Linking information to strategy as a trusted partner

Accounting Ahead | Original study resource | accountingahead.com.au

Linking information to strategy as a trusted

partner

MODULE 2 | PART C.2 | STUDENT COMPANION

Strategy is cascaded down through tactical and operational plans, and information must flow back up from the

transaction level to show whether the strategy is being implemented and whether it works. First translate

strategy into funded priorities with milestones and end results; then cascade it.

Two ways to cascade strategy

Financial approach

Budgets cascade to every unit and sub-unit

Each unit prioritises resources between new initiatives

and existing programs

Major projects resourced separately through project

plans

Performance management approach

Resources and results compared with non-financial

standards and outcomes

Continuous improvement: steady gains towards best

practice

Transformational breakthroughs: re-engineered or new

processes that lift performance sharply

Management accountants link information to strategy by building stakeholder and market knowledge and

relationships: gauging stakeholder satisfaction, suggesting what financial and performance information to collect,

reviewing results by unit, and investigating shortfalls with unit managers.

Using information strategically: Drucker's four questions

Drucker's question What Oakline Furniture found (imagined) Action

Do we have the right information? Sales by store, but nothing on why products are returned Record return reasons

How effectively are we using it? A 40-page monthly pack; most managers read only page

one

One-page summary with drill-down

Is it built into our products and

services?

Customers are not told a reliable delivery date, though the

warehouse knows it

Show delivery dates at checkout

How can we improve? What are

we missing?

Most returns: colours look different online Fix product photos; returns fall

Information is only valuable when it is turned into results for stakeholders

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | STUDENT COMPANION

1

Accounting Ahead | Original study resource | accountingahead.com.au

The trust equation, term by term

Term What it means in practice

Credibility Listen carefully; separate rational from emotional issues; help frame a solvable

problem; manage expectations honestly

Reliability Deliver consistently and excellently; anticipate needs

Empathy Build sound relationships; communicate professionally; work through concerns

together

Self-orientation (divisor) How focused you seem on yourself; keep it low by being transparent, flexible,

dedicated and humble

Trustworthiness = (Credibility + Reliability + Empathy) / Self-orientation

8 + 9 + 7 = 24

Self-orientation 2

Trust score 12

8 + 9 + 7 = 24

Self-orientation 6

Trust score 4

Same skills, but two-thirds of the trust disappears when self-interest rises (illustrative ratings out of 10)

Why it is hard, and a process that helps

Common difficulties Five-step process

Explaining technical material at short notice 1. Engage

Hostile, competitive colleagues 2. Listen

A culture that prizes expertise and mastery 3. Frame

Being more open than feels comfortable 4. Envision

Risking a bonus or job by delivering bad news 5. Commit

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | STUDENT COMPANION

2

Accounting Ahead | Original study resource | accountingahead.com.au

Custodian of information versus formal data roles

Role Responsibility

Data steward Content, context and business rules of information, through system design that

validates inputs and makes outputs verifiable

Data custodian Authorised access to stored data and its integrity, including in transmission

Management accountant as

custodian

Technology keeps producing the accounting and non-financial information needed;

fits decision needs; business-continuity risks to relevance and faithful representation

considered; recruit, develop and keep engaged accounting staff

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | STUDENT COMPANION

3

Accounting Ahead | Original study resource | accountingahead.com.au

Practice questions

MODULE 2 | PART C.2 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Continuous improvement or breakthrough?

Initiative Your answer

(a) Cutting invoice processing time by 5% a year

(b) Replacing paper job cards with a mobile app that reshapes the service

model

(c) Monthly tweaks to warehouse picking routes

(d) Moving from stores to a fully online model

(e) Reducing waste by 1% each quarter

(f) Redesigning the whole order-to-cash process around self-service

Question 2 - Calculate and interpret trustworthiness

Ratings are out of 10. Calculate each score and explain what Jordan should work on.

Accountant Credibility Reliability Empathy Self-orientation Trust score

Mei 7 8 9 3

Jordan 9 9 6 8

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | STUDENT COMPANION

4

Accounting Ahead | Original study resource | accountingahead.com.au

Question 3 - Drucker's questions for a dental clinic group

Apply Drucker's four questions to a group of eight dental clinics that tracks revenue per clinic but little else.

Suggest one finding and one action for each question.

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | STUDENT COMPANION

5

Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 2 | PART C.2 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Continuous improvement or breakthrough?

Initiative Answer

(a) Continuous improvement

(b) Breakthrough

(c) Continuous improvement

(d) Breakthrough

(e) Continuous improvement

(f) Breakthrough

Question 2 - Calculate and interpret trustworthiness

Mei: (7 + 8 + 9) / 3 = 24 / 3 = 8. Jordan: (9 + 9 + 6) / 8 = 24 / 8 = 3.

Both have the same numerator, but Jordan's high self-orientation cuts trust sharply. Jordan should focus on

others' goals, be transparent about motives, credit colleagues and listen more; lifting empathy would also help.

Question 3 - Drucker's questions for a dental clinic group

Right information? Only revenue per clinic; missing chair utilisation, recall rates and patient satisfaction.

Action: add them.

Used effectively? Reports go to the owner only. Action: share clinic-level dashboards with practice

managers.

Built into services? Patients are not reminded when check-ups are due. Action: automated recall reminders.

Improve / missing? No data on why patients leave. Action: short exit survey and analysis of lapsed patients.

STRATEGIC MANAGEMENT ACCOUNTING | M2 PART C.2 | WORKED ANSWERS

6