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Posted: February 26th, 2023

 

The Impact of Managers’ Participation in Costing System Design on Their Perceived Contributions to Process Improvement

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SOPHIE HOOZÉE ∗ and QUANG-HUY NGO∗∗

∗Department of Accounting, Corporate Finance and Taxation, Ghent University, Ghent, Belgium; ∗∗Department of Accounting, Can Tho Technical Economic College, Can Tho, Vietnam

(Received: January 2016; accepted: August 2017)

Abstract The aim of this paper is to investigate the impact of managers’ participation in costing sys- tem design on their perceived contributions to process improvement. Drawing on the literature on business process management, participative decision-making and self-determination theory, we propose that partici- pation in costing system design fosters managers’ perceived contributions to process improvement through their autonomous motivation for cost management and their perceived usefulness of cost information. Ques- tionnaire data obtained from 170 Belgian managers were used to test the proposed model. The results suggest that participation in costing system design increases managers’ autonomous motivation for cost management and enhances their perceived usefulness of cost information. Managers’ perceived usefulness of cost information is, in turn, positively associated with their perceived contributions to process improve- ment. The effect of managers’ autonomous motivation for cost management on their perceived contributions to process improvement is, however, not significant. Taken together, our findings imply that contribu- tions to process improvement mainly emerge through informational mechanisms rather than motivational mechanisms triggered by the participation process.

1. Introduction

Firms often use costing systems to increase their financial performance by improving their business processes (e.g. Banker, Bardhan, & Chen, 2008). In particular, costing systems may reveal sources of inefficiency and ineffectiveness of business processes by providing detailed information about the consumption of resources by each of the firm’s activities (e.g. Innes & Mitchell, 1990; Turney, 1991). Prior research has demonstrated that participation in costing sys- tem design may help to identify such process improvements (e.g. Hoozée & Bruggeman, 2010). It is, however, unclear how participation can actually result in these beneficial outcomes.

The purpose of this study is to disentangle the mechanisms through which managers’ participa- tion in costing system design may foster their perceived contributions to process improvement. Understanding these mechanisms is important as they can provide insight into how firms can leverage the benefits offered by participation into process improvement. Although the relation

Correspondence Address: Sophie Hoozée, Department of Accounting, Corporate Finance and Taxation, Ghent Univer- sity, Sint-Pietersplein 7, 9000 Ghent, Belgium. Email: sophie.hoozee@ugent.be

Paper accepted by Sally Widener.

© 2017 European Accounting Association

 

 

748 S. Hoozée and Q.-H. Ngo

between participation and desired outcomes may be influenced by many intervening variables, in line with the literature on participative decision-making (e.g. Latham, Winters, & Locke, 1994), we focus on motivational and informational factors. More specifically, building on self- determination theory and research on business process management, we predict the impact of participation in costing system design on perceived contributions to process improvement in terms of its role as an enabler of autonomous motivation for cost management and perceived usefulness of cost information.

Using survey data from 170 Belgian managers, we find that although managers’ autonomous motivation for cost management increases as a result of their participation in the costing system design process, this higher autonomous motivation does not stimulate their perceived contri- butions to process improvement. Regarding the informational path, we do find that perceived usefulness of cost information positively mediates the impact of managers’ participation in costing system design on their perceived contributions to process improvement.

Compared with prior research, this study provides three unique contributions. First, by unrav- eling the mechanisms that enable participation to result in process improvements, this study complements prior work on the potential of cost information to improve business processes (e.g. Hoozée & Bruggeman, 2010; Innes & Mitchell, 1990), as well as studies that have investi- gated the determinants of business process re-engineering success (e.g. Terziovski, Fitzpatrick, & O’Neill, 2003). Second, our study contributes to the literature on participative decision-making by highlighting the importance of informational mechanisms over motivational mechanisms in explaining why participation could lead to process improvements. This is in line with Latham et al. (1994), who argued that studies on participation, instead of focusing on motivational mechanisms, should be redirected to investigate informational mechanisms because the effi- cacy of participation as an organizational process lies not only in its potential to promote motivation or commitment, but also in its ability to facilitate information exchange and knowl- edge transfer. Third, by showing that a participative system design strategy could actually be used to enhance motivation, we clarify equivocal results of previous research on the link between budgetary participation and motivation (cf. Mia, 1989). In particular, according to Brownell and McInnes (1986), the inconsistent results in budgeting studies investigating the participation-motivation relationship may be due to differences in the approaches used to mea- sure motivation. We addressed their concern by using well-developed scales from studies on self-determination theory to measure autonomous motivation. As such, we also contribute to the growing body of accounting evidence on the effects of autonomous motivation, for example, regarding subordinates’ work effort induced by subjective performance evaluation (Kunz, 2015), managers’ creation of budget slack (De Baerdemaeker & Bruggeman, 2015) and the impact of different uses of performance metrics on employee job performance (Groen, Wouters, & Wilderom, 2017).

The remainder of this paper is structured as follows. The next section presents the theoretical background and hypotheses development. Section 3 describes the research method. Section 4 shows the results of this study. The last section concludes, discusses the limitations and offers suggestions for future research.

2. Literature Review and Hypotheses Development

Drawing on the literature on business process management, we first introduce the definition of a business process and the role of costing systems in process improvement. Second, using the literature on participative decision-making and self-determination theory, we identify the charac- teristics of participation in costing system design and explain the motivational and informational

 

 

The Impact of Managers’ Participation in Costing System Design 749

mechanisms through which managers’ participation may stimulate their perceived contributions to process improvement.

2.1. The Use of Costing Systems for Process Improvements

Davenport and Short (1990, p. 12) defined the concept of business processes as ‘a set of logically related tasks performed to achieve a defined business outcome’. Hammer and Champy (1993, p. 35) later emphasized the client-centred aspects of a business process: ‘a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer’. In the context of the present study, we conceive of a business process as an umbrella term that combines various operational work processes, such as product/service delivery, sales order processing, budget preparation, new product/service development, etc.

In both manufacturing and service environments, business processes may be redesigned by breaking them down in activities or work processes in order to reveal sources of inefficiency and ineffectiveness (Davenport & Short, 1990). As such, business process redesign focuses on creating and delivering value by rethinking, restructuring and streamlining work processes (Talwar, 1993).

To detect inefficient and ineffective parts of work processes, information systems are required (e.g. Davenport & Short, 1990). In this respect, costing systems, as a particular example of infor- mation systems, serve four important purposes in that costing systems that (1) provide a high level of cost information detail, (2) have a high ability to classify costs according to their behav- ior, (3) frequently disseminate cost information throughout the organization and (4) calculate various types of variances, can be expected to produce more useful and relevant cost informa- tion for managerial decision-making (Pizzini, 2006). As such, costing systems are equipped to help users identify process improvements. For instance, a costing system such as activity-based costing may reveal opportunities for process improvement by providing detailed insights into the consumption of resources by each activity of a firm (e.g. Holton, 2007; Innes & Mitchell, 1990; Turney, 1991).

To foster users’ acceptance of an information system and to make sure that it meets users’ information requirements, Tarafdar, Tu, and Ragu-Nathan (2010) suggest a participative strategy. In a similar vein, the beneficial outcomes of user participation have been investigated in the con- text of costing systems (e.g. Bhimani & Pigott, 1992; Hoozée & Bruggeman, 2010; McGowan & Klammer, 1997).

2.2. Participation in Costing System Design

Research on participative decision-making assumes that the relationship between participa- tion and its desired outcomes is driven by two mechanisms: motivational and informational (cognitive) mechanisms (Locke & Schweiger, 1979). First, from a motivational point of view, participation enables great

SOLUTION

The results suggest that participation in costing system design increases managers’ autonomous motivation for cost management and enhances their perceived usefulness of cost information. Managers’ perceived usefulness of cost information, in turn, is positively associated with their perceived contributions to process improvement. However, the effect of managers’ autonomous motivation for cost management on their perceived contributions to process improvement is not significant. The authors conclude that contributions to process improvement mainly emerge through informational mechanisms rather than motivational mechanisms triggered by the participation process.

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