Emma Butterfield

Managerial Decision-making and Management

Accounting Information

Helsinki Metropolia University of Applied Sciences

Master’s Degree in Business Administration
Business Informatics
Master’s Thesis
8th March, 2016
 Abstract

Author(s) Emma Butterfield

Title Managerial Decision-making and Management Accounting
Information

Number of Pages 84 pages + 2 appendices

Date 8th March, 2016

Degree Master of Business Administration

Degree Programme Master´s Degree Programme in Business Informatics

Instructor Antti Hovi, Senior Lecturer

Considering the pace of business changes and significant amounts of information available
to businesses using modern technology, one prime challenge has become to filter out the
valuable information and present it in a manner that makes it useful for managers to take on
business decisions. These changed requirements have led management accounting to
adapt alongside. This Master’s Thesis is a case study of Tecnotree Group, a global provider
of telecom IT solutions, the purpose of which was to explore how the current management
accounting reports correspond to the management information needs and to identify how
the management reporting could be improved or supplemented, so that the reports would
benefit the management and better support informed and efficient decision-making within
the organization. More explicitly, the study sought to provide answers to the reports usability,
quality, perceived challenges to extract value to support decisions and development direc-
tions.

The theoretical framework of the study defines accounting and its main functions, the man-
agerial decision-making process, and the ways in which management accounting infor-
mation can support decision-making. Additionally, described are the relationship among
data, information, and knowledge, the progression of knowledge considering the relevance
for a decision setting and the management reporting process, including effective reporting
principles and required qualities of useful reports. The main empirical data collection method
used was a semi-structured online questionnaire targeted to the Group’s management.

The study results showed that the management saw important to have reports’ financial
information available to support decision-making in many areas, and the majority used these
regularly on a monthly basis. The results indicated also that the reports affect decision-mak-
ing and management is likely to act on the basis of the information received. However, in
most of the cases only about half of the available information was utilized. The quality of the
reports was considered also to be variable. In light of the results, the main challenges per-
ceived to extract value from the reports to inform decisions were related to the availability,
consistency, accuracy and user-friendliness. Furthermore, the results indicated that more
attention should be put on seeing the financial information as a strategic resource to reach
a more holistic understanding of this in the organisation.

The study results suggest more emphasis in management reporting should be given to get-
ting the right information to the right people in time, emphasizing the overall user experience
to increase the reports usability in decision-making, considering the important role of high-
quality, multi-level communication and interaction and also to adding more analysis to the
reports, in order to build a more in-depth view to support decision-making.

Keywords management accounting, managerial decision-making, man-

agement reporting, information, knowledge
Contents

1 Introduction 1

1.1 Background 1
1.2 Business dilemma 3
1.3 Research purpose and delimitations 4
1.4 Structure of the study 5

2 Research methodology 5

2.1 Research design 6

2.1.1 Research philosophy and approach 7
2.1.2 Research strategy 9
2.1.3 Research choices and time horizon 11
2.1.4 Data collection methods 12
2.2 Reliability and validity of the research 14

3 Management accounting and decision-making 16

3.1 The nature and role of accounting 17

3.1.1 Accounting as an information system 21
3.1.2 Accounting as an service function 22
3.2 Decision-making in organizations 25
3.2.1 Managerial decision-making 26
3.2.1 The decision-making process 26
3.2.2 Objectives of managerial accounting activity 27
3.3 Knowing organization 31

4 Information and management reporting 33

4.1 Defining data, information, and knowledge 34

4.2 Management reporting 36
4.2.1 Principles for an effective business reporting process 39
4.2.2 Qualities of reports useful for decision makers 41
4.3 Considering analytical in the frame of decision-making 43
4.4 Information as a competitive asset 46

5 Empirical Study 47

5.1 Case company overview 47

5.2 Decision-making power in the company 49
5.3 Finance function and management reporting 50
5.4 Current state analysis 53
6 Empirical Findings and Analysis 56

6.1 Online questionnaire 56

6.2 Background variables 57
6.3 The use of financial information 59
6.4 Quality of management accounting reports 62
6.5 Development areas of management accounting reports 64
6.6 Suggestions for improvement in management accounting reports 68

7 Discussion and conclusions 72

7.1 Discussion of results 72

7.2 Recommendations 76
7.3 Suggestions for further research 78

References 79

Appendices

Appendix 1. Survey invitation

Appendix 2. Online questionnaire

Figure 1. The Research onion ...................................................................................................... 6

Figure 2. The research process, adapted from Dubois & Gadde (2002) .................................... 11
Figure 3. Information value chain ................................................................................................ 20
Figure 4. Accounting as an information system .......................................................................... 22
Figure 5. The characteristics that influence the usefulness of accounting information .............. 23
Figure 6. Cost and value relationship in providing management accounting information .......... 24
Figure 7. The decision-making, planning and control process ................................................... 27
Figure 8. Managerial decisions: planning, directing, and controlling .......................................... 28
Figure 9. Management decisions requiring management accounting information ..................... 30
Figure 10. The knowing cycle ..................................................................................................... 31
Figure 11. Knowledge as a progression of states ....................................................................... 36
Figure 12. Types of management reporting ................................................................................ 38
Figure 13. Relation of reporting principles .................................................................................. 39
Figure 14. Finance business partnering ...................................................................................... 43
Figure 15. Organization chart - Top management ...................................................................... 50
Figure 16. Financial reporting system architecture ..................................................................... 52
Figure 17. SWOT analysis: Management reporting .................................................................... 53
Table 1. Terminology and criteria used to evaluate rigour of research findings ......................... 15
Table 2. The major differences between managerial and financial accounting .......................... 18
Table 3. Ten key differences - traditional and strategic management accounting (MA) ............ 21
Table 4. Analytical dimensions.................................................................................................... 44

Results 1. Background variables – Region, position and years in the company ........................ 58
Results 2. The time interval in using reports containing financial information at work ............... 60
Results 3. Importance of financial information availability .......................................................... 60
Results 4. Use of available financial information and role as a strategic resource..................... 61
Results 5. Necessary information obtained with sufficient detail and on-time ............................ 63
Results 6. Quality of management accounting reports ............................................................... 63
Results 7. Missing factors in the management accounting reports and their impacts ................ 66
Results 8. Typically perceived challenges to extract value from management accounting reports
to inform decisions ...................................................................................................................... 67
Results 9. Regional division of challenges .................................................................................. 68
Results 10. Suggestions for improvement to increase the use of management accounting
reports and support better informed decision-making ................................................................ 70
Results 11. Opportunities seen as the result of increased availability of information ................. 71
Results 12. Opportunities seen by position................................................................................. 71
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1 Introduction

In this opening chapter, we introduce the background of the study and describe the busi-
ness dilemma. In addition to this, we will discuss the purpose and delimitations of the
study, alongside with the research questions. Furthermore, the structure of the study will
be presented to conclude the chapter.

1.1 Background

We are all living and working in an increasingly fast paced and ever changing world.
Where we can say information is everywhere we can see and imagine – in emails, doc-
uments, websites, databases, and reports. This is called the digital age that has brought
us a quantum increase in the amount of data available to the modern organisation. But
it is not just the amount of data that sets this time in history apart, it is the speed with
which data reaches organizations, the variety of form, and the opportunities available to
learn from new data, combine with existing data, and create new insights. (EIU, 2011)

Like Axson (2010) states “information is the lifeblood of the modern corporation. Without
it, decisions cannot be made, customers cannot be served, and earnings cannot be
grown.” Whilst all information is valuable, it ironically alone doesn’t have all the answers
and the rapid flow of data may even result in organizations losing control over the quality
of information. This was reflected in the research, conducted by Harvard Business Re-
view Analytics Services (2014), to understand the level of confidence corporate leaders
have in the decisions made. That shows there is a lack of confidence in, how the infor-
mation is influencing decision-making, as based on the data and information available to
them, 42% of the global business leaders don’t have confidence in any decisions made,
due to a lack of information or easy access to it. (HBR, 2014)

Yet good planning and control over operations via effective decisions needs to be based
on a steady flow of good quality and up-to-date information. That means one of the prime
challenges facing modern businesses is obtaining quality information from the vast pool
of data available to take on business decisions. Because, information quality is consid-
ered one of the key determinants for the quality of an organisation’s decisions and ac-
tions (Stvilia, et al., 2007). Since, it is perceived that high-quality information makes it
easier to convert available information into knowledge, by helping to interpret and assess
 2 (84)

the information, combine with prior knowledge, and facilitate the utilization of information
in new contexts in the organizations (Eppler & Wittig, 2000). Thus, making the acquisition
of quality information the key to attaining a competitive advantage (Salaun & Flores,
2001). However, before information can be an asset for business it needs to be managed
properly and put into context to determine, what is useful, and what is not.

Although, it is widely admitted that information plays a critical role in the success of or-
ganizations, information acquired by decision makers will have little impact on ultimate
performance of an organization, if it is not really used effectively in the process of deci-
sion-making (Davenport & Beers, 1995). In decision-making, the contribution of infor-
mation reduces uncertainty, allows organizations to quickly respond to business events,
and supports companies making changes in business strategies, plans and performance
indicators (Popovič & Habjan, 2012). The crucial value of relevant information, espe-
cially, in strategic decision-making is illustrated in Citroen’s (2011) study findings, which
state that having more relevant information at hand reduces uncertainty, adding to the
comfort factor and feeling that the ultimate decision has been supported by a more ra-
tional process.

This means information has become indispensable for decision-making in any business
organization, regardless of the activities pursued and whether the activities are profit-
seeking or non-profit. It has become a much needed asset, as the success of an organ-
ization is going to be directly proportional to the knowledge it is able to apply in real time
to manage the business processes.

Accounting, considered to be a key source of information about business performance,

can help managers to develop knowledge about the organization’s environment in sev-
eral ways. It makes visible those events that are not perceptible by daily activities of a
manager and provides an overall quantitative perspective on their work. (Hall, 2010)
Consequently, accounting information can reveal issues that are overlooked during ordi-
nary daily activities and can provide an independent control over operations to help man-
agers be aware, which allows the manager to determine the meaning and significance
of all the operations (Socea, 2012).

However, as a result of the dynamic environment, accounting must adapt alongside to

satisfy the decision makers constantly changing information needs. This has widened
and deepened the role of the finance function in the organizations and has contributed
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to the transition from the traditional role focused on number crunching and maintaining
the overall functioning of the accounting systems to an increasingly business oriented
role. The business orientation of management accounting meaning the willingness and
ability of management accounting to deliver more added value to the management in
decision-making and control of the organizations. (Järvenpää, 2007)

1.2 Business dilemma

A decision is essential for an organization’s survival and development, since it is prior to

any action (Socea, 2012). A manager is an individual responsible for an organization or
a set of entities. Any manager is invested with formal authority in accordance with his
assigned statute. In their role, managers have to make effective decisions to keep the
organization flourishing. Hence, as long as there is management, there will be the “prob-
lem” of how to manage better. Therefore, as Greenberg & Baron (2008) say, to make
decisions is one of the most important and critical activities of organizations. Since, or-
ganizations as systems build themselves up by making decisions. Every made decision
creates and leads to a new decision. These decision might involve the strategic direction
of the organization or simply just deal with the day-to-day activities of employees.

Thus, management is constantly confronted with the problem of alternative decision-

making, especially knowing that resources are relatively scarce and limited. This neces-
sitates doing the right things, the appropriate use of resources and the need to set dif-
ferent things in the order of importance. However, as we live in an age of data abun-
dance. Business managers have today access to far more data than any previous gen-
eration of managers, and that is transforming the way many business decisions are
made.

Therefore, it is pertinent that quality accounting information is made available for proper
and precise decision-making, maximization of profitability and optimal utilization of
scarce resources. Because accounting information is not only required for evaluation of
the past and keeping the present on course; it is useful in planning the future of the
organization. (Nnenna, 2012) Given these conditions, the accelerating pace of business
changes and the significant amounts of information available to businesses using mod-
ern technology, the challenge is to filter out useful information and present it in a manner
that makes it useful for managers.
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1.3 Research purpose and delimitations

The research organization in this study is Tecnotree Group, my employer, a global pro-
vider of telecom IT solutions. The portfolio of products and solutions provides to telecom
operators, known today as communication service providers (CSP), the full range of
business management systems for the management of products, customers and reve-
nue. The business is based on system project sales, maintenance contracts, managed
services, and on customising, support and professional services. The corporation holds
today a strong footing, especially, in the developing markets, such as, Latin America,
Middle East and Africa. Globally employing around 1 000 people and providing globally
products and services for circa 90 telecom operators in around 70 countries. The com-
pany is listed on the main list of NASDAQ OMX Helsinki. The corporate headquarters
are located in Espoo, Finland. (Tecnotree, n.d.-a)

In this study, we shall discuss the importance of financial information from the organiza-
tion’s management point of view. The study will concentrate on internal financial report-
ing, leaving outside external reporting controlled by laws and regulations and operational
reporting. The focus of this study is to explore the use of reported management account-
ing information in managerial decision-making. The purpose is to create a picture of the
reality, an understanding of how the current management accounting reports correspond
to management information needs, and raise out potentials for development.

Objectives are necessary for every study, as they provide a sense of direction and focus
the efforts. The classification of research purpose often referred to in the literature is the
threefold one of exploratory, descriptive, and explanatory. An exploratory study is used
when the purpose of the research is to find new insights and to understand the nature of
a problem. The aim of a descriptive study is to provide a clear picture of the phenomenon
studied. Whereas, the explanatory study is used to explain the relationships between
variables in a situation or problem. (Saunders, et al., 2009, pp. 139-140)

The purpose of this study is to gain a deeper understanding of how the reported man-
agement accounting information can better support informed and efficient decision-mak-
ing within the study organization. Therefore, in this study the exploratory research design
is employed. More explicitly, the aim is to identify how management reporting could be
improved or supplemented, so that the reports would benefit the organization's manage-
ment.
 5 (84)

The main research problem that this study will aim to explore and provide answer to is:
 How the reported management accounting information can better support in-
formed and efficient managerial decision-making process?

Sub-questions that are to support more detailed exploration of the main question are:
 To what extend does the management make use of the current management
accounting reports - how useful are these perceived?
 What challenges are seen to hinder the utilization of reported management ac-
counting information in decision-making?
 What kind of management accounting reports should be produced in the future
to support the management activity - what issues should be considered?

Through discovering the answers to the main and sub-questions this study seeks to un-
derstand the role of management accounting information as an aid to management de-
cisions-making in the study organization. The findings are expected to present the core
factors that by understanding and improving, would enable clear and concise reports,
which serve management decision-making as effectively as possible to support creation
of business value.

1.4 Structure of the study

The remainder of this study is structured as follows. In the next chapter, we provide a
detailed description of the methodological framework adopted in this study. In the follow-
ing two chapters, we introduce the conceptual framework of this study and review prior
academic research and literature. After this we discuss the empirical part of this work,
namely the case study. Then we present the empirical results and findings and after that
the study is completed with the conclusions chapter.

2 Research methodology

In this chapter, we present the methodological framework adopted in this study. Discuss
the various research philosophies and approaches, and review the choices involved in
the research design and explain which of these are relevant to this study. Furthermore,
the reliability and validity of the study findings will be elaborated.
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2.1 Research design

In overall, the research design as described by Yin (2009, p. 26) can be seen as the “a
logical plan for getting from here to there”, where here represents the set of research
questions to be answered and there is some set of answers to these questions. Between
is the journey that may contain a number of major steps, including the collection and
analysis of the relevant data. In other words, the research design is a framework or blue-
print for conducting the research. Within this study to illustrate, we use the metaphor of
the “research onion” developed by Saunders, et al. (2009, p. 108), to describe the stages
that need to be covered when undertaking a research process. Viewed from the outside,
each layer of the onion represents a step in the research process, as visualized in Figure
1. Thus, peeling the onion illustrates the progress of the research process, starting with
the research philosophy. Followed by the research approach and then the research strat-
egy, research choices and time horizon. Finally, reaching the centre of the onion, which
contains the data collection techniques and procedures.

RESEARH
Experiment PHILOSOPHY

Survey Positivism
RESEARH
Mono method Case APPROACH
Study
Deductive
Cross-Sectional
Action Realism
Mixed Research
Data Collection
Methods method

Longitudial Grounded
Interpre-
Theory
Inductive tivism
Multi method
Ethnography

Archival research
Pragmatism

Techniques and
procedures

Time Horison
Research
Choices
Research
RESEARH DESIGN Strategy

Figure 1. The Research onion

(Saunders, et al., 2009, p. 108)
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It is the researcher’s understandings and associated decisions, in relation to the outer

layers of the research onion that provide the context and boundaries within which data
collection techniques and analysis procedures will be selected. Once selected, the re-
search philosophy acts like a ‘‘set of lenses’’, that allows the researcher to interpret the
study fieldwork within a particular set of established assumptions, thus merging the use-
fulness of the paradigm with the practical application of conducting research. (Burke,
2007)

2.1.1 Research philosophy and approach

Research philosophy forms the outermost layer of the research onion. In general, phi-
losophy can be defined, as the questioning of the basic fundamental concepts and the
need to embrace a meaningful understanding of a particular field. (Burke, 2007) The
research philosophy comprises important assumptions about the way people view the
world and the relation to the development and nature of knowledge. Generally, there are
three main ways of thinking about research philosophy: epistemology, ontology and ax-
iology. Epistemology relates to what constitutes acceptable knowledge in the field of
study. Ontology studies the questions of the assumptions researchers have about the
way the world operates and the commitment held to particular views – the nature of
reality. Axiology is concerned with judgements about values. It would be misleading to
assume one research philosophy is better than the other, they are better at doing differ-
ent things. Hence, the adoption of the right research philosophy depends on the research
question that a researcher is seeking to answer. However, the practical reality is that a
particular research question rarely falls neatly into only one philosophical domain.
(Saunders, et al., 2009, p. 107 to 116)

According to Saunders et al. (2009) there are four different research philosophies; prag-
matism, positivism, realism and interpretivism. The research philosophy of pragmatism
argues that based on the research question(s) either or both observable phenomena and
subjective meanings can provide acceptable knowledge. The focus is on practical ap-
plied research, integrating different perspectives to help interpret data. Positivism as-
sumes that the reality exists independently of the thing being studied and only observable
phenomena can create data i.e. facts. This usually deals with large samples of quantita-
tive data, statistical hypothesis testing and the end result of such research can be law-
like generalizations. Realism considers that there is a reality independent of human
thoughts and beliefs. This assumption underpins the collection and analysis of the data.
 8 (84)

The last research philosophy, interpretivism, suggests that important is the researcher’s
understanding of the differences between humans in our role as social actors in the nat-
ural environment. This type of research is value bound and focuses to understand, what
is being researched considering a particular set of circumstances and individuals at a
specific time. Therefore, likely to include data collection and analysis of qualitative data
from in-depth investigations with small samples to gather rich insights into subjective
meanings. (Saunders, et al., 2009, p. 109 to 119)

The next layer of the research onion is the research approach. That has two main ap-
proaches: deduction and induction. The deductive approach is described as the devel-
opment from general to particular. It comprises the development of an idea, or hypothe-
sis, from existing theory, which can then be tested through the collection of data. With
the inductive approach it is vice versa, the first step is to collect data from participants
and analyse that data. The next step is to develop a theory as a result of the analysis.
The structure of this approach is more flexible and less concerned with the need to gen-
eralise, more commonly used in qualitative research. (Saunders, et al., 2009, pp. 124-
127) There is also a third research approach called abduction, which is a cross between
deduction and induction. The abductive approach is based on redirections in the re-
search process. Rather than relying on deduction or induction, the abductive logic
stresses going back and forth between the theoretical framework, data sources and anal-
ysis; i.e. the matching of these three elements. (Dubois & Gadde, 2002)

Depending on the perspective the terms quantitative and qualitative can be used in two
distinct discourses, one relating to how the researcher understands the world and the
ultimate purpose of the research and the second referring to research methods - how
data are collected and analysed. (McMillan & Schumacher, 2005, p. 12) Typically, quan-
titative approach is used to respond to research questions requiring numerical data, the
qualitative approach to answer questions requiring textural data, and the mixed methods
approach when both numerical and textural data are required for the research questions
(Williams, 2007). Creswell (2003) describes that the quantitative approach is about col-
lection of data so that information can be quantified and exposed to statistical treatment,
in order to support or contradict the alternate research claims. Whereas, the qualitative
approach takes a more holistic approach to examine the meaning of social phenomena,
rather than looking for causative relationships between established variables. This
means the quantitative method provides an objective measure of reality, while the qual-
itative method allows to explore and better understand things being highly involved in
 9 (84)

their natural settings, attempting to make sense of actual experiences, or to interpret,

phenomena in terms of the meanings people bring to them. (Williams, 2007; Creswell,
2003)

For this study, the research philosophy we have chosen is pragmatism that places "the
research problem" as central and applies all approaches to understanding the problem.
Pragmatism is not committed to any one system of philosophy or reality, instead the
focus is on the 'what' and 'how' of the research problem based on the intended conse-
quences, that gives the researcher freedom of choice. (Creswell, 2003, p. 12) The prag-
matic approach involves using the method which appears best suited to enable answer-
ing the research problem, thus avoiding getting caught up in philosophical debates about
which is the best approach. Thus, the researchers can use both quantitative and quali-
tative data as the focus is to provide the best understanding of the research problem.
Focus is on practical applied research, integrating different perspectives to help interpret
data. (Saunders, et al., 2009, p. 109 to 119) This study is based on a qualitative adduc-
tive approach and builds on the inevitable interaction of theory and evidence, the back-
and-forth character of the research process.

2.1.2 Research strategy

Peeling away the methodological choice reveals the next layer of the onion that is strat-
egy(ies). As the label already suggests, the researchers can use one strategy or more
within the research design to answer the research questions. The strategy, as described
by Remenyi et al. (2003) provides the overall direction of the research including the pro-
cess by which the research is conducted. Saunders et al. (2009, p. 141) state that the
appropriate research strategy has to be selected based on the research questions and
objectives, the extent of existing knowledge on the subject area to be researched, the
amount of time and resources available, and the philosophical underpinnings of the re-
searcher. The strategy of the research can include a different number of approaches,
such as experiment, survey, case study, action research, grounded theory, or a system-
atic literature review.

From these various strategies, we sought to adopt in this study, as the appropriate re-
search strategy the case study. Because, it is an approach to research that facilitates
exploration of a phenomenon within its context using a variety of data sources. In which,
Creswell (2003, p. 15) states the “researcher explores in depth a program, an event, an
 10 (84)

activity, a process, or one or more individuals”. Defined by Yin (2009, p. 18) as an “em-
pirical inquiry that investigates a contemporary phenomenon in depth and within its real-
life context, especially when the boundaries between phenomenon and context are not
clearly evident.” Dul & Hak (2008) complement by defining the case study as follows:

“A case study is a study in which (a) one case (single case study) or a small number of
cases (comparative case study) in their real life context are selected, and (b) scores
obtained from these cases are analysed in a qualitative manner (Dul & Hak, 2008, p. 4).”

In particular, the case study is used to gain rich understanding of the research context
and processes being enacted. Because it is seen to have the ability to produce answers
to the ‘why?’ question as well as to the ‘what?’ and ‘how?’ type questions. Case study
research, moreover, can accommodate both qualitative and quantitative data allowing
the researcher to get a rich mix of data for the study by employing variety of data collec-
tion techniques, i.e. observation, interviews, documentary analysis and questionnaires.
(Saunders, et al., 2009, p. 146) Case study offers the possibility of understanding the
nature of accounting in practice that can be used in a variety of ways by researchers:
descriptive, illustrative, experimental, exploratory, and explanatory. The distinction of
these different types of cases may not necessarily be always clear-cut. Despite, the list
gives an indication of the range of case study usability: describe the nature and form of
current accounting practices, illustrate new and possible innovative practices, examine
the difficulties/benefits involved in implementing new procedures and techniques, ex-
plore the reasons for particular practices, or understand and explain the specific rather
than produce generalizations. (Ryan, et al., 2002, pp. 143-144)

Whilst case study research is a distinctive research strategy, which presents many ad-
vantages to a research study, and allows in-depth investigation of the issues at hand, it
is not without criticism. As some of the common criticisms of case study, Yin (2009, p.
14) has identified lack of rigor, being bias, difficulty to generalise, and taking too long and
producing hefty documents. In response, it was noted that the quality of a case study
can be enhanced by establishing reliability and validity of the study findings. (Yin, 2009,
p. 24) These we will discuss in more detail subsequently, under the subheading of relia-
bility and validity of the research.

The abductive approach in case study research stresses emergence and flexible pro-
cesses as strengths of good case studies. In the abductive logic, it is important to let the
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empirical reality interact with conceptual ideas in the analysis, to be open to new ideas
and to let the case process develop. Thus the evolving framework and case become the
cornerstones of the case study. (Dubois & Gadde, 2002) This reflects the continuously
evolving understanding of the researcher. This case study research process using ab-
ductive approach is visualized in Figure 2.

Framework

Inductive

Theory Evidence THE EMPIRICAL

LITERATURE
WORLD

Deductive

Case

Figure 2. The research process, adapted from Dubois & Gadde (2002)

This research process starts with the preparation review of theory that gives an initial
indication of the types of evidence that should be looked for in the case study and builds
on the matching of theory and reality done by going back and forth between the frame-
work, data sources, and analysis to discover new dimensions of the research problem.

2.1.3 Research choices and time horizon

The choices outlined in the research onion include the mono method, the multi-method
and the mixed method. As the names of these choices suggest, the mono-method means
using one research approach for the study, either a single quantitative or qualitative data
collection technique with the corresponding analysis procedure. While in the multi-
method, a wider selection of either quantitative or qualitative methods are used. Whereas
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the mixed-method combines both qualitative and quantitative data collection techniques
and analysis procedures. (Saunders, et al., 2009, pp. 151-152) Hence, this study is a
mixed method research, as it involves a combined methodology.

The final layer of the research onion, before reaching the core, highlights the time horizon
over which the researcher carries out the research project. Two types of time horizons
are specified: the cross-sectional and the longitudinal time horizon. A ‘snapshot’ horizon
is termed as cross-sectional, whereas the diary perspective is termed as longitudinal.
The cross-sectional time horizon is used when the research is concerned with the study
of a particular phenomenon to answer a question or address a problem at a specific time,
likely to undertake strategies such as a survey or case study. Conversely, a longitudinal
time horizon for data collection refers to the collection of data repeatedly over an ex-
tended period of time, and is typically used where an important factor for the research is
examining change and development over time. The selected time horizon is not depend-
ent on a specific research approach or methodology. (Saunders, et al., 2009, p. 155)
The time horizon in this study is cross-sectional, as this is a case study of a particular
phenomenon in an organizational environment at a particular time.

2.1.4 Data collection methods

The empirical part of this study is conducted in the case company, in order to analyse
and observe its management reporting practices and conceptions, and to compare prac-
tice to the theory. The empirical evidence for this study is gathered by using primary and
secondary data. Secondary data means the information that already exists, whereas pri-
mary data is original data, new data collected for the purpose of the specific research
(Saunders, et al., 2009, p. 256). The data collection in this case study is a combination
of documentary data, semi-structured questionnaire and participant observation, with
main emphasis on the first two. These are considered to be the most suitable data col-
lection methods taking into account the subject of the study, available time resources
and the information requirements.

Documentary data, in this study, is considered as a source of secondary data. As defined

by Scott (1990), “a document is an artefact, which has as its central feature an inscribed
text.” Simply put, this means a document is a written text. These documents are pro-
duced by individuals and groups in the course of their everyday practices, for their own
immediate practical needs. The documents range from public through private to personal
 13 (84)

documents. Most organizations collect and store a variety of data to support their oper-
ations. Such documentary secondary data may include written materials like notices,
correspondence (including emails), minutes of meetings, reports, transcripts of speeches
and administrative and public records. In addition, documentary data can also include
non-written materials such as e.g. voice and video recordings, pictures as well as organ-
izations’ databases. (Saunders, et al., 2009, p. 258) Whilst the use of documentary
sources, it must be noted that documents are not deliberately produced for the purpose
of research, and the researcher needs to be aware of the origins, purpose and the orig-
inal audience of the documents. Nevertheless, documents are useful as they tell us indi-
rectly about the social world of the people who created them. (Payne & Payne, 2004, p.
61) The ultimate purpose of examining documents is to arrive at an understanding of the
meaning and significance of what the document contains (Scott, 1990, p. 28).

Questionnaire is the main method of primary data collection used in this study.
Questionnaires are one of the most widely used means of collecting data, distributed to
the potential respondents by post, e-mail, as an online questionnaire, or face-to-face by
hand. That provide an efficient way of collecting answers from a large sample, because
each respondent is asked to reply to the same set of questions. (Saunders, et al., 2009,
p. 361) Questionnaires are perceived to be, especially, useful when: the research
objectives centre on surveying and profiling a situation (to develop overall patterns),
sufficient is already known about the situation under study making it possible to formulate
meaningful questions to include in the questionnaire, and willing respondents can be
identified, who are in a position to provide meaningful data about the research topic.
(Rowley, 2014) In case studies, questionnaires are considered to be useful to obtain
evidence from a number of people. That provide a convenient way to gather information
in a consistent and comparable way. (Ryan, et al., 2002, p. 154)

The researh questionnaire can range from highly structured to unstructured. A semi-
structured questionnaire is a mix of unstructured and structured questionnaires. It sets
the agenda i.e. structure, sequence and focus but does not presuppose the nature of the
response. The list of questions that make up the questionnaire may be open or close
ended. An open ended question is one in which possible responses are not supplied in
advance. Each respondent writes the answer to the question in their own words.
Therefore, these kind of questions are very useful for exploring issues concerning beliefs,
attitudes, and practices. On the contrary, a close ended question usually provides a set
of responses or options from which a respondent indicates his/her choice. Particularly
 14 (84)

useful, when the study topic concerns factual issues, or is a familiar one with a limited
range of responses. (Cohen, et al., 2007, pp. 320-321)

As a complementary method, participant observation is used to collect primary data.

Participant observation is qualitative and the emphasis is on discovering the meaning
people attach to their actions. In this method, the researcher participates in the lives and
activities of those whom are studied and attempts to understand what is going on in a
wide range of social settings. (Saunders, et al., 2009, pp. 288-290) This process allows
researchers to learn about the activities of the people under study in the natural setting
through observing and participating in those activities. Dewalt & Dewalt (2002) believe
that the goal of using participant observation is to develop a holistic understanding of the
phenomena under study, as objectively and accurately as possible given the limitations
of the method. They suggest participant observation to be used as a way to increase the
validity of the study, as observations may help the researcher to have a more compre-
hensive understanding of the context and phenomenon under study.

The degree to which the researcher involves himself/herself in participation in the re-
search under study makes a difference in the quality and amount of data he/she will be
able to collect. In the complete participant role the researcher is a member of the group
being studied, who conceals his/her researcher role from the group to avoid interfering
with the normal activity. In the participant as observer stance, the researcher is a member
of the group being studied, and the group is informed about the research activity. The
observer as participant stance allows the researcher to participate in the group activities
as desired, yet the main role of the researcher in this stance is to collect data, and the
group being studied is aware of the researcher's observation activities. The opposite role
to the complete participant is the complete observer, in which the researcher is com-
pletely hidden not taking part in the activities of the group. (Saunders, et al., 2009, pp.
293-294) In this study, the researcher works in the case study organization but isn’t a
member of the group studied, so participant observer stance is the closest to the com-
plete observer role.

2.2 Reliability and validity of the research

Validity and reliability are key aspects of all research. Because, evaluating the quality of
research is essential if study findings are to be utilised in practice. In the traditional un-
derstanding, rooted in quantitative research, validity is concerned with the integrity and
 15 (84)

application of the methods undertaken and the precision in which the findings accurately
reflect the study intention, while reliability describes consistency within the employed
analytical procedures and replicability of the study finding. (Golafshani, 2003) Although
this may be acceptable for quantitative methods, many qualitative researchers disagree
such notions to be unlikely appropriate. Therefore, these concepts should be reconsid-
ered in the qualitative research paradigm.

Lincoln and Guba (1985) offer alternative criteria for demonstrating rigour within qualita-
tive research, namely truth value or credibility, consistency or dependability, neutrality or
confirmability, and applicability or transferability. Table 1 outlines the differences be-
tween quantitative and qualitative terminology and criteria used to evaluate rigour of re-
search findings.

Table 1. Terminology and criteria used to evaluate rigour of research findings

(Golafshani, 2003; Lincoln & Guba, 1985)

Quantitative research Alternative terminology associated with qualitative research

Validity: Truth value (or credibility):

The precision in which the find- Confidence in the ‘truth’ of the findings to clearly and accurately
ings accurately reflect the study presents participants’ perspectives. Noting that multiple realities ex-
intention. ist; the researchers’ outline personal experiences and viewpoints
that may have resulted in bias.

Reliability: Consistency (or dependability):

The consistency of the analytical Relates to the ‘trustworthiness’ and whether findings can be re-
procedures and replicability of peated. Dependent on the researcher maintaining a ‘decision-trail’;
the study findings. that is, the researcher’s decisions are clear and transparent.

Neutrality (or confirmability):

The degree to which study findings are determined by respondent
and research conditions, not biases, motivations, interests or per-
spectives of the researcher.

Generalisability: Applicability (or transferability):

The transferability of the findings The applicability of findings to other contexts, settings or groups.
to other settings and applicability
in other contexts.

In case study research, the interpretations of the resarcher and his or her relation to the
subject matter is an essential element of the case. Hence, it is important to know the
researcher has adopted appropriate and reliable research methods, called procedural
reliability. Meaning the research has good design, which addresses clearly specified
 16 (84)

research questions, a comprehensive research plan and all evidence is recorded

coherently and analysis is documented. This demonstrates that the case study findings
are reliable. In addition, in case study research the contextual validity, indicates the
creditability of the study evidence and the conclusions drawn. This can involve
assessment of various elements; pieces of evidence, particular sources of evidence,
researchers interpretations, alternative theories or even alternative methodologies.
(Ryan, et al., 2002, pp. 155-156)

Triangulation is a typically used strategy for improving the validity and reliability of
research or evaluation of findings. Triangulation may take several forms, but commonly
It refers to the employment of two or more data sources, methods, investigators,
theoretical perspectives and approaches to analysis in the study of a single phenomenon
and then validating the congruence among them. The major goal of tringulation is to
reduce the disadvantages inherent in the use of any single approach using a variety of
approaches to confirm each other. (Scandura & Williams, 2000) Triangulation is a
primary strategy that supports the principle in case study research to view and explore
the phenomena from multiple perspectives (Baxter & Jack, 2008).

3 Management accounting and decision-making

In this opening chapter of the literature review, we begin by considering the roles of ac-
counting and decision-making independently to clarify the concepts. We shall identify the
nature of accounting and its main functions, discuss managerial decision-making, the
decision-making process, and the ways in which management accounting information
can support decision-making. To conclude the chapter, we will review the concept of the
knowing organization. In the subsequent chapter, we will define the relationship among
data, information, and knowledge. Review the progression of knowledge considering the
relevance for a decision setting. Discuss management reporting process and objectives,
including effective reporting principles and qualities of reports required to support deci-
sion-making. The purpose is to build a substantial conceptual framework for understand-
ing the role of management accounting in decision-making and why an effective man-
agement reporting process is vital to support informed and efficient decision-making.
 17 (84)

3.1 The nature and role of accounting

Business is not directly about accounting, it is about markets, people and operations.
However, accounting is closely implicated in all of the related decisions, because it is the
financial representation of the business activity. (Collier, 2003, p. 1) That can be seen,
as a service activity, which uses words and symbols to communicate financial infor-
mation. Often called the ‘language of business’, which communicates economic infor-
mation to people who have an interest in an organization. (Drury, 2008, p. 6) In the or-
ganization, the major purpose of the use of accounting information is seen to be the
minimization of risk, failure and uncertainties and also to stay ahead of competitors
(Nnenna, 2012).

As a profession, accounting has evolved in response to society’s need for economic

information to help people make decisions. During the course of its evolution, accounting
has undergone many changes in its concept, convention, policies and procedures. Over
the years, as well many definitions have been formulated by the professionals to keep
up with the changing socio-economic setting. But a frequently quoted definition of ac-
counting that captures also the theme of this study well is the one formulated by the
American Accounting Association in 1966, as follows:

“Accounting is the process of identifying, measuring and communicating economic

information to permit informed judgements and decisions by users of the information
(AAA, 1966, p. 1).”

This is an important definition because it acknowledges, that the general role of account-
ing is to help people make informed business decisions and recognizes accounting is a
process concerned with capturing business events, recording their financial effect, sum-
marizing, reporting and interpreting the results (Collier, 2003, p. 3).

Traditionally, accounting is seen to fulfil three functions: scorekeeping, attention-direct-

ing, and problem solving. Scorekeeping function deals with capturing, recording, sum-
marizing, and reporting financial performance. Attention-directing means the interpreta-
tion of business performance to give a signal to draw the attention of managers, partic-
ularly for i.e. to the comparison between actual and planned performance. In the problem
solving role, accounting assists in identifying the best choice from a range of alternative
actions, by showing the relative pros and cons. (Collier 2003, 4-5)
 18 (84)

It is generally recognised, that accounting fulfils two distinct roles: a ‘stewardship’ and a
‘decision-usefulness’ role. The focus has traditionally been more on providing a steward-
ship, meaning a report on the status of transactions for the period, including position at
the period beginning, period transactions and the status at the end of the period. More
recently, the focus has seen to be shifted towards a way of assisting a wide range of
users to make informed decisions about the allocation of scarce resources. (Atrill, et al.,
2014, p. 3) Considering the theme of this study, this decision-making perspective of ac-
counting plays a key role and it will shape the way we deal with each topic.

Accounting is an umbrella term and it can be divided into several areas of activity. The
main distinction is namely that between financial accounting and management (i.e. man-
agerial) accounting that reflects the internal and external users of accounting information.
Financial accounting (i.e. external reporting) is concerned with reporting general purpose
information in the form of published financial statements and other reports to users ex-
ternal to an entity in order to help them make sound economic decisions about the en-
tity’s performance and financial position. In contrast to, management accounting (i.e. in-
ternal reporting) focuses mainly upon the needs of internal managers of an organisation
to help them make better decisions and improve the efficiency and effectiveness of ex-
isting operations and make future plans. (Drury, 2008, p. 7; Hilton, 2009, p. 13) The focus
of this study is in the latter, namely management accounting.

The distinction between management and financial accounting, depicted in Table 2, can
be identified in reference to; (1) the main users of the reports, (2) the regulation, (3) the
source of data, (4) the nature of the reports and range of information, and (5) the report-
ing interval.

Table 2. The major differences between managerial and financial accounting

(Hilton, 2009, p. 13; Atrill, et al., 2014, p. 7 to 8)

Managerial Accounting Financial Accounting

Users of Management, Interested parties,

Information within the organization outside the organization
Unregulated, since intended only Regulated, must confirm with gener-
Regulation
for management ally accepted accounting principles
The organizations basic accounting
Almost exclusively drawn from the or-
Source of Data system, plus various other sources
ganizations basic accounting system
as applicable
 19 (84)

Often specific purpose reports.

Reports often on subunits within
the organization, such as depart- General purpose financial reports.
ments, divisions, geographical re- Reports on the enterprise in its en-
Nature of reports
gions or product lines, with consid- tirety, with a broad view of the posi-
and range of infor-
erable detail to help with particular tion.
mation decision. Focus almost exclusively on historical
Based on a combination of histori- transaction data.
cal data, estimates, and projections
of future events.
Reports may be produced on re-
Reports are produced in accordance to
Reporting interval quest as frequently as required by
a routine reporting cycle.
the managers.

Management accounting has in response to the changing nature of the global economy
reinvented itself many times over. Thereby, it has undergone many changes in focus,
techniques, functions and roles. Despite of the continuous evolvement, a constant theme
in management accounting that has remained the same is the role to provide what man-
agers need and want. (Allot, et al., 2000) Thus, it has become an integral part of the
management process by providing critical information for managers who must plan,
control and decide in an evolving business environment, highly competitive, charac-
terized by imperfect information, different objectives and control problems within the or-
ganization. (Creţu & Gheonea, 2011) That can be described as the process of identifying,
measuring, analysing, interpreting, and communicating information in pursuit of an or-
ganization’s goals (Hilton, 2009, p. 4).

This business centred approach of management accounting has over time led the em-
phasis of the function to move beyond its traditional concern with a narrow range of
numbers to incorporate wider issues in management, to develop towards a strategic
business partner role. This shift in focus is presented in the Institute of Management
Accountants (2008) definition of Management Accounting as follows:

“Management accounting is a profession that involves partnering in management de-

cision-making, devising planning and performance management systems, and provid-
ing expertise in financial reporting and control to assist management in the formulation
and implementation of an organization’s strategy (IMA, 2008).”

This development towards a strategic business partner, indicates that the information
provider role of a management accountant must be more diverse across the organiza-
tion’s information value chain. Instead of the traditional role, often interpreted as centred
 20 (84)

on the lower end of the value chain. Hence, the role for management accountants has
shifted in two respects with regard to the information value chain, shown in Figure 3: to
(1) provide the conceptual framework for converting data into information and (2) fulfil
the role of enabler and strategic business partner along the entire information value
chain. (IMA, 2008)

MA Conceptual Design

Business
Need
Information
Data Knowledge Decision
(Real or
Estimates)
Business
Events

Figure 3. Information value chain

(IMA, 2008)

Most of the recent developments in management accounting are best considered under
the umbrella of strategic management accounting, which can be broadly defined as the
use of management accounting systems to support strategic decision-making. (Tillman
& Goddard, 2008) According to Roslender and Hartb (2003), best understood as a ge-
neric approach to accounting for strategic positioning defined by an attempt to incorpo-
rate insights from management accounting and marketing management within a strate-
gic management framework. Which aims to provide information that will support the stra-
tegic plans and decisions made within a business (Atrill, et al., 2014). The role seen to
be, as described by Puolamäki (2007), to support the management team decision-mak-
ing concerning the implementation of strategic change and challenging the predominant
way of carrying out activities in an organisation.

Roselender and Hart (2003) contend that strategic management accounting is not only
about making management accounting more “strategic‟, but also about bringing more
benefits to an organisation. However, it does not break away from the existing manage-
ment accounting, as in fact both generally offer similar functions at an operational level.
But the strategic management accounting endeavours to develop these ideas and to
refine them, thus aiding improvement in the performance of such organizations at a stra-
tegic level to be a better tool for rational decision-making. (Shah, et al., 2011) Wilson and
 21 (84)

Chua (1993) present ten key differences between management accounting and strategic
management accounting as shown in Table 3.

Table 3. Ten key differences - traditional and strategic management accounting (MA)
(Wilson & Chua, 1993)

Traditional MA Strategic MA
1 Historic Prospective
2 Single Entity Relative
3 Introspective Out-ward looking
4 Manufacturing focus Competitive focus
5 Existing activities Possibilities
6 Reactive Proactive
7 Programmed Un-programmed
8 Data orientation Information oriented
9 Based on existing systems Unconstrained by existing systems
10 Built on conventions Ignores conventions

The strategic element of management accounting requires enhanced intelligence, to pro-

vide information relevant to support the strategic decision-making and the strategic man-
agement processes within organisations. It is the role of the management accounting
system i.e. the accounting process that can, viewed as part of the organizations’ total
information system, provide such economic information to meet the decision makers’
data demands.

3.1.1 Accounting as an information system

According to Collier (2003, p. 4) accounting is a collection of systems and processes

used to record, report, and interpret an economic entity's business transactions, which
provides in financial terms an explanation or report about the transactions of an organi-
zation. That can be simply described, as the process of recognizing, evaluating and com-
municating information to allow informed judgements and decisions by users of the in-
formation. This is to say that accounting information is valuable to those who need to
make decisions and plans about business and control the businesses. (Atrill, et al., 2014,
p. 3) Thus, the key aspects of accounting are identifying the key financial components of
an organization, measuring the monetary values of these to represent a true and fair
 22 (84)

view of the organization, and communicating this financial information in a way useful to
the users of that information (Black, 2005, p. 2).

In other words, accounting is basically a process in which input data converts into output
information. That viewed as an information system involves the following four sequential
stages shown in Figure 4 (Atrill, et al., 2014, p. 6):

1. Identifying and capturing relevant financial information

2. Recording the information collected in a systematic manner
3. Analysing and interpreting the information collected
4. Reporting the information in a way that meets the users’ needs

Figure 4. Accounting as an information system

(Atrill, et al., 2014)

The first two stages are related to the preparation and the last two with the utilization of
information collected. Considering the decision-making emphasis of this study, we shall
focus on the latter two elements of the process – analysis and reporting of the financial
information. Because we are concerned with, how information is used by and is useful
to decision makers, rather than with how it is collected and recorded.

3.1.2 Accounting as an service function

Considering that accounting processes or gathers and studies “raw data” and converts
it into suitable information required in the process of decision-making, we may also de-
scribe it as a service function, providing financial information to the users i.e. ‘clients’.
(Zager & Zager, 2006) The quality of the service provided determined by the extent the
 23 (84)

information is suitable to the needs of the various clients. To be useful, the information
needs to meet certain qualities illustrated in Figure 5.

COST QUALIFIERS
CONSTRAINS

Fundamental Enhancing

Faitful
Relevance Representation

Predictive Confirmatory Complete- Neutrality Freedom

Value Value ness from error

MATERIALITY

Comparability Timeliness Verifiability Understanda-

bility

Figure 5. The characteristics that influence the usefulness of accounting information

(Atrill, et al., 2014, p. 5)

In particular the information needs to meet, the fundamental qualities of relevance and
faithful representation, to have materiality – potential to alter the decisions that users
make. The relevance means information is able to influence decisions, having predictive
and/or confirmatory value. To be faithful representation, the information should represent
what it is supposed to being complete, neutral, and free from error. Additionally, there
are other qualities that, if present, can enhance information usefulness: comparability to
help identify similarities and differences between items of information; verifiability to as-
sure a faithful portrayal; timeliness to be produced in time; and understandability to be
presented clearly and concisely. However, it is worth to note these qualities don’t make
information useful, they only can enhance information that is already relevant and faith-
fully represented. In addition to the characteristics described above, the balance between
cost and value needs to be noted. This means in theory, only accounting information
should be produced if the cost of providing is less than the value to be derived from its
use. (Atrill, et al., 2014, p. 3 to 5)
 24 (84)

The benefits of quality information that meets these criteria may contain enhanced deci-
sion-making, customer service, product/service quality, productivity, reduced staffing
and so on. However, quantifying the benefits of information generally tends to be more
difficult than quantifying the costs, as it includes making judgement and often the benefits
of information are more qualitative, like improved knowledge about customers, competi-
tors and the markets. (Collier & Agyei-Ampomah, 2009, p. 243)

Theoretically, the Figure 6 visualizes how the total value of information received by the
decision maker is expected to eventually decline. The broken line indicates the optimal
level of information provision, the point at which the gap between the value of information
and the cost of providing that information is at its greatest. (Atrill & McLaney, 2009, p.
19)

Total value
or cost (€) Cost

Value

Optimal
Quantity

Total quantity of information

Figure 6. Cost and value relationship in providing management accounting information

(Atrill & McLaney, 2009, p. 19)

Beyond this optimal point, each additional piece of information will cost more than the
value of having it. This is the point of diminishing marginal returns, where increasing the
amount of information further provides little additional benefit. Explaining why this shall
happen is not that evident, perhaps as additional information becomes less relevant, or
because of the problems that a decision maker may have in processing the sheer quan-
tity of information provided. (Atrill & McLaney, 2009, p. 19)

In spite of this notion, it is clear information is indispensable for decision-making in any

business organization to ensure the success and survival of an organization. But the
 25 (84)

information must meet the three criteria set by Emery (1969, p. 91) to be valuable for
managers, only if it can:

1. Help reduce the future uncertainty

2. Affect the respective decision
3. Help ‘sensitively’ change the consequences of a decision.

3.2 Decision-making in organizations

Presenting management accounting as a fundamental part of management and a ser-

vice of decision-making requires that we describe the conception of management ac-
counting and the management functions in the context of decision-making. But before
discussing what decision-making is, let us define what a decision is, because decision-
making is a process of deciding. Traditionally, a decision is stated to be a choice of the
course of action leading to a certain desired objective. This suggests, decision-making
is a non-random activity culminating in making the selection of one out of multiple alter-
native courses of action. (Burstein & Holsapple, 2008, p. 26)

Decision-making is part of our everyday life and we all need to make decisions either
consciously or un-consciously at work and in our personal life. We make decisions and/or
contribute to the decision-making individually and/or as group. These decision we make
may be based on facts, experience and/or intuition. Fundamentally, every decision has
hidden within it a guess about the future. Because when solving a problem or achieving
a goal, we estimate the situation and then anticipate if we will achieve our desired objec-
tive by taking a certain action (Burstein & Holsapple, 2008, p. 4). The forming of prefer-
ences, identities, rules, situations, and expectations all involve making sense out of a
confusing organisational world. Hence, as organizations make decisions, they transform
their preferences and their identities and shape the world they interpret. (Shapira, 2010,
p. 20) Therefore, as Greenberg & Baron (2008) state making decisions is one of the
most important and critical activities of organizations, because organizations as systems
build themselves up by making decisions.

Decision-making and its role in organizations can be viewed in a number of ways. The
decision-making theory used in this study will focus on a combination of two disciplines:
managerial decision-making and knowledge management. The aim of the theory is to
support the study findings and informed managerial decision-making.
 26 (84)

3.2.1 Managerial decision-making

Organizations are made of people – people are the organization. Accordingly, it is im-
portant to understand that people are the ones who make decisions in an organization.
According to Shapira (2010), within any organization humans after all create the roles
and responsibilities, structures, processes and procedures that encounter decision-mak-
ing and define decision-making culture of that organization. Having this in mind decision-
making in an organization can be described as a coherent and rational process in which
alternative interests and perspectives are considered in an orderly manner until the op-
timal alternative is selected. (Shapira, 2010, p. 20) Managers are in the organizations’
the people who have to take most of the decisions, both day-to-day and strategically,
about how the scarce resources within their control are to be used to reach the organi-
zational goals. Thus, making decisions is considered to be one of the most crucial man-
agement activities, defined as the choice making process among several activities.
(Greenberg & Baron, 2008, p. 380)

A decision is the result of a process, which steps are as important as the final choice. It
is a choice made at a time, in a given context, from alternatives, to stimulate actions of
variable size and duration. That is essential for an organization’s survival and develop-
ment, since it is prior to any action (Socea, 2012). The objective of this decision-making
process is to move the situation from the current state to some desired future state. Con-
sidering the often complex decision-making context, this process often requires a com-
mitment to embark on a journey toward an uncertain future. Thus, to be successful, the
organization must have the capacity and internal support mechanism required to carry
out this journey (i.e. the decision strategy). (Burstein & Holsapple, 2008, p. 11) Managers
are also expected to be capable to analyse and interpret accounting information so that
decisions are made understanding the financial implications of the decisions.

3.2.1 The decision-making process

The decision context and type can vary and the outcome is often dependant on the de-
cision maker. Although, in sequential models there are some common steps that can be
identified included to nearly every decision. These steps can be applied as a framework
for the decision-making process that are useful regardless of the decision’s type, context
and maker.
 27 (84)

Drury (2008) describes the decision-making process, visualised in Figure 7, as compris-

ing of five stages which belong to the decision-making (or planning) process, followed
by two final stages which represent the control process. As the first step in the planning
process management needs to identify the goals and objectives. These shall work then
later as the guiding direction that enable the decision makers to assess the attractiveness
of the alternative courses of actions. After data is collected about the possible alterna-
tives, the course of action that is seen to best satisfy the objectives of an organization
will be chosen and implemented. Following the decision-making process, the control pro-
cess should be in place to measure and correct the concrete performance of the alter-
natives chosen. (Drury, 2008, pp. 8-11)

1. Identify objectives

2. Search for alternative courses of action

Planning
Process 3. Gather data about alternatives

4. Select alternative courses of action

5. Implement the decisions

6. Compare actual and planned outcomes

Control
Process 7. Respond to divergences from plan

Figure 7. The decision-making, planning and control process

(Drury, 2008, p. 8)

An intuitive sense of good decision-making seems to be natural for some managers.

However, the reality tends to be that consistently good decision-making is rarely based
on intuition only. But to support is required diligent accumulation and evaluation of infor-
mation. This is where management accounting comes in, providing the information
needed to fuel the decision-making process.

3.2.2 Objectives of managerial accounting activity

Business value results from good management decisions. These decisions must occur
across a spectrum of activities, in other words, related to three interrelated management
 28 (84)

processes: planning, directing, and controlling shown in Figure 8. Planning is about think-
ing ahead, selecting a course of action to reach desired outcomes. (Walther & Skousen,
2009, p. 11) Planning involves converting goals and objectives into the specific activities
and resources that are required to meet the set goals and objectives (Drury, 2008, p.
19). For a plan to come to life, it requires initiation and direction of numerous actions, i.e.
it needs to be realized into action. Since things rarely go exactly like planned, the man-
agement must exercise control to monitor and adjust for deviations. (Walther & Skousen,
2009, p. 16) This control is the process of ensuring that the actual outcomes are in line
with the plans. Performance needs to be also measured and compared to the targets on
a periodic basis. (Drury, 2008, p. 19). Correct execution of each of these activities cul-
minates in the creation of business value. Whereas, conversely failure in these activities
is a roadmap leading to business failure. (Walther & Skousen, 2009, p. 11)

BUSINESS VALUE

MANAGEMENT DECISIONS

PLANNING DIRECTING CONTROLLING

Figure 8. Managerial decisions: planning, directing, and controlling

The roles of management accountants vary from one organization to the next, depending
on factors such as the size of an organization, the type of an organization, culture, in-
dustry and others. Then again, these factors change from time to time, the roles of man-
agement accountants in the past are not the same nowadays, because the business
circumstances are different. Notwithstanding, such differences do not change the basic
roles of management accountants, but influence and determine the complexity of the
roles. (Ahid & Augustine, 2012)

Hilton (2009, p. 6 to 7) states managerial accountants’ play an important role and add
value to their organization by pursuing five major objectives:
 29 (84)

1. Providing information for decision-making and planning

2. Assisting managers in directing and controlling operational activities
3. Motivating managers and other employees towards the organization’s goals
4. Measuring the performance of activities, subunits, managers, and other employ-
ees within the organization
5. Assessing the organizations competitive position, and working with other manag-
ers to ensure the organizations long-run competitiveness in its industry

It is the role of the management accountant to make available for managers feedback
information in the form of periodic reports, suitably analysed, to enable them to determine
if operations for which they are accountable for are running according to plan and recog-
nize those activities where corrective action is required. In particular, the management
accounting function should deliver economic feedback to managers to support them in
controlling costs and improving the efficiency and effectiveness of operations. (Drury,
2008, p. 19).

Thus, the objective of implementing management accounting in an organization is to

provide managers relevant information to allow them to effectively evaluate the organi-
zation’s actual performance, to quantify the goals and objectives in budgets and medium
and long term plans, to improve decision-making at both operational and strategic level,
and to take corrective actions to comply with the set performance objectives. (Creţu &
Gheonea, 2011) In other words, management accounting is seen as an information
provider for internal business processes, management planning and control, resource
management and creation of value through effectively used materials. (Ahid & Augus-
tine, 2012)

In particular, Atrill & McLaney (2009) identifies four broad areas, where management
accounting information is necessary to support managers in decision-making: develop-
ing long-term plans and strategies, performance evaluation and control, allocating re-
sources and determining costs and benefits (set out in Figure 9.).
 30 (84)

Developing long-term Performance evaluation

plans and strategies and control

MANAGEMENT
ACCOUNTIG
INFORMATION

Determining costs and

Allocating recources
benefits

Figure 9. Management decisions requiring management accounting information

(Atrill & McLaney, 2009, p. 23)

The management accounting information is considered to be useful in developing appro-

priate objectives, long-term plans and strategies, help in reviewing the performance of
the business against the set criteria and form the basis for deciding between the various
strategies on offer. Additionally, information is used to control and allocate the limited
business resources in an efficient and effective manner to reach the optimum level of
output, mix of products and the appropriate type of investments. Including details weigh-
ing the costs against the benefits, management accounting information also helps to
make decisions on a particular course of action, i.e. producing a new product or closing
down a department. (Atrill & McLaney, 2009, p. 23)

Noting these considerations, any manager leading a business needs management ac-
counting information that allows to shape the future, to transform it from an unknown,
uncertain and risky into a more predicted and planed one, with an uncertainty and risk
understood and evaluated in financial terms. As Choo (2003) states organizational know-
ing applies, when the principles of information use are connected to each other to con-
stitute a larger network of processes through which the organization: constructs shared
meanings about its actions and identity; discovers, shares, and applies new knowledge;
and initiates patterns of action through search, evaluation, and selection of alternatives.
Knowledge can and should be evaluated by the decisions or actions it leads to. As better
knowledge can lead, for example, to wiser decisions about strategy, competitors, cus-
tomers, distribution channels, and product and service life cycles. (Davenport & Prusak,
2000, p. 6)
 31 (84)

3.3 Knowing organization

Nonaka, et al. (2008) argue knowledge is not a static substance or thing, but an ever-
changing process of interaction in an ever-growing field of relations. Knowledge is cre-
ated from the synthesis of thinking and action by individuals interacting both within and
beyond organizational boundaries that generate the basis for creating new knowledge
again, through the knowledge creation spiral. It is the people’s values and value-based
decisions that determine the way of life in an organization and the value the organization
creates in the era of the knowledge society. (Nonaka, et al., 2008, pp. 3,18)

Without having a clear understanding of the organizational and human processes

through which information becomes selected and expressed as insight, knowledge, and
action, an organization is unable to thrive and grow in an increasingly complex environ-
ment. According to Choo (2006), "knowing organization" is the one that links the strategic
information processes of sense making, knowledge creating, and decision-making into
a continuous cycle of learning and adaptation to formulate strategy and select course of
actions. We can visualize the interactions of these processes, as shown in Figure 10, to
see that the outcome of information usage in one mode provides the elaborated context
and the expanded resources for information usage in the other modes.

Signals from/to the environment

SENSE
MAKING

Meanings, purposes Meanings, purposes

Problems, opportunities Problems, opportunities
Knowledge-Gap Decision-Gap

New capabilities
KNOWLEDGE DECISION
CREATING Innovations
MAKING
Knowledge Actions
from/to others Knowing-Doing Gap by/on others

Figure 10. The knowing cycle

(Choo, 2006)
 32 (84)

Since the organizations face a dynamic and uncertain world, organizations use infor-
mation first to make sense of changes in their environment to construct meaning and
build an understanding of what is happening to the organization and what the organiza-
tion is doing. Market forces and dynamics control the organization's success or failure.
Fiscal and legal structures ground its identity and range of influence. Public opinion and
societal norms shape its role and reach. The critical dependencies between an organi-
zation and its environment require the organization to be constantly alert of changes and
shifts in its external relationships. Changes in the environment continuously generate
signals and cues. Unfortunately, these messages can be often vague and compatible
with multiple interpretations. Hence, making it a crucial task of management to discern
the most significant changes, interpret their meaning, and develop appropriate re-
sponses. This is called sense making, of which the short term goal is to build a shared
understanding that allows for continuity of operations and the long-term goal is to ensure
that the organization adapts and continues to thrive in a dynamic environment. (Choo,
2006, pp. 1 to 2, 5)

The second arena of strategic information use is when organizations generate new
knowledge. This is a process that allows an organization to create or acquire, organize
and process information in order to generate new knowledge through organizational
learning. This process is triggered by knowledge gaps that stand in the way of solving a
technical or task-related problem, developing a new product or service, or taking ad-
vantage of an opportunity. The knowledge an organisation possesses can be divided
into three categories: tacit knowledge embedded in the expertise and experience of in-
dividuals and groups; explicit knowledge codified in organizational rules, routines, and
procedures, or cultural knowledge expressed in the assumptions and beliefs, and norms
used by members to assign value and significance to new information or knowledge. An
organization over time develops its own tightly integrated bundle of tacit, explicit and
cultural knowledge that constitutes its core capability. As an organization exists because
of its ability to integrate and channel these sets of knowledge into activities and outcomes
that are meaningful and valuable. Capable to grow when it is able to continuously refresh
its knowledge and extend its capabilities. (Choo, 2006, p. 2; Choo, 2003)

The third strategic information process, decision-making is triggered by a choice situa-

tion, an occasion in which the organization is expected to select a course of action. De-
cision makers are expected to search for alternatives, evaluate consequences, and com-
 33 (84)

mit to a course of action. In theory, this choice is to be made rationally based upon com-
plete information. But in practice, organizational decision-making departs from the ideal,
as individuals are limited in their ability to search and process information in a completely
rational manner. The principals, rules and routines structure in an organization, reduce
the uncertainty and complexity of the choice-making process. To be an effective organi-
zation, decisions are vital because they lie closest to action and are intended to enable
the organization to achieve its goals. (Choo, 2006, p. 2)

The above definitions and perspectives indicate a continuous flow of information main-
tained between sense-making, knowledge creating, and decision-making. Sense making
builds the context, the frame of reference for knowledge creation and decision-making.
Knowledge creation expands organizational capabilities and introduces innovations. De-
cision-making converts beliefs and capabilities into commitments to act. Allowing the
knowing organization to possess in depth, enlightened and well announced information
and knowledge, and use special capability to create knowledge, thus enabling that it can
be controlled with intelligence and creativity. (Choo, 2006)

If a company can truly leverage its knowledge, it should be as stated by Thierauf (1999)
able to accomplish three advantages. First, knowledge should make the organization
more responsive to the rapidly changing competitive landscape, able to exploit new op-
portunities more quickly and reduce competitive vulnerabilities. Second, knowledge
should allow managers and employees to evaluate a company's critical success factors
more thoroughly. Third, knowledge should enhance the internal efficiency and produc-
tivity of the organization, including better coordination of the organization's functional
components. (Thierauf, 1999, pp. 13-14) Making such an organization well informed,
alert, aware of threats and opportunities, prepared to develop in a dynamic environment,
able to anticipate and adapt to changes already in an early stage and analyse the skills
and expertise of its members to learn and innovate. (Choo, 2006)

4 Information and management reporting

Decision-making is related to the flow of information. Development in information tech-

nology have allowed businesses to collect, sort, and deliver almost limitless amounts of
data, creating massive amounts of information in various formats. Making it evident the
problem is not lack of data, instead the challenge for the management reporting process
 34 (84)

is to synthesize and structure all the data into relevant, actionable information and then
deliver it to the right person at the right time to support informed decision-making. This
means today, more than ever, financial professionals are being challenged by their com-
pany’s executives, managers, and staff to provide more effective and meaningful man-
agement reporting.

4.1 Defining data, information, and knowledge

In order to continue the discussion with management reporting and its decision support
role, we need to next define the relationship among data, information, and knowledge,
to better understand what falls under each in the business context.

We use the concept of knowledge frequently in our everyday language. Sometimes we

refer to know-how, while other times we mean wisdom. On many occasions, we even
use it talking about information. Thus, part of the challenge of defining knowledge arises
from its relationship to the two other concepts, namely data and information. These two
concepts are often viewed as lower categories of knowledge. However, the exact rela-
tionship varies greatly from one context to another and how simple it may sound, it is
important to emphasise that data, information, and knowledge are not interchangeable
concepts. Hence, organizational success and failure can often depend on understanding
each one, knowing which is required when, what already exists, and what we can or can’t
do with each.

Data can be defined as a set of discrete objective facts about an event or a process
which has little significance alone, e.g. numerical quantities or other attributes derived
from observation, experiment, or calculation (like cost, speed, time, or capacity). That is
in an organizational context most usefully described as structured records of transac-
tions. Making data essentially raw material for information, which is meant to change
the way the receiver perceives something to have an impact on a decision maker’s judg-
ment and behaviour. (Davenport & Prusak, 2000, p. 2 to 3; Bergeson, 2003, p. 10)

Information comes from the form that data takes as it is arranged and presented in dif-
ferent ways. Information is a collection of data and associated explanations, interpreta-
tions and other textual material related to a specific object, event, or process. (Bergeson,
2003, p. 10) Unlike data, information has a meaning – the relevance and purpose. Not
only does it potentially shape the person who gets it to make some difference but it has
 35 (84)

shape, i.e. it is organized to some purpose having added value. (Davenport & Prusak,
2000, p. 4) As stated by Thierauf (1999, p. 7), information is structured data that is useful
to the manager in analysing and resolving critical problems. That is recognised nowa-
days to be a vital business asset, as quality and timely business information is among a
manager's most important resources, which helps to understand the "big picture" and
make the right decisions at the right time.

Knowledge derives from information, as information derives from data. Knowledge is the
application of information, it allows management to gain a more complete picture, linking
the information together with increased understanding. Knowledge is a familiarity, aware-
ness or understanding of someone or something, such as facts, information, descriptions
or skills, which is acquired through experience or education by perceiving, discovering
or learning. Knowledge is closely related to doing and implies know-how and understand-
ing. The knowledge possessed by each individual is a product of his/her experience, and
encompasses the norms by which an individual evaluates new inputs from the surround-
ings. (Davenport & Prusak, 2000) A definition to help discuss about knowledge in organ-
izations presented by Davenport & Prusak (2000) is as follows:

“Knowledge is a fluid mix of framed experience, values, contextual information, and

expert insight that provides a framework for evaluating and incorporating new experi-
ences and information. It originates and is applied in the minds of knowers. In organi-
zations, it often becomes embedded not only in documents or repositories but also in
organizational routines, processes, practices, and norms.”
(Davenport & Prusak, 2000, p. 5)

Thierauf (1999, p. 7) argues information can be turned into knowledge only in the hands
of an expert, as it requires expertise to interpret the underlying information structure to
derive insight and understanding – the knowledge. Like, for example, the capability re-
quired to interpret the organizations financial results. Davenport & Prusak (2000), de-
scribe knowledge develops over time and experience refers to what we have done and
what has happened to us in the past. This provides a historical standpoint from which to
view and understand new situations and events. (Davenport & Prusak, 2000, p. 7)

Knowledge represents a state or potential for action and decisions in a person,

organization or a group. That can be transformed in the process of learning, which
creates changes in understanding, decision or action. Knowledge is based on
information that is organized, synthesized, or summarized to enhance comprehension,
 36 (84)

awareness, or understanding. (Bergeson, 2003, p. 10) This progression of knowledge

considering the relevance for a decision setting can be illustrated as six states, identified
by Van Lohuizen (1986) shown in Figure 11, called data, information, structured
information, insight, judgement, and decision. (Burstein & Holsapple, 2008, p. 40)

Knowledge of increasing
usability and relevance
for a decision setting
Evaluate DECISION
Choice
Weigh JUDGEMENT

Synthesize INSIGHT
Design
Analyze STRUCTURED INFORMATION

Select INFORMATION Intelli-

gence

Gather DATA

Figure 11. Knowledge as a progression of states

(Burstein & Holsapple, 2008, p. 40)

In order to progress from one state to another various operations can be undertaken:
selecting from data, analyzing, synthesizing, weighing, and evaluating. This nature of
knowledge processing required for state transformations means that these states form a
progression from the lowest level, where usability is marginal or potential, to higher levels
where usability is clearer and more immediate. In other words, there is an increase in
the relevance of knowledge with respect to accomplishing some objective, i.e. reaching
a decision. (Burstein & Holsapple, 2008, p. 40 to 41)

An analysis of all aspects of an organization’s reported performance and financial con-

dition – complemented with other considerations, including strategy, approach to risk,
and capabilities to deliver results - is needed to develop expectations for the creation of
value in the longer term. (CICA, 2010)

4.2 Management reporting

A company’s success in generating sales, controlling costs, and therefore, operating

profitability depends not only on the quality of its basic resources (personnel, equipment,
 37 (84)

and techniques), but also on the quality of reports supplied to the management. Because,
without an effective reporting process, it is like management is flying blind, forced to
adapt to evolving business conditions with little timely or relevant information (Axson,
2010, p. 141).

Management reporting is a systematic process that starts with an event - all events cre-
ate data. An event may be a call from a customer or an employee arriving at work; they
all create data that may be subsequently used for management reporting. (Axson, 2010,
p. 141) However, reporting is not the same as data generation. According to Kohler
(1985) reporting refers to "a body of information organized for presentation or transmis-
sion to others. It often includes interpretations, recommendations and findings with sup-
porting evidence in the form of other reports." In other words, reporting requires summa-
rization of data that will provide useful information to the user. Reporting is the process
of communicating information. Management reporting is the process of providing infor-
mation to the management, an organized method of communicating to each manager all
the data required for decisions, when needed and in a tailored form, which supports
understanding and stimulates action. (Periasamy, 675) Management reporting covers
all activities associated with the reporting of performance measures, events, analysis,
and other information to support decision-making. The information reported contains, but
is not necessarily limited to, reporting current and prior period results and forecasts of
future periods; comparing actual results to any comparison basis (e.g. plan, forecast, or
relevant external measures) in variance analysis; calculation and reporting of perfor-
mance measurements, both financial and nonfinancial; consolidation; and fulfilment of
ad hoc reporting requirements. (Axson, 2010, p. 26)

When properly designed, reports serve as an invaluable management function support-

ing managers to make well informed and timely decisions that help to reach organiza-
tional goals. The reporting requirements are a function of the roles and responsibilities
of the recipient, the decisions to be made, the goals and plans of the organization, and
the actual results achieved in executing those plans (Axson, 2010, p. 26). More explicitly,
as the objectives of management reporting are seen:

 To provide the required information of the business to allow its managerial func-
tions of i.e. planning, organizing, controlling, directing, and decision-making to be
done efficiently and effectively.
 To ensure the operational efficiency.
 38 (84)

 To facilitate the maximum utilization of resources.

 To secure workers’ industrial understanding.
 To assist in motivating, improving discipline and morale.
 To help the management make effective decision-making. (Periasamy, 2010, p.
675 to 676)

The form of management reporting can be either oral or a written report. The classifica-
tion of the written management reports can be done in a number of ways, according to
object or purpose, period or function, like the types of reporting shown in more detail in
Figure 12. (Periasamy, 2010, p. 678)

TYPES OF MANAGEMENT REPORTING

Oral Reports Written Reports

According to Objects According to Period According to Fuctions

External Internal Routine Special Operating Financial

Reports Reports Reports Reports Reports Reports

To Top To Middle Level To Junior Level Control Information Venture

Static Dynamic
Management Management Management Reports Reports Measurement
Reports Reports
Reports

Figure 12. Types of management reporting

(Periasamy, 2010, p. 678)

The production of useful financial information is a complex task and is becoming increas-
ingly so as a result of sophisticated business transactions, ever-changing standards, and
increased regulatory requirements. All these factors require a thorough and logical ap-
proach to identify all the facts surrounding a transaction and considerable professional
judgement to assess how the guidance should be applied. (CICA, 2010)

High-quality information is required to lead everyday business successfully and it is one

of the major drivers of sustainable organizational success. As with high-quality business
reports, it is evident managers have better ability to make decisions. The best way to
 39 (84)

ensure such reports are created is an effective reporting process, wherein all internal
and external stakeholders get appropriate high-quality business reports in a timely fash-
ion, as suitable information is crucial to make informed decisions with respect to an or-
ganization’s capacity to create and preserve value. (IFAC, 2013)

4.2.1 Principles for an effective business reporting process

Concerning the reporting process, IFAC (2013) has published guidance in the form of
principles for an effective business reporting process. These principles depicted, in Fig-
ure 13, do not prescribe a specific approach, but highlight a number of areas for specific
consideration, which represent good practices to ensure effective reporting processes in
an organization.

Commitment to Effective Reporting

Roles and Responsibilites

Planning and Control

Evaluation and Stakeholder
Improvement Engagement

Principles for Effective Business Reporting

Accurance Content
Reporting Processes

Analysis and Framework and

Interpretation Standards
Reprting processes and Systems

Use of Technology

Figure 13. Relation of reporting principles

IFAC (2013)

Management’s commitment to effective reporting is stated as the first principle. Senior

management is expected to assume a leadership role providing strategic input into and
oversight over to make sure that the organization has suitable reporting processes and
controls in place, in order to deliver high-quality reports. This requires having adequate
 40 (84)

resources to create and maintain the reporting process. Guidance should also be clear
related to the appearance of reports to avoid information overload and time wasted pre-
paring and reading unnecessary information. The second principle deals with employing
the suitable personnel, defining the roles and responsibilities, and organising collabora-
tion among those involved in the reporting process. The third principle states the organ-
ization should develop and implement an effective planning and control cycle for its re-
porting processes. This should include documentation of the reporting processes con-
taining identified risks and related control. This can consist of reporting or accounting
manuals, policies and procedures. (IFAC, 2013)

The fourth principle mentioned is about engaging stakeholders, both internal and exter-
nal, to understand their information requirements with regard to past, present, and future,
to amend the reporting accordingly. The fifth principle is devoted to defining the reporting
content and audience, layout, and timing of reports. Once organization has a clear view
of the information requirements, these should be then translated into reporting demands
to provide different information to different stakeholders reflecting the information needs;
it shall not be “one size fits all”. To provide better insights into what drives the business
and the opportunities and threats it is dealing with, the reporting needs to be open, trans-
parent, and have a forward-looking orientation to support informed decision-making. The
frequency and timing of reporting is also an important issue, and should be planned to
meet the stakeholders’ requirements. The requirement for more frequent and timely re-
porting is a good motivator for organizations to improve their internal reporting. However,
providing the reports earlier increases the need for estimates, shortens the time available
for analysis and interpretation, and can also increase organizational costs. Therefore,
management needs to determine the right balance between using estimates, costs, ad-
equate analysis and interpretation, and the timeliness of reports. (IFAC, 2013)

IFAC’s (2013) sixth principle deals with selecting frameworks and standards, but since
the focus of this study is on internal reporting, we shall interpret this principle referring to
the need to have adequate and updated internal policies and instruction in place in the
organization to support the reporting. The seventh principle is about determining report-
ing processes, considering what information needs to be captured, processed, analysed,
and reported, and how to organize the information processes and related systems for
effective reporting and better decision-making. Information technology plays a central
role in the process of business reporting and the eighth principle notes the organization
 41 (84)

should identify, analyse and select appropriate communication tools to optimize the dis-
tribution of reporting information via the various communications channels. The ninth
principle states the organization should ensure that reported information is sufficiently
analysed and interpreted before it is provided to stakeholders. The tenth principle han-
dles assurance in reports and reporting processes that contributes to accountability,
transparency and reliability. The last principle notes the importance of evaluating and
improving reporting processes on a regular basis in order to identify and carry out further
improvements required for maintaining reporting effectiveness. (IFAC, 2013)

4.2.2 Qualities of reports useful for decision makers

In general, a good report should comprise all the necessary information to facilitate de-
cision-making. Leading the managers to ask the right questions and initiate a chain of
actions that will enhance the ability of the organisation to achieve its short- and long-term
goals. (Starovic, 2009) As Axson (2010) describes effective management reports should
build around three basic principles: content, delivery, and people. This means moving
away from a one-size-fits-all approach, making the information recipients needs the start-
ing point of the reporting, and delivering the right information to the right people at the
right time.

There are several qualities that are associated with useful information. Relevance, mean-
ing management accounting information must have the ability to influence decisions, i.e.
be targeted at the requirements of the individual manager for whom it is being provided
and available, when the decision needs to be made. In other words, this means infor-
mation needs to be pertinent. Accuracy, meaning information must be precise. To have
value for the decision maker, relevant and accurate information need to be also timely,
that is, available in time. Managers should be also capable to rely upon the information.
Meaning it needs to be free from significant errors or bias. A problem often faced though
in accounting is, that highly relevant information may not be very reliable or vice versa.
(Hilton, 2009, pp. 590-591; Starovic, 2009)

Kumar (2010) complements and introduces that the general characteristics of good re-
porting are promptness, comparison, consistency, and simplicity. Promptness in report-
ing means the report should be issued before the information becomes ancient history.
This is important and it cannot be really overemphasised, as managers need quick re-
 42 (84)

ports to carry out daily operations, even at times sacrificing reliability for speed is ac-
cepted, i.e. in cases where complete information is not needed for showing trends. Com-
parison in reports provides perspective, like current month, last month and the same
month of last year, so that managers can evaluate trends in the performance of the busi-
ness over time and in relation to other similar businesses and review possible deviations
needing attention. Consistency is closely related with the principle of comparison in re-
porting, as it is necessary to present information in the same manner to allow comparison
between different reporting periods. Simplicity, another necessity of reporting, means
presenting the information in a clear manner to ensure the significance of the information
to be understood by the users. In practice, this means elimination of extraneous data,
appropriate use of graphs, exact and simple definitions of financial terms, precise use of
technical terms, and careful summarisation of operating results.

Consideration of cost shall be also noted, as reporting must be commensurate with the
benefits derived not to become an unnecessary drag on the resources of an undertaking.
Osborn (1998) points out that the use of simplified accounting information, i.e. infor-
mation structured around key issues and categories, stimulates productive discussion
among managers and more time being devoted to building shared interpretations of re-
sults. Hall (2010) notes similarly, that developing knowledge of the work environment is
likely to be facilitated by highlighting key events and outcomes, with managers develop-
ing their own connections and interpretations, rather than trying to formalise relations via
cause-and-effect chains. Furthermore, information needs to be easily comprehended by
managers so that they have confidence in their understanding of the underlying data.

As a consequence of the rapidly changing business conditions, management accounting

has moved beyond its traditional concern with a narrow range of numbers to incorporate
wider issues of performance measurement and management. Shifting the reporting fo-
cus, as visualized in Figure 14, from producing necessary reports to keep score of oper-
ating results to incorporate broader information to understand relevance, share insights
and influence decisions to achieve impact. (CIMA, 2009)
 43 (84)

QUANTITATIVE SKILSS QUALITATIVE

EFFECTIVENESS
EFFICIENCY

Data Capture Reports Analyses Insight Influence Impact

Value

Comfort Zone

Figure 14. Finance business partnering

(CIMA, 2009)

This shift has taken the management accountants on a journey from many traditional
accountants’ comfort zone - quantitative roots, where the business imperative was to
maximise efficiency, to where the emphasis is on enabling value creation requiring qual-
itative skills. (CIMA, 2009) The changed requirements have led management accounting
from backward-looking control purposes towards the use of forward-looking accounting
information for strategic planning and control, and for decision-making (Taipaleenmäki &
Ikäheimo, 2013).

4.3 Considering analytical in the frame of decision-making

For too long, many important decisions have not been based on data, but on the intuition
or experience – research suggests up to 40% of major decisions are based not on facts,
but on the managers’ gut. Sometimes intuitive and experience based decisions may work
out well, but in other cases they can leave money on the table if, i.e. products and ser-
vices are priced on hunches about what the market will bear, not on actual data or people
are hired based on intuition, not on analysis of the skills and personality traits that predict
an employee’s high performance. (Davenport, et al., 2010, p. 1)

However, business analytics is not a new phenomenon. Though it’s been around, only
recently it is making its breakthrough, as organizations are anchoring in the technically
oriented environment. (Laursen & Thorlund, 2010) Where novel business opportunities,
 44 (84)

timing, and know-how, as well as, the need to provide fast and effective service due to
increased business competition, require rapid and more sophisticated information and
data analysis. These requirements challenge management accounting to effectively sup-
port the decision-making process. (Schläfke, et al., 2012)

In order to do so, business analytics allows to go beyond traditional reporting and offers
a way to deal with increasing complexity, uncertainty, and volatility. Providing an oppor-
tunity to effectively support the understanding, exploration, and exploitation of business
dynamics and opportunities leading to better decision-making. (Schläfke, et al., 2012)
Analytics can also contribute to more objective decision-making by revealing evidence
on performance creation and effect relationships (Klatt, et al., 2011).

Therefore, if we want to make better decisions and take the right actions, we have to
exploit analytics. But what do we actually mean by analytical, what are the key questions
addressed; what kind of data and reasoning does it involve. In modern day business,
analytics can be seen as engaging in the use of data, structured or unstructured, with
formal analysis to arrive at learnings that help in improving performance in key business
domains and making better business decisions (Agrawal, 2014). Considering analytical
in the frame of decision-making, we mean the use of analysis, data, and systematic rea-
soning to make decisions. That begins with anticipating, how information will be used to
address key questions across the time and innovation dimensions presented in Table 4.
(Davenport, et al., 2010, p. 7)

Table 4. Analytical dimensions

(Davenport, et al., 2010, p. 7)

PAST PRESENT FUTURE

What happened? What is happening What will happen?

Information now?
(Reporting) (Extrapolation)
(Alerts)

How and why did it What’s the

What’s the next best best/worst that can
Insight happen?
action? happen?
(Modelling, experi-
(Recommendation) (Prediction, optimiza-
mental design)
tion, simulation)
 45 (84)

The first set of questions presented, in Table 4, addresses the time dimension, past,
present and future. All useful questions, that data and analytics can provide information
about to answer, but the limitation of these questions is that they don’t tell why something
happens or how likely it is to recur. Whereas, the second set of question includes insight,
necessitating more advanced tools to dig deeper for the answers. Together, these six
questions encompass much of what managers need to know about an organization in
order to have a comprehensive overview of a problem that needs to be solved and/or
decision that needs to be made. Davenport et al. (2010) recommend managers to use
this question matrix to challenge existing uses of information, as often moving from
purely information-oriented questions towards the later set of questions containing in-
sights is likely to give a much deeper and better understanding of the dynamics of the
business and related decisions that need to be made. (Davenport, et al., 2010, p. 7)

Though, analysing the data and having all the information at managers’ disposal does
not guarantee success in making the right decisions. Good analytics can facilitate better
informed managerial decision-making but, however, need to note analytics does not
make the decision on behalf of the manager. Davenport et al. (2010, p. 3) argue for an
organization to put analytics to work for decision-making the payoffs or benefits are the
following:

 Help manage and steer the business, as analytics provide managers tools to bet-
ter understand the dynamics of their business, anticipate how shifting trends and
market conditions will influence business performance.
 Make it easier to identify what is really working, as analytical testing can tell
whether an intervention is causing desired changes in business or whether it is
simply the result of random statistical fluctuations.
 Leverage previous investments in IT and information to get further insights, faster
execution and more business value in many business processes.
 Cut costs and improved efficiencies, as optimization techniques can minimize
asset requirements, and predictive models can anticipate changes in the market-
place enabling the organization to adjust quickly to slash costs and eliminate
waste.
 Improve risk management allowing more precise metrics.
 Provide a basis for improving decision-making over time, as using clear logic and
supporting data to make decisions, makes it easier to examine the process to
figure out how to improve it.
 46 (84)

Klatt et al. (2011) complement, sensible application of business analytics in practice can
add considerable value and improve decision-making. Supporting managers in under-
standing and structuring their business dynamics. Establishing assumptions and key en-
vironmental influences to allow for the testing of strategy strength to help reveal, what
can provide valuable insights into future strategic orientation. Improving leveraging effi-
ciency by speeding up task execution and helping to reduce the risk of time-consuming
mistakes by identifying previous causes of errors. Supporting learning from changes to
improve management’s understanding of market and customer behaviour that can be
used to anticipate future changes and also help to objectify decisions.

4.4 Information as a competitive asset

As we have described, the way in which organisations across the globe make business
decisions is evolving. Consumers are increasingly sophisticated, technology is rapidly
evolving, and competition continues to become more global. The advanced business
analysis tools and techniques unimaginable a generation ago, offer managers clues to
new opportunities to achieve competitive advantage (Fahey, 2009). Across industries,
organizations are realizing the many possibilities the quantum increase in the amount of
data available to the modern organisation creates. Leading organizations are investing
in innovation that leverages the ever-growing opportunities to collect new data, combine
external and internal data and apply big data and analytics to outperform competitors.
(Marshall, et al., 2015)

Consequently, the need to make the most of organizational knowledge, to get as much
value as possible from it, is greater now than in the past. As like Porrini & Starbuck (2015)
find, information and knowledge have become highly valuable in developed economies.
With information we refer to data that has meaning, which derives in organizational con-
texts from sense-making frameworks that reflect organizations’ properties, including the
different messages communicated internally and externally.

But as information changes rapidly, knowledge instead develops incrementally, because

it is the accumulation of information. This task calls for clear focus and even a little cre-
ativity. Because, like Axson (2010) describes the best practice organizations tend to
avoid relying on what exists today. Instead, these organizations seek out ways to provide
a distinct competitive advantage in better anticipating customer needs and in quickly
fixing operational problems. Making increasingly more advanced use of information.
 47 (84)

Therefore, the value of information is increasingly being recognised and it is considered

to be a key economic resource - one of the organizations most important assets.

An asset can be defined as something that has value. However, assets on their own are
not of much use, but the source of value comes from the opportunities that possession
of the assets creates. The same applies to data, it can deliver value only through effective
transformation i.e. the progression of knowledge discussed earlier, into an action or de-
cision. Such knowledge allows management to make decisions that will influence the
drivers of the change and improve future performance. For this to be realized, the organ-
ization’s processes and systems that generate data and produce information and
knowledge need to be aligned with the processes and people who derive insight, make
decisions, and put them into action. (Axson, 2010, pp. 156-157)

5 Empirical Study

This chapter is dedicated to the empirical research. We will first introduce the case com-
pany and use the PEST-analysis to go through briefly the general business context.
Then proceed further with describing the decision-making power in the company, the
finance function and the management reporting process. Concluding the chapter with a
current state analysis conducted using the SWOT analysis framework.

5.1 Case company overview

Tecnotree Group (hereinafter referred to as Tecnotree) operates in the field of telecom

IT solutions. Providing globally products and services for circa 90 telecom operators in
around 70 countries. The company’s products and solutions portfolio provides to telecom
operators, known today as communication service providers, the full range of business
management systems for the management of products, customers and revenue. The
business is based on system project sales, maintenance contracts, managed services,
and on customising, support and professional services. The corporation holds today a
strong footing, especially, in the developing markets, such as Latin America, Middle East
and Africa, employing globally around 1 000 people. (Tecnotree, n.d.-a)
 48 (84)

Tecnotree comprises of Tecnotree Corporation, headquartered in Finland, and its sub-

sidiaries. The main subsidiaries are Tecnotree Convergence Private Ltd, India,
Tecnotree Convergence Middle East, UAE, Tecnotree Ltd, Ireland, Tecnotree Sistemas
de Telecommunicação Ltda, Brazil, Tecnotree Argentina SRL, and Tecnotree (M) Sdn
Bhd, Malaysia. The company is registered and domiciled in Espoo, Finland. The parent
company Tecnotree Corporation is responsible for the group’s administration, strategic
planning, finance, financing and investor relations, and provides corporate services for
the operational business units. The parent company buys services from its subsidiaries,
such as sales, R&D, delivery, logistics and manufacturing activities, depending on the
role of the subsidiary. (Tecnotree, n.d.-c)

Tecnotree’s vision is a connected world, where personalized content, product and ser-
vice bundles are offered in digital marketplaces. The aim is that the products and solu-
tions produced enable the communications service providers to expand their business
by creating digital marketplaces, bundle services for every taste and boost customer
lifetime value. (Tecnotree, n.d.-b) This allows Tecnotree to build growth by enabling the
service providers to create such marketplaces. The growth is based on strengthening
the existing customer relationships as well as entering into new markets.

So that we can better understand decision making in the organization and the business
context, it is good to go through briefly the general factors affecting the current environ-
ment of the company. This is typically done using a PEST or PESTEL analysis - a tool
designed to understand the external macro environment in which an organization oper-
ates. That helps to better understand the market conditions, and as such recognize the
position, potential and direction for the business. Each letter of this acronym represents
a factor believed to affect the organization’s environment, namely: political, economic,
social, technological. Including additionally, in the broader PESTEL model also the envi-
ronmental and legal aspects. (Gupta, 2013)

The political factors of the environment present actual and potential restrictions on the
business operations. These restrictions can take the form of laws and regulations, tax
policies, trade and tariff regulations, i.e. the ways governments can intervene on the tel-
ecommunications markets. The economic aspects relate to the changes in the wider
economy such as economic growth, interest rates, exchange rates and inflation rate that
can all have an impact on the telecommunications market. The prevailing global tight-
 49 (84)

ened political situation brings tensions also to the business world. Besides, its own chal-
lenge creates as well the prolonged weak economic situation in Europe - cost savings
must be made and productivity needs to be increased without the loss of quality. Despite
the challenging situation, the company needs to be able to develop and create new and
this stresses finding an innovative way of working increasingly important.

The social factors include in the analysis the diverse cultural and demographic aspects
of the society, relating to e.g. patterns of behaviour, tastes and lifestyles. The socio-
cultural dimension of the telecommunications market has been strongly affected by the
change occurred in the customers’ preferences and life habits, concerning the commu-
nication channels used daily. The switch from voice to data traffic, that has led to the
Interned being the preferred communication channel, exploitable by the multitude of ap-
plications, which can be used on smartphones and other smart devices. This is driving
the expansion of digital marketplaces, opening many new business opportunities but
simultaneously competition is also intensifying. The technological factors relate to the
application of new inventions and ideas such as R&D activity, automation, technology
incentives and the rate of technological change. The speed of technological change is
especially important in trade sectors such as telecommunications, as it is practically
transforming the whole industry and the ability to remain competitive depends strongly
on the company’s capability to implement new technology

5.2 Decision-making power in the company

Tecnotree’s Annual General Meeting of Shareholders holds the highest authority and
decision-making power in the company. The board of directors, elected in the Annual
General Meeting, is the body who jointly oversees the activities of the company and is
responsible for the suitable organisation of business operations and corporate admin-
istration. The board shall also ensure that in the company the accounting and financial
administration are controlled appropriately. In addition, the board is accountable for pro-
moting the interests of the company and all its shareholders by pursuing to carry out a
business strategy that in the long‐term ensures the best possible return on capital in-
vested in the company. (Tecnotree, 2014)

The CEO of the company is appointed by the board, whose duty is to lead the operational
activities and be in charge of the performance of the corporation. The CEO shall also
ensure that the company's accounting is made in accordance with the legislation and
 50 (84)

that its assets are managed reliably. The board appoints as well the members of the
company’s management board. The members of the board are experienced profession-
als in different fields. Each member of the management board is the director of a function
in the company as depicted in the top management organization chart (Figure 15).
(Tecnotree, 2014)

Board of
Directors

CEO

VP, HR & VP, Europe VP, MEA &

CFO CTO R&D
Academy & Americas APAC

Sales, Customer
Statutory Sales,
Global Human Business Experience,
Accounting, Solution
Resources, Development, Revenue
Management, Management, Development
Global Solution Products,
Accounting, Marketing, Operations
Tecnotree Consulting, Customer
F&A BU’s Solution
Academy Delivery & Products,
Global IT Delivery
Support CTO Office

Figure 15. Organization chart - Top management

The management board described in the organization chart (Figure 15) is chaired by the
CEO. The duty of the management board is to support the CEO, manage and develop
the company’s operations in accordance with the agreed strategies and objectives, cre-
ate group‐level procedures, provide support to risk management processes, monitor the
global human resource policy and remuneration system, as well as, manage stakeholder
relations. (Tecnotree, 2014)

5.3 Finance function and management reporting

The finance function provides a broad range of different services to meet corporate, le-
gal, statutory, tax and compliance requirements. This includes transactional, administra-
tive, professional and technical services to support the business. As well as, delivering
financial and management reporting to support the core business activities and bring
 51 (84)

value for decision-making. The general reporting objective is to produce timely and rele-
vant information for decision-making.

The local finance teams of the operational subsidiaries support the day-to-day manage-
ment of the regional business operations and are responsible for the local bookkeeping
and other statutory obligations. The local finance teams need to also report to the head
office and ensure the accuracy of the figures reported. The head office finance depart-
ment, led by the group’s CFO, is responsible for producing the required group financial
statements for external reporting and internal accounting analysis and performance re-
ports to the management of different business units to monitor the profitability of the
business. All finance team employees have their own role in reporting and internal con-
trol, but the group’s CFO and the head office controllers hold the main responsibility for
those issues related to group management accounting, internal reporting and control. It
is also the role of the head office finance department to support, monitor, instruct and as
applicable offer training to the local finance teams.

The board of directors and the Group’s management need several financial and opera-
tional reports regularly; monthly, quarterly or annually. As the consolidated monthly re-
porting is done on the group level, the data must be collected from each subsidiary. The
head office controllers gather, analyse and edit the data of the parent company, and
require the equivalent data from the subsidiaries. Detailed description of the financial
reporting system architecture used is shown in Figure 16. In practice, it helps that the
company uses mainly a common ERP system, so the data for the different companies
can be also viewed at the head office. In addition, also some other source systems are
commonly used, which helps in the information consolidation. Hence, most of the data
of the different companies can be retrieved directly from these source systems at the
head office, when the necessary monthly reporting closure procedures have been com-
pleted. Standardized methods are used at all stages of the data collection process and
fully manual collection is minimized. Once all data is loaded into the consolidation sys-
tem, analysed, and group consolidation is done, reports are prepared, checked and an-
alysed and delivered to the relevant parties.
 52 (84)

Salesforce
Data providers –
Sales/CRM Management
Source Systems

P2P – Axapta QlikView

Purchase to Pay ERP System Management Reporting
System

Voyager(s) –
Traveling system EXTRACT

Spread Sheet Data -

i.e. Sales Order
GC7
Information
Statutory
Consolidation
Hyperion System
Project Mgmt
Systems – EXTRACT Consolidation
ProjectServer, Jira,
System

PMS, E-forecast

Figure 16. Financial reporting system architecture

The consolidated monthly actuals form the basis for further analysis, such as comparison
to budgets, targets and plans. Support information provides context and understanding,
which allows financial information to be linked to the underlying organizational activities.
This type of information is typically required to interpret and assess the significance of
the financial information, i.e. trends, interpretations or analysis.

Period reports are made on a regular basis at approximately the same format, which are
usually monitoring reports used for directing and supervising the activities. These reports
must be ideally drawn up quickly after the end of the reporting period and deviations, as
well as, other relevant information should be clearly visible. In addition, there are context-
sensitive ad-hoc reports, which are issued as needed, which often provide alternative
calculations, setting out clarifications for decision-making. The reported financial infor-
mation can consist of numbers and descriptions, including records, accumulations and
analysis concerning the financial consequences of the organizational activities relating
to the past or future.
 53 (84)

5.4 Current state analysis

The SWOT analysis is one of the basic analytical tools used to make a situation analysis
to determine where the company stands on the key strategic areas. This helps to better
understand the big picture of the most important factors that influence the survival and
success as well as build an action plan. More explicitly, the SWOT acronym refers to the
company’s internal potential and limitations, i.e. the strengths and weaknesses, and the
probable opportunities and threats in the external environment. This type of an analysis
helps to recognise the strengths, which make it easier to take advantage of the opportu-
nities and react against the threats. Similarly, the weaknesses identified should be taken
into account to find out how to meet the opportunities and defend from the threats. In
other words, making such an analysis of the organization’s environment helps to focus
activities into areas where the company is strong and where the greatest opportunities
lie. (Ifediora, et al., 2014) Current state analysis, carried out using the SWOT framework,
of the management reporting environment in the case company is shown in Figure 17.

HELPFUL HARMFUL

Strengts Weaknesses
- Vision, readiness for reform - Level of financial resources
- Openness to new ideas - Old tools / systems/
INTERNAL

- Experience coupled with new techniques/ approaches

knowledge - Process inefficiencies
- International standing - Gaps in internal
communication
- Staff motivation

Opportunities Threats
- New technologies - Funding unpredictability
- Access to international - Fast paced quantum increase
EXTERNAL

experience / co-operation in available information

- Streamline processes - Competition for talent
- Cost savings - Fear / opposition to change
- Define own destiny – view among staff
information as strategic asset

Figure 17. SWOT analysis: Management reporting

 54 (84)

Tecnotree’s clear strength is definitely a strong vision that is aspirational and inspira-
tional. As well, the readiness for reform and ability, if necessary, to implement changes
helps minimize risks, sustain performance and respond to change in ways that create
advantage. Management encourages employees to put ideas forward, which supports
creative thinking and development of an innovative working culture. Flow of information
and ideas up, down and across the business encourages the development of new ways
doing things and can also encourage business productivity.

The finance teams’ strength lies in diversity. Team members’ extensive experience of
many years on the job coupled with the fresh knowledge / skills of the younger employ-
ees enables building effective and multi-dimensional finance teams. Combining each
other’s strengths and drive provides as well a great environment for growth that can help
reach optimum results and strengthen the organization. The international position of the
company can be seen also as a strength, since the global organization enables diverse
international cooperation and knowledge sharing.

Organizations increasingly require more speed to adjust to the changes in the environ-
ment. The role of technology in meeting this challenge can be seen as increasingly
important. Therefore, some outdated tools and systems used in Tenotree’s management
reporting can be seen as a weakness. Because, these can slow down and complicate
the work and also cause extra costs. There is also a risk that these can prevent the
organization from developing and reduce the competitiveness. This is because, when
technology is utilized for routine work tasks, more time is available for analysis and de-
velopment. Some inefficiencies in techniques and processes can be also identified,
which may result in benefits lower than expected. Particularly, as considering the new
perspectives and possibilities is vital to adapt to the today’s constantly evolving business
environment.

There is also room for improvement in systematic internal communication, so that de-
sired information reaches employees at every level. Because, internal communication
handled in a systematic way is a powerful tool that can have tremendous potential for
positive outcomes – like building commitment, trust, job satisfaction, motivation and im-
proved performance. That can, among other things, enhance company reputation, or-
ganizational success and improve results. The uncertainty about funding needs to be
also seen as a weakness, because it creates a lot of tension and it also sets investment
 55 (84)

constrains that may slow down company development. In addition, the challenging situ-
ation of the company may also affect the employees’ motivation.

Investing in new technology provides many opportunities for Tecnotree to enhance its
management reporting process to more effectively support and add value for manage-
ment decision-making. Utilizing modern technological solutions in the collection, han-
dling, and presentation of information, gives more time for analyses and creates oppor-
tunities to add value. Modern technologies facilitate also access to information in real-
time, help optimize and rationalise the distribution of information, and offer interactive
user-friendly reporting solutions, which can contribute to increasing the usability of infor-
mation in decision-making. New solutions as well support the development of processes
that may globally help uniform information and reporting consistency. Thus, aid also in
streamlining the international processes and reporting, which can increase efficiency and
create opportunities for cost savings. Fundamentally, the company holds all the cards to
define its own destiny, i.e. by making the right choices to be in a strong position taking
the advantage of information as a strategic asset.

However, nowadays the business world have to contend with a wide variety of chal-
lenges. While the fast pace of technological development and quantum increase in the
amount of available information create many opportunities, these can be also viewed as
a threat bringing new challenges to efficiently process and analyze data etc. Especially,
considering Tecnotree’s current financially challenging situation, which may affect the
company’s capability to invest, it can pose a challenge to keep up with the pace.

As a result of the changing business conditions, the role of the finance function in organ-
izations has widened and deepened to meet the decision makers evolving information
needs, which has led to intensifying competition for analytically minded experts. This can
be seen as a threat, because, as the talent playing field gets more and more competitive,
it will become ever more challenging to attract and retain people with great potential,
which are much needed in order to win going forward. Therefore, it is vital the company
is able to offer a competitive workplace. Employees fear / resistance of change can also
create challenges and tensions in the work, in which case there is a risk that the peak
performance may be incomplete.
 56 (84)

6 Empirical Findings and Analysis

In this chapter, we will describe how the empirical data has been collected using the
online questionnaire. Then we will discuss and analyse the obtained results under the
following areas: background information, the use of financial information, quality of man-
agement accounting reports, development areas of management accounting reports and
suggestions for improvement in management accounting reports.

6.1 Online questionnaire

The research questionnaire was carried out online. This distribution method was selected
due to its versatility, convenience, efficiency and affordability to implement a question-
naire in which selected respondents are scattered across the globe. The online ques-
tionnaire responses are also stored automatically in a database, which enables hassle-
free management of data and as a result a smaller possibility of data errors.

The aim of the online questionnaire was to find out, how the reported management ac-
counting information can better support efficient decision-making within the organization.
The questionnaire (see appendix 2) was constructed based on the literature review and
observations made as to allow groups of questions to provide results pertaining to the
research questions to meet the study objectives. The questions follow a logical progres-
sion with simple themes to group the questions to sustain the interest of the respondents
and stimulate question answering. These themes were as follows: background infor-
mation, the use of financial information, quality of management accounting reports, de-
velopment areas of management accounting reports and suggestions for improvement
in management accounting reports.

The online questionnaire was carried out using a software, called E-lomake, offered by
Metropolia University of Applied Sciences that allows to create and publish user-friendly,
easy to fill online forms, which can be easily targeted to the desired respondents group.
The responses are, as well, stored automatically in a database and by using the software
the information can be browsed online. Also the saved data can be simply transferred to
a spreadsheet and / or statistical software for further analysis. In this study, the question-
naire results have been organized and analysed in the Microsoft Excel spreadsheet. Nu-
merical values have been assigned to the non-open-ended questions for the data anal-
ysis. Qualitative analysis for the open-questions was also conducted following thematic
 57 (84)

analysis principles. That is an analysis method commonly used to identify, categorize

analyse, and report patterns of meaning (themes) in a qualitative data set to provide
answers to the research questions addressed. The aim of this analysis is to organise
and describe the data set in rich detail. Thematic analysis is not tied to any particular
outcome form - the result can simple be a list of themes, a complex model building the-
matic networks, or something in between. Given this flexibility of thematic analysis, it can
used within different frameworks to gain insight and knowledge from the data gathered.
(Braun & Clarke, 2006)

The respondents were selected using purposive sampling, which is a non-probability

sampling technique used in which the researcher selects the respondents based upon
variety of criteria that are essential to the research dependent on the research questions
and objectives. This basically means that the sample selection is based on the re-
searcher’s judgement. (Saunders, et al., 2009, pp. 237-239) Considering the objectives
of this study, as the target group of the questionnaire was selected the case company’s
management, which was believed to use financial information in decision-making at
work. The target group included, senior management, middle management, as well as
experts – a total of 48 people.

The online questionnaire was completed between 12th of November, 2015 and 27th of
November, 2015. An email (see appendix 1) was sent out to each respondent including
a link to complete the questionnaire, which explained the purpose of the research and
its relevance. The online questionnaire included a welcome screen that intended to cap-
ture the people’s interest and encourage them to proceed. A reminder email was sent to
all respondents to participate in the questionnaire. The participation to the questionnaire
was anonymous. Contact information of the researcher was provided in the emails and
in the online questionnaire, so that it was easy for the respondents to contact in case
there were any questions. A total of 25 people from the target group responded to the
questionnaire, which gave a response rate of 52 %. The more detailed results of the
questionnaire are presented in the following sections of this chapter under the earlier
introduced theme groups.

6.2 Background variables

In background variables, the first section of the questionnaire, the respondents were
asked to answer questions about their region, current position in the organization, how
 58 (84)

long they had been working in the organization and their requirement for reports contain-
ing financial information at work. As the section name indicates, the intention of these
questions was to profile the background of the respondents. In relation to these variables,
we will also analyse some questionnaire results, as it is possible, so that the respondents
cannot be identified. The following figure (Results 1) presents a summary of the answers
to these questions.

Region Europe Position

44% Executive
APAC
12%
20%
Senior
Middle Management
Management 48%
40%

MEA
24% LatAm 12%

Years in the company

Less than 2
10+ years
years
32%
28%

6 - 9 years 2 - 5 years
12% 28%

Results 1. Background variables – Region, position and years in the company

Most of the respondents, 44 percent, were from Europe region. The second highest num-
ber of responses, 24 percent, came from MEA (Middle East and Africa) region. From the
APAC (Asia-Pacific) region 20 percent of the responses were received and only 12 per-
cent of the answers came from LatAm (Latin America) region. However, it is important
to note that this is not directly proportional, since equal number of questionnaires were
not sent to each region. Because the target group was not evenly distributed among the
regions.

The senior management was the most active respondent group. Their share of the total
respondents was 48 percent. The second most active respondent group was middle
management, which accounted for 40 percent. The executives accounted for 12 percent
 59 (84)

of the questionnaire responses. The division among these groups was not either equal
in the target respondent group, so these figures cannot be directly compared with each
other. However, this clearly shows that the selected respondents are placed in the or-
ganization in line with the study objectives and are eligible to answer the questions.

In general, most of the respondents were experienced and had long working careers.
The majority of the respondents, 32 percent, had worked for the company for over 10
years. Out of the respondents, 28 percent, had worked in the company for 2 to 5 years.
As well as, the share of respondents (28 percent) who had worked in the company for
less than 2 years. The proportion of respondents who had worked in the company for 6
to 9 years was 12 percent.

All respondents stated that they need reports containing financial information in their
work. In case a respondent would have experienced that they do not need these reports
at work, this answer would have automatically directed the questionnaire straight to the
final section concerning the suggestions for improvement in management accounting
reports. At this point, there was also an open question, in which the respondents had an
opportunity to explain why these reports were not seen necessary at work. Because none
of the respondents felt this way, there is no further analysis in this regard. Nonetheless,
this result reassures the validity of the respondent group to answer the set questions.

6.3 The use of financial information

In the next questionnaire section, respondents were asked questions to survey how often
in general they used reports containing financial information at work, how important they
perceived it to have these reports available to support in different activities, how the
available financial information was considered to be used in their organization and
whether the information was viewed as a strategic asset.

As the below figure (Results 2) shows, most of the respondents (71 percent) used reports
containing financial information at work on a monthly basis. One fourth (25 percent) of
the respondents used this type of reports quarterly. Some respondents (4 percent) also
used such information only semi-annually.
 60 (84)

Monthly;
80%
71%

60%

40%
Quaterly;
25%
20% Semi-
Annually;
4% Annually;
0%
0%

Results 2. The time interval in using reports containing financial information at work

To measure the perceived significance of the availability of reports containing financial

information to support in different activities, respondents (Results 3) were asked to rank
the importance of having such reports for each activity on a scale that includes very
important, somewhat important, not very important, and not at all important.

Results 3. Importance of financial information availability

As the most important, respondents perceived to have reports containing financial infor-
mation available to support in developing long-term plans and strategies. The respond-
ents were in agreement that it was either very important (72 percent) or somewhat im-
portant (28 percent). In the other activities, there was more dispersion in the responses.
The most widely respondents answered to the three activities concerning planning goals
and objectives, allocating the resources and assessing the organizations competitive
position. Meaning that in respect to these the differences were the greatest in the per-
ceived importance of having reports containing financial information available to support
 61 (84)

in these matters. Out of the respondents 80-84 percent ranked having these reports
available to support at least somewhat important. On the other hand, 16-20 percent of
the respondents slightly contradictorily perceived that it is not very important or not at all
important to have these reports available to support in these matters. Respondents had
somewhat different views of the importance to have these reports available to support in
directing and controlling the performance and motivating the teams towards the organi-
zation’s goals. In both, 8 percent of the respondents were of the opinion that it is not very
important. The rest of the respondents described that it is either very important or some-
what important. The more detailed importance rank results of each activity have been
depicted in the previous figure (Results 3) above.

Then the respondents (Results 4) were asked to select the option best describing how
the available financial information was used in their organization. The clear majority of
the respondents (64 percent) thought that about half of the valuable information was
probably utilized. One fifth (20 percent) of the respondents felt that nearly all of the infor-
mation that is of real value was well used. In turn, 16 percent saw also that vast quantities
of information was unexploited.

Information (Results 4) was viewed as a strategic asset by 80 percent of the respond-

ents. The rest of the respondents (20 percent), did not experience that information would
be considered as a strategic resource in their organization. Reasons mentioned for this
were lack of information sharing, lack of prioritization, inability to receive the right infor-
mation. Also was expressed that the information is needed more often and in a more
detailed level, so that it could be a strategic asset of the organization.

Use of available financial Information - Strategic Asset

100%
information Nearly all
Vast quantities of information is 80%
80%
information go used well 20%
untapped
16% 60%

40%
Probably about half of valuable
information is utilized 20% 20%
64%
0%
AGREE DISAGREE

Results 4. Use of available financial information and role as a strategic resource

 62 (84)

6.4 Quality of management accounting reports

In the following questionnaire section, the respondents were asked to describe the qual-
ity of management accounting reports. Questions were asked in this theme to survey if
respondents received the necessary management accounting reports on performance
relative to established objectives and whether the information provided was in sufficient
detail and on-time to enable carrying out decision-making efficiently. In addition to this,
respondents were asked to indicate their opinion about statements measuring the quality
of the current management accounting reports considering the decision-making perspec-
tive.

As can be seen from the figure below (Results 5), the necessary management account-
ing reports on performance required to reach the objectives received 68 percent of the
respondents. In contrast, 32 percent of respondents felt that the information obtained
was incomplete. In the open comments, respondents pointed out that the reports were
not received on a regular basis, only the monthly expense reports were received or it
was difficult to obtain the operational costs for the sales team. One of the respondents
expressed that it is important to receive reports regularly to compare actuals to budget.
Another respondent stressed that it is important to get information to enable advance
planning and to avoid last-minute decision-making.

In the opinion of 56 percent of the respondents (Results 5), the information was provided
in sufficient detail and on-time to enable efficient decision-making. On the contrary, 44
percent were of the opinion that there are gaps and challenges. In the open comments,
the respondents mentioned that challenges brought to have only the consolidated top
level of the information (which has not been allocated by cost center nor by project), the
time it sometimes takes to get the required information, the availability of information
more frequently or on request. Also was mentioned that at times it is not clear what the
numbers mean or that the information is subject to change so that re-validation is
needed. As well, room for improvement was seen in the quantity of redundant infor-
mation. A few of the respondents also suggested online “links” to be made available for
self-service all the time. In addition, one of the respondents pointed out the added value
of more detailed information available via Qlikview.
 63 (84)

Necessary information obtained Sufficient detail and on-time

100% 100%

80% 80%
68%
60% 60% 56%

40% 40% 44%

32%
20% 20%

0% 0%
AGREE DISAGREE AGREE DISAGREE

Results 5. Necessary information obtained with sufficient detail and on-time

To measure the quality of the management accounting reports considering the decision-
making perspective, respondents (Results 6) were asked to rank their agreement with
statements on a scale that includes strongly disagree, disagree, neither agree nor disa-
gree, agree and strongly agree.

Results 6. Quality of management accounting reports

The figure (Results 6) above illustrates the respondents' opinions on the quality of the
management accounting reports considering the decision-making perspective. The re-
spondents almost completely agreed (80 percent) that it is probable they will act on the
basis of information obtained from these reports. Otherwise, there was more dispersion
in the responses. Meaning the agreement with the statements shown was more clearly
divided. Out of the respondents 50-60 percent, agreed or strongly agreed with relying on
the accuracy of the reports as well as the adequacy of the information contained in the
reports. Instead less than half of the respondents agreed or strongly agreed with the
 64 (84)

other statements. Out of the respondents 36-48 percent, agreed or strongly agreed that
the information received was up-to-date, required information was readily available, and
the reports were easily comprehensible. Respondents agreed the least on that the re-
ports were clear and illustrated, as well as the general satisfaction with the current man-
agement accounting reports. Under 29 percent of the respondents agreed or strongly
agreed with these statements.

Interesting was in the responses that 52 percent of the respondents did not take a posi-
tion, i.e. neither agreed nor disagreed, whether was pleased with the current manage-
ment accounting reports. Likewise, 36 percent of the respondents did not express any
position regarding whether the required information was readily available or if the reports
are clear and illustrated. Out of the respondents 36 percent, were of the opinion that the
reports are not clear and illustrative. With the reported information received to be up-to-
date and ready availability of required information, disagreed or strongly disagreed 28
percent of the respondents. Not satisfied, in disagreement or strong disagreement, were
24 percent of the respondents with the reports easy comprehensibility and satisfaction
of current management accounting reports. One fifth of the respondents, 20 percent,
disagreed or strongly disagreed with the accuracy of the reports and the adequacy of the
information contained in the reports. Only 4 percent of the respondents did not see it
likely they will act based on the information obtained in the reports. The more detailed
agreement rank results with each statement have been depicted in the previous figure
(Results 6) above.

6.5 Development areas of management accounting reports

After this, in the next questionnaire section, respondents were asked to think about the
information required for decision-making and the available management accounting re-
ports and to describe if something was missing in these reports. In addition, respondents
were asked to select the typically perceived challenges (up to three) in their organization
to extract value from the current management accounting reports to support decisions.

The aspects perceived to be missing in the management accounting reports from the
decision-making perspective were inquired with an open question. Overall, 19 respond-
ents (76 percent) expressed their opinions (Figure 7). Similar answers were classified in
the same category and these classes were given descriptive names based on the con-
tent. These eight basic theme categories derived from the textual data were: content,
 65 (84)

schedule, distribution, lack of uniformity, accuracy, analysis, appearance and forecast.

The analysis was continued and these basic themes were further refined and placed into
three upper level theme clusters of signification. That summarize the principal assump-
tions of a group of basic themes, in order to more clearly describe what the text says.
These upper level theme clusters were getting the right information, quality of reports
and relevance - ability to influence decision-making. Influence encompasses these all
and describes as a whole what the meaning of the text is within the context of the analysis
performed.

Some respondents felt that the reports lack information such as product performance,
customer and customer group profitability, or actual versus budget for each cost center
and rolled up summary. Others saw that reports are needed to monitor cash flows and
the comparative profitability of various businesses to ensure correct resource allocation
between various alternatives. In addition, getting the information on time or not receiving
the reports was as well mentioned as a challenge. The responses also indicated that
consistency and accuracy was needed. Furthermore, the responses revealed that more
in-depth analysis was desired. As well, the responses showed that the appearance of
the reports should be user-friendly, easy-to-read, customizable, and include some graph-
ical presentation of the trend. Few responses also brought up the importance of fore-
casting.

Considering the decision-making perspective the named issues relating to the content,
schedule and distribution affect the ability to get the right information. While lack of uni-
formity and accuracy impact the quality of the reports, which may undermine their cred-
ibility. Analysis, appearance and forecast again affect the relevance of the reports, i.e.
ability to influence decision-making. The lack of these can reduce the usability of the
reports, so that the desired benefits cannot be attained. The combined effect of these
reflects the overall usability of the reports in the managerial decision-making process.
 66 (84)

FLAWS / MISSING INFLUENCE

 Opex Expenses / P&L per cost center are missing
 Cash flow reports are missing, only see public information
on quarterly basis
 Project and Product performance missing from the reports
 We may need more reports on the comparative profitabil-
ity of various businesses to ensure that we allocate our re- Content
sources correctly between various alternatives
 Market share, customer and customer group profitability, Getting the
product profitability right infor-
 Continuous top 5 investment opportunities
 Actual versus budget reports for each cc & rolled up report mation

 Opex Expenses are not received on time

 P&L per cost center are not received on time Schedule

 We don´t receive information

 I would like to receive these reports in order for me to Distribution
comment

 Some reports are very focused some of them are not. They
do not clearly aid in controlling the resources in an efficient Lack of
manner and thus identify areas to optimize cost uniformity

 Lots of reports are done manually and the accuracy is a

Quality of
challenge
 Consolidation, accuracy of information reports
 There is not an awful lot of costing and its breakdown Accuracy
 More detailed project cost reports
 More emphasis on project profitability reporting with right
level of details

 Explanatory notes, reasoning, analysis

 Pricing structure not followed and analysis not done after
the project is delivered
 Some analysis required when needed Analysis
 More written analysis on the meaning of the numbers to
support decision-making
 Analysis of reasons for deviations from plan

 Reports are not user-friendly, we can’t customize to our

needs. Lot of manual intervention needed Relevance – ability to
 Project actual costs, rev rec & invoicing/payments in an
easily readable form would help influence decision-
Appearance
 Graphical presentation of the trend and the budget making
 Reports can be simplified to improve readability & under-
standability

 Historical data of information for the last 5 years needed

in forecasting
 12 months rolling projection of sales and profitability Forecast

Results 7. Missing factors in the management accounting reports and their impacts

The respondents (Results 8) typically perceived, as the main challenges to extract value
from the current management accounting reports to inform decisions, the access to the
right information (20 percent) and the lack of analysis involved (20 percent). After this,
the most significant challenges were seen to be the timeliness of the reports (14 percent),
as well as getting the information to the right people within the organization (14 percent).
 67 (84)

Some respondents felt as the challenge the information accuracy and reliability (13 per-
cent). The least were considered as challenges the quantity of information to identify
what is essential (9 percent) and the lack of flexibility and interactivity (9 percent).

Access to the right information 20%

Lack of analysis involved 20%

Timeliness of the reports 14%

Getting the information to the right
people within the organization
14%

Information accuracy and reliability 13%

Quantity of information to identify
what is essential
9%

Lack of flexibility/interactivity 9%

0% 10% 20% 30%

Results 8. Typically perceived challenges to extract value from management accounting reports
to inform decisions

At the regional level (Results 9), the differences in the challenges perceived stand out
more clearly. In the MEA (Middle East and Africa) region, the main challenge was seen
the access to the right information. In addition to this, major challenges were considered
the information accuracy and reliability and the lack of analysis involved. While in the
APAC (Asia-Pacific) region, the most significant challenge was seen the timeliness of
the reports. In addition, as the main challenges were considered the accuracy and relia-
bility of information and the access to the right information. As equal challenges were
seen in the LatAm (Latin America) region access to the right information, timeliness of
the reports and the lack of flexibility and interactivity. As the most significant challenge
was seen in the Europe region, the lack of analysis involved. In addition, as the other
major challenges were perceived getting the information to the right people within the
organization and access to the right information
 68 (84)

MEA APAC LatAm Europe

LACK OF FLEXIBILITY/INTERACTIVITY

LACK OF ANALYSIS INVOLVED

QUANTITY OF INFORMATION TO IDENTIFY

WHAT IS ESSENTIAL
GETTING THE INFORMATION TO THE RIGHT
PEOPLE WITHIN THE ORGANIZATION
TIMELINESS OF THE REPORTS

INFORMATION ACCURACY AND RELIABILITY

ACCESS TO THE RIGHT INFORMATION

0% 10% 20% 30% 40%

% by region

Results 9. Regional division of challenges

The respondent also had an opportunity to name other challenges and comment by using
an open comment space. A couple comments were made. One respondent highlighted
the lack of interactivity and stated it is not easy or possible other than by aggregating
manually previous reports to combine, filter, view or analyse information over a time
frame other than the one given by the report (e.g. monthly). As a challenge was also
seen that reports are distributed and can't be fetched on a needs basis (includes timing,
content etc.). Another respondent brought up that the analysis part is missing.

6.6 Suggestions for improvement in management accounting reports

To conclude the questionnaire, respondents were asked to give suggestions for improve-
ment in management accounting reports that could increase the utilization and support
better informed decision-making. In addition, respondents were also asked to select what
opportunities (up to three) they see the increased availability of information could bring
in their organization.

The suggestions for improvement in management accounting reports were inquired with
an open question. Overall, 17 respondents (68 percent) expressed their opinions (Re-
sults 10). The textual data was carefully analysed to identify patterns and develop
 69 (84)

themes. Based on similarity the identified themes were as follows: reports, details, anal-
ysis, and qualities. As a whole the ability to increase the use of management accounting
reports and support better informed decision-making, encompasses all the above men-
tioned themes within the context of the analysis performed.

Some respondents pointed out different reports, which could increase the use and better
support decision-making. These included a more detailed report on monitoring the ex-
penditure, budget and forecast reports updated on a monthly basis, actual versus budget
reports, project and product reports as well as headcount and personnel costs report.
Others wanted to see more details, such as the cash flow situations, project cost and
profitability reports, real man-day costs, traveling resources per customer/project, or cost
separation per local site resources. In addition, respondents brought up the need for
analysis, i.e. the reports should include supportive analysis and interpretation, trends of
key indicators, planned versus implementation analysis and learning to next cases and
more detailed analysis of profitability of various regions, businesses and new ideas.
Qualities desired in the reports were also named, like on time, accurate, reliable and
comprehensive reports; easily understandable, relevant, concise and customized to suit
the organizational dynamics to facilitate faster decision making; more interactive report-
ing between finance and its stakeholders, i.e. two-way communication.
 70 (84)

Increase the use of management accounting

reports and support better informed
decision-making
Reports Details Analysis Qualities
 Budget and forecast  Would be helpful to  Interpretation and  Accurate, reliable
updated monthly see cash flow situa- analysis to support and comprehensive
 P&L per sub- tions in detail the reports reports
costcenter  One level down in  Reports including  Customized reports
 A more accurate re- more detailed Pro- analysis and trends for each function
port to track where ject cost reports, of key indicators  An accurate on time
the money is spent costs per tasks  Planned versus im- report. Timing is all
and why have not  One level down in plementation analy- important
achieved what was real man days costs sis and learning to  Project actual costs,
initially planned  Cost separation per next cases rev rec & invoic-
 Financial Planning local site resources /  More detailed anal- ing/payments in an
reports would be traveling resources ysis of profitability easily readable form
crucial per customer and of various regions,  Reports need to be
 Actual versus per project businesses and new even more easily
budget reports for  Project profitability ideas understandable, rel-
each cc & rolled up reports with right evant, concise & a
report level of details bit customized to
 Project and product suit the organiza-
accounting reports tional dynamics to
 Report about head facilitate faster de-
count and general cision making
cost (social charges  More interactive re-
benefits + bonus porting between fi-
etc.) and the break- nance and its stake-
down of personnel holders - two-way
BY Cost and their in- communication
crease or decrease
costs.

Results 10. Suggestions for improvement to increase the use of management accounting reports
and support better informed decision-making

The respondents considered (Results 11) increasing profitability as the strongest oppor-
tunity (25 percent) of increased information availability. Opportunities were seen also to
streamline business processes (20 percent), inform strategic direction (18 percent), and
boost productivity by better utilization of resources (17 percent). Possible benefits were
perceived to be grasped as well to improve product/service quality (7 percent) as well as
to grow market share and revenue (6 percent). As the result of increased availability of
information, little to no benefit were seen to get closer to customers (4 percent) or reduce
staffing (3 percent).
 71 (84)

Increasing profitability 25%

Streamlining business processes 20%

Informing strategic direction 18%

Boosting productivity - utilization of resources 17%

Improving product/service quality 7%

Growing market share and revenue 6%

Getting closer to customers 4%

Reducing staffing 3%

0% 10% 20% 30%

Results 11. Opportunities seen as the result of increased availability of information

There were some differences in the opportunities seen by position (Results 12). Senior
and middle management found increasing profitability the greatest opportunity, as the
result of increased availability of information. By contrast, the experts perceived as the
most important opportunities, better utilization of resources to boost productivity and
streamlining business processes. Senior and middle management saw as the second
most significant opportunities, informing strategic direction and streamlining business
processes. However, need to note that there was a bit more dispersion in the middle
management responses and the percentage shares of these were a few units lower.
Otherwise, the experts experienced some opportunities in increasing profitability, inform-
ing strategic direction, and improving product/service quality.

Results 12. Opportunities seen by position

 72 (84)

The respondent also had an opportunity to name other opportunities and comment by
using an open comment space. A few comments were gathered. One respondent felt
that it is important to be able to generate accounting reports per account in order to
measure the overall performance of each account for better decision making. The overall
company reports were seen helpful for shareholders and strategic decisions but not nec-
essarily to give the required direction to mid-level management for making decisions
regarding their own territory. Another respondent mentioned the cost savings and attain-
ing the organizational objectives. One respondent stated knowing the places to put more
money and where to cut and stop the activities.

7 Discussion and conclusions

In this final chapter, we will conclude the findings and discuss the most relevant ones in
a general level. This discussion will be undertaken in the light of the research questions,
which were presented in the Introduction chapter of this study. Secondly, based on the
study findings we will present some recommendations for the organization. Furthermore,
some suggestions for further research will be given.

7.1 Discussion of results

Given the accelerating pace of business changes and the significant amounts of infor-
mation available to businesses using modern technology, obtaining useful, quality infor-
mation is essential to take on business decisions. The purpose of this study was to ex-
plore how the current management accounting reports correspond to the management
information needs and to identify how management reporting could be improved or sup-
plemented, so that the reports would benefit the organization's management and better
support informed and efficient decision-making within the study organization. More ex-
plicitly, the study sought to provide answers to the reports usability, quality, perceived
challenges to extract value to support decisions, and development directions. The aim
was to respond to one main research question, as well as three sub-questions. The an-
swers to these questions based on the study results are presented below, starting with
the sub-questions which aim to support more detailed exploration of the main question.
 73 (84)

To what extend does the management make use of the current management accounting
reports - how useful are these perceived?

The usability of the current management accounting reports was studied from many dif-
ferent angles. The study results showed that the majority of the organization’s manage-
ment used the reports containing financial information at work on a monthly basis, thus
the overall utilization rate can be considered good.

Having reports containing financial information available to support decision-making was

seen as important to the organization’s management in many areas. Above all significant
was perceived to have these reports available to support in developing long-term plans
and strategies. As well, clearly necessary was considered to have these reports available
to support in planning goals and objectives, as well as, directing and controlling the per-
formance. Regarding utilization of the financial information, the study results indicate in
most of the cases currently about half of the available information is utilized. Which is a
strong indicator of the need, to pay more attention in the future to utilize available finan-
cial information more comprehensively in the organization.

The results of the study show that the reported financial information affects decision-
making and management is likely to act on the basis of the information received. How-
ever, some essential things are evident from the results that can facilitate and enhance
the usability of information to support decision-making. First of all, a prerequisite for the
usability is to pay attention to the fact that the necessary information reaches the right
recipient. Secondly, need to ensure the information is reported in sufficient detail and on
time.

Somewhat unfortunate for the study results was the fact that many did not tell how
pleased they were with the current reports, which leaves open the general satisfaction.
Consequently in the future, it is particularly important in the management accounting
reports, to emphasize highlighting essential information, clarity, accuracy and con-
sistency in order to support the decision-making in the best possible way.

What challenges are seen to hinder the utilization of reported management accounting
information in decision-making?
 74 (84)

The results of the study show that it is important to pay attention to the accessibility to
facilitate the effective use of information in decision-making. In other words, it is the
question of awareness that who needs the reports and what reports are required. There-
fore, it is necessary to ensure smooth, timely flow of information to make it possible to
develop processes. However, it is worth to note that if there is too much information,
there is a risk that the relevant information remains in the shadows and as a result un-
exploited in decision-making.

Reliability and quality of reporting is also essential to invest in, because this directly af-
fects the relevance of information. The accuracy of the reports is as well fundamental.
According to the results, manual reporting poses challenges, as the data processing is
slow and the margin of error possibility increases. Therefore, it is essential to minimise
this in future, as it is important to be able to produce consistent reports, in order to avoid
misperceptions and ensure clear understanding of the reports. In addition, special atten-
tion needs to be paid to user friendliness, right level of detail and analysis to increase
the reports scope of usability and meet the management information needs as well as
possible.

What kind of management accounting reports should be produced in the future to support
the management activity - what issues should be considered?

In light of the results, it is going to be even more important in the future to highlight the
key information in the reports. Because more and more information will be available,
careful consideration will be required to understand what kind of information should be
reported in which from to bring the most value to the company. This is indispensable to
enable efficient, informed decision-making.

To build value, the results show that in the future the organization will increasingly need
to focus on producing analytical reports effectively. Because, this enables a deeper un-
derstanding of business situations and future prospects. Time has also become valuable
in today's interactive world, and, thereby, it should be possible to get quickly the infor-
mation required. This will be even further emphasized in the future to facilitate faster
decision-making. Also, the ability to create customised reports on demand will be signif-
icant. Since they allow in certain circumstances, just the data and format that will meet
the user’s needs the best. Besides, it should be noted that active two-way communication
is required in order to produce high-quality analytical reports cost-effectively.
 75 (84)

How the reported management accounting information can better support in-formed and
efficient managerial decision-making process?

In summary of the results, it can be stated that it would be good to pay attention to the
flow of the reporting process in the future, so that the right information reaches the right
recipient. Attention should be paid as well to keeping to the schedules to avoid delays in
the reporting process, in order to leave management enough time to analyse the infor-
mation. This requires all parties commit to staying on schedule. Smooth progress of the
traditional monthly finance close process should also be ensured, in order to allow more
time for interpretation and analysis of the information.

As well, it would be important to make assessments of the quality and content of the
reports in order to guarantee the reports’ usability and accuracy to support their rele-
vance in decision-making. In addition, should strive to keep the reports clear and uniform,
in order to assure their quality. In terms of the content, the reports will need to contain a
more in-depth and analytical approach in the future to achieve the optimal benefits from
the use of reports in decision-making. As a result of the abundance of information, will
need to as well focus on clarity and compacting the reports to ensure the relevant infor-
mation is displayed, so that it will be used in decision-making.

In order to develop the reporting to the desired direction, open communication and mul-
tidirectional flow of information is required. Everyone must understand the importance
and the objectives of the reporting process and what their role is in this. As only together,
can create the ground rules for constructive and cost-effective development. Because,
particularly in today's challenging economic climate opportunities for additional resourc-
ing are limited and development should therefore aim to build on the internally already
existing organizational resources. In practice, the question is often of prioritization and
effective organization of tasks.

Furthermore, the results indicate that more emphasis should be put on seeing the finan-
cial information as a strategic resource to reach a more holistic understanding of this in
the organisation. Since, in the future understanding information as a strategic resource
of the organization will be even more important with the increasing opportunities of new
technological developments. Through the understanding of the strategic asset, organi-
zation strengthens and the ground for growth and development is fruitful.
 76 (84)

7.2 Recommendations

Based on the results summarized above, the following recommendations are made to
improve management accounting reporting in order to support managerial decision-mak-
ing as effectively as possible and as well help create business value within the study
organization.

The findings of this study suggest that more attention should be paid to getting the right
information to the right people in time to support decision-making, because all did not
receive the reports they needed. This is important because information can only acquire
value through the ability to influence the decisions made by the users. This means that
the utilization of a report is an important benchmark for its value, which is substantially
affected by the availability of reported information on time. In addition to this it is also
essential, as we have gone through, the information is relevant and accurate, to have
value for the decision maker.

Considering the current information and technology driven economy, the significance of
understanding information sharing and the practice is emphasized for organizations to
stay competitive and increase profitability. Thus, it is particularly important to ensure
clear distribution of information to make sure all would have the right tools available to
do the job. This distribution of information should be consistent and clearly guided. It is
also important to clarify, whom to ask for the missing information if necessary, so the
lack of information does not affect the work. Openness and broad dissemination of infor-
mation are also seen to strongly support organizational learning, sense making and cre-
ation of new knowledge for decision-making.

The study findings also indicate that it is vital to emphasize the overall user experience,
to increase the reports usability in decision-making. The value for the end user is typically
associated with the perceived usefulness. This supports the fact that the report value is
closely linked with usability, which tends to strongly reflect the perceived satisfaction with
the information. Usability itself means much more than just easy to use. Often this is
evaluated against the user’s requirements for success and satisfaction. Practically, this
means understanding the situational aspects of management reporting needs and what
may seem obvious that the reporting requirements are driven by the information recipi-
ents’ needs, not the calendar or system processing cycle. That is to say, reporting needs
to be increasingly tailored to the individual recipient.
 77 (84)

Consequently, in today's global digital world, the reported information should be to an

increasing extent readily available in an interactive environment, in order to, build a pow-
erful real-time, high-quality distribution channel of information. This typically means
dashboard type of reports presented in a web environment, which have been produced
using business discovery platforms like Qlikview. That allow faster data processing ca-
pabilities to have the information constantly updated. Give users possibilities to apply
various filters on the data to view the information from different perspectives and, addi-
tionally, bring together powerful visualization and real-time analysis opportunities to dis-
cover insights.

Based on the study results, it should be as well noted that high-quality, multi-level com-
munication and interaction play an important role. Effective communication helps to see
the common objectives of the organization. Open dialogue is clearly also seen to support
better engagement and efficiency. Consistent, high-quality and multi-directional commu-
nication supports as well information sharing within the organization. Consistency and
transparency are important factors in all organizational communication, but particularly
in financial communication. Because effective financial reporting requires the figures to
be communicated in a way that is meaningful and understandable to the target audience,
otherwise it is just numbers with no real significance.

It is not just important that the right information reaches the right recipient, as efficiently
as possible, but the information sharing and the depth of the interaction must be consid-
ered on many different levels in order to achieve the best results. This is one prerequisite
to have the most accurate and timely reports available to support effective decision-mak-
ing. The objective should be effective two-way communication, which provides a good
framework for co-operation and building trust. Thus, providing an excellent environment
for development and creation of added value for the business.

Additionally, the study results suggest focus should be given to adding more analysis to
the reports, in order to bring a more in-depth view to support decision-making. Even
reporting and analysis are sometimes used interchangeably, these are quite distinct from
each other and it is important to note. Simply put, reporting is about converting data into
information - the process of constructing, arranging, consolidating, formatting, and sum-
marizing. Whereas analysis requires a more custom approach to interpret data at a
deeper level to extract actionable recommendations – turn information into insights.
 78 (84)

However, this is not the question about identifying which one, reporting or analysis,
brings more value, instead it is important to understand the essential roles of both in the
overall picture that should help support business success and growth. Reporting rarely
alone leads to action and analysis can be thought of as building the bridge between data
and action. Making the analysis does not guarantee the right decisions, activities on the
basis of insights, business guidance in the right direction or that the teams will put the
right choices to effective use in practice. However, it is a necessary step closer to action
to realize the information potential as business value.

7.3 Suggestions for further research

It is important to carry out further research, to develop the management reporting to meet
today’s rapidly changing requirements. In light of the study results, one possible further
research topic, which could be good to address, is how the usability of the management
accounting reports could be improved. This could be done as a qualitative interview
study, in order to collect from the reports’ users the most comprehensive view of the
direction in which reporting should be developed to make it the most user-friendly.

Another further research topic could be to examine the communication strategy, as well
as, the best communication channels in the organization, so that the flow of information
would be the most effective, comprehensive and the right information reaches the right
recipient in a cost-effective manner. A third suggestion for further research, could be to
explore the possibilities to streamline the monthly reporting process to allow more time
for management to analyse the reported information.
 79 (84)

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 Appendix 1
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Appendix 1: Survey invitation

Dear All,

You are being invited to participate in a research study that is part of my master’s thesis
at Helsinki Metropolia University of Applied Sciences. The purpose of this research is to
understand, how the reported management accounting information can better support
efficient decision-making within the organization.

The responses will be held as strictly confidential and the participation is anonymous.

Your help would be greatly appreciated. To do so please click on the following link,
https://elomake.metropolia.fi/lomakkeet/14913/

Kindly note, the survey is open until the 27th of November 2015.

Thank you in advance for your contribution!

If you have questions regarding the survey or study, please don’t hesitate to contact me.

Best regards,
Emma Butterfield
 Appendix 2
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Appendix 2: Online questionnaire

Role of management accounting information in decision-Making

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