You are on page 1of 10

Introduction

Widespread use of enterprise resource planning (ERP) systems has fundamentally re-shaped the way business
data is collected, stored, disseminated and used throughout the world. This change in information processing
orientation fundamentally affects many areas of accounting and control. However, the existing research in
accounting has provided only relatively few useful empirical fndings. (Sutton, 2006; Granlund, 2011) Research
in accounting information systems has been mainly confned to decision-making and issues of management
control have gained only little attention (Granlund, 2011). As earlier studies have focused mainly on the ERP
implementation phase (see e.g. Poston and Grabski, 2001; Granlund and Malmi, 2002; Bradford and Florin,
2003; Caglio, 2003; Lodh and Gaffkin, 2003; Newell et al., 2003; Scapens and Jazayeri, 2003; Scott and
Wagner, 2003) it is diffcult to estimate how lasting the consequences of this technology shift for management
control will be. Even though management control and ERP systems are becoming inseparable as some kind of
new business standards or systemic entities, we have only little empirical evidence on the ways in which ERP
systems are involved in management control practices (see also Granlund and Mouritsen, 2003). This gap has
been noted in recent management control studies calling for more research examining the everyday use of ERP
systems (see e.g. Dechow and Mouritsen, 2005; Grabski et al., 2009; Granlund, 2011) by asking what we really
know of the effects of ERP systems on organizations, and especially on management control
.

2.1. Management control

Management control systems have been defned in various ways in the accounting and management
literature. The prevailing view is that control systems in organizations consist of a set of different forms of
control that are in systemic interaction with each other. There are different typologies conceptualizing the main
elements of the overall control system, differing by number of elements and conceptualization (Otley, 1980;
Simons, 1995; Alvesson and Krreman, 2004; Malmi and Brown, 2008).
Malmi and Brown (2008) analyzed and synthesized nearly four decades of management control system
research. They formed a typology of management control systems consisting of seven elements: planning,
cybernetic control, reward and compensation, administrative and cultural controls. When setting objectives for
different parts of the organization, planning creates feed-forward control. Cybernetic controls are based on the
effects of feedback information and comparison on the goals. Rewards and compensation controls are operated
when the decisions on fnancial and other benefts are based on goal achievement. Administrative controls use
organization structure, policies and procedures to get people in the organization to behave in desired ways. As
shared values, beliefs and social norms create behavioral and control effects, this type of control is called
cultural control.
Anthony's (1965) classical defnition of management control focuses on formal information processes where
management accounting is central, and also distinguishes between strategic planning, management control
and task control. Strategic planning is the process of setting the goals of the organization, whereas task control
is the process of ensuring that specifc tasks are carried out effectively and effciently (see also Anthony and
Govindarajan, 1998). Strategic control focuses on how the strategy is planned and implemented in the longterm, whereas task control focuses on annual or short-term performance. The function of management control
is thus to support managers in monitoring the fnancial consequences in the short term, but at the same time
keep an eye on the emerging longer-term strategic issues related to successful change management (see also
Merchant, 1998; Chenhall and Euske, 2007; Merchant and Van der Stede, 2012). Later in this study we will use
the term operative control instead of task control, which we believe describes more aptly the controlling
activities at operational level.
In this paper our purpose is to explore the use and implications of ERP technology for management control
mainly in the light of Anthony (1965) and Merchant and Van der Stede (2012), while they analytically
distinguish management control from strategic and operative control. We focus on the formal information
processes where management accounting is seen to be a central element. These different functions of control
are also usually located in different functional parts or levels of organization hierarchy.
ERP and management control
ERP systems currently constitute an important technological infrastructure for accounting and
management control systems in organizations. ERP systems, while not pure accounting systems, are centrally
bound and constructed by processes of planning and cybernetic control. In this way management control and
information technology have been claimed to be inseparable. (Granlund and Mouritsen, 2003; Chapman, 2005). In

this paper we will focus on these basic management control activities: the use made of ERP in strategic,
management and operative control activities.
These modern ERP systems are embedded by the promise of integration that standardizes operations and
thereby enables their centralized management. They promise to solve the most urgent management problems, to
mold the organization into the desired form, and, as a result, achieve a high level of performance. All this will be
achieved by adopting an ERP system. (see e.g. Granlund, 2011) The business literature, however, describes highly
challenging implementations that have sometimes even paralyzed the operations of entire companies. The promise
of integration or its benefts may not be realized in practice. Blind faith in the effciency enhancing capacity of the
new technology may lead to new effciency problems. Depending on how implemented, IT can also produce
constrained images of (economic) reality (Granlund, 2011, p. 10).
Despite the technological potential companies do not necessarily use the analytical capacity embedded
in ERPS and other software packages (Granlund, 2011). One wonders why: why is the performance improvement
potential of the new information technology not realized in practice? And furthermore, in cases when the model of
operations programmed into ERP does not suit an organization, the information technology may become a trap of
bad performance from which it is very diffcult to fnd a way out.When in use the systems tend to dictatewhat can
be done andwhat not (Dechow andMouritsen, 2005; Hyvnen et al., 2009).
Implementations of these modern and highly complex ERP systems are not as unambiguous as has been
presented. This has also been observed in recent management accounting studies (see e.g. Chapman, 2005;
Dechow and Mouritsen, 2005; Quattrone and Hopper, 2006; Hyvnen et al., 2008, 2009). These studies have
argued that implementations are frst and foremost social processes. Quattrone and Hopper (2006) describe ERP
implementation as a change process through customization and user involvement. They argue that SAP (one
commercial ERP software) will never exist as a tangible object with clearly defned features and it will never reach a
stable endpoint. They studied SAP implementation in one multinational organization and reported that even four
years after starting its implementation, when it appeared to operate smoothly, SAP was incomplete. This same
phenomenon was also noted by Rikhardsson and Kraemmegaard (2006), who studied ERP implementations in six
Danish companies. They conclude that ERP is rather an organizational development journey than a system
implementation project. They also argue that ERP is a commitment to change the organization, a process without
end.
Even though there are different industry versions and the system itself is modular in structure, ERP is a
standard software. (Hyvnen et al., 2006) As a standard software, ERP offers standard solutions for all companies,
all production sites and all tasks. It is known that for many tasks there are best-of-breed software solutions with
better functions than ERP, but many companies are willing to compromise with ERP as the second best option for
individual tasks while aiming at integration, more centralized management of operations, and the performance
benefts of this reorganization. It is also possible that the model of operations programmed into ERP does not suit to
a special task at hand. This standard solution characteristic of ERP raises the question of how people make
technologies work in everyday practice despite problems with the intended formal procedures. (Dechow and
Mouritsen, 2005; Grabski et al., 2009) This entails focusing on the informal practices around ERP implementation
and use.
According to Dechow and Mouritsen (2005) (in ERP) data may be accurate, shareable and available to
many different parties but hardly create the panoptic dream of visibility and action at a distance. There is no place
for all the details of all management control problems. Something is always omitted. Even if ERP systems make
fnancial accounting stronger, they do not automatically strengthen management accounting. Dechow and
Mouritsen (ibid.) found this paradoxical since ERP systems are often presented as technologies for management
control.
Dechow and Mouritsen (2005) analyzed how two companies pursued integration of management and
control through enterprise resource planning (ERP) systems. They concluded that control cannot be studied apart
from technology and context. ERP systems do not defne what integration is and how it is to bedeveloped, but they
imply a techno-logic that conditions how control can be performed through fnancial and non-fnancial
representations. They recognized that ERP systems are particularly interesting for what they make impossible.
Granlund (2011) later highlighted this result by stating that information system confguration may defne (enable or
constrain) certain aspects of management control. Such effects are not clearly visible, and decision-makers are
frequently unaware of the consequences of the choices they are asked to make during system implementation.

Research has also demonstrated that different organizational levels may have different perspectives on
ERP systems (see van der Weeken and Wouters, 2002; Dechow and Mouritsen, 2005; Rikhardsson and
Kraemmegaard, 2006; Hyvnen et al., 2008 and also Kaplan, 1988). van der Weeken and Wouters (2002) argue that
the usage of ERP system varies signifcantly between organizational levels. Dechow and Mouritsen (2005) and
Hyvnen et al. (2008) argue that people in organizations mean different things when talking about the same ERP
system.

In addition, we may note that in earlier studies the focus has been on interviews with top management
(see Dechow and Mouritsen, 2005; Rikhardsson and Kraemmegaard, 2006; Hyvnen et al., 2008). However, this top
management perspective illustrates only one, often very narrow aspect of the whole ERP. How ERP in this
perspective becomes a fact needs much more research than has so far been done. Rikhardsson and
Kraemmergaard (2006) also emphasize that top management has only evinced positive arguments on ERP in most
companies.
According to the literature the standard nature of ERP systems is also problematic. As Dechow and
Mouritsen (2005) and Quattrone and Hopper (2005) illustrate, it is very challenging to re-confgure the ERP system
after it has once been installed. Rom and Rohde (2007) claimed that an ERP system and its processes can be
planned but the usage cannot. Granlund (2011) concluded that ERP systems promote standardization of accounting
practices in organizations, but we do not know how.
The challenges of standard software solutions are crucial in global organizations but also in smaller frms.
In earlier studies the focus has been on SAP implementation in global MNO companies. Our study will look at an
organization one degree smaller, which is also using an alternative ERP solution (namely IBS) instead of commonly
studied SAP.
In sum, earlier research has demonstrated that ERP systems standardize businesses, but what happens, in
particular for management control, if operations in business units are very different, and if the purposes of the
people using ERP are very different? Research fndings are mainly available on large global and multinational
organizations, while little attention has been paid to smaller frms even though also they have been very active in
implementing ERP systems. Findings are only available on top management, who have typically been highly
positive regarding ERP systems, because they have been planning the vision of ERP usage and are likely unwilling
to criticize their own decisions. Previous studies have also evidenced that people in organizations may understand
ERP in many different ways. Summarizing all these abovementioned research results and gaps noted, our purpose
in this study is to explore and theorize what management control benefts, challenges and problems have come to
stay as a result of implementation an ERP: what, why, and in which circumstances in the context of not a very large
frm and from the perspectives of all organizational levels.
The purpose of our study is to explore and theorize the benefts, challenges and problems for management
control four years after the introduction of an ERP system. We also try to fnd explanations for why and under what
circumstances these challenges and benefts may emerge. To achieve a holistic view of the organization our
fndings are constructed from the viewpoints of people at different levels and in functions of the organization.
3. Research method and methodology
The focus in this study is in an in-depth analysis of the usage of an ERP system for management control
purposes in a middle-sized organization. To achieve a profound understanding of the phenomenon we adopted the
qualitative and explorative case study method, basing our arguments on fndings from real life. (Ahrens and Dent,
1998; Ahrens and Chapman, 2006; Ahrens et al., 2008; Vaivio, 2008) Case studies and feld empirical feldwork are
frequently suggested in order to learn more about the complex organizational effects of ERP (e.g. Sutton, 2006;
Rom and Rohde, 2007; Granlund, 2011) and to problematize the consultative and textbook appreciations of its
simplistic usefulness (Vaivio, 2008) of ERP systems
Our case organization, Group Aluminium, is a leading supplier of casting components in Europe. The turnover of the
group is 130 million Euros and it has over 1400 employees. Group Aluminium operates globally and has production
plants in six different countries: in Finland, Sweden, China, India, Estonia and Russia. The company also has sales
offces in France, Denmark and the USA. Aluminium's main customers are in the telecommunications and
automobile industries. All the main group functions are located in the head offce in Finland. The plant managers of
the factories are fnancially responsible. Group Aluminium was selected as our case company because: 1) their ERP

system had been up and running for some years; 2) they had implemented all the main ERP modules; 3) they had
different kind of businesses in different business units, but the same ERP system was implemented in all business
units; and 4) the size of the company enabled us to form a conception of the organization as a whole.We considered
it interesting to investigate a systemother than SAP. It was also very important that top management gave us full
access and support to conduct the study on ERP in action. The ERP systemwas implemented in Group Aluminiumin
2003, and all themain ERPmodules were in active use (Financials, Sales and Support, Manufacturing, Distribution,
Human Resources) and also some extra modules that support these core modules. The ERP system was
implemented in 10 different production plants in 5 different countries. In Finland and in Sweden all the employees
used the ERP system, while in other countries only selected key userswere using the system. End users totaled 235.
The system also included over 1200 raw-material and purchasing items, over 1600 semi-manufactured items and
over 4000 end products. The production lines had a total of 50 displays where workers could make entries into the
ERP system. Our empirical examination was done in 2006, and included 24 interviews, all of which were recorded
and transcribed. Typically the interviews lasted from one to one and a half hours. In addition we had several
informal discussions and meetings in the case company, and we also met the company management several times
during the feldwork. Moreover, we gathered information from different materials such as the system vendors'
brochures. We used semi-structured interviews as the objective was to create an open discussion, so as also to
enable discussion about negative aspects of ERP. The interviews began with an introduction to the purpose of the
study. We noticed that actually many of our interviewees were very pleased that somebody wanted to hear how the
ERP was working in practice. Many seemed to have a need to vent their thoughts on ERP to an outsider. Frequently
the interview actually began without our feld question: How is ERP working in practice, how you are using it in
your tasks? During the interviews unexpected themes and issues also emerged.We sought to tackle these issues
inmore detail, and sometimes there was need for an extra interview. As an example,wewere interested in how
changes in production lines and in machine groups would affect cost accounting and management control reports.
Interviews were conducted with interviewees from three different organizational levels: 1) top management, 2)
fnancial, administrative and sales people, and 3) production management, production supervisors and shop foor
people. The views of employees at different levels and in different functions of the organization gave us a rich,
detailed picture of the usage of ERP system. The datawere analyzed by reading the interview data and observing
different ERP related management control benefts, challenges and problems. For analytical purposes we defned
beneft as an advantage or proft accruing fromsomething, and defned challenge as a dispute, questioning of
something, or a diffcult or demanding task for someone.However, a beneft for someonemay simultaneously be a
challenge for someone else. Thus the defnition of beneft or challenge depends on the interviewees and we had
tomake our analysis by organizational level. In analyzing the data, we frst categorized challenges and benefts. All
the fndings were numbered totaling 108 relevant fndings, ofwhich 81were challenges and 27 benefts. After this
we analyzed the data by subdividing the challenges and benefts and visualizing the connections between them
(see data analysis of challenges in the Appendix 1). 4. ERP supporting strategic control Top management especially
found ERP to be a fantastic management control tool. All the senior executives interviewed, the CFO, CIO and the
COO emphasized that ERP had added transparency and it was easy to control all the business units and activities at
the time.
It has been successful in that everything is transparent at the moment. If I look at it from the fnancial
management perspective, it is a fantastic tool. I can see the sales and accounts of whichever factory I want. I can
see the orders. I can see all I need to see, receivables, liabilities, whatever I want, and all transparently and in real
time. (CFO 10.11.2006) A decided advantage was also that the enterprise's overall management was facilitated by
the new ERP system. Global action requires a coherent approach. In addition, the ERP contained a standardized
form which is easy to implement in new (purchased or established) plants. From my point of view it is really good,
that we have only one system, when it is very easy to check what is happening in our plants. Big brother is
watching them. (Laughing) (COO 13.11.2006) Top management also perceived the main benefts of ERP in
strategic management. ERP had been a tool to transform the company and the operations in the manufacturing
plants into the desired form. Top management was confdent that the logic in the ERP system would improve the
performance of Aluminium. The ERP system defned how the group would be developed in the future. We tried to
fnd a way to operate systematically, and some way we felt that the logic in these ERP systems is very clever.
(COO 13.11.2006) The COO noted that systematization was going to be attained especially by the new information
system, because systematization was built-into ERP systems: We aim at a systematic mode of operation. And it is
reasoned to work as the ERP system requires, because the systematization is built into those systems. And of
course we were trying for each plant to operate in the same way. (COO 13.11.2006) The CIO described the
rationality behind the ERP enabled systematization and harmonization between different plants as follows: Each
plant did their tasks in their own way. However, because we have over 10 different plants, if we try to analyze and
manage those plants centrally, we have to gather the facts systematically. The basics have to be done in the same
way if you try to make some general decisions. And one way to put those in the same form is one common ERP.
(CIO 20.9.2006) A decided beneft also seemed to be the number of the systems. At the time of the interviews there

was only one main control system, ERP, and there was no need to learn and use a set of different kind of bestofbreed or factory-specifc systems. All development efforts can be focused into the companywide ERP. It is very
good that we have only one system, which is the same for everyone and which can be used by everyone. It is also
good that there are no longer any separate systems in each business unit, which, in addition, were used in different
ways in each business unit. (Business Controller 25.9.2006) In top management the main purpose in utilizing ERP
was to systematize and standardize the functions and work methods between different production plants. The
operating environment was changing radically, customers were becoming more global and the pressure to improve
the effciency of operations continuously challenged top management. Production had to be planned more
comprehensive way, as the CFO describes the starting point of ERP system: We had (start) to study, how we were
going to operate as soundly and effciently as possible. As few documentations, phases in processes and muddle
through as possible, and thereafter materials fow smoothly through the organization. (CFO 10.11.2006) Middle
management and the offce staff saw the main benefts of ERP in everyday routine tasks. As an example, the data
gathering for the monthly proft and loss statement from all business units was very easy and could be done very
fast.
For gathering the monthly fnancial information it is pretty suitable. Sometimes small checks are needed in the
valuations of the warehouses, but mainly the accounting information is generated automatically. (Business
Controller 25.9.2006) An accountant emphasizes that the system is good, but that its excellence depends on its
usage. It clarifes many tasks. However, many times, people will input into the system whatever numbers and
fgures. They should be much more carefulPreviously, when the bookkeeping was in my own hands, I knew how
the bookkeeping worked. But nowadays, I feel that I have become a controller whose task is to control, watch out
and question that why, why and why? (Accountant 13.11.2006) 4.1. Summarizing the benefts of ERP As can be
seen, top management used the ERP for strategic control. ERP was seen in a very positive light. ERP was not used
only for preparing the monthly proft and loss statement, but also for creating and implementing the strategic vision
of the company. This is also one of our main fndings and we may summarize that the main benefts of ERP in
management control can be concluded for: 1) enabling the strategic vision, 2) implementing standards worldwide in
the company, and 3) enabling transparency in controlling subsidiaries. Our study shows that the one of the main
benefts of the ERP system was the transparency achieved. The ERP system was found to be a fantastic tool for
top management enabling transparency and control. In particular, the system highlighted the benefts in speed to
gather and create monthly proft and loss statements. Those reports could be compiled very quickly from several
different units in the organization, and fairly easily, since there were no separate systems for data collection, but
only one ERP. Another major beneft, especially from the senior management perspective, was the implementation
of the strategic vision by ERP. This refers to the integration of several business units using the ERP system. This
made it possible to use common items, common proft and loss statements and reports, and common accounting
principles. This enabled centralized control. In addition, the usage of the ERP system was related to a reform in the
mode of operation. This can be related to the potential change in the organization culture achieved by one
standardized ERP system. The main benefts generated in our case organization are presented in Table 1. 5. ERP
creating conficts and contradictions in management control The main challenges in using the ERP system are that
entries (in production lines) have to be done absolutely correctly. This means, according to the ERP system that
before the user can move on in production, the previous process phase has to be recorded. Conversely, the next
process phase cannot be recorded before the recordings of the previous process phase have been done correctly
because the ERP system requires that items have to be in balance. The supervisor at factory J reported that the
production process had always been the same in this factory, there had been no changes. Big changes were now
occurring as the production process was to be integrated into the processes de fned in the ERP system. The
(production) process has not been changed. Products have been produced for years in the same processes. But now
those processes have been built into to the ERP system and problems occur, especially in making entries in
production chain. If the recordings are not absolutely correct, the next phase is in trouble. (Supervisor at factory J
9.10.2006) At shop foor level the ERP system worked if the recording of the entries worked. If making entries did
not work, then the ERP system did not work either, as a real time and transparent management control system had
been planned. The prerequisite is that errors should not occur. Even a singly error, incomplete recording or
recording not done in the entry process, could bring the ERP system to a halt.
This system requires that everything has to be done exactly, spot-on, as the system requires, or the system goes
down. It does not tolerate any mistakes. (Production planner at factory J 22.8.2006) Entries were sometimes made
long after the concrete production phase, and mistakes and errors in making entries caused continuous confusions
in production. The offcial way of thinking on the shop foor was that production processes should move on in a
certain pace and entries to the ERP system should be done according to the production activities as they occurred.
However, the workers emphasized that working would become slower when entry failed or balances had to be
checked manually. In production lines the workers did not in practice follow the offcial mode of operation presented
by the ERP system. Making changes to the ERP system seemed very troublesome. The basic data in the ERP system

were based on some rough estimates and plans, but when these plans changed, the system was unable to follow.
It can never follow, and that it is the problem. If you worked by the rules of the ERP, you would lose your fexibility,
and you would work in a very rigidly planned way. That is also possible, but thereafter you can unlearn your
fexibility. You can't do many tasks at the same time, you cannot change the machine by occasion, you have to do it
in one predefned way. (Plant manager at factory J 18.10.2006) Making changes was apparently impossible, which
meant that not all entries could be made. This led to faulty cost and proftability reports on products and customers.
If some of our volume products are ordered for fast delivery, we try to serve our major customers as best we can.
We use all possible machines, all possible routings and capacity for that kind of fast delivery orders of volume
products. And for the rest we try to fnd alternative routings, possibly outsourcing. Our world at the factory changes
all the time, which can be also seen in our cost accounting. The system just works like that. (Plant manager at
factory J 24.11.2006) Our case company operated in two different industries. The main difference between these
industries was the customer's mode of operation. Factory J operated in the telecommunications industry and the
mode of action was from order to make. The starting point here is what the customer wants. We do all we can to
execute that (produce and deliver the order as soon as possible). In that case we will respect no system. We will put
all our effort into the production, so that the customer will get the order when they need it. That is our working
philosophy. We try to be very fexible. And nobody ever asked if the order was done according the ERP system, but
they have asked if the delivery was on time and if the quality was as agreed. Well, you can imagine how this kind of
fexibility can be built into the ERP system. (Plant manager at factory J 18.10.2006) The reality in plant J seems to
be anything but systematic, as the plant manager describes: Unfortunately that is the role of the subcontractor. If
we think a bit, how systematic we should be if we worked according the systematic ERP system, we should release
our production orders for the next week by Wednesday, so that men, supervisors and workers could plan their
coming week. Unfortunately there has never been a situation where the planning holds to the next week. (Plant
manager at factory J 24.11.2006) In practice this means that production orders will be prioritized according to
customers' wishes. Our life is such that we often discontinue production orders (processes) and start on more
urgent ones, and thereafter continue with the older orders. And in practice the routings may change so that
normally the order goes through one pipe, but now it goes through three pipes (through our subcontractor and
other pipes and machines in our factory). Routings change all the time. Tell me who has time, when you notice that
we are not working according the ERP system, to make the changes into the ERP system, and try to get the ERP
work. The factory in practice does not work in that way. (Plant manager at factory J 18.10.2006) Traditionally
factories have been managed by fnancial accounting information. However, radical and rapid changes in the
environment mean that the management control of factories requires more detailed information. In our case, the
fexibly changing machine (entry) groups seem to be both obstacles to work according to the ERP system and
obstacles to utilizing cost and proftability analyses. Production at the factories is managed according to customers'
wishes, not according to the ERP system. According to the philosophy of the ERP system all changes should be done
in the ERP system and production should follow thereafter. Note that the product is in focus in production.
Management and control in their entirety are based on producing the product. From the management control
perspective cost and proftability analyses are essential in the factories. However, in practice factory management
does not trust the cost and proftability reports of products and customers printed from the ERP system at all. The
main difference between external fnancial accounting and managerial cost and proftability reports is that the
fnancial information is based on facts like invoices and salaries. Cost and proftability analysis is then based on
entries in production lines, the correctness of which is highly suspect. As the supervisor pointed out, product
proftability analysis was not based on ERP reports because these are known to be faulty. This is because each step
is not be signed into the ERP system. The product proftability analysis is wrong, but the reason is that we are
using the system wrong. We have agreed that it is not worth entering each minute detail on each product as it takes
time away from production. (Supervisor TP 13.11.2006) Production management and staff saw very little beneft
from using the ERP. The system worked, but only when the prerequisites and situations in production ftted together.
In practice, situations in production were constantly changing and in SMEs there were no resources to add these
changes into the ERP system. This created challenges to make entries. It was also time consuming and frustrating
to correct the mistakes. All these affects task performance and satisfaction in production. Making basic entries
could be done easily, but when a complicated entry was needed, challenges arose immediately. At the moment in
the production, the monthly proft and loss statement was the main fnancial control tool. Supervisors on the shop
foor emphasized the role of production line workers in the use of the ERP system. The supervisors in particular
criticized the systemas no substitute for the human thinking and experience needed in production management.
For them the ERP system was just an instrument, and the real production planning and management were done
elsewhere. It is continuous interaction. People in production planning and production discuss all the time. The ERP
system suggests producing something with detailed routings, but that does not work in practice. That would be
fantastic, if we just input basic data and orders and everything goes right. But our world changes daily, the order
book changes, prioritizations change and so on. Customers largely determine what we do. (Supervisor at factory J
9.10.2006) It is noted that in practice it was the supervisor who outlined the situation at shop foor level in factories:
how many workerswere needed and whichmachines were to be used. Workersmight be ill and machines might be

undergoing maintenance. Supervisors made the routing decisions in practice, despite what the ERP system
suggested. Supervisors emphasized that the ERP system did not outline the environment and situation in practice.
The ERP did what it was commanded to do. The ERP worked by the parameters inputted to the system. The
supervisors reported that the ERP worked in its own reality as supervisor at factory P reported: The system does
not understand the situation in that way, how many machines are available and so on. That is our job to divide the
order among different machines, so that the customer will get the delivery in time. (Supervisor at factory P
28.11.2006) A real challenge is also the predictability of the production processes. Working according to the ERP
system requires that the processes are predictable. The system does not understand breakdowns. It would be easy
if you set up the machine at 2 o'clock in the afternoon, the setup time is 4 hours and thereafter there will be
produced 70 units per hour and the process ends the next day at 2 o'clock in the afternoon as predefned in the ERP
system, nomatter howmany units have been produced in practice. In practice itmay be that nothing will be none
produced (because the production process is so challenging). (Operational manager at factory J 24.11.2006)
Challenges in the operational environment in production were due to the long and complex production chain. There
were many phases where changes might occur. Thus, in production they used the ERP system as they see it
possible. Minor changes in production were not entered into the ERP system. Very challenging cases were
outsourcings to subcontractors. The central management required that all basic data be inputted into the system.
Only then could the entries in the production line follow correctly. Middle management and offce staff related the
main challenges to making entries but also to personnel resources. The main challenge arose whenever people
made entries incorrectly. This was reportedly due to pressure and haste in business processes, trying to make their
job faster and because of the complicated system. However, this delayed the processes in the supply chain. If
everybody followed the system, and made their orders from the system, everything in accounting would work. But
many times, people hurry when they feel that their tasks can be done much faster if they don't touch the system at
all. This way they cut corners, and then it is my job to ask manually these things afterwards. (Accountant
13.11.2006) The accountant emphasizes that correcting the incorrect entries is time consuming and frustrating.
We are required to get the information from the people somehow. As an example, prices may vary between the
invoice and the order, and then it is my job to check and ask these things, and correct themin the system.
(Accountant 13.11.2006) In practice, all majormistakes and errors had to be corrected in the system or it would not
work. The entering process and various functions in the ERP system were interdependent. In practice there had to
be a person with the required knowledge to correct those daily errors. I correct errors. One of my tasks is to run
around there in the factory, asking what is correct. For example, this morning I have been running there since 7
o'clock with pencil and paper asking if these entries are correct. Isn't it a good system? Laughing! (Production
planner at factory J 22.8.2006) Middle management and offce staff emphasized that ERP included numerous
options which had not yet been used because of understaffng. ERP was seen as a good option, but insuffcient
personnel had so far been assigned to the usage of ERP. Middlemanagementwas willing and able to use the ERP for
business improvement but at the time of the interviews there was only time for basic use. You can do almost
whatever you want if you have ability to use the system. (Accountant 13.11.2006) Middle management and offce
staff named understaffng as the main challenge. They emphasized that it was a real challenge in SME companies
when the key user left the company. In our case study the main user in accounting, the person who was
implementing and determining the ERP for the company moved to another frm. This left a real gap in knowledge
about using the ERP. We have not been able to develop the system because we lack resources. Especially after our
main user in accounting left. At the moment our task is to keep this systemworking. There is no time to develop it.
(Business Controller 25.9.2006) And he continued: When the personwhowas implementing this systemleft the
company, at the same time that created a big gap in our knowledge of how to use the ERP in our organization.
(Business Controller 25.9.2006) Middle management and offce staff perceived the main challenges to be
understaffng and technical problems. The real challenge experienced by top management was also that employees
did not feel that making entries was the part of their job. Top management understood that operational
environmentswere different in different plants, and that making entries in ERP, sometimes under high pressure was
demanding and might lead to human error. But in every plant the same ERP logic had to be followed. This was the
top management perspective on how things would happen using ERP. These requirements focused especially on the
people on the production lines, where the entries in ERP were to be done. The CFO emphasized the central role of
these production line ERP users as follows: This is part of your job, when you start (the job), you sign it, when you
stop it, you sign it; or when you take material and put it forward, you sign it. It is your job to do it (to make sings)!
(CFO 10.11.2006)Author help here! The CIO also reported that people still feared for their jobs when ERP was used.
The employees did not understand what would happen when ERP was introduced and this created some reluctance
to use ERP in business development. Top management was aware that negative attitudes to ERP persisted, but felt
and emphasized that only negative aspects of ERP were discussed among employees, never positive things. It is
noteworthy that top management was mostly positively disposed to ERP and mainly emphasized the positive
effects of ERP. In addition, employees still did not know what the processes really were and how individual

processes were linked to the overall production system of the plant. This meant that employees did not understand
why they needed to make entries in the system and how that benefted the business.
The main challenges faced by using the ERP system in our case organization are 1) making entries and 2)
understaffng. Challenges in making entries can be divided into several subchallenges. One of these is internalizing
the processes of the organization. Nevertheless, three years after ERP startup the employees did not know what the
processes were and how they were related to the functioning of the company. Thus the employees did not
understand why it was important to make entries into the ERP system in different processes in the organization.
Another challenge in making entries was the excessively burdensome entry process. This took time in production
and was a source of error. Incorrect entries seemed to create frustration among the employees. We also recognized
that in some situations it was not possible to make correct entries in the ERP system. This challenge occurred when
production lines were changed but new lines were not created in the ERP. All transactions should be signed, but
while it was not possible, it also added frustration among the employees. In addition, a real challenge which
consumed a great deal of time and resources was correcting incorrect entries.Most of the employees had basic skills
in making entries, but no skills in rectifying mistakes. Sometimes the source of the mistakes was untraceable,
making it even more diffcult to correct these incorrect entries. We also observed that shop foor workers especially
were very critical of the ERP system. ERP was not accepted as part of their job. They were interested in producing
physical products, and most reluctant to use the ERP system, which exposed them to the risk of error. Another main
challenge in our case organization was understaffng, in particular of those skilled in using the ERP system. Our
study shows that there were not enough people with have experience and skills to use ERP system at the case site.
Firstly, the modern and complex ERP system needed special skills. Secondly, there was no time to use other than
basic functions of the ERP system. And thirdly, if a key ERP person left the company, it created a big gap in
knowledge and support in the usage of ERP. The main challenges are presented in Table 2. 6. ERP in management
control At the strategic management level of the organization the ERP-centered business model (i.e. mode of
operation) is taken as a prerequisite for management control in Aluminium. It was expected that the
implementation of the ERP-centered, highly formalized, standardized and rigid planning and feedback processes
enabled systematized and centralized control. However, it required of the whole organization very strict compliance
with the ERP system's work standards and the standard business model. Managerial disciplinary processes were
therefore crucial in order to maintain the work standards that the functioning of the ERP system required. Although
the organization had different plants, all working in different ways, and operating in different operating
environments, according to top management one common information system was still the best possible solution
for the development of management control throughout the organization. This meant that different kinds of
businesses were expected to be harmonized with one business model presented in the ERP system. It also meant
that the organization culture and work practices should be harmonized, and that strategic management should
accept that the ft with the business processes and control system with the environment where the plant operates
would not be optimal in all cases. Production management called into question how one, common and standard ERP
system can be used in different plants and in different technological, work process and business contexts. In
production the business model in use was based on understanding the nature of production. Serving customers was
top priority and a starting point for the whole business. When the mismatch was the most striking, there were two
parallel control systems in use. One was the formal ERP centered control, maintained with minimum effort and only
because it was required by top management. The other was the cultural control on which the production staff relied
in running the plant to serve customers. In order for the ERP system to be a tool for management and control in
production, the obstacle of making detailed and correct entries into the system had to be overcome. The initial
assumption was that the amount of time required for making entries would decrease. In practice the time used due
to errors and mistakes was many-fold. Mistakes and errors were apparently due to a lack of basic computer skills.
Making basic entries does not require any specifc skills, but lack of general computer skills was emphasized in
making more complicated entries and in correcting mistakes. Errors and mistakes made by oneself, by some other
user, or untraceability of the error sometimes impaired motivation to use the ERP system. Continuously correcting
errors is very time consuming and entails a risk of the focus shifting from the customer to the ERP system. The most
critical actors for the functioning of the ERP system were the support users, who were able to correct all kind of
errors. Supervisors at factories emphasized that without workers entry processes would not work. And without an
entry process the ERP system could not be used in management and control functions. Supervisors at shop foor
level thought that the most challenging task in the use of the ERP system was the integration of production
processes with the ERP system. In practice this merely added to the need for making entries and changes to the
system, manifest in an increased number of errors and mistakes. It was crucial for using the ERP system even one
mistake or error was enough to stop the entry process in ERP. This did not usually stop the production, but might
delay it or give rise to new complications. The real problem in the entry process was that errors and mistakes
tended to cumulate. There were no skills available or no time enough to correct these on the spot, but the
production continued regardless. This meant that errors and mistakes persisted and the entry process did not keep
pace with the production process. These errors and mistakes became apparent at the latest in the administration,

when they could not print out the shipping documents. In a rapidly changing environment product proftability
analysis is deemed essential for management and control of operations. However, the plant managers emphasized
that the product proftability analysis of the ERP system could not be used due to faulty data. The problem was
particularly evident in the production process incompatibilities with the entry process. Therefore management and
control at factory level were based on the monthly, quarterly and yearly fnancial information available. However,
this was not suffcient for the needs of proper management control in production. The grand intermediary role of
management control that Anthony (1965) and management accounting textbooks (like Merchant and Van der
Stede, 2012) maintain, in the ERP context, is apparent merely in a brave struggle to keep the technological and
human parts of the system in operation. Faulty information is deleterious for the system. But when production
people whose role is to input information are too occupied with production operations do not understand the
essential meaning of their information input role for the system as a whole, and no-one does not have enough time
for guidance or learning the system usage at an adequate level, constant problemsin systemmaintenance are
inevitable. Faulty information input, in practice, makes cybernetic control at the production level diffcult and
sometimes impossible. And the situation is even worse when production operations demand great fexibility of
planning. For strategic planning and control, however, this seems to be fne as long as the fnancial information is
substantially correct at the aggregate level and comparable between the production plants. This situation is next
visualized in Fig. 1.
7. Concluding discussion
ERP systems have attracted a lot of interest in accounting research.Much of this interest has been directed to
various aspects of ERP systemimplementation. The results of these studies have revealed many complexities and
challenges in the implementation processes (Dechow and Mouritsen, 2005; Quattrone and Hopper, 2006;
Rikhardsson and Kraemmegaard, 2006; Hyvnen et al., 2008). The effects of new ICT on accounting work and the
organizational roles of accountants have also been of great interest (Granlund and Malmi, 2002; Caglio, 2003;
Scapens and Jazayeri, 2003; Hyvnen et al., 2009). Due to the novelty of the ERP technology centered phenomenon
there is a lack of studies on the systems in use. It is noted that implementation processes may be very lengthy and
the systems may be unstable for years. Despite this, we think it is still worthmaking a conceptual distinction
between systemimplementation and use (Dechow andMouritsen, 2005; Quattrone and Hopper, 2006). Our study
tries to fll this gap by making observations and an analysis of a system that had been in use for a few years, and
the organization which had found some kind of stability in its existence. In light of the fndings of this study, the
argument evinced by Dechow and Mouritsen (2005) about what ERP makes impossible proved especially valid. ERP
made it possible to gather fnancial accounting data in a standardized manner from all business units and to provide
top management with a set of basic fnancial accounting reports that are comparable between production plants.
This reporting was enough to give a feeling of transparency and control for top management at the level of
strategic control, but did not yield much useful information for the management of business units or any detailed
proftability analysis of the production. It proved impossible to conduct decent cost variance or product proftability
analyses for the managerial purposes of the business unit. This is especially due to the lack of resources in the
maintenance of ERP systems and the rigidity of ERP in planning when production fexibility was called for. In
general, the lack of information systems skills and time resources severely limited the opportunity to develop
management accounting in the ERP context. Thus we may end up with the proposition that very basic fnancial
accounting, mainly income statement and balance sheet reports, will represent the strategic control or strategic
management accounting, and management control in SMEs using ERP systems will be characterized by a lack of
advanced cost accounting and other management accounting techniques. Control, which was considered as
strategic control was actually restricted to the much narrower fnancial control based on periodical fnancial
statements. Instead of allegedly contributing to integration, ERP has quite the opposite effects. As the ERP makes
information technologies more integrated, it simultaneously makes the long-term strategic control and short-term
operative control within the organization more disintegrated. In this sense our study supports earlier research
showing that an ERP system may lead to functional barriers and contradictions in control rather than to their
breakdowns (see also Quattrone and Hopper, 2005). Moreover, and more signifcantly, the ERP did not fulfll top
management's expectations related to cultural integration at all. In top management the ERP-centered running of
the business is seen as a prerequisite for effcient management control. The implementation of the ERP-centered,
highly formalized and standardized communication processes makes systematized and centralized control possible
to some extent. This, however, requires very strict compliance from the whole organization with the ERP system's
standards and mode of action. On the shop foor, however, the main challenge is how a single, common and
standard ERP system can work in different contexts, like plants, work processes and business contexts. On the shop
foor the business is always based on understanding the nature of production and serving the customer as top
priority. As Mouritsen (1999) found in his case study, here, too, the formal top-down driven system tends to replace
the customer centered and fexible factory with rigid bureaucracy. Thus ERP systems may have demoralizing effects
on the culture of business organizations. We argue that this disintegration may be caused by too burdensome
production control logic embedded in the ERP systems (see also Elmes et al., 2005) and by the rigidity of the ERP
system whence changes in the production and business environment are diffcult to model in the system (see also
Quattrone and Hopper, 2005). Thus the ERP system makes it very challenging (Dechow and Mouritsen, 2005) to
manage the strategic control and operative control in an integrated way. Some of the problems are due to
insuffcient personnel resources and the vulnerability of the complex system. The functioning of the system as well
as the use of new analytical possibilities (including management accounting techniques) that it offers seem to
depend on the main user of the system, often just one person in the SME context. Our analysis of the data from

different levels of the organization shed light on the differences in how performance and management control are
understood. On the shop foor the performance is about being able to deliver the right kind of product to the
customer in time. The beneft of the ERP is evaluated on the basis of whether it helps the production to better
perform their task today. The top management time perspective is much longer because ERP for them is a means of
strategic planning and control, the results of which can possibly be evaluated only in a few years' time. For middle
management and administrative staff the incorrect data in the system causes annoying problems with the
cybernetic control and fnancial information processes they are involved in. Thus the major roles for management
control were to struggle to keep the technological and human parts of the system somehow operational, and to
produce the fnancial accounting information. We have also shown that the endless implementation is due to a
predefned ERP system, which is supposed to retain its form unchanged (see Dechow and Mouritsen, 2005,
Quattrone and Hopper 2001, Dillard and Yuthas, 2006; Quattrone and Hopper, 2006; Rikhardsson and
Kraemmegaard, 2006). In the implementation defned processes and routings in ERP system are not long valid in
the fast changing business context. We have illustrated that at strategic level ERP standardizes and systemizes, but
at operational level, it needs to be adapted to the changes in business and customer requirements. In small and
medium sized companies, as in our case, this may be a problem, because there are no resources to make those
continuous changes and constantly adjust the ERP system to the changing environment. This may lead to conficts
and contradictions in management control. If these reconfgurations are not done, it may result in incorrect usage of
the system in the form of making incorrect entries or not making them at all. Quattrone and Hopper (2006) state
that ERP is homogeneous information system (information system in a highly standardized form), which is used
heterogeneously, in a very inconsistent way in an organization. In our study the heterogeneous usage of ERP is
due to the large number of errors in making entries, but especially because it is structurally impossible to use it in
the intended way, particularly in factory J. What ERP renders impossible is therefore important (Dechow and
Mouritsen, 2005). In our study, we demonstrated that the heterogeneous use of ERP may lead to problems in
management control, particularly in the form of incorrect data and missing management accounting techniques,
and this is partly due to a lack of personnel resources in SMEs, and partly to the activities rendered structurally
impossible. We can conclude that in this study we examined the everyday usage of an ERP system instead of the
implementation phase (see Granlund, 2011). We focused our attention on one manufacturing company which is not
very large, and gathered our data from all organizational levels instead of interviewing only top management or
management accountants. We have demonstrated that there are apparently massive challenges in companies of
that size in using an ERP system, and showed that people who input data into the system have a key role in the
usability of the ERP system for management control purposes. Especially at the week and day level of production
planning (i.e. operative control) the tasks and the logic in ERP are in stark contrast with the resource planning and
the formal business model in use. Despite this contradiction, experienced and skilled people will always fnd their
ways in the everyday survival game of coping with the demands of ERP and business. Finally we may argue that
there was a certain connection between the benefts and challenges. The anticipated benefts were in many ways
conditioned by the issues, which really proved to be the challenges. Major benefts expected by top management
concerned strategic control related issues of 1) transparency and 2) strategic vision related to integration, i.e.
standardized working practices. However, several challenges emerged and practically impeded the expected
benefts. Scarce resources limited the development and utilization of the ERP system and dif fculties in making
entries further limited the opportunity to use management accounting information. This meant that the
transparency in practice included only standardized fnancial accounting transparency, no more. Moreover,
diffculties in making entries and the structural inadequacy of the ERP also led to a situation in which the working
practices were little standardized in practice, but remained heterogeneous, while people in the units tried somehow
to survive with the ERP system in order to keep the production process running and serve the customer properly.
Whether this proposition holds only in our case study or whether it has wider empirical implications remains to be
resolved in further studies, including various feld study settings or using statistical empirical data as the effects of
heterogeneous plants or scarce IT-resources to the use of ERP in SME context. Appendix A. Interviews Position in
organization Date Duration of the interview Application specialist SN 17.8.2006 1.0 h Production planner TO 22.8.2006 1.0 h Chief information
offcer JP 20.9.2006 1 h 15 min Business controller PK 25.9.2006 1.0 h Sales of fcer KS 6.10.2006 1.0 h Supervisor KP 9.10.2006 1.0 h Worker A
9.10.2006 15 min Supervisor TN 11.10.2006 1.0 h Worker B 11.10.2006 15 min Worker C 11.10.2006 15 min Plant manager at factory J MK
18.10.2006 1.0 h Chief fnancial offcer MT 10.11.2006 1.0 h Chief operative offcer AN 13.11.2006 45 min Accountant IK 13.11.2006 45 min
Plant manager at factory P MN 13.11.2006 45 min Supervisor TP 13.11.2006 1.0 h Worker D 13.11.2006 15 min Worker E 13.11.2006 15 min
Business controller PK 27.11.2006 1.0 h Plant manager at factory J MK 24.11.2006 1.0 h Development manager JV 28.11.2006 1.0 h Plant
manager at factory P MN 28.11.2006 1 h 15 min Supervisor HV 28.11.2006 1.0 h Supervisor MT 28.11.2006 1.0 h Total 24 interviews 294 H.
Teittinen et al. / International Journal of Accounting Information Systems 14 (2013) 278296