The work culture within an organization being immensely important, it is subject to change with respect to the demands of the market. However, the management, while operating these changes, frequently overlook the necessary changes that are required to do away with the shortcomings of a traditional accounting system. Accounting systems exist and function in a nuanced format, which has a direct bearing on organizational culture, especially through efficient distribution of finances across various operative mediums within the organization, which are in turn, proportionate with optimizing revenue generation through performance. Thus, accounting systems of emerging economies tread a complicated path, the handling of which requires certain managerial skills, which also takes into consideration the spiritual, socio-psychological, as well as material factors pertaining to a prospective organizational culture. The interrelation between the two variables, organizational culture and accounting, are subject to certain key pedagogical dimensions, which seeks behavioural and communicative changes within an organization. Accounting in this regard, takes into account not only the financial capital, but also the intellectual capital, and their collaborated bearing on a well-developed value proposition. Accounting helps in organizing and economizing a company’s activities by channelizing management accounting practices, leading to the sustainable development of the company. Hence, accounting draws largely on sustainable dimensions. A process of ‘lean thinking’, elimination of redundant elements through economic assessment helps in the process. Annual reports or accounts seek to improve performativity and productivity thereby enhancing the profitability not only through management of finances, but also that of the intellectual capital, which, although cannot be measured on quantitative terms, still has a direct bearing on the finances (Clarke, Seng and Whiting 2011). Thus the literature review attempts to highlight the points of commonality and differences between the aforementioned areas of accounting and organizational culture from a critical and theoretical perspective, especially around four specific articles. .
Apart from the fact that all the four chosen articles are directly related to the managerial decisions for improvement of organizational culture based on an assessment through efficient accounting systems and vice-versa, there are further subtle areas or themes which are common across all of them.
A progressive organization, which integrates dynamic changes within its framework, must also encompass modern techniques of sustainability accounting and ‘lean Management Accounting Practices (MAP)’ which attempts to overcome the incompetence of conventional accounting practices which were unable to keep pace with the dynamic changes, and produced faulty information, which directly impacted the workflow of the company. Those accounting practices are reported to allocate costs arbitrarily with short-term focus rather than strategic accounting practices. Significant developments have been made in the fields of finance accounting, cost accounting and management accounting, all leading to sustainability accounting which reconsiders the social, environmental and economic risks and benefits, bordering on the work culture within the organization, which interact with a nuanced corporate accounting system. The paper by Fullerton, Kennedy and Widener (2014) focuses on these management accounting practices through efficient use of ‘lean thinking’ in manufacturing industries. Through a framework of ‘contingency theory’, which has been referred to in the articles, it shows how strategic use of lean MAP and ‘value stream costing’ (VSC) can lead to a developed performance index for the company, along with the empowerment of the employees (Fullerton, Kennedy and Widener 2014). Thus, it has a significant bearing on the existing work culture within the organization, especially through adoption of sustainable accounting techniques, which gives significant importance to intellectual capital (IC), which relates to behavioural accounting. Value Added Intellectual Coefficient (VAIC) is a measuring tool for IC which makes use of readily available quantifiable and audited information for an essentially qualitative analysis (Clarke, Seng and Whiting 2011). Thus, accounting, with all its nuances, serves the “territorializing”, “mediating”, “adjudicating” and “subjectivizing” functions (Miller and Power 2013).
Although the four concerned articles talks about the relation and interdependence of organizational culture and accounting at large from a theoretical perspective, there are marked differences in the approach and the thematic aspects which they cover. While Miller and Power gives a general idea about the interconnection between the two concerned variables, focussing on the four major roles played by accounting, and how they relate to the structure and function of the organization, Fullerton, Kennedy and Widener focuses more on lean practices of manufacturing firms by taking primary data from a niche quarter. Schaltegger and Burritt, through a nuanced discussion attempts to define the very term ‘sustainability accounting’, drawing nourishment from other theoretical terms and practices bordering around sustainable development and other aspects of corporate accounting, and attempts an integration of ‘sustainability accounting’ within the very framework of an organizations business processes and performance. Clarke, Seng, and Whiting focuses more on the human factor and its impact on business, how it is socially, psychologically and spiritually connected to accounting and organizational culture.
The changes in the behavioural patterns within an organization, resulting from contingent features of the interior environment, has implications for managerial operative changes. It is at this level that accounting gears as well as gets geared by socio-psychological, and spiritual dimensions, which in turn is shaped by management of information (Schaltegger and Burritt 2010). The communication of these information helps in operationalizing sustainable accounting. Such operations encompasses social and environmental issues, both internal as well as external, which has a direct impact on the company’s finances. From a managerial perspective, the development of sustainable accounting, which is itself a measuring tool for organizational culture, encompasses assessment and comparison of products, communications and rewards regarding performativity, all of which are directly related to the improvement of intellectual capital. Similarly, the operation of VAIC index comprises yardsticks like ‘human capital efficiency’ (HCE), ‘structural capital efficiency’ (SCE) and ‘capital employed efficiency’ (CEE) (Clarke, Seng and Whiting 2011). These efficiency measurement tools, along with sustainability and accountability seeks to be motivational tools for the actors within a broader framework of accounting systems. Like Schaltegger and Burritt, the article by Fullerton, Kennedy and Widener also focus on the distribution of information within the structure of lean MAP, which seeks to improve the operations performance through improved leadership and communication standards which are integral parts of the work culture within an organization. One practical implication that comes out of the operation personnel is that they are unable to work independently and must cooperate with the management accountants for accelerating their efficiency and production. The collaboration of these productive operation personnel along with the accounting personnel can modernize the accounting systems through improved organizational culture, which, in turn, is again further motivated by the updated accounting systems and the cycle continues.
The article on lean MAP says was prepared based on the opinions coming out of a survey. The respondents were chosen from a selective area of people who have attended the Lean Accounting Summit and were not randomly chosen. Besides, the measurements and data interpretation were being done by the author. Both are pointers to biasness of opinions. The measurement of VSC is unidirectional and lacks comparative plurality. This particular study provides a scope for an integrated study of operations and accounting long term analysis of evidence collected randomly from a large cross section, bearing on interdisciplinary subjects which has a direct effect on a firm’s accounting and organizational culture. This would lead to sustained success of lean MAP.
On the other hand, the article titled ‘Sustainability Accounting for Companies’ suggests that plurality complicates the theory and gives less importance to environmental impacts and organizational performance. Hence, the requirements proposed for corporate practice of sustainability accounting system opens up pathways for a multifaceted theoretical research approach that has, at the same time, real-time significance where the two variables of organizational culture and accounting are proportionately amalgamated where it serves the utilitarian approach.
The article focussing on Intellectual Capital (IC) comes up with three major challenges that are commonly faced by IC measures – firstly, unavailability of important information and research tools to outsiders; secondly, the information regarding that comes out regarding qualitative judgement risks being opinionated; thirdly, it is difficult to qualitative information into quantitative financial terms. Although, VAIC is capable of overcoming these challenges, however, it has its own share of limitations. A significant proportion of the information that is used by VAIC, comes from tangible assets. The interrelation between IC and performance of an organization being a virgin territory in the context of research and study, this paper opens up immense possibilities of research in this field. The focus on VAIC acts as a motivational factor in this regard.
The article by Miller and Power, although discusses the various avenues of accounting and organizational culture, however, it disregards the relative corporate traditions of countries like Italy, Germany, Sweden and Japan. Thus, although apparently the propositions appear to assume a universal dimension, in reality it fails to do so. This paper opens the prospects of further in-depth studies of the four key roles of accounting and their environmental impact, both within as well as outside the organization. In this process the varied traditions pertaining to ‘accounting’, ‘organizing’ and ‘economizing’ should be considered.
Reference
Clarke, M., Seng, D. and Whiting, R.H., 2011. Intellectual capital and firm performance in Australia. Journal of Intellectual Capital, 12(4), pp.505-530.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.
Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting accounting research and organization theory. The Academy of Management Annals, 7(1), pp.557-605.
Schaltegger, S. and Burritt, R.L., 2010. Sustainability accounting for companies: Catchphrase or decision support for business leaders?. Journal of World Business, 45(4), pp.375-384.
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