Cerys - Management Essays

Question 1

Discuss the concept of Inter-Organisational Relationships

Answer 1

• Alliances - co-operative relationships representing the middle-ground between markets and hierarchies.
• Globalisation
• Trends - closer business relationships & outsourcing.
• Example - Rolls Royce - restructuring, kept 40 key partnerships (down from 500 suppliers)
• Motives - exploit unique resources (Das & Tend, 1998) & achieve specific outcomes (Glaister & Brickley, 1996).
• High failure rates (> 60%).
• Types of Relationships - Dyadic (vertical, horizontal, diagonal), Networks.
• Issues with IORs
• Failed Alliances - Volkswagen & Suzuki (2009)
• Control problems - control structure deficit.

Question 2

Explain the main drivers behind the development and increased importance of Inter-Organisational Relationships

Answer 2

• to extend management control beyond the company’s borders to alliances/relationships.
• Globalisation
• Technological Development
• Increased technical complexity of products/services - popular in Manufacturing industry.
• Brings problems - extending legal boundaries.
• Closer Business Relationships
• Outsourcing

Question 3

Discuss the interrelation between risk, trust and control at an Inter-Organisational Context.

Answer 3

• Risk (Das & Tend, 2001) = probability of an uncertainty.
• Relational Risk - not having satisfactory co-operation.
• Performance Risk - alliance’s objectives are not met.
• Trust (Child & Faulkner, 1998) = “the belief that the other’s actions will be beneficial” [not detrimental]
  (Sako, 1992)
• Contractual Trust - partner will honour terms of contract (minimum trust)
• Competence Trust - partner is capable, has the capabilities to perform objectives.
• Goodwill Trust - partner will have the best intentions.

-Trust & Risk (Das & Teng, 2001)
* Goodwill trust reduces relational risk.
* Competence trust reduces performance risk.

• Trust & Control
• Should be complements.
• Trust - more intrinsic, Control - more overt and active (Das & Teng, 2001)
• Relationship can change over time (Varoutsa & Scapens, 2017)

Question 4

The Implications for Management Control Systems in an Inter-Organisational Context.

Answer 4

• Types of Controls
• Outcome/Results Controls - Target costing, value chain analysis, rank-based rewards, IO cost management, Open-book accounting. Performance risk reduced.
• Behaviour/Action Controls - how parties should act, policy documents/procedures, frequent meetings, communication. Relational risk reduced.
• Social/Cultural Controls - values, norms and culture that influence behaviour. Selection of partner - ‘matching’. Trust. Will reduce both relational and performance risk.
• Changes of a company’s internal MCS
• overlapping responsibilities
• inter-organisational perspective on target costing
• working capital management
• account for network effects
• Joint development of inter-organisational management control
• inter-organisational performance measures
• inter-organisational behaviour controls
• inter-organisational cost management
• social control techniques

Question 5

Discuss what is the Digital Economy and how it impacts organisational activities.

Answer 5

• “use of IT in all aspects of the economy, including internal operations of organisations” (Atkinson and McKay, 2007)
• Information, intellectual capital, knowledge growth and exchange are critical.
• Multi-stakeholder environment - customer empowerment (social media, online reviews for all to see)
• Digital Transformation - making the best use of technology - efficiency, efficacy and automation.
• New infrastructure, new business models - e.g., Google, eBay.
• Pace of Change - ensuring business continuity - COVID (example: Mothercare).

Question 6

Discuss the interrelation of data, information and knowledge.

Answer 6

• Information Systems = “a set of connected technologies and resources that collects, tranforms and disseminates information” (Burns et al. 2013)
• Hybridization of MA - focus on how the IS itself is designed and how data is stored.
• Diagram from Bhimani & Willcocls (2017)
  Activity -> Data Storage -> Information -> Tacit/Explicit Knowledge
• Tacit = silent knowledge, just kept between managers.
• Explicit = reporting clearly, seen as output of information system.
  For decision making - involving all parties, not just managers
  Strong argument for interactions between data, information and knowledge.

Question 7

Describe the main types of information system and explain the concept of systems (de)coupling.

Answer 7

• Stand-alone systems
  1. Spreadsheets - Nestle example
  2. Best-of-Breed (BoB) systems - enabling a specific ability - e.g., BS
  3. Separate accounting/sales/inventory systems.
• Integrated systems
  1. Enterprise Resource Planning systems - 1 large system, highly coupled subsystems for specialisms. Implemented across value chain.
  2. Systems with high communication - e.g., sales and accounting system.
• Systems (de)coupling - systems diverging from each other.
  Depends on interdependence between the systems - the extent that changes in one affect the state of the other.

Question 8

Discuss the technological advancements in accounting.

Answer 8

• Big Data - the 5 V’s
• Technological Adoption - AI adoption study (54% using)
• Cloud Computing - ‘Software as a Service’ - Advantages & Disadvantages (for Finance functions)
• Robotic Process Automation - performs rule-based repetitive tasks.
• Artificial Intelligence - mimics human cognitive functions - used a lot in accounting.

Question 9

Discuss the impact of digitalisation on accounting.

Answer 9

• Big Data - core business asset.
• New performance indicators based on big data & social media.
• Predictive Analytics - anticipate future events, forecast possible outcomes and select actions.
• Balanced Scorecard - new performance indicators - communication of information, business analytics.
• Digital Costing - example: Ikea in Dubai.
• Forecasting - real-time info available, increased complexity.
• Budgets - Planning & Evaluation roles (more accurate targets)
• Risk Management - increased data, real-tim info, longer-term opportunities.
• Role of Accountants - “redefining and expanding the role of accountants” (Thomson, 2018)
• Elimination of traditional activities
• Hybridisation between accountants and IT staff
• Focus on value-added activities.

Challenges (Arniboldi et al. 2017)
* Externality - origin & ownership of data
* Abductivity - change in decision-making
* Inexhaustibility - the “representativeness” of information and data.

Ethical Considerations - objectivity, privacy, transparency, accountability, trustworthiness

Example - Horizon/Post Office scandal

Question 10

Outline some of the current issues in Sustainability & the impact for organisations.

Answer 10

• “Simply adapting performance measurement systems such as balanced scorecards is insufficient and that sustainability needs to be embedded into organisational strategy” (Beusch et al. 2022)
• Proactive approach - design MCS to monitor sustainable performance.
• Moved to now be a central part of organisational life.
• Sustainable Development Goals - integrated approach to planning, measuring and reporting.
• Example: BT - net-zero business by March 2031.
• Weak/Strong Sustainability (Laine, et al., 2022)
• Lag from Financial Reporting literature (1880s - early 1990s), to MA (early 2000s)
• Listed company - voluntarily include CSR data in reports and accounts (Operating and Financial Review)
• CSR issues do not erode business outcomes, but contribute to business success.
• Circular Economy - don’t just dispose.
• Environmental Awareness is critical to long-term survival.
• New regulatory requirements.
• Organisations need to be mindful of their procurement practices and supplier sources - value chain sustainability.
• Example: Nestle - child slavery.
• Global Reporting Initiative - help organisations assess their impacts on the economy, environment and society.

Question 11

Explore some of the broader developments in MA & Sustainability

Answer 11

• Integrated Reporting - holistic/integrated representation of performance, importance of intangible assets (how to capture this data?), rethinking what is meant by value creation.
• Global Reporting Initiative - help organisations assess their impacts on the economy, environment and society.
• “Investors, regulators and businesses all demand organisations focus on long-term value and resilience that meet present needs without compromising future generations’ ability to meet their needs” (AICPA & CIMA, 2020)
• Environmental MA - “The management of environmental and economic performance through the development and implementation of appropriate environment-related accounting systems and practices” (IFAC, 2005)
• Waste costs? how are they allocated to processes?
• Environmental Prevention/Detection Costs, Environmental Internal/External Failure Costs
• Material Flow Cost Accounting - Circular Economy
• Sustainable Investment Appraisal
• Life-Cycle Assessment

Question 12

Evaluate the impact of Sustainability for MA practices.

Answer 12

• Life-Cycle Assessment - quantify total sustainability impact.
• Sustainability Budgeting - communicating sustainability objectives, inclusion of natural resources, Variance analysis.
• Activity Analysis - environmental activities.
• Key Performance Indicators - familiar territory for organisations, but complex. Adding sustainability to BSC. Difficult to devise appropriate KPIs.
• What metrics should be used, how and why? - qualitative/quantitative, relative/absolute numbers, timescales.

Issues/Challenges
- Accounting tools are notoriously short-term oriented, need to be long-term for sustainability.
- majority of performance measures focus on internal processes.
- ensure that traditional financial MA does not dominate.
- Implementation issues - simply having sustainability MA tools doesn’t show how effective they are, relevance of measures?

Question 13

Discuss the impact of sustainability for management control and management control systems.

Answer 13

• If improvements are to translate to long-term shareholder value, firms must ensure that it is fully integrated into strategic processes (Mundy et al. 2013)
• Should use MCS to achieve strategic change, drive sustainability strategy and achieve objectives.
• Sustainability can be integrated using diagnostic and interactive controls (Gond et al. 2012)
• where profit-seeking logics dominate, MCS may be insufficient to see radical change (Narayanan and Boyce, 2019)
• Encouraging managers to take on responsibility for sustainability.
• organisations balancing traditional business priorities with sustainability demands.
• Integrating sustainability into the beliefs system might encourage managers to take responsibility.
• ESG is everywhere - not just a trend that will fade away soon.
• Organisations need to better prioritise.
• Scope of Accounting needs to expand to combine business-based knowledge with understanding complex socio-ecological systems.