Someone recently bought our

students are currently browsing our notes.


Planning And Control In Inter Organisational Settings Notes

Accounting Notes > Managerial Accounting Notes

This is an extract of our Planning And Control In Inter Organisational Settings document, which we sell as part of our Managerial Accounting Notes collection written by the top tier of LSE students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Managerial Accounting Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Lecture 4: Planning and Control in Inter-Organisational Settings Topics

* Contingency theory in management accounting

* Open-book accounting

* Networked organisations


Contingency Theory in Management Accounting Introduction to contingency theory (K&K)
* Has its origins in explaining the structure of organizations by particular circumstances (Lawrence and Lorsch, 1967)
* MA developed it to explain the shape of MA systems in organizations (Waterhouse and Tiessen 1978, Otley 1980, Fisher 1998, Chenhall 2003)

* Management control systems do not develop and operate independently of the organisation
* Instead: "Many of the changes and improvements in management accounting are related to contingencies in the external environment and internal structure, strategy and culture of companies" (Dekker, 2003)

* Traditional contingency theory focuses on:
* Direct causal links between strategy, structure and performance
* Differentiates between exogenous environmental and endogenous firm-specific factors

Key Points

* Contingency theory

* Networked organisations

* Functions of inter-organisational MCS

* Open-book accounting

* Advantages of open-book accounting

* Factors affecting open-book accounting

* Trust and IOMCS

* Four stages of IOMCS (Tomkins) Definitions

* Coordination = Distribution (geographical and technological) combines with increased interconnectedness calls for frequent, detailed and relevant exchange of information

* Monitoring = Measurement and performance assessment

* Open-Book Accounting = Where organisations that maintain commercial contacts also share cost information

* Trust = "The willingness of a party to be vulnerable to the actions of another party on the expectation that the other party will perform a particular action which is important to the trusting party" - (Velez et al, 2008)


* If networks are perceived as specific entities that consist of several firms, a new perspective emerges
* Involving context factors that are neither firm-specific nor environmental, but instead network -specific
* i.e. type of network coordination, the trust among the network members, or their difference in size
* These factors impact MA practices within networks Networked Organisations
* Organisations maintain network of close, enduring connections
* We need to take into account the effect of these connections on organisational behaviour, costs and performance
* e.g. they create close connections with their suppliers to:
* Share information
* Take part in product development Functions of Inter-Organisational MCS
* Monitoring = Measurement and performance assessment
* Intended to reduce opportunism and promote goal congruence
* Coordination = Distribution (geographical and technological) combines with increased interconnectedness calls for frequent, detailed and relevant exchange of information
* Intended to assist learning
* Which function is more likely to diminish trust?
* Monitoring:
* It sends a signal that partners may behave opportunistically and [?] need monitoring
* Paradox is that increased monitoring may bring about more opportunistic behaviour
* [?] is it can be a cycle Open-book Accounting

* One way in which organisations collaborate

* Open-Book Accounting = Where organisations that maintain commercial contacts also share cost information
* This allows them to use it as part of their cost management
* It is a means of improving the cost efficiency of supply chains
* Also a tool for building trust into customer-supplier relationships Introduction to open-book accounting
* Many manufacturing companies have developed close cooperative relationships with their key suppliers and buyers in recent years
? Reduces vertical integration
? Allows concentration on core competencies
? Enhances competitiveness
? Early involvement of major suppliers in product development
? More comprehensive sharing of information (McIvor, 2001)
* Organisational boundaries of individual firms have increasingly become blurred (K&K)
? Leading to emergence of manufacturing networks
? Provide a platform for inter-organizational cost management (Cooper and Yoshikawa 1994, Cooper and Slagmulder 1998 and 1999, Cullen et al. 1999, Mouritsen et al. 2001, Kajuter 2002, Kulmala et al 2002)

Advantages of open-book accounting
* Collaborative efforts create additional opportunities for cost reduction
? Cost reduction arise through collaborative efforts of network members
? However, such opportunities require transparency of cost structures
* Therefore open-book accounting plays a key role in inter-organizational cost management (Lamming 1993, Cooper and Slagmulder 1999, Mouritsen et al 2001, Kulmala 2002)
* Outsourcing may cause information asymmetry between the buyer and supplier (Cooper and Slagmulder, 2004)
? Buyer may ask for specifications that unnecessarily increase the costs of the supplier
? Buyer may not know to what degree each component contributes to the overall cost
# [?] open book accounting can help
? Product engineers at the buyer and supplier may work together to identify changes to the specifications which lower overall costs

Course Notes Page 8

Buy the full version of these notes or essay plans and more in our Managerial Accounting Notes.