Introduction

This textbook is an alternative introduction to strategic management accounting tools such as budgets, activity based costing, balanced scorecards and the use of performance measures to penalise and reward employees. The book is aimed at students who have an introductory knowledge of these management accounting tools but it does not require an in depth knowledge of how they work. I use the chapters in this book as the core material for two classes in management accounting with students who have had a one semester introduction to management accounting. In one class, students apply the framework in this book to empirical academic papers in management accounting and in the other class, they apply the framework to business case studies.

The two classes show the general intent of this textbook. The goal is to present an analytic framework rooted in academic research that can be used to understand and analyse real businesses. In the first part of the book I build up a coherent framework based on different theoretical perspectives in the academic literature. The core principles of the theories are explained through stripped-down stories of intentionally unrealistic business transactions. This narrative approach is a deliberate choice. I do not expect that the reader of this book is familiar with the academic literature or its terminology. The style of this book is closer to the more personal style of online newsletters and blogs than traditional academic writing or textbooks. At the same time, I want to do justice to the variety of insights that have been generated in the academic literature. The stories allow me to explain the core principle of a theory in a short self-contained narrative that is easy to remember. This is why I also recommend the first part of this book to my doctoral students when they start out with their research project.

The first part of the book builds up the framework and it is the major departing point from traditional management accounting textbooks. I first explain the difference how organisations can create a competitive advantage through a combination of difficult to imitate investments which defines the strategy of the organisation. The core idea of this textbook is that management accounting tools contribute to managing the core investments in the organisation and this is exactly what makes them strategic. That means that whether a certain management accounting tool is strategic depends on its function and not necessarily whether it is a new and revolutionary tool. In my book, the much maligned budget is the quintessential strategic management accounting tool because it is the main tool by which organisations decide where their priorities are. My approach emphasises the role ^[1] of management accounting tools in the organisation first and focuses on the details of how they work later.

A second version of this book will contain a second part in which I will delve more deeply in budgets, activity based costing, and the balanced scorecard.