By Catalin Nicolae Albu, Nadia Albu, Flavius Andrei Guinea and Mathew Tsamenyi

The implementation of new accounting systems is not a simple, linear process, but one that is fundamentally subject to the interests and behaviours of different implementing actors, as well as wider social and economic realities.

In order to explore the role of different actors on the implementation of management accounting (MA) systems, we recently examined data from a study conducted in 2005-2010 of 20 small and medium-sized enterprise (SME) construction companies in Romania. During this period, Romania was typical of Central and Eastern European (CEE) countries in that its economy was moving away from the macro-planning of its state-socialist past while trying to adopt more western-style management (including accounting) practices and norms.

For Romania’s construction industry, the rapid increase in activity (brought on by buoyant economic growth in the early-to-mid-2000s) had exposed several shortcomings in the way costings (i.e. cost estimates) for construction materials were carried out. The traditional reliance on a system of using rough estimates based on prior experience was no longer accurate or efficient enough, prompting company owners and managers to agree to trial a new costing system to boost transparency and aid their decision-making processes.

Although it experienced initial support, the costing tool and its attendant procedures came to be viewed with concern and distrust, first, by engineers in the field, and then by managers and even company owners later on. Even though the intended use of the system was to generate accurate data for decision making, internal actors realised that it also created greater visibility over their activities, setting up potential opportunities for internal discipline and punishment.

At the same time, the system proved increasingly useful as a method of minimising income tax payments through creative accounting and the manipulation of data and reporting. In the wake of the 2008 financial crisis, decreased construction activity and increased pressure to minimise costs led some companies to become disinterested in the original goals of the costing tool, and instead to utilise it almost entirely for tax optimisation purposes.

This example highlights how actors’ fears, needs and desires (which can be summarised as their interpretations and responses to MA-based changes) can influence the implementation and changing use of a costing system. It also shows the fundamental role of company owners in the design of MA systems, while acknowledging how all employees, not just managers, influence how they function practically. Crucially, it further demonstrates how actors can respond to increased visibility over their actions by resisting new systems. They may, for example, sabotage them through non-compliance or direct manipulation of data in order to protect their decision-making power or preferred informal ways of working.

Ultimately, certain kinds of manipulation of reporting can become desirable to implementing companies. In the study described above, the costing system evolved from a tool for aiding visibility and decision making, to a dual costing dataset (one for decision making, one for tax purposes) and finally into a tool purely for tax optimisation.

Our study has a number of managerial implications. For one, company owners and managers need to be informed about the intended and unintended consequences of implementing MA tools and about the roles various actors play in shaping their use.

Furthermore, they need to grasp potential sources of resistance – and even resentment – that could be displayed by employees at different levels in response to accounting being used as a means of increasing visibility – and hence control – over their activities. Characteristics such as a general lack of MA knowledge, short-termism or a focus on taxation and financial reporting can influence actors’ behaviours and ultimately condition the adoption of MA techniques.

Ultimately, having an understanding of the factors at play can help managers and external consultants modify their approaches to implementing MA tools and systems, while accounting for potential drifts and deviations from their original purpose. Moreover, systems designers should take the potential for transformation into account from the outset, with an open mind about how such changes may occur, and whether they are ultimately positive or negative.

This article refers to a study entitled, “Dealing with the visibility created by accounting numbers – A case study of cost accounting translation in a transitional economy,” published in the Journal of Accounting in Emerging Economies here.

Catalin Nicolae Albu and Nadia Albu are professors and Flavius Andrei Guinea is a researcher in the Department of Accounting and Auditing at Bucharest University of Economic Studies. Mathew Tsamenyi is Professor of Management Practice in Accounting at CEIBS and the Executive Director of CEIBS Africa. Learn more about his teaching and research interests here.