Upper echelons theory in management accounting and control research

Abstract

In recent years, scholars have started to draw on upper echelons theory to analyze the relationship between the characteristics of top managers and management accounting and control systems. This short survey paper aims to give an overview of upper echelons theory and its current applications to management accounting and control research. The paper shows that existing research consistently finds that younger and shorter-tenured CFOs and top managers with business-related backgrounds are associated with more innovative and/or sophisticated management accounting and control systems. In contrast, the (sparse) extant results on CEO characteristics and on characteristics of top management teams are somewhat contradictory. The paper concludes with an outlook on fruitful future research avenues, which include the analysis of additional management accounting and control systems and additional upper echelon characteristics, moderators such as managerial discretion and executive job demands, and the combined effect of upper echelons and management accounting and control systems on organizational performance.

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Fig. 1

Notes

  1. 1.

    Besides typical demographic upper echelon characteristics such as age, career experience, and education, Fig. 1 also contains leadership style, since Waldman et al. (2004) have shown that leadership style—as another upper echelon characteristic—significantly contributes to the ability of upper echelon models to predict organizational performance.

  2. 2.

    To be considered for this review, articles were required to feature the following keywords in their title, abstract and/or author-generated article keywords. The search phrase used was (“upper echelon*” OR “CFO characteristic*” OR “chief financial officer characteristic*” OR “CEO characteristic*” OR “chief executive officer characteristic*” OR “CEO demographic*” OR “CFO demographic*” OR “chief executive officer demographic*” OR “chief financial officer demographic*” OR “top management team*” OR “leadership style*”) AND (“management account*” OR “management control*”). Note that asterisks in the search phrase allowed for different keyword endings; for instance, “management account*” captured both “management accounting” and “management accountant”. The search results reflect the articles available in print or online ahead of print as per October 31, 2013.

  3. 3.

    Although Malmi and Brown (2008, p. 290) clearly distinguish between the purpose of management control systems (“put in place in order to direct employee behavior”) and management accounting systems (“designed to support decision-making at any organizational level, but leave the use of those systems unmonitored”), they acknowledge that the same instruments (such as planning or costing systems) can be used for management control and management accounting at the same time. Thus, their typology is used to map the results in this review paper, as their framework presents a comprehensive typology of management control systems and the present paper aims to summarize relationships between upper echelon characteristics and management accounting and control systems without a strict focus on their underlying purpose.

  4. 4.

    Note that considerate and structuring leadership styles are not opposites. Managers can score high (or low) on both types of leadership styles at the same time (Abernethy et al. 2010).

  5. 5.

    According to Abernethy et al.’s (2010) description, the “planning and control systems” they studied can be well classified as “budgets” in Malmi and Brown’s (2008) framework (see Table 2).

  6. 6.

    Delegation can be classified as an as aspect of governance structure and thus as a kind of administrative control according to Malmi and Brown (2008) (see Table 2).

  7. 7.

    Beliefs are part of the value system, and can thus—according to Malmi and Brown (2008)—be regarded as part of cultural/value-based controls (as classified in Table 2).

  8. 8.

    The “scope of management accounting systems” as studied by Naranjo-Gil and Hartmann (2006) can be classified—as shown in Table 2—as an aspect of hybrid measurement systems in Malmi and Brown’s (2008) framework.

  9. 9.

    Mian (2001) defines a CFO as the position responsible for overseeing the firm’s accounting function, for the preparation of financial results, for the firm’s treasury side of the business and consequently for raising capital.

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Acknowledgments

The author thanks two anonymous reviewers for their most helpful comments and Ingrid Abfalter for her outstanding assistance in language editing.

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Correspondence to Martin R. W. Hiebl.

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Hiebl, M.R.W. Upper echelons theory in management accounting and control research. J Manag Control 24, 223–240 (2014). https://doi.org/10.1007/s00187-013-0183-1

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Keywords

  • Upper echelons
  • Management accounting
  • Management control