Chapter 6. Satisfaction and benefits of ativity-based costing implementation in Polish
6.3. Analysis of the research results
183 6.3.2. Quality of ABC information with respect to traditional system
In order to verify the hypothesis about better quality of information from ABC in comparison to traditional cost accounting system, tests enabling comparison of two means in case of related pairs of samples have been carried out. The respondents were asked to evaluate the traditional cost accounting system and the newly implemented ABC system in terms of five features i.e. accuracy, accessibility, reliability, timeliness and understandability of information provided by both systems. The results presented in table 6.3 support hypothesis 2. The respondents assess accuracy (statistical significance 0.01, t = –8.42), accessibility (statistical significance 0.01, t = –5.89), reliability (statistical significance 0.01, t = –3.18), timeliness (statistical significance 0.01, t = –4.30) and understandability (statistical significance 0.01, t = –5.65) of the information from the newly implemented ABC system significantly higher than the information generated from the traditional cost accounting system.
Table 6.3. Quality of ABC information with respect to traditional system
Dependent variablea
Traditional system ABC
t-value McGowan (1998) ABC mean
Byrne et al.
(2009) ABC mean mean standard deviation mean standard
deviation
Accuracy 3.29 1.05 1.43 0.63 –8.42b 2.27 2.20
Accessibility 3.36 0.99 1.64 0.73 –5.89b 3.57 2.38
Reliability 2.86 1.48 1.86 0.76 –3.18b 2.49 2.35
Timeliness 3.36 1.25 1.71 0.81 –4.30b 2.58 2.45
Understandability 2.93 1.05 1.64 0.62 –5.65b 2.47 2.31
a In this question a scale from 1-very high evaluation to 5-very low evaluation has been used.
b Significant at level 0.01.
The research results of information quality from the new activity-based costing, with respect to the information from the traditional cost accounting system (table 6.3), are confirmed by McGowan’s (1998) and Byrne et al. (2009) studies; however: (a) in this research the information quality from the new ABC, in relation to the traditional cost accounting system, was ranked much higher (all averages below 2) than in the McGowan’s (1998) and Byrne et al. (2009) studies (where none of the averages was lower than 2), (b) in McGowan’s research (1998) the accessibility of information from the current system and ABC was evaluated by respondents at a similar level (3.50 and 3.57 respectively), yet the difference was not statistically significant.
The results obtained in this research are mirrored in the work of Swenson et al. (1996), who examined the level of satisfaction of managers from 25 companies
6. Satisfaction and benefits of ABC implementation in Polish companies
(where activity-based costing was used) ensuing from implementation of product valuation methods. The average satisfaction level was much higher in case of ABC than in case of traditional cost accounting system (managers’ satisfaction with ABC in companies which implemented ABC in Swenson, Flescher (1996) study, was similar to the satisfaction of managers in Howell’s et al. research (1987)). Similar results were also reported in the study of Swenson and Barney (2001), who examined 15 best ABC practice companies. The overall attitude towards ABC was in this study quite favourable, especially when compared with traditional costing system8. One respondent in this research noted that “ABC/M is and has been our only cost management tool. Compared to what we had before, it’s excellent”. Swenson and Barney (2001) noted, however, that for many companies the positive perceptions were based not on actual but projected benefits.
6.3.3. Usefulness of ABC information
In order to evaluate usefulness of activity-based costing, ten variables have been used (while variable ten tested the overall perception of ABC usefulness and variable six the job performance, the rest of the variables related generally to the usefulness of ABC information in respondents’ work). The results presented in table 6.4 support hypothesis 3. Respondents confirm positive and statistically significant influence of ABC (much lower mean than the average value of 3) on their work, especially its influence on improvement in the quality of their work (mean 1.57 and t = –8.88 at statistical significance 0.01), its influence on control over work-related procedures (mean 1.50 and t = –10.46 at statistical significance 0.01), the ability to accomplish tasks quickly (mean 2.21 and t = –4.27 at statistical significance 0.01), aiding of critical aspects of their job (mean 1.43 and t = –11.01 at statistical significance 0.01), its influence on the improvement of their job productivity (mean 1.86 and t = –7 at statistical significance 0.01), the ability to improve their job performance (mean 1.64 and t = –8.54 at statistical significance 0.01), accomplishing more work than under the old system (mean 2.07 and t = –4.93 at statistical significance 0.01), improvement of their job effectiveness (mean 1.93 and t = –6.85 at statistical significance 0.01), easier accomplishment of work-related tasks (average 1.64 and t = –9.65 at statistical significance 0.01).
Respondents point out that ABC is generally useful in their work – they rank its influence on their work usefulness as definitely positive and the influence is statistically significant (mean 1.43 and t = –11.01 at statistical significance 0.01).
8 Swenson and Barney (2001) reported that ABC/M was perceived as ‘good’ or ‘excellent’ in respect of information reliability (by 88% of respondents), timeliness of information (by 64% of respondents) and information accessibility (by 47% of respondents).
185
Table 6.4. Usefulness of ABC information
Dependent variablea Mean Standard
deviation t-value McGowan (1998)
mean
Byrne et al.
(2009) mean Improvements in the quality of
work 1.57 0.84 –8.88b 2.30 2.42
Greater control over work-related
procedures 1.50 0.75 –10.46b 2.49 2.23
Accomplishing tasks more quickly 2.21 0.96 –4.27b 2.56 2.74 Support for the critical aspects
of job 1.43 0.74 –11.01b 2.33 2.14
Increased job productivity 1.86 0.85 –7.00b 2.30 2.46
Increased job performance 1.64 0.83 –8.54b 2.13 2.40
Accomplishing more work than
under the old system 2.07 0.98 –4.93b 2.62 2.80
Enhanced effectiveness on the job 1.93 0.81 –6.85b 2.28 2.31 Makes it easier to accomplish
work-related tasks 1.64 0.73 –9.65b 2.77 2.48
Overall, I find ABCM useful in
my job 1.43 0.74 –11.01b 2.03 2.09
a In this question a scale from 1-definitely yes to 5-definitely not has been used.
b Significant at level 0.01.
The results of research which examined usefulness of information generated from the newly implemented activity-based costing are confirmed by the results of McGowan’s (1998) and Byrne et al. (2009) studies, however: (a) this research found the usefulness of ABC information higher (eight means below 2) than the McGowan’s (1998) and Byrne et al. (2009) studies (none of the means was lower than 2), (b) in this research respondents assessed that the implementation of ABC makes it easier to accomplish work-related tasks in a considerably positive and statistically significant manner, whereas respondents in the McGowan’s study (1998) did not see such relationship.
6.3.4. Influence of ABC on company
The results presented in table 6.5 partly support hypothesis 4. Respondents confirm that ABC implementation had a considerably positive and statistically significant impact (much lower than the average value of 3) on the increase of quality of decisions (mean 1.48 and t = –13.61 at statistical significance 0.01) as well as on the increase of overall focus on the goals of the entity (mean 1.50
6. Satisfaction and benefits of ABC implementation in Polish companies
and t = –15.31 at statistical significance 0.01). According to respondents, ABC implementation had a slightly positive (slightly lower than the average value of 3) yet statistically significant influence on the boost of innovativeness (mean 2.14 and t = –5.89 at statistical significance 0.01) and improvement of communications across functions (mean 2.50 and t = –3.10 at statistical significance 0.01). The research proves that ABC implementation had no statistically significant influence on the improvement of relations across functions (insignificant and unimportant positive impact) or on the waste reductions (insignificant and unimportant negative impact).
Table 6.5. Influence of ABC on company
Dependent variablea Mean Standard
deviation t-value McGowan
(1998) mean Byrne et al.
(2009) mean
Quality of decisions 1.48 0.58 –13.61b 2.32 2.05
Waste reductions 3.29 1.18 1.26 2.01 2.26
Innovation 2.14 0.76 –5.89 b 2.10 2.51
Relationships across functions 2.86 0.76 –0.98 2.29 2.40
Communications across
functions 2.50 0.84 –3.10b 2.21 2.39
Overall focus on the goals of
the entity 1.50 0.51 –15.31b 2.23 2.92
a In this question a scale from 1-definitely yes to 5-definitely not has been used.
b Significant at level 0.01.
The results of this research on the influence of a newly implemented ABC on a company (table 6.5) are partly confirmed by McGowan’s (1998) and Byrne et al. (2009) studies. However, their studies claimed that the influence of ABC implementation on a company was insubstantial yet statistically significant in case of all dependent variables. The research carried out in Poland claims that ABC implementation had: (a) a substantially positive and statistically significant influence on the quality improvement of decisions and the increase of concentration on company’s aims, (b) a slightly positive and statistically significant impact on the boost of innovativeness and improvement of communication across functions, and (c) a statistically insignificant and unsubstantial influence on the improvement of relations across functions (positive influence) and waste reductions (negative influence).
The results are confirmed by the Swenson and Flescher research (1996).
Authors of the study noticed that the general satisfaction assessment ensuing from ABC implementation (which was very positive in their study) was a rather subjective measure of benefits derived from the process of ABC implementation.
They also claimed that ABC information may be of little importance if it is not
187 used in the decision-making process. After close examination of ABC information use, they stated that 92% of companies used it to improve the processes, 72% to set product prices and to make decisions about products, 48% used it in the process of product design and 24% in making decisions about components9. Respondents emphasized the necessity to integrate ABC with all other areas of company’s functioning and they stressed the fact that the systems were not implemented in isolation. In all companies, with no exceptions, representatives of different departments took part in the process of implementation, and ABC systems were designed with an application of a new philosophy – people who made use of ABC information were seen as ABC system clients whereas accounting departments attempted to satisfy the needs of internal clients, just in the same way as the companies tried to satisfy the needs of their external clients.
6.3.5. Differences in ABC evaluation by preparers and users
The results presented in table 6.6 mostly do not support hypothesis 5. In particular:
1) general satisfaction of ABC implementation does not significantly differ between preparers and users of ABC information (in the study by McGowan (1998), satisfaction of people preparing the information was statistically more significant than the people who used it);
2) evaluation of accuracy, reliability and understandability of information does not differ between preparers and users of ABC information, however accessibility (F = 5.44 at statistical significance 0.01) and timeliness of ABC information (F = 3.68 at statistical significance 0.01) was evaluated higher by preparers than users (in McGowan’s research (1998) there were no statistically significant discrepancies);
3) evaluation of the influence of ABC implementation on the aiding of critical aspects of respondents’ work (F = 3.21 at statistical significance 0.1) and its general usefulness in their work (F = 5.04 at statistical significance 0.1) is ranked substantially higher by preparers than users; the evaluation of remaining variables which influence the quality of information does not differ significantly between the preparers and users of ABC information (in McGowan’s study (1998) statistically significant differences were noticed in the perception of improvement of work quality, improvement of work control and boost of work effectiveness);\
4) evaluation of the influence of ABC implementation on the improvement of decision quality (F = 2.61 at statistical significance 0.1) is ranked substantiallyhigher
9 The results of current research were also supported by findings of Swenson and Barney (2001), who observed that 97% of respondents from 15 best ABC practice companies assessed ABC/M information as ‘good’ or ‘excellent’ in decision support and 73% as ‘good’ or ‘excellent’
from the point of view of cross-functional needs.
6. Satisfaction and benefits of ABC implementation in Polish companies
by preparers than users; the evaluation of remaining variables does not differ significantly between the two groups (in McGowan’s study (1998) there were no statistically significant discrepancies).
Table 6.6. Differences in ABC evaluation by preparers and users
Dependent variable Mean
(preparers) Mean
(users) F-value A. Satisfaction
General satisfaction of ABC implementation 1.50 1.38 1.12
B. Information quality
Accessibility 2.00 1.75 1.37
Accuracy 1.33 2.00 5.44a
Reliability 1.83 0.38 1.50
Timeliness 1.17 2.00 3.68a
Understandability 2.17 0.63 2.47
C. Information usefulness
Improvements in the quality of my work 1.50 1.63 1.20
Greater control over work-related procedures 1.50 1.50 1.23
Accomplishing tasks more quickly 2.50 2.00 1.28
Support for the critical aspects of my job 1.33 1.50 3.21b
Increased job productivity 1.67 2.00 1.29
Increased job performance 1.50 1.75 1.12
Accomplishing more work than under the old
system 1.83 2.25 2.39
Enhanced effectiveness on the job 2.00 1.88 2.46
Makes it easier to accomplish work-related tasks 1.33 1.88 2.61
Overall, I find ABCM useful in my job 1.17 1.63 5.04b
D. Influence on company
Quality of decisions 1.50 1.38 2.61b
Waste reductions 2.67 3.75 1.27
Innovation 2.00 2.25 1.60
Relationships across functions 2.67 3.00 1.17
Communications across functions 2.50 2.50 1.22
Overall focus on the goals of the entity 1.92 1.13 1.36
a Significant at 0.01.
b Significant at 0.1.
In the research by Swenson and Flescher (1996) one may find different results of satisfaction evaluation ensuing from ABC implementation perceived by preparers and users of the information. In that research, satisfaction of preparers (3.30) was statistically more significant than the users (2.73) (where 1 meant ‘lack of satisfaction’, 2 ‘the need of improvement’, 3 ‘satisfaction’ and 4 ‘great satisfaction’). The change of cost accounting system is a complex and
189 expensive process. It should take place to improve the satisfaction of information users. Swenson’s et al. (1996) respondents stressed the fact that they would have implemented ABC “even if they had to spend their own money on it”. After ABC implementation, the people who used the information were substantially more satisfied with the information provided by management accounting specialists.