Shifting Perspectives: Accounting, Visibility, and Management Action

What is it about?

The objective of the research, and paper, is to determine first whether or not the accounting abstraction appears to dominate the manager’s perceptions of the physical reality of the firm’s utilization of its physical assets, and second, whether changes in the accounting abstraction (e.g. the addition of Capacity cost management reports and measurements) lead to changes in how managers perceive, and use, their physical assets. Using a cognitive decision-making structure developed by Wagenaar et al. (1995), this study explores the interplay between the structure and nature of capacity reporting (the surface structure of the decision) and the subsequent analysis and choice of managers within the firm (the deep structure of the decision). A five-site field research methodology was used to gather data from companies across a multitude of industry contexts and situations. Results suggest that the nature of capacity measurement and reporting does shape manager’s perceptions of current and potential future performance (the cognitive surface structure), with major implications for the nature and type of decisions and trade-offs made (the deep structure). Specifically, managers appear to make decisions that are illogical when considered in light of the physical reality of their operations based on the representations of this reality (e.g. the capacity measures and reports). Analysis and interpretation of these results suggest that what accounting makes visible appears to drive decision-making and performance in organization.

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Why is it important?

Results suggest that the nature of capacity measurement and reporting does shape manager’s perceptions of current and potential future performance (the cognitive surface structure), with major implications for the nature and type of decisions and trade-offs made (the deep structure). Specifically, managers appear to make decisions that are illogical when considered in light of the physical reality of their operations based on the representations of this reality (e.g. the capacity measures and reports). These results suggest that what accounting makes visible appears to drive decision-making and performance in organization.