Advances in Management Accounting: Volume 14

AIMA intends to provide authors with timely reviews clearly indicating the acceptance status of their manuscripts. The results of initial reviews normally will be reported to authors within eight weeks from the date the manuscript is received. Once a manuscript is tentatively accepted, the prospects for publication are excellent. The author(s) will be accepted to work with the corresponding Editor, who will act as a liaison between the author(s) and the reviewers to resolve areas of concern. To ensure publication, it is the author's responsibility to make necessary revisions in a timely and satisfactory manner.

This volume of Advances in Management Accounting (AIMA) begins with a paper by Evans, Leone, and Nagarajan on non-financial performance measures, or quality-based incentives, in particular, in the healthcare industry. This study examines the economic consequences of non-financial measures of performance in contracts between Health Maintenance Organizations (HMOs) and primary care physicians (PCPs). The authors examine how quality provisions in HMO–PCP contracts affect utilization (patient length of stay in the hospital), patient satisfaction, and HMO costs. In the second paper, Shields and Shields review the research on revenue drivers by reference to five revenue-driver models in the accounting literature. The revenue drivers identified by quantitative empirical research are located in a revenue-driver model based on their levels of analysis (customer, product, organization, and industry) and other characteristics of a revenue driver–revenue relation.

This study examines the economic consequences of non-financial measures of performance in contracts between health maintenance organizations (HMOs) and primary care physicians (PCPs). HMOs have expanded contractual arrangements to give physicians not only financial incentives to control costs, but also to make the physicians accountable for the quality of patient care. Specifically, we examine how quality provisions in HMO–PCP contracts affect utilization (patient length of stay in the hospital), patient satisfaction, and HMO costs. Our results show that quality clauses are associated with a statistically significant increase in utilization (29 more hospital days annually per 1,000 HMO enrollees). Further, inclusion of quality clauses in PCP contracts also led to a significant increase in patient satisfaction, but no associated increase in HMO costs. Overall, these results suggest that quality clauses in PCP contracts can increase value by increasing customer satisfaction without significantly increasing cost.

While management-accounting research continues to focus on cost drivers, research has recently begun to examine revenue drivers. We review the research on revenue drivers with reference to five revenue-driver models in the accounting literature. The revenue drivers identified by quantitative empirical research are located in a revenue-driver model based on their levels of analysis (customer, product, organization, industry) and other characteristics of a revenue driver–revenue relation. Implications of this model for research are discussed.

This paper examines potential cognitive difficulties inherent in the use of performance measurement systems. We examine the potential for emphasizing financial measures as compared to nonfinancial measures in the evaluation of an organization's overall performance. The results suggest that users of performance measurement data will emphasize historical financial measures. Two separate experiments provide additional evidence that users of performance measurement data suffer a halo bias, in that an organization's performance on financial measures appears to influence their perception of the organization's performance on nonfinancial measures.

Issues relating to the financial and non-financial performance of firms are attracting considerable research attention. Four specific factors are focused on this paper, namely quality of information system (IS) information, corporate environmental integration, product innovation, and product quality to investigate the extent to which these variables influence financial and non-financial performance. All four independent variables were found to enhance the performance assessed in non-financial terms. In contrast, the results show that product innovation alone influences financial performance. The findings of this study suggest that the efficacy of these factors may be more effectively assessed by evaluating their impact on performance measured in non-financial terms, thereby suggesting that the inclusion of non-financial measures in performance evaluation models should enhance control system functioning.

Using data from 236 Mexican manufacturing facilities, we examine the relationship between management control systems and structures and environmental compliance and we test the applicability of management control theory in Mexican industry. We report that success in compliance with environmental regulations is significantly associated with degree of management commitment, planning, belief systems, measurement systems, and rewards. This study contributes to the management control literature by empirically testing the efficacy of management control systems and structures in Mexican industry. It contributes evidence about the implementation of environmental strategies in organizations. Finally, by focusing our analysis on Mexican companies, it gives us a rare view of management control and strategy implementation in a developing economy.

This paper examines the implications for accounting, information, and control of a growing body of research to develop and empirically test of a holistic model of organizational success and failure in entrepreneurial organizations at different stages of growth. It builds upon previous work by Falmholtz and colleagues on developing a model of organizational success and failure. It also builds upon a perspective previously developed by Flamholtz, which presents a broader view of the role of accounting control systems in an organizational context.

The initial model proposes that there are six key factors or “strategic building blocks” of successful organizations, and the six key variables must be designed as a holistic system, which has been termed “The Pyramid of Organizational Development”. The model together with the growing body of research designed to assess its validity has significant implications for accounting, information, and control.

If a comprehensive performance model for business is to be useful in an analytic and predictive sense, the model must capture the interrelationships of factors that influence organizational performance such as organizational maturity, size, products and services, management systems, industry characteristics, and environmental influences. Flamholtz includes a number of key factors in his model. However, Flamholtz's explication of the factors does call into question some aspects of the model. For instance, Flamholtz explicitly equates level of sales revenue with specific growth stages of the organization and implicitly equates level of sales revenue with the maturity of the organization. Although these factors may be correlated in many organizations, care must be taken so that the comprehensive performance model does not confound key factors.

Euske and Malina (2005) have presented a thoughtful and constructive critique of my article entitled “Strategic Organizational Development and Financial Performance: Implications for Accounting, Information, and Control.” However, I disagree with a number of questions and criticisms they have raised.

In this article, we examine the link between product development organization and target cost management. More specifically, we investigate the interactive effects of alternative product development organizations, methods for setting target costs, and alternative decision-making authority in assigning targets. Based on the results of a questionnaire survey of Japanese manufacturers, we intend to provide some early evidence on those interactive effects to stimulate further research in this area of target cost management. We find that organizational efficiency is connected with cost reduction performance in target cost management from the two perspectives: (1) the relationship between the simultaneous involvement of project leaders and functional staff and the use of a particular target cost-setting method, and (2) the correlation of the simultaneous project-function involvement with the level of expected cost reduction performance. No particular product development organization shows any preference for the use of a target cost-setting method. The preference, however, is shown clearly when a particular target cost allocation decision authority is aligned with the use of a target cost-setting method. Companies with higher levels of cost reduction performance (expected or experienced) tend to make project leaders and functional staff get simultaneously involved in target cost allocation decisions.

This research uses structural .equation modeling to investigate the relationships between environmental uncertainty, budget communication, budget influence, budget goal commitment and managerial performance. To this end, data from 173 U.S. individual managers were used for the study. The results show that environmental uncertainty significantly affects both budget communication and budget influence which, in turn, impact budget goal commitment. Also, budget goal commitment is significantly related to managerial performance. Implications, limitations and directions for future research are discussed.

In this paper, we investigate the effect that employee rank has on attitudes and performance where supervisors establish budgeted standards of performance. This paper advances the extant management accounting literature by considering a variable (employee rank) not considered in prior related studies. Our findings indicate the impact of attitudes on performance is moderated by the rank of the employee within the organization. We find lower ranked employees within the organization performed better when they felt the process for establishing their performance standards was fair. For employees in higher ranking positions, the motivation associated with feedback on their performance was a factor in determining performance, while the degree to which they felt the process for establishing standards was fair was not.

Many studies, motivated by concerns for activity-based costing (ABC) implementation efforts being less than successful, have suggested that the lack of success in this area stems more from behavioral, as opposed to technical, factors. This concern for the behavioral aspects of systems implementation has also emerged from much of the more general information systems research examining determinants of implementation success. Accordingly, the purpose of this study is to determine if a popular process theory of motivation, expectancy theory, would be useful in explaining the motivation of managers to incorporate ABC information into their job. Data obtained from two experiments employing a judgment modeling methodology support the relevance of both the valence and force models of expectancy theory in this context. Further, the judgments provided by the subject managers suggest they perceive improved product cost accuracy as the most beneficial outcome of ABC use, followed by an equivalent appreciation for both an enhanced ability to communicate the underlying economics of the firm and to identify non-value-added activities. Additionally, subject managers exhibited a greater concern for the possibility that obtaining the data to maintain the ABC system would be difficult and costly than they did for concerns that the ABC information would increase the level of complexity of the information that they use.

Issues of performance measurement are ubiquitous in modern organizations and are often concerned with evaluations of outputs or efficiency (which encompasses both inputs and outputs) of an entity or process. Examples of output measures include revenue generated, defective units produced, on-time shipments, etc. Efficiency examples include standard cost variances, machine up-time rate, and efficiency scores from input–output models such as Data Envelopment Analysis (DEA).

Difficult-to-measure outputs are often included even though they cannot be measured with precision. When outputs of a production process are not easy to measure, serious dysfunctional decision-making can be expected and these problems may be particularly acute when efficiency measurements from input–output models are directly tied to rewards and incentives. Both for-profit firms and public sector organizations may share output measurability problems.

In this paper, we examine the possible problems of using input–output models (such as DEA) when outputs are difficult to quantify within an agency theory perspective and illustrate the potential problems using recent proposals in the UK for evaluating and rewarding police unit performance. We conclude that although input–output models, particularly those such as DEA may be useful as a diagnostic tool to assist decision-makers in altering future operating strategies and policies, it has serious limitations when rewards and incentives are attached to the DEA performance evaluations. In our view, overreliance on mechanical, formula-based approaches is potentially a serious threat to improving performance in these situations.