Chapter 5 ass 2 step 2
As I open chapter 5, I read about hope and leadership. This is very inspiring. I think about my previous roles in management and also about my recent studies in organisational behaviour. I recently learned about Mintzberg’s managerial roles, and the reason why I remember this is because I thought about how relevant it was to me and my experience. Minztberg concluded that managers perform 10 different roles, and these are broken down into interpersonal, informational and decisional.
(Stephen (2019). Organisational Behaviour. S.L.: Pearson Education Austral.)
Out of these roles, and which ones I relate to more often, is a leader who would monitor, and then resource allocator and negotiator. It was very common for me to motivate my employees through many different methods in my last role within VTG:ASX. I was also responsible for transmitting back information to the GM and CEO and COO, as well as responsible for the effective budgeting of my team. I had no accounting experience, but I imagine that If I did, I would’ve been even more effective in my role. I used to think sometimes how I could’ve been more effective? But effectiveness wasn’t my biggest problem as a Manager, no I was very effective. My biggest challenge was that I was not very successful. What do I mean by successful and not effective? Well, also learning this in my organisational behaviour studies, Fred Luthans stated that successful managers are the ones who spend around 48% of their time networking, while effective managers spend 44% of their time communicating. I was very effective in my role and my peers respected me. I got results. However, I did not network enough with the people that I should’ve. So, when Martin talks about Hope and influence in management, I think about how many requirements there are of a manager, and I wonder, if management accounting will be like this? Will management accounting have many different roles where one can be successful but another effective? Time will tell as I read further on.
(On page 171 R Glenn Hubbard (2019). Essentials of economics. Melbourne, Vic: Pearson Australia,)It’s really interesting to read about Henry Ford and how he came about making cars affordable to the everyday consumer. I have been learning about his company in economics as well. At one point as workers for henry Ford made a four model A body and his staff became more and more specialised at creating the goods, he thought he could lower his Average Total cost further, and decided to build a larger a plant. However, it was too big, and this caused diseconomies of scale, managers had trouble coordinating employees and it became inefficient. I wonder if management accounting will enable us to find the inefficiencies of a business. Was Ford able to determine to shut down the plant through Management accounting? As a financial planning major, I didn’t choose the management accounting subject, I am now wondering if this was such a wise move and If I should make this optional subject part of my studies again? If it provides information like this then surely it would make sense to do it, so why would it be optional in the first place? Shouldn’t all accountants know this?
5.2 challenges for managers
Reading about the challenges managers face makes perfect sense to me. With all the roles and responsibilities, I had of being a manager in many of my leadership roles, controlling cost was by far one of the most important. In my last role as a National Business and Education Support Manager, I was responsible Australia wide for the Departments EBITDA. This was about 30% of the totals business EBITDA. So, it was a huge responsibility. One of the things I always looked at, was keeping my controllable costs in line. The easiest controllable cost of course, was always wages. Making sure I kept my Gross Profit vs Wages in line with the company’s standards. If a team member was not performing well (sales were well below company’s standards and therefore affecting my controllable costs) , then I would take a range of actions. Motivation and training, finding any underlying obstacle for preventing high performance and removing it, and also performance management. A performance improvement plan is not necessarily negative as people assume, I always made sure to my employees that this was a chance for us to work more closely together and to offer more support. However, not all employees view this as a positive experience, and yes, some I did have to terminate and none of which I regret as I gave them the opportunity to succeed first. I always had readily available the figures and costs at the end of each month, and I was able to analyse these issues with our accountant and the GM in our business meetings. It’s clear that the accountant was providing at the meetings some form of management accounting. This was provided to only us, not released to the asx, and it was always there to help us steer the car as Martin refers to in chapter 5, as the GM and I were the ones to steer the car. I always took my role seriously because if one employee was not performing and had no desire or motivation to perform well, then their performance was jeopardising the role of everyone else. I couldn’t afford to let the actions of a one effect the majorities future and their job. Yes, it was that important and I treated every dollar that company spent as if it were my own. That’s why I’m familiar with time lags. My GM and I couldn’t afford to wait every 2nd week of the month to receive the total breakdown of costs in our department. We devised our own simple way of being able to track our costs. We would incorporate our fixed costs such as phones, cars, lease, and for this purpose we would also add wages, as in my department the team members were salaried. We never paid overtime because they never worked overtime, we kept this cost under control. We then would add other variable costs, such as travel, meeting expenses (this expense was sent to us at the end of each week by the team members) etc. Then we would calculate their total profit. So Gross Profit - (Fixed costs + Variable Costs) = total profit. Now this sum was the total profit that each employee would bring to the company. Was it 100% accurate? No, but was it useful and close enough? yes. We did this because we didn’t always have the luxury of being able to wait for the management accounting figures. It provided a somewhat accurate number; was quick to calculate based on the information we had; and helped us to be proactive in managing poor performance. When I read about time lags and the shorter the time lags the quicker response, I think about our method. The firm I was managing would be considered a large firm and we had our daily budgets, weekly budgets, monthly budgets, along with daily targets, weekly target and monthly targets. I consider this to be a part of quantifying the companies plans into short terms budgets. Our plan was to make money (a very simplified analysis) while aligning ourselves to the organisations values. There were many obstacles we use to face and it’s very relevant to read about operating problems, uncontrollable factors and errors in planning on page 10. I can’t begin to tell you how annoying it was, to have everything planned; all our targets and budgets set; tasks given to all the employees for the week and then; Apple without warning would make some sort change in their operational, admin or MDM systems which would affect everyone’s ability to perform their role. We had to change the entire workflow of our organisation just because Apple made one change and didn’t notify anyone until it was last minute. Why do firms do this? Wouldn’t you think the bigger the firm the more consideration they would have for smaller firms in reselling their goods and trying to keep costs under control? Wouldn’t you think they would be happy that we were out there promoting their product to our clients? Where was the professional consideration for my firm? The truth, it’s not that apple didn’t care, it’s just they were too large to manage their communication to their resellers correctly. Add to that, no one was ever accountable for it at Apple, because no one knew whose responsibility it was. When feedback like this was passed on to the Apple BDM’s, it ended there. Falling away into the dark abyss of a lack of organisational structure. It happens. I’m sure it did with my firm too unfortunately. Sometimes firms get too large and cracks appear.
When I first saw the term Management accounting in my university degree, I thought it would be boring. I don’t need to be told how to manage accountants, nor do I want to learn. I’ve had plenty of different roles managing people and accountants would be no different. After all accountants are people too. They have souls. As long as you know what motivates the individual and what the organisations culture is you can motivate that person. But this is not what management accounting is and I was very wrong in my assumptions. As I read more and more about what management accounting actually is, the more I am interested in it. It’s not what I thought it was, and I am excited by what it is. Yes, that’s right, I am excited by it. When I read chapter 4, I was so overwhelmed by of the knowledge in it. It was a big chapter and my first impressions led me to doubting myself. As time has moved on, I’m more confident with it and after reading this chapter I’m really looking forward to learning more about all aspects of accounting. I think this is because I understand the importance of management accounting, I’ve seen it in the workplace, and I have a fair understanding of it. I really can’t wait to start reading the next chapter now, and I’m also considering changing my degree structure so that I can study Management accounting. I loved this chapter and I’m sure I will the next one too. To answer my question at the start, Does management accounting have many different roles? From what I have read yes it does. It helps to keep track of costs, make and communicate short term plans and predict the future. But is it like management, where one role can be successful and another effective? I think I will need to learn more about Management accounting to find out that answer.
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