The human side of accounting

Is there a human side of accounting? Fresh Ph.D. Olga Iermolenko, bets her thesis on it.

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Who: Olga Iermolenko is a 31 years old native Ukrainian, who works at the High North Center, Nord University Business School in Bodø.

What: Recently defended her thesis "The human side of accounting: The bonds between human agency and management accounting practices' changes in the transitional economy".

What is the role of human agency in shaping management accounting practices? Olga Iermolenko has studied how people using accounting systems, change and interrupt the whole control system into a more organic tool, using their human compassion and passion and negotiating abilities.

The thesis studies the human side of accounting through the notion of human embedded agency. It refers to the human ability to create, maintain and disrupt management accounting practices (MAPs). By including the human dimension into analysis, Iermolenko's study extends classic accounting studies and broadens existing explanation boundaries of MAPs' changes as highly rational and rigid processes.

– I am interested in accounting, but I am also obsessed with people involved in accounting and affected by accounting, and therefore I decided to study the human side of accounting, Iermolenko explains.

People care

– I used four different, but theoretically interrelated studies that introduced readers to the mechanisms of management accounting changes from the position of human actors involved in these processes. I found out that accounting is something people care about, that accounting creates space that makes people feel comfortable or uncomfortable, and sometimes very emotional. During one of the case studies, I observed that accounting through a series of dialogues went from being a compulsory, coercive and often rigid tool to a way of expressing freedom and creativity of people in a studied big energy company in Ukraine. And this is one of examples that shows how people and accounting affect each other.

Iermolenko studied how management accounting changes mainly the context of post-socialist countries (PSCs). Management accounting as a business tool is a relatively new practice for many PSCs, in comparison to the western context, especially when it comes to former or current state-owned companies and other organizations that rarely used accounting for planning and decision making even 10-15 years ago.  

– By means of a literature review, I have described and compared the progress in management accounting reforms across 28 different PSCs of Eastern and Central Europe and former Soviet republics in between 1991 and 2017. I have observed that changes are happening across all PSCs, but with different speed. PSCs that scored highest in terms of agentic and negotiating abilities of different actors involved in accounting changes, made the biggest progress in adopting modern accounting practices and tools. Actors involved in changes - both, individual and organizational - were mainly adaptive and willing to negotiate and experiment. Contrary, the countries that had low negotiating abilities of actors involved in accounting changes - where actors were mainly suspicious and resistant to changes - scored low in adopting new accounting tools and systems.

Creative accounting

The three basic dimensions of agency were then examined in three empirical studies. Iermolenko had examined how human agency's dimensions such as 'situated awareness', 'care' and 'habit' implicate management accounting change in situations of significant transformations. By doing this, the thesis showed three distinct and interesting cases of interlinks between management accounting change and human agency:

  • How situated awareness calls upon enabling coercion
  • How informal management control practices in projects require managerial care
  • How habits of an institutional entrepreneur preclude or trigger serial changes in management accounting.

In this sense, the summary chapter made a theoretical contribution to the research literature by bringing interesting details about micro-processes through which human agency occurs and shapes management accounting change. The thesis also highlighted the importance of cultivating emotional abilities and human skills especially in times of digitalization.

In her interviews, Iermolenko found that company's managers often resorted to creative accounting to save staff from being laid off or projects from being cancelled.

– I found that leaders may face many uncertainties, but they meet them with their own solutions. With their human component. Accounting is nothing without people, the fresh Ph.D firmly decides.