According to Chandler’s ideology regarding the structures behind successful management, it is obvious that he focused on organizational innovation as tool for transformation. The key features as discussed by Chandler include technological sophistication, social and cultural implications. Additionally, in order to fuel economic growth, the firms must carry out an industrial research and development. This will also help the organization to undergo through a revolution process to improve the modern market economies. Chandler based his accounts regarding structures and strategies on the major decisive process of called managerial revolution. Some of the best things that came with managerial innovation are structures necessary in the formation of the present enterprise. One of them is a line-and-staff structure with processes of ‘administrative co-ordination (572). Another thing is that this new form of management produced first the large modern business enterprise. It also contributed to the formation and transformation of the present economic world, which is dominated by oligopolies made up of such enterprises. The focus of this paper is highlighting the structures created through management innovation and their importance to accountants and accounting professional in the process of managing new management systems.
Outsourcing is the first structure that Chandler. In this structure, it does not necessarily mean decentralization, but as much as a firm does not own physical assets of its suppliers, it maintains very strict administrative control over the suppliers. This implies that the suppliers must comply with the system of order fulfillment and logistics. Through the corporate-wide centralization, the structure that uses outsourcing helps in ensuring that enterprise resource planning system is successful (Nelles 272).
The second structure layers of hierarchy, which helps in flattening to ensure that the number of layers within the organization is minimized. It also calls for outsourcing of the internal shared services center that goes handy with the managerial autonomy. This is a structure that looks into numerous issues within the organization such as autonomy for divisional and country managers in regard to procurement, finance, policies guiding the HR department, and other related functions (Alfred 474). For instance, numerous managers have the duty of using their ability to modify the formulation of products. Through this structure communication is also made easy since all the decisions are made centrally.
The third structure the disintermediation, which is extremely consistent with what Chandler refers to as vertical integration. In this business structure, the firms have the duty of cutting out the middlemen. This structure ensures that goods reach the customer at a lower price since the middlemen who adds some costs are minimized, nonetheless, the ratio of purchased parts to that of sales are high. This is a structure that is likely to make numerous companies to attain success since it focuses on immediate access to the ever changing consumer preferences. Given the fact that consumer preferences are likely to change, they are never a subject to design rules. This is why it is essential to have the managerial department make decision on the manner to respond to such consistent changes. Indeed, it is clear that when going through Chandler, The Visible Hand, the author stresses the integration of invention of the delivery chain.
The final structure is off shoring, which calls for technological advancement with an efficient Chandlerian managerial capabilities that help in the management of distant flow of products and essential information that is vital for the organization. In this process, firms are always willing to incur higher costs than they are likely to incur purely on domestic production (Chandler 17). The role played by emergent staff function by accounting and accountants is another crucial aspect of management. This is a process that Chandler says that it takes a three-stage model of economic development. To begin with, the first stage took place between 1790 and 1840 and the structure at the time was the mechanism of production and distribution of goods and services. In this process the production and the distribution of goods and services was the primary structure or mechanism. During this period, nobody knew the modern business enterprise. The second stage was between 1840 and 1880, which witnessed the emergence of the modern business enterprise accompanied by epochal changes in the infrastructure. The structure consisted of advanced communication and transportation of goods from one station to another. The final stage was in 1880 and 1920, when the rail road was completed, thus hastening the emergence of the modern industrial enterprise that saw many business organization being formed. In fact, Chandler asserts that by the beginning of the World War I, managerial revolution was complete with all the necessary structures in place.
Free enterprise is essential important drivers of markets and economists. Most economists therefore have underlined the crucial task of playing an instrumental role in market development or innovation. Seal et al argue that in recent decades there has been what is referred to as an ‘important innovations in management accounting’. In order to critically evaluate one such management accounting ‘innovation’, it is crucial to understand the basic purpose of accounting information, which is to make informed decisions. Besides, management accounting is one of the branches of accounting that emphasizes or produces important information to managers. It also forms the most integral part of strategic process within most firms. Inappropriate conventional management accounting offered very miniature lee way for provision of timely and better decision making processes (Paul 445). Nonetheless, following technological advancements and vigorous competition, numerous firms have embarked on looking for better and innovative ways of managing their business structures.
The nineteenth century witnessed an important process of industrial revolution that remarkably contributed to managerial innovation. Robert affirms that “Managerial innovation was a major tool for economic development” (53). Many researchers admit that it had immense impact on the American economy. Through the development of a transformative set up towards achieving economic development that started roughly in the 1880s, this process of integration of mass production and mass distribution. This is a process that occurred in the modern industrial enterprise. Many firms in America emulated such a move, thus hastening organization innovation in regards to vertical integration.
Thomas says, “Organization innovation was so crucial to numerous organizations through horizontal integration, thus encouraging organization innovation within the middle management” (265). This was a crucial metamorphosis to many firms and they embraced the horizontal combination or integration that brought a closure to vertical integration. Business organizations through their leaders and the help of economists had to device some ways of culminating great mergers. This is a process that witnessed the emergence of big business that contributed to the passing of anti-trust legislation to assist helping in hastening this innovation.
Management and accounting innovation has remarkably transformed the modern business in various ways. Through the innovation, modern business has witnessed the introduction of extensions to the existing management accounting systems. One of such accounting management systems is a non-financial performance measures and alternative accounting systems like fixed budgeting system with budgets that are flexible (Van de Ven 598). Another area that has been affected by this management accounting innovation process is the modification of outputs. This is whereby the amendment in the information output of management accounting was witnessed. This was later followed by operational modification, basically focusing on the technical adjustment in the management accounting system. It is important to note that the innovation process was helpful in the management of the emergent control system. Another important aspect of the innovation was the capability of evaluating the cost and benefits of innovation. Nonetheless, a thorough scrutiny by researchers clearly indicates that the costs were relatively vague. In some instances, it acted as a motivation to employees, however, some of the benefits were dependent on the on the specific factors within the firm (Sulaiman & Mitchell, 425). The worst thing with this kind of innovation is that if the process backfires, the entire process can likely be shortened because of managerial mistrust on the management accountant’s opinions. This can only happen in cases whereby there is radical innovation.
Management accounting innovation exists as a result of internal labor market for managerial staffs in hierarchical organizations. Nevertheless, it is noteworthy that manager in the past resisted management accounting innovation persistently. This witnessed few organizations being formed in the perpetual management accounting innovation. Generally, management accounting innovation presented many benefits that can only be considered as synonymous with irrationality. In fact, this is a process that is likely to contribute to numerous changes in the business community.
To conclude, Chandler’s ideology regarding the structures behind successful management has been instrumental in the process of accounting management. Through the The Visible Hand by Alfred D. Chandler, on learns that it is obvious that the author focused on organizational innovation as tool for transformation. The transformation process is both gainful and detrimental to some extent. Nevertheless, management accounting innovations is a move that garnered numerous possibilities in the field of accounting. It presented several opportunities to the accountants through the new management accounting systems. These systems were extremely instrumental in creating numerous management systems that led to transformation of the management accounting field.