I actually realised the story this song tells, I started to think, okay it was only written 30 years ago, but look how much has changed in even that short time. I thing it’s time Mark Knopfler wrote a new version! By the way, if you don’t know the song, it’s about 15 mins long and has some really cool guitar pieces.
Part of my job as a lecturer is to teach and research. Both of these tasks involve communication skills at various levels. To teach I need to get a point across and encourage students to think. To write up research, I need to communicate (in writing) complex things like theoretical constructs. Now, maybe it’s something to do with the fact that I am Irish (gift of the ‘gab’ ), but I love to use stories to get my point across. Why? Read on.
First, this quote says it much better that I ever could:
“The universe is made of stories, not of atoms.” ― Muriel Rukeyser
In other words, no matter where we look, who we look at, or what we look at there is a story behind it. So no matter how complex the subject matter we are trying to explain, we can can a story about it.
Second, stories are known to all cultures.
No matter where you come from, what your cultural specifics are, or even what religion your are I can guarantee that there are stories in your culture.
Third, which bring together the previous points, stories can be utilised to deliver effective messages.
For example, some leaders are good story tellers (see here ), or some really complex matters can be explained using stories (see here for how a story is used to explain the ongoing euro crisis). Or to give another example that may surprise you. The story of the Princess and the Frog is actually originally a way to explain sexuality to young ladies. They may conceive it as an ugly thing (the Frog), which pesters them regularly (for a kiss) but once they confront it head on (kiss the Frog, or throw it a wall as in the original German version) it is quite beautiful (becomes a Prince).
So what’s my point. Well, simply put tell the story. If it is a presentation, a dissertation, thesis or whatever, remember there is a story in there to be told. Trust me, if you tell the story, you’re on the way to getting your argument/point across.
In my research work, I write and read a lot about how accounting practices become taken-for-granted within organisations. This taken-for-grantedness might be equated with the term “institutionalised”, based on theories from economics and sociology. When we think of the term institutionalised, we often associate with things like being in jail for too long, or something that’s more physical like the an Institute of Engineers. But, it can be something far more fluffy. While driving to work in early December, a useful example came to mind as I listened to the radio. It was December 1st, and an Irish radio DJ called Larry Gogan is typically accepted as the person to play the first Christmas song on the Irish airwaves – it was Fairytale of New York for Christmas 2011 just in case you’re interested. It is not written down anywhere that Larry does this, and to be honest I don’t know how this practice came about. But radio listeners know that Larry is expected to play the first Christmas song each year. In other words, it is an institutionalised practice. And what happens is something tries to change this? After a quick search I found some comments from 2006 on a boards site:
I hope he gets a rap on the knuckles / kick in the balls for stealing Larry’s thunder. If he wants to do it after Larry has gone to the Great Microphone in the Sky (not for many years yet, I hope, I hasten to add), fair enough, but he shouldn’t have upstaged Larry like that
These quotes/posts above show that some people did not like the fact that another DJ broke the accepted practice. This is quite typical when change to any institutional practices is attempted. Similarly, in the world of accounting, there may be practices which are just accepted as how things should be done. Trying to change these can be tricky, but if we can understand why such practices became institutionalised, then we might be able to foster some change.
I recently have been lucky enough to study accounting records at a company over a period spanning from about 1870 to today. It was a truly great experience, and history is not really one of my favourite topics. But having seen accounting techniques that we still apply today develop over time, it really gave me an appreciation for where present day accounting came from. The other thing that struck me was the level of detailed communication that went on between the accountants and various other parts of the organisation in the past. At the particular archive I was working in, volumes of typed-out reports and many hand-written ledgers, memos and other reports provided a wonderful picture of accounting over more than a century. What really struck though was how bad we are today at leaving a similar trail of history. Most accounting information is now electronically stored, which may be a problem in itself for any future researchers of accounting history. But a bigger problem is more likely to be the dispersal of information across modern organisations. While the main accounting records may be stored in an electronic, but archivable format, there’s normally vast amounts of related information stored in emails, documents and spreadsheets all across a company. This may make it impossible for any future business/accounting historians to follow the story of accounting within organisations today. So if you are an accountant, future accountant or a manager, why not think about how centralised your important accounting information is. It not only makes sense that important information be available to all now (and thus centralised), but it also leaves a more complete picture for the business itself to look over historic records – and of course makes it easier for future story-tellers/researchers.
Part of my job as a lecturer is to do research on management accounting and related areas. It can be a really interesting part of the job and, yes I know this is sad, but I get a great kick of it. Research in management accounting means getting out to (or surveying) businesses to understand for example, what management accountants do in practice. The outputs of research can be twofold, namely 1) integration into teaching, and 2) publication in an professional or academic journal. The latter is probably the main goal of most academics, but in some countries, more pressure is exerted to publish a certain number of research pieces in a given time period.
I read this article (Times Higher Education – ‘Publish or perish’ culture distorting research results) recently, which mentioned some work by Daniele Fanelli from the University of Edinburgh. (The original journal articles is freely available here) Fanelli points out that research is often better accepted if outcomes are positive. He is not (I think) saying that this is bad, but simply questioning if the way academic output is measured effects the way academics behave. To relate this is management accounting, it is the basic problem of placing too much emphasis of a single or small number of performance measures. For example, profit is the most commonly known performance measure used by accountants and managers. In addition business also assess performance based on other measures such as health & safety, customer satisfaction and how “green” they are. Now, getting back to research, let’s assume the only thing academics are measured on is published papers, the big question is “is this one single output measure adequate to give “true” picture. Well, to be honest as I’m a more a “newbie” to research (having only just got my PhD this month) I don’t know the answer. But, given my experience as a management accountant, I would be a little concerned that any one single performance measurement does not give the the true picture. So, if an academic has to “publish or perish”, will there be manipulation of the “budget” or “budgetary slack” to borrow some management accounting terms. In other words, can targets – e.g. x papers in n years- be achieved to the detriment of other noble objectives like teaching quality or student engagement? I don’t know, but it’s worth asking the question. Is their a thesis there?