What get measured gets managed, What needs managed gets measured Essay Example

an effective performance measurement system, as suggested by management accountants. This ensures that strategies and objectives are in sync with actions (Lynch and Cross, 1991). Research evidence indicates that companies using an integrated balanced measurement system perform better and have higher stock prices (Gates, 1999) than those not adopting such measures. However, an organization's goals and the severity of measures may differ based on its culture, people, and past experiences. Management accounting theory and practice have undergone a significant transformation over the last three decades.

Management accounting has undergone significant changes due to the recognition of the wider role of accounting in today's changing technological and organisational context. Previously, it only focused on addressing the problems of technology in the 19th century. However, since the early 1980s, numerous criticisms emerged regarding the inefficiency and incapability of traditional cost and management accounting practices, resulting in the need for fresh innovative techniques and methods. As a response to such criticisms, management accountants have introduced several new techniques such as activity-based costing, target costing, and the balanced scorecard. These changes have been influenced by various interrelated factors, including debates on the limitations of the traditional accounting paradigm.

Johnson and Kaplan's (1987) Relevance Lost: Rise & Fall of Management Accounting highlighted areas of concern, stating that management accounting had not adapted to the rapidly changing environment. The 1980s marked a period of significant research, re-evaluation, and innovation in management accounting. Previously perceived as a neutral tool for achieving organisational objectives, management accounting underwent a rejuvenation in terms of both research and the practices and techniques employed.

According to Miller (1994), management accounting is a social and institutional practice that

shapes reality. In contrast to traditional economic perspectives, Scapens (1999) defines modern management accounting practices as an extensive organisational approach that encompasses financial information for decision-making. Garrison, Noreen, and Seal (2003) emphasize the crucial role of management accounting in providing data to internal managers who oversee a company's operations. The increasing importance of accounting stems from technological advances in the 1980s and 1990s that have posed challenges for managing profits in both profit and non-profit organizations.

Management accounting has undergone significant changes due to the development of new accounting metrics resulting from technological advancements. These changes have contributed to a more efficient evaluation of individual and organizational performance while expediting communication between accountants and other managers through accounting decentralization. Additionally, non-accountants have taken on some responsibilities previously held by accountants and other managers as a result of the broader business landscape that now includes multifunctional teams.

During the period of reform in accounting practices to better serve modern organisations, new techniques were proposed to replace outdated methods that were unable to accommodate the fast-changing business environment. Some of these techniques include activity-based accounting, target costing, balanced scorecards, strategic costing, quality costing, and attribute costing. One of the most prominent approaches that emerged during this period was strategic management accounting. This method emphasizes the importance of external and non-financial information in addition to internally generated data. According to CIMA, strategic management accounting aims to provide information for formulating an organisation's strategy and implementing its management. This technique employs both internal and external factors to assess a company's performance, both externally and internally.

The objective of strategic management accounting is to provide companies with a competitive edge in

their growth and development by comparing their performance against rivals. To achieve this aim, several techniques are employed, including activity-based costing, life cycle costing, and balanced scorecard. Despite being an established field, there is potential for further advancement in the role of strategic management accounting within management accounting. An integrated system that combines financial and non-financial performance measures has given rise to the balanced scorecard, which provides management with a rapid and thorough evaluation of a company's performance.

The balanced scorecard is a vital tool for managers to measure performance strategically. It aims to balance an organization's financial perspective by assessing key performance indicators while integrating various measures of performance. This method helps organizations clarify their vision and strategy, transforming them into actionable steps. In 1992, Kaplan and Norton introduced the balanced scorecard as an improvement on previous strategic management accounting techniques. The balanced scorecard offers feedback on internal business processes and external outcomes, enabling continuous advancement in strategic performance and results.

The implementation of the balanced scorecard leads to lasting success in strategic planning. This is achieved through the integration of four perspectives and a comprehensive view of the organization. These perspectives include learning and growth, internal business processes, customer satisfaction, and financial analysis.