Starting Points for the Development of Strategic Management Accounting

Strategic management accounting (SMA) is a set of ideas and techniques that deal with accounting data (about competitors and the business) to assist the organization’s management in making strategic decisions. The concept emerged in the 1980s, together with a paper written by Simmonds, who, for the first time, advocated SMA and recommended adopting it (Parker et al., 2008). Then, many scholars in UK and US tried to extend their main ideas in their publications. For instance, the book Pathways to Progress (1994) written by Bromwich and Bhimani became an influential work at that time (Cescon et al., 2019). This particular piece of research and their other works examined British firms and suggested changes to management accounting in order to keep up with modern managerial processes.

Other key developers representing the US were Robin Cooper, Robert Kaplan, and John Shanks. All of them criticized management accounting at that time, suggesting helpful changes and developing concepts. For example, American thinkers presented strategic cost management (SCM), a tool that reduces total costs. Its main aim is to improve a firm’s strategic position by achieving cost leadership that may lead to a competitive advantage in the market (Cescon et al., 2019). Traditional forms of management accounting were deemed inferior compared to SCM and SMA as they lacked a strategic perspective. According to Parker et al. (2008), the first 25 years of SMA development and adoption were controversial. From one side, SMA impacted overall accounting and practice: it influenced many other managerial disciplines, developed tools that were adopted by others, and was a part of professional training. For instance, in the 1990s, management consultants promoted the adoption of SMA techniques such as BSC, VBM, and ABC. On the other side, it was hardly implemented in the way the key developers devised it. Most of its techniques (KPIs, process analysis, or cost management) were embedded into IT, marketing, and management areas.

To conclude, the founding fathers of SMA are Simmonds, Bromwich, Bhimani, Cooper, Kaplan, Shank, and others. Although there are not the same systems Kaplan and Cooper suggested, their elements became an accepted practice and business language. Most SMA developments are not currently owned by accounting functions; however, they become valuable tools in other disciplines. The current trend sees more and more small enterprises embracing strategic management accounting.

References

Cescon, F., Costantini, A., & Grassetti, L. (2019). Strategic choices and strategic management accounting in large manufacturing firms. Journal of Management and Governance, 23(3), 605-636. Web.

Parker, L., Guthrie, J., Milne, M., & Langfield‐Smith, K. (2008). Strategic management accounting: how far have we come in 25 years?. Accounting, Auditing & Accountability Journal, 21(2), 204-228. Web.