Does Management Accounting Play Role in Planning Process

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1. Introduction

come isinessmanagementhas becomecular, inesses ining wier, 198ensurehas actk andGsition

Such a management control system consists of two dimensions:(i) information selection; and (ii) information presentation. The rst

information (Ch

Journal of Business Research xxx (2009) xxxxxx

JBR-06929; No of Pages 8

Contents lists available at ScienceDirect

Journal of Busin

ARTICLE IN PRESSimplementation requires instruments that facilitate and control theeffective implementation of the formulated strategies.

In order tomanage the business and achieve organizational efcacy,the organization takes some elements into account, such as organiza-tional structure,management style and themanagement control systemthat includes the management accounting system (Govindarajan,1988). Particularly the management control system is an importantmechanism, responsible for the design and implementation of strate-gies. In terms of range and reliability, the provision of managerial

premise of this study is that the nature of the planning process, whichincludes strategic planning and budget, varies in accordance with theaccounting prole tools that companies implement. Some companiesimplement all tools according to the conceptual framework, whereasothers present less-developed proles in terms of these tools(Frezatti, 2005).

According to Scapens (1994), organizations use more recentlydeveloped accounting tools less frequently than traditional accountingtools. For the purposes of the present analysis, this research do notinformation that feeds the planning and con

Corresponding author. Tel.: +55 11 3091 5820; faxE-mail addresses: [email protected] (F. Frezatti), andso

(A.B. Aguiar), [email protected] (R. Guerreiro), mgouvea@1 Tel.: +55 27 4009 4444.2 Tel.: +55 11 3091 5820.

0148-2963/$ see front matter 2009 Published by Edoi:10.1016/j.jbusres.2009.11.008

Please cite this article as: Frezatti F, et al,jbusres.2009.11.008of a particular form ofn of policies and theirmoreover, the strategy

The present study examines how the attributes of the informationproduced by the management accounting system affect the selectionof management control techniques (Ferreira and Otley, 2006). Thestrategic planning between the formulatioimplementation (Mintzberg et al., 1998);unpredictable in recent decades, and bucorrespondinglymore complex. In partibecome a threat to the survival of businIn this environment, strategic plannorganizational efcacy is critical (Portlation of effective strategies will notorganizational efcacyunless the entitystrategies (Jermias andGani, 2004; Shanimplementation requires the interpocreased competitionhasmore vulnerable sectors.th a view to achieving5). However, the formu-that an entity achievesually implemented thoseovindarajan, 1997). This

2000; Tillema, 2005; Gerdin, 2005). The second refers to the techniquesof management control adopted by organizations, including traditionalones like strategic planning and budgeting (Gosselin, 1997; Chenhalland Langeld-Smith, 1998; Haldma and Lts, 2002; Jermias and Gani,2004). The relationship between these two dimensions of themanagement control systemdetermines the design of themanagementcontrol system (Ferreira and Otley, 2006).trol processes is critical. consider neithertools (Chenhallconcerned withwextent they exist

Examining thmanagement conorder to reach anidentication of

: +55 11 3091 [email protected] (M.A. Gouvea).

lsevier Inc.

Does management accounting play role in penhall and Morris, 1986; Bouwens and Abernethy,

The business environment has be ncreasingly volatile and relates to the selection of appropriate management accountingDoes management accounting play role i

Fabio Frezatti a,, Andson B. Aguiar a,b,1, Reinaldo Gua University of Sao Paulo, School of Economics, Business Administration, and Accounting, A05508-900, State of So Paulo, Brazilb Fucape Business School, Av. Fernando Ferrari, 1358, Boa Vista, Vitria-ES, 29075-505, Br

a b s t r a c ta r t i c l e i n f o

Article history:Received 1 March 2009Received in revised form 1 September 2009Accepted 1 November 2009Available online xxxx

Keywords:Management accountingStrategic planningBudget

This study examines the recompanies. The main goal isaccounting scheme in thelarge-sized companies, usinhierarchy process (AHP) anplanning processes into vclusters. The study concludeto the management accounplanning process?

eiro a,2, Maria A. Gouvea a,2

rof. Luciano Gualberto 908, FEA3, Cidade Universitria, So Paulo City,

onship between management accounting and planning proles in Brazilianunderstand the consequences of not including a fully structured managementning process. The authors conducted a eld research among medium andprobabilistic sample from a population of 2281 companies. Using analytictatistical cluster analysis, the authors grouped the entities' strategic budgetroles, after which the authors applied statistical tests to assess the veat poor or fully implemented strategic and budget-planning processes relateproles of the Brazilian organizations studied.

2009 Published by Elsevier Inc.

ess Researchstrategic planning nor budget as recently developedand Langeld-Smith, 1998). The study is not onlyhether they exist in an organization, but also to what(in terms of complexity and usage proles).e mutual implications of the dimensions of thetrol system is relevant (Ferreira and Otley, 2006) inunderstanding of the association between them. The

the attributes' prole can explain relevant differences

lanning process?, J Bus Res (2009), doi:10.1016/j.

among the entities in terms of the planning process, usage level andeven satisfaction level with the use of the artifact.

This study intends to add to the literature the qualitative discussionof the planning process in a more ambitious dimension than to simplyidentify whether the process exists or not, perceiving if differentplanning process proles require peculiarities in terms of the attributesof themanagement accounting system. Consequently, the developmentitself and demand of management accounting can be understood in abroader way on the basis of this associative analysis.

Considering that management accounting may have differentproles of level of structuring and that, according to these prolesmanagement accounting may have different impacts on the strategicplan and budget, the study aims to address the following researchquestion.

Is management accounting structure associated with the planning

context, Rogers and Bamford (2002) note that the key organizationalissue in the future will be information management and the strategicplanning process has to emphasize the types of information thatsupport the company's strategic orientation No process requiresgreater coordination and information input than an organization'splanning process.

Apparently the management team requires a great deal of internalinformation to support its decision-making process and that eachorganization has its own conguration of needs, timing, and details.The selection of the information is critical because this selection must

2 F. Frezatti et al. / Journal of Business Research xxx (2009) xxxxxx

ARTICLE IN PRESS(strategic and budget) processes development? H1: the structure ofthe management accounting attributes associates with the strategicplanning and budget development.

2. Literature review

This literature review focuses on the following subjects: the strategicplanning process; the relationship between strategic planning andbudgeting; the management accounting information system; therelationship between management accounting and the planningprocess; and (v) the attributes of themanagement accounting structure(see Fig. 1).

2.1. Strategic planning process

Strategic planning literature usually predicts that the use of astrategic planning process positively affects protability, and thispositive effect has been its major objective since at least the 1960s(Pearce et al., 1987). However, various studies have reached differingconclusions from analyses of the relationship between strategicplanning and performance (Armstrong, 1982; Glaister and Falshaw,1999; Andersen, 2000; Rogers and Bamford, 2002). According to Brockand Barry (2003), this divergence results from: (i) inconsistencies inputting plans into action; (ii) ignoring contextual inuences; and(iii) invalidmeasuring techniques. The last item includesweaknesses inaccounting data. In this regard, Peel and Bridge (1998) suggest that theuse of accounting-basedmeasures, such as revenue, is one reason for thedivergence. As Bracker and Pearson (1986) observe, this lack ofconvergence occurs because accounting-based performance measureshave two inherent weaknesses: (i) a lack of homogeneity in accountingdata; and (ii) non-availability of data for small rms.

O'Regan and Ghobadian (2002) identify some barriers to the im-plementation of formal strategic planningincluding a lack ofrelevant and adequate information, which is central to the strategicplanning process for companies that use this process formally. In thisFig. 1. Planning and management accounting attributes association.

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008meet the specic needs of the organization, rather than being amandatory specication imposed from outside the rm. Mostcriticisms of accounting information arise from a failure to plan theinformation structure according to the organization's specic require-ments or needs. The authors do not intend to investigate possiblereasons for that, like life cycle and costbenet evaluation, but theavailability of the information structure, captured by the attributesprole is the main point of the research.

According to Fischmann and Almeida (1993), the strategiccomponents of the planning process are: vision, mission, long-termobjectives, scenarios, and operational plans (as shown in Table 1).

2.2. Relationship between strategic planning and budgeting

Steiner (1979) considers that the strategic planning concept hasthe following characteristics: (i) related to the future consequences ofcurrent decisions; (ii) a process that begins by setting organizationalobjectives, then denes the strategies and policies to reach them, and,nally, develops detailed plans to guarantee that the strategies areimplemented; (iii) an attitudethat is, strategic planning is more thanan intellectual exercise; and (iv) responsible for the links among long-term strategic plans, medium-term programs, short-term budgets,and operational plans. The budget is the tool that enables the strategicplan to meet its objectives.

In creating the links, especially the connection between the long-term plans and the short-term budgets, the association betweenstrategic issues and tactical issues becomes especially relevant to thedevelopment of the planning system as a wholethus avoiding eitheran ethereal approach (which lacks contact with business reality) or anexclusively tactical process (which lacks consideration of the overallstrategic objectives of the company). Neither of these extremesprovides the process with the necessary balance.

As Andersen (2000, p. 184) observes, a relation normally existsbetween a failure to show a positive association between strategicplanning and performance and a tendency not to emphasize the roleof strategic planning.Management accounting can thus contribute topoor strategic planningeither because information is inadequate orabsent, or because information has been badly used.

Oliveira (1985) categorizes the most common strategic planningaws as occurring: (i) before the start of the elaboration (ofplanning); (ii) during the elaboration; and (iii) during the imple-mentation. Among the aws in the rst category, Oliveira (1985,p. 35) refers to not preparing the ground for strategic planning insidethe company [and] not scheduling the system for the control andevaluation of strategic planning. Establishing the criteria and

Table 1Elements of strategic planning and budget.

Strategic planning Budget

1. Vision 1. Assumptions2. Mission 2. Marketing plan3. Strategies and long-term goals 3. Production and logistic plan4. Scenarios 4. Human resources plan5. Long-term operating plan 5. Capital budget

6. Projected nancial statementsng play role in planning process?, J Bus Res (2009), doi:10.1016/j.

3F. Frezatti et al. / Journal of Business Research xxx (2009) xxxxxx

ARTICLE IN PRESSparameters, as well as the necessary information system for theadequate control and evaluation of strategic planning, is fundamentalfor the executive.

The success of strategic planning thus depends on control andevaluation on the basis of management accounting tools (whichinclude budgeting and budgetary control). Adequate managementaccounting can offer the support that is necessary to the planningprocess as a whole. However, as Welsch et al. (1988) observe, thebudget (which is the managers' tactical instrument) has to contain allrelevant assumptions, marketing plans, production plans, suppliesand inventories, human resource plans, investment plans, andnancial statement projections (see Table 1).

2.3. Management accounting information systems

Welsch et al. (1988) and Hansen and Mowen (2006) divideaccounting information systems into two main subsystems: nancialand management. However, they note that these subsystems are notnecessarily independent of one another; indeed, in an ideal situation,integration and connected database would exist between the twosubsystems. A possibility exists to use each subsystem's outputs asinputs for the other. In short, these authors support the integration ofaccounting databases. Management accounting systems are part of anorganization's wider management control systems. In general,management control exists to ensure that internal agents act inaccordance with the organizational goals (Raiborn et al., 2004; Drury,2004; Berry et al., 2005; Anthony and Govindarajan, 2002). In thisregard, management accounting information systems represent oneof the most relevant control mechanisms for evaluating whethervarious activities are realizing benets for the organization (Drury,2004).

According to ShankandGovindarajan(1997), ... accountingexists inadministration mainly to facilitate the development and implementa-tion of business strategy. They considered administration to be acyclical process that involves four phases: (i) the formulation ofstrategies; (ii) the communication of these strategies throughout theorganization; (iii) the development of tactics, and putting these tacticsinto practice to implement the strategies throughout the entireorganization; and (iv) the development of controls to monitor theimplementation steps and to assess success in reaching strategic goals.

Shank andGovindarajan (1997) also note that accounting has a roleto play in each of these phases. In the rst phase, accountinginformation constitutes the basis for nancial analysis by facilitatingthe identication of nancially practicable strategies. In the secondphase, the accounting reports represent an important tool forcommunicating the basic aspects of the strategy. In the third phase,accounting information facilitates the identication of the mostefcient tactical program to reach the company's goals. Finally,accounting has an important role to play in monitoring theperformance of managers and business unitsin terms of standardcosts, expense budgets, and annual prot plans.

Management accounting systems thus have the potential to supplynancial information related to costing products, services, and otheritems of interest for management in terms of planning, control,assignment, continuous improvement, and decision-making (Hansenand Mowen, 2006). Management accounting can thus supply theinformation required for both goals denition in the strategydenition process and for performance assignment (Raiborn et al.,2004). However, the planning and control process must consider bothnancial and non-nancial information.

2.4. Relationship betweenmanagement accounting and the planning process

The selection and utilization of management control techniquesdetermine the prole of the management information system (Ferreira

and Otley, 2006). The attributes of the information generated by the

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008system depend especially on the techniques employed for strategicplanning and budget. Ferreira and Otley (2006) demonstrate thepresence of a relationship between conventional management controltechniques, such as strategic planning and budget, and traditionalmanagement control information.

One of Mintzberg's (1994) harshest criticisms of strategic plannersis that they are distant from the day-to-day details of operations informulating strategybecause they assume that information systemscan fully inform them. This criticism becomes even more pertinent ifthe business does not ensure that managers receive the daily factualinformation that only management accounting can provide. Thus,even authors who criticize strategic planningsuch as Mintzberg(1994)refer to the need for information to assist in the formation ofstrategies and to assess their viability after implementation. However,critics exist regarding the use of accounting data as a source of suchinformationwhether to support strategy formation (Mintzberg et al.,1998) or to analyze company performance (Peel and Bridge, 1998;Bracker and Pearson, 1986). According to Mintzberg et al. (1998),factual information (including management information) is oftenlimited in the following respects:

frequently has a limited scope and often leaves out important non-economic and non-quantitative factors;

often too complex, limiting the efcient use of factual information instrategy formulation;

frequently arrives too late, reducing the use of factual information instrategy formulation; and

a surprising amount of factual information cannot be trusted.

In this context, an adequate supply of information becomes amatter of priority in the decision-making process, and this priority hasprovoked changes in the kind of information that managementaccounting has delivered in recent years. Ward (1993, p. 9) endorsesthe importance of management accounting in observing that: thestrategic planning exercise is elaborated to create plans that wouldallow the company to reach its goals. These plans normally demandimportant data from management accounting.

Similarly, Horngren and Foster (1997) note that accounting facilitates planning, control and decision-making through budgetsand other nancial standards, without the systematic recording of itscurrent results and its role in performance evaluation. These authorshave also noted that a management accounting system can beefcient only when this system is consistent with the organization'sgoals and strategies.

2.5. Attributes of management accounting structure

The characterization of management accounting in terms of itsattributes is an important aspect of the present studywhich takesthe research of Moores and Yuen (2001) as a theoretical basis. Theseauthors consolidated the relevant attributes of management account-ing in two groups: information selection and information presenta-tionas suggested on the basis of the Statement of AccountingConcept 3 (SAC3, 1990).

The rst, information selection includes the content dimensions ortools which accounting systems use to support managers decisions.However, in view of the fact that organizations can differ in terms ofstrategies, structures, and styles, information presentation includesother attributes of accountingsuch as aggregation level, integration,scope, and timeliness. Table 2 shows the variables that make up theattributes.

Moores and Yuen (2001) do not specify how to capture someattributes mentioned in their study. In Table 2, the authors attemptedto detail some of these. The present study did not consider theenvironment scanning attribute because the orientation of this

research is towards the internal aspects of a company's decisions.

ng play role in planning process?, J Bus Res (2009), doi:10.1016/j.

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ARTICLE IN PRESSTable 2Accounting attributes by dimension.Source: Moores and Yuen (2001, p.355), adapted.

Selection Inform

Conceptual denition Research modus operandi Conce

1. Monthly income statements 1. Monthly income statements Aggre2. Monthly balance sheet 2. Monthly balance sheet a. Dec3. Cash ow statement 3. Cash ow statement b. Com4. Cost accounting 4. Costing method type and

cost accumulation systemc. Com

5. Non-participatorybudget control

5. Centralized strategic planningprocess, budget and budget control

d. Rep

6. Participatory budget control 6. Participatory strategic planningprocess, budget and budget control

7. Capital budget 7. Capital budget8. Long-term planningand forecasts

8. Long-term planning and forecasts

9. Responsibility accounting 9. Responsibility accounting detailedper cost center, business unit, etc

10. Quality control 10. Waste reduction programs11. Environment scanning 11. Not considered in this study12. Financial informationfor performance evaluation

12. Financial information forperformance evaluation

13. Long-term criteria forperformance evaluation

13. Long-term criteria forperformance evaluation

Scopee. Intf. Extg. Finh. Noi. Hisj. FutTimelk. Repl. Autm. Re3. Research design

Fig. 2 illustrates the research design for the present study.

3.1. Research approach

Because the research focusedon the relationshipbetweenacompany'splanning prole and its management accounting attributes, planningproles formed different clusters. The analysis considers the two kinds ofplanning processesstrategic planning and budget planning separately.This research applies the Steiner' (1979, p. 17) denition of the strategicplanning proles whose original conceptual strategic planning includestwo major elements: strategic planning and tactical planning. Twodimensions characterize the strategic planning. The rst one is theplanning processwhich includes, amongst others, expectations of outsideand inside interests, forecasts, past and current performance, andenvironmental information. The second dimension is the master andprogram strategies which include: mission, purposes, objectives, policies,and specic long-term projects. The research design specically appliesthe simplied strategic planning model adapted by Fischmann andAlmeida (1993) which includes the components: vision, mission, long-term objectives, scenarios, and operational plans.

In turn, the focus of the tactical planning is on short-range plans(Steiner, 1979). Welsch et al. (1988) suggest that the tactical planning(or budgeting) contains all relevant assumptions, marketing plans,production plans, supplies and inventories, human resource plans,investment plans, and nancial statement projections.

At one extreme was a cluster of rms that had the simplest (orpoorest) prole in termsof both strategicplanningandbudgeting; at theother extreme was the cluster with the most comprehensive prole interms of both strategic planning and budgeting. Between these

n. Time-l

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008on presentation

al denition Research modus operandi

ion and integrationn models a. Decision modelsnation of data over time b. Combination of data over timeation of data in functional areas c. Combination of data in functional areas

s on interaction between subunits d. Reports on interaction between subunits

l e. Internall f. Externalial g. Financialnancial h. Non-nancialal i. Historical

j. Futuresspeed k. Report speedtic reports l. ERP integrationt frequency m. Report frequencyextremes were clusters with different degrees of comprehensivenessin each of these planning processes. Based on expectations from aperusal of the relevant literature, judgments regarding simplest,poorest, and comprehensive were made in light of the rms having(or not having) the components.

3.1.1. Planning variablesTo divide the sample into different clusters, the rst step was to

identify the planning proles; the analysis of the variables directed thisidentication. Because the variables of the planning processes were ofdiffering importance, they possessed different weights of importance inthe planning model. The research applied Analytic Hierarchy Process,AHP (Saaty, 1996) to analyze the variables presented in the literaturereview and discussed in the study. Each variable received an ordinalgrade of points in an interval from 1 to 5; the greater the grade, thegreater the variable's importance and complexity. The analysisconsidered the following levels, with the rst two as preferred optionsand used the last option only if the rst two were not applicable:

from the relatively more basic (grade 1, equal to 1 point) to therelativelymore complex/more complete (grade 5, equal to 5 points)in a conceptual, resource, or actual sense;

from natural precedence (grade 1, equal to 1 point) to the last therm obtained (grade 5, equal to 5 point)in a conceptual sense; or

from the least required (grade 1, equal to 1 point) to the mostdesirable (grade 5, equal to 5 points)from a conceptual perspective.

The variables and their respective weights (points) were as follows:

Strategic planning: vision (1 point), mission (2 points), scenarios (3points), strategies and long-term objectives (4 points), and long-term operational plans (5 points); each entity being able to obtain amaximum of 15 points.

ag in information reception n. Time-lag in information reception


Budgeting: assumptions (1 point), marketing plan (2 points),production/services plan, supplies, inventories (3 points), humanresource plan (4 points), capital budget (4 points), and projectednancial statements (5 points); each entity being able to obtain a

Fig. 2. Field resear


ARTICLE IN PRESSmaximum of 19 points.

Zero indicated cases in which authors did not nd the elements.

3.1.2. Management accounting variablesAfter identifying the clusters of planning proles, the next step

was to identify the attributes that distinguished the clusters. Table 2presents the management accounting attributes, as described in theliterature review, grouped into selection and presentation dimen-sions. With a view to undertaking cluster analysis, the analysisclassied these variables in a dichotomic basis, with 1 indicating thepresence of the variable and 0 indicating its absence. This dichoto-mization made feasible the identication of the attributes that were

Table 3Population segmentation per sector.

Resumed codes per Original codes per Title

sector sector

1 2 Wholesalers and foreign trade5 Retailers

2 1 Food3 Automobile4 Beer and beverages6 Textile and confection7 Civil construction8 Electric-electronic9 Pharmaceutical

10 Hygiene, cleaning and cosmetics12 Civil construction material13 Mechanic14 Mining15 Paper and cellulose16 Plastic and rubber17 Chemical and petrochemical substance21 Iron extraction and metallurgy22 Technology and informatics

3 11 Financial institutions4 23 Telecommunications5 19 Public services6 18 Services others

20 Transport24 Communication

7 25 Various others

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008present in the different clusters or, even more usefully, the attributesthat were not present in some clusters.

3.2. Population, sampling and data collection

The studypopulation includedorganizations that are active in Brazilboth multinational and national, public and private. The authors chosethese organizations from all states of the Brazilian federation. Thepopulation target used the denitions of the National Bank of Economicand Social Development (BNDES) to dene a medium-sized companythat is, revenue that exceeds US$18 million/year. The source oforganizational information in dening the study population was thedatabase developed by the Brazilian magazine Melhores e Maioresdatabase. In total, the sample population included 2281 organizationscharacterized as medium-sized or large. The total revenues of thecompanies were US$502 billion. The population represented sevensectors (see Table 3). The authors also categorized these sectors byrevenues scale, in accordance with the entity's size.

A pretest assessed the consistency and sequence of questions inthe survey. During the eldwork, the denition and segmentation of aprobabilistic sample classied the companies based on the annualrevenues in dollars, using a 12% error margin and a 95% signicance

ch overview.level. Data collection included answers from 119 entities, identied bymeans of random numbers, using Excel worksheet resources andtaking into consideration both sector and size.

The eld research involved three interviewers who had contactwith the organizations. Data collection used a questionnaire,complemented by interviews. The company's senior nancial exec-utive received and answered the questionnaire sent by e-mail. In 30%of cases, additionally, a follow-up interview was held to clarify somepoints or to assist in conrming the questionnaire.

3.3. Statistical analysis

The study used the following statistical analyses:

Multivariate analysis (specically cluster technique): with a view tocategorizing the entities and identifying distinct planning proles; theresearch analysis rst used Hierarchical approach and, next assequence, the technique used a K-means, ordinal scale, and furthestneighbor approachwith a view to identifying thevedistinct companygroups in terms of strategic and budget planning process; and

MannWhitney test: applied to analyze the distinct cluster groupsand to test the hypotheses with a 95% signicance level. Because the


theoretical model included 26 variables, the determination of anacceptable signicance level considered the transformation of 0.05to 0.002 (0.05/26). The data analysis compared each cluster with thesum of all the other clusters. For example, the study investigated the

Cluster 5: strong emphasis on budgeting (18.1), but intermediateconcern for strategic planning (7.7). This cluster contained 22companies.

The data analysis also applied the MannWhitney test to eachcluster, and at least one variable was within the signicance leveldened for the study (Table 5). Based on the results, the nullhypothesis (H0) was thus rejected, and hypothesis H1 was conrmed.For this sample, the planning prole was associated with theattributes of management accounting.

In terms of each cluster, the following observations are due (Tables6 and 7):

Cluster 1: this cluster was the most comprehensive cluster in terms ofboth strategic plan and budget. The cluster included many manufac-turing industries, but fewernancial institutions. Larger revenueswerecharacteristic of this cluster. The attributes found in this cluster were:monthly balance sheet, monthly cash ow, capital budgeting, and long-

Table 4Clusters and centroids distribution.

Description Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5

Meaning The mostadherent

High budgetand low SP

The leastadherent

High SP andlow budget

Highestbudget andlow SP

Strategicplan

14,3 7,1 3,8 12,6 7,7

Budgeting 18,3 11,8 2,9 5,5 18,1Number ofentities

42 28 13 14 22

% on totalof sample

35.3 23.5 10.9 11.8 18.5

lust


ARTICLE IN PRESSvariables that distinguished cluster 1 from clusters 2+3+4+5.The application of this analysis was similar in the other clusters.

4. Data analysis

Data analysis included ve distinct clusters. Clusters 1 and 3 wereat the two extremes, with the other alternatives representingintermediate cases. Table 4 presents the arrangement of the clustersaccording to the centroids.

Cluster 1: the most comprehensive cluster in terms of both strategicplan (14.3) and budgeting (18.3). This group included 42 entitiesthat had both a strategic plan and a tactical plan in accordance withthe conceptual framework. This conguration is likely to cope withthe theoretical approach of high adherence of budget to strategicplanning.

Cluster 2: intermediate level with more emphasis in budgeting (7.1)than strategic planning (11.8). Total of 28 entities. This clusterincluded the companies that had tactical concerns, but relativelylittle support for strategic planning.

Cluster 3: this cluster was the simplest cluster in both strategicplanning (3.8) and budgeting (2.9). This cluster consisted of 13entities.

Cluster 4: intermediate level with more emphasis on strategicplanning (12.6) than on budgeting (5.5). This cluster included 14entities. Although concerned about the strategic plan, theseorganizations had little support from the budget. As consequence,the expectation is that strategic planning is the main focus ofprocess and weak tool to implement the planned actions.

Table 5Management accounting attributes and strategic (SP) and budget (B) planning prole c

Attributes ClustersSelection 1

2. Monthly balance sheet 0.000(yes)

3. Cash ow statement 0.001(yes)

4. Cost accounting

7. Capital budget 0.000(yes)

8. Long-term planning and forecasts 0.000(yes)

13. Long-term criteria for performance evaluation

Presentation 1

h. Scope non-nancial

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008termplanning and forecast. This cluster thushad thebasics of a structureto accomplish a comprehensive planning system; in particular, capitalbudgeting was present in this cluster, but not in other clusters.

Cluster 2: an intermediate level of strategic planning, but greateremphasis on budgeting characterized this cluster. The cluster hadthe fewest manufacturing industries, but the most nancialinstitutions. In terms of revenue, this cluster had a relatively greaternumber of smaller entities than average. The only characteristic thatdistinguished this cluster from the others was less utilization of thecosting system than in the other clusters.

Cluster 3: this cluster was the simplest cluster in both strategicplanning and budget. In terms of revenues, this cluster had a greaternumber of smaller companies and fewer large ones. Foreign tradeand wholesaling entities were most prominent in this cluster.Distinguishing this cluster from the others was a lack of capitalbudget, long-term planning and forecasts, and non-nancial scope.Cash ow and balance sheet of the entities reected the informationprovided by the capital budget.

Cluster 4: from the perspective of the planning process, thus clusterwas at an intermediate level, with greater emphasis on strategicplanning than on budgeting. Companies with larger revenues andthose classied as other services were most prominent in thiscluster. Attributes not found in this sector included capital budgetand long-term criteria for performance evaluation. Without theseattributes, the entities were unable to structure their planningsystems as a whole; development of strategic planningwas possible,but not in terms of the comprehensiveness that the conceptualframework proposed. This result is probably why the budgetingfocus was not as signicant as in cluster 1.

ers with lower (1signicance level/n).

2 3 4 5

0.002(no)

0.000(no)

0.000(no)

0.002(no)

0.000(no)

0.000(no)

2 3 4 5

0.002 (no)ng play role in planning process?, J Bus Res (2009), doi:10.1016/j.

Table 6Cluster distribution per sectors.

Sector Cluster1

Cluster2

Cluster3

Cluster4

Cluster5

Total % stotal

Number of entitiesForeign trade andwholesaling

4 5 3 2 2 16 13%

Industry ingeneral

24 9 6 7 9 55 46%

Financialinstitutions

3 7 1 1 2 14 12%

Telecom services 2 2 4 3%Public services 5 3 1 1 2 12 10%Other services 4 3 2 3 5 17 14%Various 1 1 1%Total 42 28 13 14 22 119 100%

In %Foreign trade andwholesaling

10% 18% 23% 14% 9% 13%

Industry ingeneral

57% 32% 46% 50% 41% 46%

Financialinstitutions

7% 25% 8% 7% 9% 12%


ARTICLE IN PRESS Cluster 5: this cluster had a strong emphasis on budget, but only anintermediate emphasis on strategic planning. Organizations withlarger revenues were found in this cluster more frequently than inother clusters. The only characteristic that distinguished this clusterfrom the others was a lack of capital budget.

A signicant nding was that themajority of the attributes associatedwith the planning prole included those mentioned in the literature asbeing the most important management accounting attributes.

5. Results and implications

Telecom services 5% 0% 0% 0% 9% 3%Public services 12% 11% 8% 7% 9% 10%Other services 10% 11% 15% 21% 23% 14%Various 0% 4% 0% 0% 0% 1%Total 100% 100% 100% 100% 100% 100%The analysis provided indication that both themanagement accountstructure and planning process (strategic plan and budget) havedifferent proles, treated in the clusters. This result, when referring toplanning process, was in accordance with Steiner (1979) which arguesthat a universal strategic planning structure that can be equally

Table 7Cluster distribution per revenues.

Revenues in US$millions

Cluster1

Cluster2

Cluster3

Cluster4

Cluster5

Total % stotal

Number of entitiesUp to 50 7 7 2 2 3 21 18%N50 b100 5 2 4 2 3 16 13%N100 b250 5 5 2 2 3 17 14%N250 b500 8 4 1 3 16 13%N500 b1000 5 4 2 3 6 20 17%N1000 b3000 10 4 1 4 4 23 19%N3000 b30,000 2 2 1 1 6 5%Total 42 28 13 14 22 119 100%

In %Up to 50 17% 25% 15% 14% 14% 18%N50 b100 12% 7% 31% 14% 14% 13%N100 b250 12% 18% 15% 14% 14% 14%N250 b500 19% 14% 8% 0% 14% 13%N500 b1000 12% 14% 15% 21% 27% 17%N1000 b3000 24% 14% 8% 29% 18% 19%N3000 b30,000 5% 7% 8% 7% 0% 5%Total 100% 100% 100% 100% 100% 100%

Please cite this article as: Frezatti F, et al, Does management accountijbusres.2009.11.008adequate for all companies does not exist. As the focus of this paper isnot the strategydenition but its implementation and control, the lackofstructure implies in difculties to implement and follow that. Theseveral clusters indicate the level of heterogeneity of the proles, fromvery poor up to a complex and fully adherent.

The results identied different clusters as per considering themanagement account structure of attributes, in comparison with itsconstruct, from the one that is the poorest one up to the mostadherent. An important implication is the association between themost adherent prole from the planning perspective and the poorest,less adherent prole from the perspective of management accounting.The contrary is also true, the most adherent and complete is the onethat has the most adherent planning structure. The results demon-strated that a size characteristic is not present due to the fact that themost adherent cluster is the one relatively balanced.

Considering the implications, the following arguments are possible:

Any level of association in terms of management accounting andplanning process exists. This research can't provide insights withevidences about the drive of that: the results doesn't imply thatmanagement accounting prole is fully adherent due to a fullyadherent planning process or the contrary, the planning processprole is adherent due to the management accounting is adherent.Causality is not possible from the adopted methodologicalperspective;

The maturity level detected by the cluster, or lack of that, maydemand efforts to prepare the basis for development. In otherwords, planning process not well structured might demand, rst, animprovement in management accounting to provide grounding.After that the planning process might be improved. This result canexplain the not matured status of some organization when talkingabout planning process.

If the prior assertion is true, any crisis time will push or stronglydemand the planning process and, as a consequence, will also push anot sufcient matured, with a prole not sufciently adherent toconceptual framework;

on the other hand, if the management accounting is matured,included in the most adherent proles, the organization will have asolid basis for planning process development.

Accounting literature has given increased attention to the relation-ship between management accounting system and strategy (Langeld-Smith, 2007). This accounting literature has focused on differentstrategic frameworks, such as strategy processemergent and deliber-ate (Mintzberg andWaters, 1985)and strategy typologiesdefenders,prospectors, and analyzers (Miles and Snow, 1978), leadership,differentiation, and focus (Porter, 1985), and build, hold, harvest, anddivest (Gupta and Govindarajan, 1984). The main contribution to thisliterature is to showwhich management accounting attributes seem tobe more adequate for different strategic planning proles.

6. Final comments

Although the management literature often mentions a presumedassociation between planning process (strategic and budgeting) andmanagement accounting attributes, few (if any) studies provideempirical evidence to conrm or refute such an association. ApplyingMoores and Yuen's (2001) model to an investigation of Brazilianmedium-sized and large companies, the present study has examinedwhether an association between the management accountingattributes used in these companies and their conceptual adherencein developing their planning does exist.

Five clusters of entities were identied, each with a differentapproach to a comprehensive planning process. Some placed moreemphasis on strategic planning, some placed greater emphasis onbudget, and others covered both. These differences reected different

approaches to coping with specic management needs.


The results demonstrate that, at least for the sample considered, arelationship existed between the companies' planning processes andthe proles of their management accounting attributes. The mostcomprehensive prole from the perspective of planning (cluster 1)wasmost in accordancewith the literature from the perspective of thestrategic plan and the budgeting elements predicted. At the otherextreme, the prole that was least in accordance with the literature(cluster 3) was the poorest from the perspective of the planningprocess.

The most signicant conclusion to be drawn is that poor congu-ration of the planning process comes from poor conguration of themanagement accounting attributes. Managers are aware of their needsand the resources rms require to provide support for proposed actions.The ndings of this study enable managers to understand differentproles and tomakedecisions regarding the appropriate prole for their

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ARTICLE IN PRESSAlthough treating strategic planning and budget as independentissues, this study consider these two variables together in the clusteranalysis. However, the impact of strategic planning on budget, andvice versa, was not specically examined in the present study; thisrelationships is worthy of further investigation in future research.

Acknowledgments

The authors acknowledge the support provided by FAPESP, CNPq,CAPES and FIPECAFI for the research that originated this paper.

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Does management accounting play role in planning process?IntroductionLiterature reviewStrategic planning processRelationship between strategic planning and budgetingManagement accounting information systemsRelationship between management accounting and the planning processAttributes of management accounting structure

Research designResearch approachPlanning variablesManagement accounting variables

Population, sampling and data collectionStatistical analysis

Data analysisResults and implicationsFinal commentsAcknowledgmentsReferences

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Does Management Accounting Play Role in Planning Process