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

Abstract

The aim of this paper is to investigate the impact of managers’ participation in costing system 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 participation 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. Questionnaire 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 improvement. 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 contributions to process improvement mainly emerge through informational mechanisms rather than motivational mechanisms triggered by the participation process.

Acknowledgements

Suggestions from and/or discussions with Josep Bisbe, Werner Bruggeman, Johan Dergård, Patricia Everaert, Mirjam Knockaert, Falconer Mitchell, Anja Van den Broeck, Heidi Vander Bauwhede and especially Anne-Marie Kruis were very much appreciated. We also would like to acknowledge the helpful comments we received from participants at the 8th Conference on Performance Management and Management Control (Nice, France, 30 September–2 October 2015), the 13th Annual Conference for Management Accounting Research (Vallendar, Germany, 10–11 March 2016), the 37th Congress of the AFC (Clermont-Ferrand, France, 19–20 May 2016), the 10th Conference on New Directions in Management Accounting (Brussels, Belgium, 14–16 December 2016) and workshops at Ghent University. Finally, we are greatly indebted to Sally Widener and two anonymous reviewers for their extremely constructive and thought-provoking feedback throughout the entire review process.

ORCID

Sophie Hoozée http://orcid.org/0000-0002-7046-5853

Notes

1 Because in this study we focus on the beneficial outcomes of participation in costing system design, we only hypothesize its effect on autonomous motivation for cost management. We do not develop a hypothesis for controlled motivation, but will control for it in our empirical model instead (see Section 3.3 and Figure 2).

2 In line with recent psychology research (Gagné et al., 2015), we do not include integrated regulation, which is the most autonomous form of extrinsic motivation, as it has typically been very difficult to psychometrically distinguish integration from identification (Vallerand et al., 1992).

3 It should be noted that the literature on participative decision-making typically also includes knowledge discovery in addition to knowledge dissemination (e.g. Latham et al., 1994). As we are studying improvement processes and not innovation, we focus on the latter only.

4 Two respondents chose the neutral option for all questions and one respondent chose a score of six for all answers. When we include these three respondents in our analyses, our results do not change.

5 We will discuss the conceptual impact of this deletion in Section 4.1.

6 When we later imported these two items into the SmartPLS software, we again found support for their elimination, as their loadings were not significant (Diamantopoulos & Winklhofer, 2001).

7 The total variance explained by one single factor is 22.69%.

8 We used SmartPLS (version 3.2.4).

9 We conjecture that managers are focused on operational processes and, hence, use underlying process insights as opposed to cost information itself to contribute to process improvement. Thanks to these enhanced process insights, they are then able to reduce costs and waste indirectly. If we had surveyed (lower level) employees or workers, the results may have been different, as they are less able to change the processes but instead have to deal with waste and cost reduction directly.

10 In the final PAF analysis, the Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy was 0.798, which is above the suggested rule-of-thumb threshold of 0.5 and indicates adequate sample size. The chi-square value for Bartlett’s test of sphericity was large (3207.25) and significant (p < .001) indicating sufficient correlations among the variables. Taken together, these two tests indicate that it is safe to proceed with and interpret the factor analysis (Hair et al., 2014, p. 103).

11 As recommended by Hair et al. (2017), we used the path weighting scheme as the structural path weighting method. We also chose to ignore sign changes in the resamples, as this is the most conservative estimation option.

12 Similar to the baseline model, we also assessed convergent validity, discriminant validity, internal consistency reliability and multicollinearity in all these additional analyses.

13 This categorization is in line with, for instance, the study of Du, Deloof, and Jorissen (2013) who also collected Belgian data (to investigate the impact of headquarters-subsidiary interdependencies on performance evaluation and reward systems).

14 In line with Drury and Tayles (2005), we used two questions to measure costing system complexity. More specifically, respondents were asked to indicate the number of cost pools used and the number of cost allocation bases used on two 8-point log₂ N scales. The variable COMPLEX was then constructed by adding the two scores (Schoute, 2009).

Additional information

Funding

This project has been funded with support from the European Commission. This manuscript reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.