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(Great English is a must!! No grammar errors!) (No FAKE citations) (5 Pages, APA Format) -------------------------------- Subject of the paper: Managerial Accounting Requirement: After reading and reflecting upon the article and model 14 managerial accounting for mba, answer the following questions. 1. Summarize the main points of the article, in your own words. 2. What is the hypothesis and what evidence does the article offer to support the central claim? Is the evidence sound? Why or why not? 3. What did you learn from reading this article? The what might be huge new understandings or small tidbits of information that you found helpful. 4. What limitations do you see in the research or argument? That is, what counter-claims or arguments can you make in response to the article? 5. How does this article connect with Module 14 of the textbook, your discussion forum assignment response, and additional research conducted during this unit? APA format, 12-font, Times New Roman, double-spaced. Reference any sources cited. Other information: Check the attachments for the rubric Format: APA FormatNo plagiarism is accepted *** The work will be checked for plagiarism through Turnitin by the professor. It is essential for everything to be free of plagiarism otherwise sanctions will be imposed*** -------- Thank you for your support article_managerial_accounting.pdf managerial_accounting_for_mba.pdf rubric.pdf Unformatted Attachment Preview Journal of Management Control (2019) 30:323–351 https://doi.org/10.1007/s00187-019-00285-w ORIGINAL PAPER Strategic thinking and accounting: potentials and pitfalls from a managerial perspective Pasi Aaltola1 Published online: 27 June 2019 © The Author(s) 2019 Abstract This study explores the strategic thinking of managers from an accounting perspective. By building on interview data from managers working with strategic roles in various organizations, an understanding is offered of the experienced potentials and pitfalls of accounting in strategic thinking. The results are elaborated into a framework presenting the dual nature of accounting in strategic contexts. This study suggests that the benefits and pitfalls of accounting for strategic thinking constitute a paradoxical duality, which cannot be fully solved, but must be addressed by practising managers. The observed role of accounting in managers’ strategic thinking also offers implications for management control in organizations. Keywords Managerial work · Accounting · Strategic thinking · Management accounting · Management control 1 Introduction Accounting is used to produce reports representing the past and the current situation, but what about the strategic foresight and visioning aspect of managerial work? This article aims to extend our understanding of the role of accounting in practicing managers’ strategic thinking as they generate ideas for business model development, strategize in order to create success for the future and quantify their strategic plans and intentions in terms of desired financial outcomes. In addition to exploring the potential benefits of using accounting in a strategic thinking context, especially the limitations and pitfalls of such an approach are theorized in this study. Previous studies have explored strategic thinking in managerial work (e.g. Zabriskie and Huellmantel 1991; Heracleous 1998; Liedtka 1998; Bonn 2001, 2005; Tavakoli and Lawton 2005; Nuntamanop et al. 2013). This literature highlights * Pasi Aaltola pasi.aaltola@jyu.fi 1 Jyväskylä University School of Business and Economics, University of Jyväskylä, P.O. Box 35, 40014 Jyväskylä, Finland 13 Vol.:(0123456789) 324 P. Aaltola explicit business impacts by suggesting that strategic thinking should be hypothesis driven (Liedtka 1998) and emphasizes a rational approach (Bonn 2005) and analytical thinking ability (Nuntamanop et al. 2013) as part of strategic thinking. Yet this literature does not outline any specific ways that accounting might play a role in strategic thinking of managers. Even though accounting practices have been suggested to be central to organizations and their management (Brouthers and Roozen 1999; Miller and Power 2013), the connection of strategic thinking to accounting seems to be a rather unexplored area in research. Literature on accounting and control has pointed to the importance of organizations’ strategizing and innovation activities (Davila et al. 2009; Simons 1995, 2000). The traditional view of management control systems in which they are considered to merely implement strategies (Anthony 1965), has been questioned. The management control literature suggests that the formulation and implementation of strategies are interdependent and that the role of the people at different levels of the company is to work actively to maintain the viability of their organization (Otley 1994; Kaplan and Norton 2004). There is also an extensive tradition in contingency-based research of examining management control emphasizing structures rather than actors (Chapman 1997; Chenhall 2003). However, the existing literature on accounting and control has been criticized for concentrating too much on organization-level analysis (Davila et al. 2009; Tervala et al. 2017; Chenhall and Moers 2015), which therefore creates the need to understand individual actors. There have been a number of calls to promote a managerial perspective in accounting research and aligning accounting research more with the actual practice of managerial work (e.g. Chua 2007; Jönsson 1998; Gerdin et al. 2014; Hall 2010). However, in spite of some recently published papers that focus on practicing managers (Goretzki 2013; Tayles et al. 2007; Jordan and Messner 2012; Burkert et al. 2011; Pfister et al. 2017), there seems to be little, if any, research focusing on the essence of accounting from the personal standpoint of individual managers. This study is inspired by these observations, therefore the individual manager, instead of the organization, is chosen as the unit of analysis in an attempt to understand accounting in the context of strategic thinking. There are many published studies describing the dual nature of accounting, with its positive and negative effects (e.g. Denis et al. 2006; Nutt 1998; Frishammar 2003; Kutschera and Ryan 2009; Cooper et al. 2001; Whittle and Mueller 2010; Mastilak et al. 2012). The use of management control systems has also been characterized as a duality of enabling and coercive controls (Adler and Borys 1996; Ahrens and Chapman 2004). Furthermore, it has been found that the perception of coercive and enabling form of control can change over time (Jordan and Messner 2012) and coexist simultaneously (Adler 2012). This study approaches the dual nature of accounting recognized in the previous literature by adopting a practice-oriented approach (Lövstål and Jontoft 2017), examining the tensions that managers confront specifically in their strategic thinking. The research question of this study is as follows: What are the ways in which experienced managers find accounting useful in strategic thinking and what are the disadvantages they have experienced? With this aim, the present study responds to calls to study subjective mechanisms and informal systems of control (Reimer et al. 2016; Tervala et al. 2017; Martyn et al. 2016) and aims to extend the understanding of contemporary research by providing explanations for 13 Strategic thinking and accounting: potentials and pitfalls… 325 why accounting is often seen to be problematic and, therefore, absent (e.g. Choudhury 1988; Taipaleenmäki 2014) in strategic contexts. A qualitative interpretative research approach is adopted to expand our view by interviewing 23 experienced managers from various organizations and exploring the ways in which accounting plays a role in their strategic thinking. The results are formed through qualitative content analysis (Hsieh and Shannon 2005) building on Bonn’s (2005) definition of strategic thinking, seeing it as a way of solving strategic problems that combines a rational and convergent approach with creative and divergent thought processes. The results of this study show that accounting is found to be useful, but simultaneously also having its disadvantages in a variety of strategic thinking contexts. Organizational accounting and management control practices were found to set frames for the individual’s strategic thinking, discouraging managers from quantifying their strategic intentions and using accounting in their strategic endeavours. The results build an understanding of accounting’s role in strategic thinking, extending it from the components of making a decision into the initial framing of the strategic setting and setting the choices made into motion. The results are elaborated into a framework presenting the dual nature of accounting suggesting that the benefits and pitfalls of accounting for strategic thinking constitute a paradoxical duality, which cannot be fully solved, but must be addressed by practising managers. The theoretical contribution of this study includes the observed dual role of accounting in managers’ strategic thinking and its implications for management control in organizations. These findings help us to understand contradictory yet interrelated paradoxical elements (Smith and Lewis 2011) of accounting and managers’ need to address these competing demands simultaneously. The rest of this article is organized as follows. Section 2 contains the literature review. Section 3 describes the methodological setting and interview data collection. Section 4 lays out the study’s main results. Section 5 makes conclusions and offers implications of this article, addresses limitations of the research and outlines avenues for further research. 2 Literature review 2.1 Strategic thinking Strategic thinking has been defined in many ways. Näsi (1991) characterizes strategic thinking broadly, covering all attributes under the term that can be labelled strategic: “Strategic thinking extends both to the formulation and execution of strategies by business leaders and to the strategic performance of the total enterprise. It includes strategic analysis, strategic planning, organization and control and even strategic leadership” (Näsi 1991: 29). Mintzberg (1994) separated strategic thinking from strategic planning. He stated that strategic planning is an analytical process that programmes and formalizes already existing strategies, whereas strategic thinking involves intuition and creativity. This view is supported by Heracleous (1998) and Graetz (2002) who have also separated strategic thinking and strategic planning from one another, but stated that they are both 13 326 P. Aaltola important for strategic management. Bonn (2001) lists three elements of strategic thinking on an individual level: (1) holistic understanding about the organization and its environment, (2) creativity and (3) a vision for the future of the organization. Liedtka (1998) has defined strategic thinking as a particular way of thinking that consists of five elements: (1) systems perspective, (2) intent focused, (3) thinking in time, (4) hypothesis driven, and (5) intelligent opportunism. Kaufman et al. (2003) characterize strategic thinking from a managerial perspective as “practical dreaming”, that is, as creating an ideal future by defining and achieving results that add value. Although there is no general agreement in the literature on how to specifically define strategic thinking, the need for such thinking is clear (Steptoe-Warren et al. 2011) and calls for further research supporting organizations’ attempts to innovate their business models have been made (Laamanen 2017). Thinking strategically—finding alternative strategies and business models to create customer value—has been stated as an important part of every manager’s job (Abraham 2005) and, furthermore, it has been suggested that the more an organization has people thinking strategically, the more readily it can respond to changes in the business environment (Tavakoli and Lawton 2005). There is existing research about the roles related to the work and performance of strategy practitioners in organizations (Nordqvist and Melin 2008), factors that influence strategic thinking at the organizational level (Moon 2013) and leadership practices that can encourage it in organizations (Goldman 2012). How strategic thinking develops in individuals has been explored (Goldman 2005; Dragoni et al. 2011), as has how it can be learned (Casey and Goldman 2010) and how it can be fostered through training (Benito-Ostolaza and Sanchis-Llopis 2014). Three elements, which build on Bonn’s (2005) definition and pull together the widely shared perspectives in the literature, are used to define the characteristics of strategic thinking in this study. First, a holistic understanding of the organizational context (Bonn 2001, 2005) is emphasized to highlight a systems perspective, a mental model of ‘how the world works’ (Liedtka 1998). Second, a visionary and proactive perspective (Bonn 2001, 2005) is included, suggesting that strategic thinking is fundamentally about developing new ideas (Stacey 1992). Acknowledging that managers do “think about strategies” in the strategy execution phase as well, strategic thinking is approached in this study from the perspective of strategy development, as a future-oriented managerial activity, as seeking innovation and visions regarding the directions that the organization should pursue (Mintzberg 1994). A strategy execution perspective is addressed only in the sense of arguing for generated strategic initiatives in the organization, not in focusing on the actual implementation of the developed strategic initiatives. Third, an innovative and creative, business-focused approach to adding customer value (Bonn 2001, 2005) is included. The market orientation is also highlighted by Moon (2013) and Abraham (2005), who describe strategic thinking as finding alternative strategies and business models to create customer value. The use of this three-fold definition of strategic thinking in this study’s data selection is outlined in more detail in Sect. 3. 13 Strategic thinking and accounting: potentials and pitfalls… 327 2.2 Strategic thinking and management accounting The existing literature has recognized the significance of aligning accounting research more with the actual practice of managerial work (e.g. Chua 2007; Jönsson 1998; Gerdin et al. 2014; Hall 2010) and to the developments within the strategy field (Nyamori et al. 2001). Research on strategic management accounting (SMA) has aimed to strengthen the connection between accounting and strategic management (Roslender and Hart 2003). SMA can also be seen to reflect the corporate-level need for accounting information that could be more useful in strategic contexts (Cinquini and Tenucci 2010). Accounting and calculative practices have even been suggested to act as engines in seeing new business opportunities (Revellino and Mouritsen 2015). The literature on management control has approached the initial phase of strategy development from various perspectives. The traditional view where management control was seen as unsuitable for innovation and strategic development has been challenged (Chenhall and Moers 2015). Whereas management accounting practices such as the balanced scorecard (Kaplan and Norton 1996) are primarily focused on managing performance along an already chosen strategic path, Simon’s levers of control framework (Simons 1995, 2000) was pivotal in emphasizing the interactive use of controls aiming at exploring the strategic uncertainties. However, despite the previous work, the existing research has been criticized for mainly focusing on exploring control issues within formal company practices and structures on an organizational level (Tervala et al. 2017; Chenhall and Moers 2015). Much of the prior research has concentrated on which accounting techniques are used and how and in what circumstances in organizations (e.g. Bisbe and Malagueno 2009; Chapman 1997; Chenhall 2003; Davila et al. 2009; Tervala et al. 2017; Chenhall and Moers 2015). To date, there has been very little attention on the use of accounting in strategic thinking from an individual manager’s standpoint. Some research does exist, however, that emphasizes individual actors’ perspectives on the issue. Accounting’s role in the management process has been explored from a cognitive point of view (Busch 1997), a sensemaking perspective (Gerdin et al. 2014; Puhakka 2017) and in how strategic initiatives are argued for (Dutton et al. 2001; Whittle and Mueller 2010). One interesting strand of accounting research has also been carried out in the area of innovation and new product development (e.g. Duhamel et al. 2014; Taipaleenmäki 2014; Jorgensen and Messner 2010; Davila 2000; Feeney and Pierce 2016; Nixon 1998). On the other hand, these settings are often manufacturing oriented and rather technical and structural by nature. Strauß and Zecher (2013) suggest that further research is needed since management control system approaches were developed at a time when most organizations were manufacturing products. This represents fairly precise and traditional contexts for accounting and decision-making. Even in these cases, management accounting has been found to be absent for various reasons, or when present, to provide the intended value to a limited extent. New product development and accounting studies typically build understanding about the adoption and use of different management control systems on a company level (Bisbe and Otley 2004; Bisbe and Malagueno 2009; Ditillo 2012; Mouritsen et al. 2009) instead of focusing, for example, on how decision-makers evaluate alternatives and use analytics in their strategic thinking. 13 328 P. Aaltola Significant analysis and discussion on the variety of reasons for using formal analysis in strategic decision-making has been presented by Langley (1989). She found that analysis could be initiated for information purposes (aimed at gaining information for decision-making), persuasion and communication (in order to communicate ideas to others), direction and control (to ensure action on the part of subordinates), and symbolism (to convey a symbolic message about the strategic issue and intentions and actions regarding it). Mueller et al. (2007) have applied Langley’s framework in their study of organizational performance. They decomposed the concept of rationality according to Langley’s (1989) framework and related these subunits to firm performance, emphasizing the importance of the definition of rationality when examining its effects on organizational performance. Kaikkonen (1994) presents another attempt to combine various perspectives on the uses of accounting in strategic contexts into a framework. He proposed an original viewpoint by examining strategic thinking from an accounting perspective and as a conceptualization that occurs in an individual strategist’s consciousness. He presents four areas where accounting could play a role in strategic thinking. First, accounting contributes to the construction of the strategist’s own world-picture when an individual applies concepts of accounting in their interpretations of the enterprise. Second, accounting has a role in strategic thinking through possible means of analysis and analytical practice. Third, accounting may fulfil the need for conviction in alleviating the fundamental sense of uncertainty regarding the future. Fourth, accounting functions as means of communication, because strategic issues are typically objects of debate and change that are concerned with shared meanings. Whereas Langley’s (1989) framework is multidimensional in its presentation of decision process rationality, it is also limited in its chosen focus on examining written, documented analytical studies in companies around strategic decision-making and scoring them according to their length and analytical sophistication. Furthermore, Langley’s model extends to the strategy implementation phase, whereas Kaikkonen’s framework focuses specifically on strategic thinking, the initial phase of future-oriented managerial activity seeking innovation. For the reasons described before and taking into account the defined focus of this paper (the perspective of individual managers), Kaikkonen’s conceptual and linguistic work is more appropriate for structuring the uses of accounting in strategic thinking in this study. The four areas of Kaikkonen’s (1994) theoretical and linguistic work can be used to draw together various perspectives presented in the existing literature. Accounting’s role in contributing to the strategist’s world-picture resonates with research on the strategic alignment of development with corporate strategy (Akroyd et al. 2016; Slagmulder 1997) as well as the sensemaking perspective, where accounting is seen as forming organizational life and actors’ interpretations of it (Gerdin et al. 2014; Puhakka 2017; Miller and Power 2013; Haukedal and Gronhaug 1994; Tillman and Goddard 2008). The second area, analysis, is consistent with the literature exploring accounting’s role in evaluating strategic alter ... 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