Management Accounting's Bigotry of Low Expectations

Published date01 November 2015
Date01 November 2015
© 2015 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22105
Management Accounting’s
BigotryofLow Expectations
Tom Pryor
It is common to hear the
questions, “What do you
want to be when you grow
up?” and “What are your career
plans after graduation?” What
is unheard of is the response,
“I want to be a management
“98% of financial execu-
tives still believe their manage-
ment accounting information
stinks, but only 20% plan
on doing anything about it.”
This message from a March
2015 speech by Jeff Thomp-
son, President and CEO of
the Institute of Management
Accountants (IMA), sheds
light on why few aspire to a
career in management account-
ing. Thompson’s remarks ref-
erenced the findings of a 2012
survey by B. Douglas Clinton,
CMA, CPA, PhD, and Larry
R. White, CMA, CFM, CPA,
CGFM. Clinton and White
said their 2012 survey findings
mirrored those of a 2003 IMA/
Ernst & Young survey. Nine
years passed with no signifi-
cant improvement.
“Willful ignorance” is the
root cause of the survey results,
according to Doug Hicks,CPA.
Doug, an early adopter of
activity‐based cost manage-
ment (ABM/ABC) in the
1990s, was in the audience for
Mr.Thompson’s speech. Hicks
wrote in his June 2015 blog that
after 30 years of widespread
warnings about the danger of
using traditional accounting
information to support busi-
ness decisions, both C‐suite
users of cost information and
the accountants who provide
it show clear signs of “willful
ignorance.” Willful ignorance
is defined as “the practice or
act of intentional and blatant
avoidance, disregard or dis-
agreement with facts, empiri-
cal evidence and well‐founded
arguments because they oppose
or contradict your own existing
personal beliefs.”
Are there improved man-
agement accounting methods
that CEO’s, CFO’s, control-
lers, and management accoun-
tants willfully ignore? Yes.
At the forefront of the list
of improved management
accounting methods is ABM/
ABC. ABM/ABC is based on
the simple principle “activities
consume costs and products
consume activities.” The
following are three unseen,
overlooked, or ignored facts:
• ABM/ABC has been
proved and approved as
superior to traditional
labor and overhead cost
allocation methods for
product and service cost-
ing. Companies such as
United Parcel Service
(UPS), Charles Schwab,
and Xu Ji Electric Co. Ltd
in China use ABM/ABC
for improved decision
• Health care systems know
the reimbursement rate for
an appendectomy, but few
know the cost of doing
one. Harvard professors
Robert S. Kaplan and
Michael E. Porter pub-
lished case study findings
in the Harvard Business
Review, September 2011,
that time‐driven ABC is
accurately calculating the
cost of delivering health
• Peter Drucker, the father
of modern manage-
ment, encouraged senior

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