Effectively managing and controlling
ABN AMRO’s Access Online
A study to design functional requirements for a
management accounting information system
Author: Lisette Haaksman Student number: 1457055 Email: lisettehaaksman@hotmail.com
Effectively managing and controlling ABN AMRO’s
Access Online
A study to design functional requirements for a management
accounting information system
University: Rijksuniversiteit Groningen
Faculty: Economics and Business
Study program: Msc Business Administration
Specialization: Organizational and Management Control First supervisor: Prof. dr. D.M. Swagerman
Second supervisor: Dr. E.P. Jansen
Organization: ABN AMRO Bank
Department: Transaction Banking
Abstract
In this study the functional requirements for a Management Accounting (MA) information system for Access Online (AOL), a highly advanced payment channel offered at ABN AMRO Bank (AAB), are designed in order to effectively manage and control AOL. The current situation for AOL is diagnosed and points to the shortcomings of the current system. In order to design the functional requirements for an adequate system, the strategy of Customer Intimacy needs to be used as a starting point. The specific functional requirements designed in this study include the focus, criteria, specific MA information and related performance measures. Furthermore, for successfully implementing the MA information system, an understanding of the processes and organizational factors that shape MA practice is necessary.
Key words: management accounting, access online, customer intimacy, financial and
Preface
This research study is the final part of my master Organizational and Management Control and thereby my study Business Administration at the Rijksuniversiteit of Groningen. Conducting research at a Dutch financial institution created the opportunity for me to apply theoretical insights in practice. During my internship at ABN AMRO Bank (AAB) I was able to experience what it is like to work at a bank and also to conduct interesting research. AAB provided me with much information concerning my topic of interest and moreover a pleasant and studious time during my internship.
Many speculations concerning the performance of Access Online (AOL) during these dynamic times cause the need for Management Accounting (MA) information to manage and control this payment channel. The first months were mainly dedicated to all different activities related to the bank and gave me a chance to get informed on my topic of research. During the last three months I analysed the current MA information system at AAB. Especially, for this part many insights from in-depth interviews were gathered. These outcomes were the main input for designing the functional requirements for a new system. Finally, I explored the way the system could be successfully applied to the bank. The outcome of this research is described in this report.
I would like to thank everyone who supported me and invested time and effort in me during this period. Furthermore, I would like to thank all my colleagues at AAB for the great time I had there. I would also like to thank my supervisor at AAB, Iwan van Soest, Product manager of AOL, Guido van der Laan and all other people who cooperated with my interviews. All these people shared their experience and knowledge concerning AOL, which helped me to look critically at my findings and this also challenged me to learn more about the topic of interest and the way activities are done at AAB.
Special thanks go out to my supervisor at the university, Prof. dr. D. M. Swagerman. He gave me fruitful insights and guidance during my study. In addition, he helped me structuring my report and reviewing parts of it. His comprehensive feedback and comments gave me direction to complete this study. In addition, I would like to thank dr. E.P. Jansen for his effort as second supervisor.
Lisette Haaksman,
Management summary
Access Online (AOL) is an international and electronic payment channel provided by ABN AMRO Bank (AAB). The organization is enacting in a dynamic environment were much attention goes to changing instead of running this payment channel. In addition, there are many different opinions about the performance of AOL present in the organisation. Managers of changing companies experience a need for Management Accounting (MA) information to cope with uncertainty (Tillman, 2007). In addition, information is needed to make sound and valid decisions and to pursue a strategy. To define the required behaviour of a system in terms of functionality, functional requirements need to be designed (Mylopoulos et al., 1999). This study designs functional requirements for an adequate MA information system needed to effectively manage and control AOL.
In order to identify important performance areas for AAB, the strategy of Customer Intimacy is used as a starting point. AAB aims at a strategy of Customer Intimacy and corresponding strategic objectives. The current MA information for AOL is diagnosed in order to design functional requirements for a new MA information system. The problem in the current situation is that MA information only gets little attention, there is no comprehensive strategic report or dashboard and most information is for operational support only. In addition, the Customer Relationship System (CRS) used by the bank lacks the ability to provide relevant MA information.
Table of content
Preface
Management Summary
1 Introduction... 13
1.1 Introduction and relevance... 13
1.2 Contingency in management accounting ... 14
1.3 Institutional approach of management accounting... 15
1.4 Practical relevance for Access Online... 16
1.5 Motivation for this study... 16
2 Research design ... 17
2.1 Problem statement... 17
2.1.1 Research objective... 17
2.1.2 Research question... 17
2.1.3 Research conditions... 19
2.2 Output of the study... 19
2.3 Research proces... 19
2.4 Methodology ... 21
3 Diagnosis of the current situation for Access Online ... 23
3.1 Introduction... 23
3.2 Enacting in a dynamic environment... 23
3.3 Clarifying Strategy... 24
3.4 Current Management Accounting information for Access Online ... 25
3.5 Conclusions... 26
4 Design of the Management Accounting information system... 27
4.1 Introduction... 27
4.2 Value of functional requirements... 27
4.3 Developing functional requirements ... 28
4.3.1 Focus of the system ... 28
4.3.2 Criteria of the management accounting system... 29
4.3.3 Management accounting information needed for the system... 30
4.3.4 Performance measures... 31
4.4 Conclusions... 34
5 Implementing the Management Accounting information system for Access Online.... 37
5.1 Introduction... 37
5.2 MA Change ... 37
5.2.1 Process of change ... 37
5.2.2 Organizational factors that influence the change process ... 38
5.3 Organizational Learning ... 41
6 Conclusions and recommendations ... 43 6.1 Introduction... 43 6.2 Conclusions... 43 6.3 Recommendations... 45 6.4 Limitations ... 46 6.5 Future research... 47 List of references ... 49 Appendices ... 53
Appendix I. List of abbreviations... 53
Appendix II. List of interviewees and related departments ... 53
Appendix III. Current MA information, related issues and opportunities ... 54
Appendix IV. Criteria on three levels ... 54
Appendix V. Financial and non-financial MA information... 56
Appendix VI. Performance measures... 57
List of figures Figure 1. Research model ... 21
Figure 2. Three different MA information practices for each level of control of AOL... 29
Figure 3. Match between strategic objectives of AOL and performance measures... 33
1 Introduction
1.1 Introduction and relevance
Access Online (AOL) is an international and electronic payment channel provided by ABN AMRO Bank (AAB) and designed for Corporate Clients. Due to the merger and later on the separation with the Royal Bank of Scotland the payment channel had to be cloned in order to be used by AAB. AAB has had doubts about cloning AOL, nevertheless it seemed financially interesting to do so. This project was called ‘Dolly’ and created the ability for AAB to continue to use AOL.
Unfortunately, at the moment MA information for AOL specifically gets little attention. MA information used in the organization mainly covers information for operational support. Furthermore, the Customer Relationship System (CRS) that is used does not (easily) provide all necessary MA information. Finally, management argues that there is more MA information available throughout the organization and that there is need for a systemized and comprehensive report with financial and non-financial accounting information to control the AOL. The function of Management Accounting (MA) according to Horngren (2004): “MA measures and reports financial and non-financial information that helps managers make decisions to fulfill the goals of an organization.” Therefore, MA information in this study includes both financial information (costs and budgets) and non-financial (about quality, customers and services) related performance measures. This financial MA information is not designed for the use by shareholders and creditors, nevertheless needed for internal management and control for managers.
How can it be possible to pursue a strategy and make valid decisions based on the performance of AOL when there is little MA information reported and used? AAB is aiming at putting the customer at the first place by enacting in Customer Intimacy. How can these goals be pursued without knowing what the customer’s opinion is about AOL and what the other important indicators of performance are? It is time to think about areas of performance that are of great importance and need to be the focus for control. There are many ways to control and manage an organization. One of these is by the use of a MA system (Merchant and Van der Stede, 2007). In this study the focus is on a MA information system to control and manage AOL and as such it will leave out other forms of control (e.g. cultural and personal). This dynamic time AAB is facing, many speculations on the performance of AOL and a lack of a fully implemented strategy cause the urge for a MA information system to make sound and valid decision in order to control and manage the payment channel effectively. To define the required behaviour of a system in terms of functionality, functional requirements need to be designed. Therefore, in this study the functional requirements for an adequate MA information system for AOL will be designed. In the next subsections the state of art of contingency (1.2) and institutional theories (1.3) of MA will be described. Finally, the practical relevance (1.4) of these theories for AOL and motivation for this study (1.4) will be explicated.
1.2 Contingency in management accounting
important when deciding on MA information needed to control AOL. Different levels and departments in the organization play a role for AOL; therefore it is extremely important to keep the level of detail of MA information in mind (Chenhall and Morris, 1986). Chenhall and Langfield-Smith (1998), Kaplan and Norton (1992) and Cuganesan (2008) also relate strategy to specific performance measures. Because the strategy dictates the important aspects in the organization, which need to be kept in control by the manager, MA information needed is highly dependent on strategy.
Simons (1990) provides a rich description of management control in two companies with different strategies in the same industry. It also points to the relationship of MA on the implementation and communication of strategy through the concept of OL. Although the most important new stream of literature is the link between MA and strategy, Simons study (1990) also has some limitations (Gray, 1990). Other theorists state that there are boundaries for influencing uncertainties. It appears from Simons’ contingency theory that managers are always able to minimize the effects of uncertainties through the use of a specific MA system. In addition, no attention is given to the interpretation and differences in interpretations about strategic uncertainties that shape management control (Gray, 1990). Finally, there is no attention to managerial characteristics and their influence on strategic decisions (Gray, 1990). These limitations need to be taken into consideration in this study.
Contingency theories in general can be criticized for more reasons. Firstly, contingency theories can lack clarity and specificity about the variables (Fisher 1995). Secondly, no measures for the defining variables are mentioned (Chenhall, 2003). Finally, contingency theories only show associations among variables, not the strength of the association (Perera et al., 1997). However, contingency theories have maintained its popularity in past years because they have become one of the most dominant theories for MA research, the framework provides a well constructed basis for doing research and there is empirical and theoretical support for this (Chenhall, 2003).
1.3 Institutional approach of management accounting
Vaivio (1999) and Innes and Mitchell (1990) also add to institutional insights by discussing factors that influence the change process: facilitators, motivators (including the role of an individual) and catalysts. These theories will help to explore the phenomenon of MA concerning AOL and can be useful for understanding the process of implementation of the system.
1.4 Practical relevance for Access Online
Despite some criticism on contingency and institutional theories that need to be taken into account when conducting research, it is interesting to look at the practical relevance of these theories for this study. These theories can help designing and analysing a MA information system suitable for AOL. However, these theories will only provide a basis for interpreting particular events which are subject in this study. Contingency theory can be useful for designing a suitable MA information system needed for AOL by taking into account the strategy. The strategy and strategic objectives are the starting point for the design of functional requirements for the MA information system and will therefore better suit the need for AAB to control the payment channel. For understanding the current situation concerning MA practice and also the processes important for MA change, research needs to be done. Despite some limitations of the framework from Burns and Scapens (2000) mentioned previously, institutional theories are very useful for recommendations concerning the implementation of MA changes for AOL. Theories of e.g. Burns and Scapens (2000) and Vaivio (1999) can provide insight and can be useful for practitioners at AAB to have more impact on the practice of MA for AOL.
1.5 Motivation for this study
2 Research design
2.1 Problem statement
The problem statement states the reason for doing research and specifies the topic to be studied. The problem statements can be subdivided into three components: the research objective, the research question and the research conditions (de Leeuw, 1990).
2.1.1 Research objective
AAB is not able to effectively manage and control AOL through the use of an adequate MA information system. As indicated by managers of AOL no comprehensive and structured document is provided with accurate and relevant MA information. This lack of structured MA information results in an inadequate MA information system. In order to manage and control AOL effectively a new MA information system needs to be designed. To define the required behaviour of a system in terms of functionality, functional requirements need to be designed (Mylopoulos et al., 1999). The MA information system needs to support and deliver correct information at the right time and to the right person. The above mentioned aspects explain the importance of adequate functional requirements in order to design an effective system (Mylopoulos et al., 1999). Therefore, objective of this study is: ‘The design of functional requirements for a Management Accounting information system needed at ABN AMRO Bank in order to effectively manage and control AOL.’
These functional requirements should be the basis of a new MA information system that gives AAB the tool to make sound and valid decisions. When all requirements (including technical) are designed the system can be developed. When the system is developed, implemented and interactively used by the organization, AOL can be effectively controlled and managed. This means decisions can be made on the basis of accurate and relevant MA information in order to manage AOL. In addition, AAB will be able to recognize and monitor the performance of important focus areas in order to control AOL.
2.1.2 Research question
The research question logically derives from the research objective. This study includes different aspects that are relevant in deciding on and designing of a MA information system. The research question as formulated for this study is:
How can ABN AMRO effectively manage and control Access Online by designing functional requirements for a new Management Accounting information system?
related managers will be used to clarify the strategy, strategic objectives and information requirements for a new system and in order to increase practical relevance.
This research question results in the need for design research. Design research can be compared to an engineering approach and is also often used in business research. Designing can be defined as constructing a model of a future, desired system (de Leeuw, 2000). The DOV model (diagnosis, design and change) created by de Leeuw (2000) is used for this design research. In the diagnosis phase the problem will be clearly formulated and will explain the need for the design of a new system. The challenge of management and control by an adequate MA information system asks for the design of functional requirements for a new system. A dominant theme in the last phase (change) is the concept of learning (de Leeuw, 2000). Changing is not an independent process because often an organizational change can ask for new information requirements for the system (de Leeuw, 2000).
In order to explore the challenge of AOL more thoroughly, the research question is subdivided in three questions. These sub questions will help to answer the main research question and correspond with the three phases of the DOV model (diagnosis, design and change).
1. What does Management Accounting information for Access Online at ABN AMRO Bank currently incorporate?
The challenge in this study is an inadequately developed MA information system. Therefore, the goal of this sub question is the identification and diagnosis of the current MA challenge. It starts with clarifying the strategy for AOL and this will be used as input for defining functional requirements. After clarifying strategy the current MA information system for AOL can be analyzed. This sub question includes the diagnosis of issues and opportunities related to the current MA information. The outcome of this diagnosis will be the input for the functional requirements for an adequate MA information system.
2. Which functional requirements for a Management Accounting information system does Access Online need?
After diagnosing the current situation for AOL an assessment will be performed to list the functional requirements that an adequate MA information system needs to effectively manage and control the payment channel. Functional requirements are functions of the system and will encompass all necessary characteristics. The functional requirements in this study include the focus of the system, the criteria of the system, MA information and related performance measurements.
Scapens (2000) and Vaivio (1999) can provide insight and can be useful for practitioners at AAB to have more impact on the practice of MA for AOL. Finally, Organization Learning (OL) is a precondition in order to practice MA. Therefore, the concept of OL will be described.
2.1.3 Research conditions
Research conditions are needed because they show the constraints for the study. Several constraints can be formulated. The study is based on an internship at AAB and will include data gathered from within the organization of AAB. Next, the research method and study needs to meet the scientific requirements stated by the Rijksuniversiteit Groningen. In addition, functional requirements are developed for the design of a new MA information system. However, the technical aspects and the design itself are not part of this research. Furthermore, although the strategy for AOL was difficult to clarify and was obtained through several interviews with management, the strategy of Customer Intimacy will be used as a given for the design of a new system. Finally, the study must be of practical relevance for AAB.
2.2 Output of the study
The output of this design research will be the design of a MA information system, set out by functional requirements, needed to effectively manage and control AOL.
2.3 Research proces
In the upcoming sections the research question will be answered. This research is divided in three parts: diagnosing the current situation, designing a MA information system by developing functional requirements and recommendations for implementing the MA system at AAB by analyzing change processes (de Leeuw, 2000; Kendall and Kendall, 2001). These phases correspond with the three research questions stated above. Several data resources are needed to be able to conduct this research. Below the steps in the design process and related data gathering will be outlined.
Secondly, in the design phase the functional requirements will be developed as an outcome of the interviews during the diagnosis phase and a literature study. Strategy, strategic objectives and diagnosis of the current system are used as input for the functional requirements. The complexity of MA information systems requires different functional requirements (Chen et al., 2008). The functional requirements will help to specify the functionalities needed for a new system and consists in this study of the focus, criteria, MA information and performance measures. Furthermore, it is important to include both financial and non-financial MA information (Vaivio, 1999). A reason for this is that accounting numbers of customers and Customer Intimacy are better understood when located within a broader framework that also includes other (non-financial) information of customers (Vaivio,1999). Finally, performance measures linked to the most important performance areas will be listed. The following sub question is answered in this phase: Which functional requirements for a Management Accounting information system does Access Online need?
Finally, analyzing the MA change process and important factors that influence the implementation process at AAB will be part of the third phase. Several organizational aspects and institutional concepts will help understanding the future MA change process at AAB. This view is among others presented by Vaivio (1999); Innes and Mitchell (1990); Burns and Scapens (2000). Furthermore, OL is a condition for MA practice and includes maintaining an active dialogue to stimulate successful implementation (Simons, 1990, Argyris and Schon, 1978, March and Olsen, 1975). The influence of OL on adapting and formulating strategy and for enacting in MA practice is strong according to Daft and Weick (1984) and Simons (1990). By learning about the organization and her performance a way of control can be established. The following sub question is answered in this phase: How can ABN AMRO Bank apply the designed Management Accounting information system?
Figure 1: Research model
In the diagnosis phase the strategy for AOL will be clarified and the current MA information system at AAB will be analyzed. Thorough research will be needed to gain a clear understanding of the current situation and information needs of the organization. Both strategy and analysis of the current MA information system will be input for the functional requirements. When the functional requirements are designed it is important to analyse the process of change and the concept of OL. These extremely important processes are a condition for successfully applying a new MA practice at AAB. These three phases help structuring the processes of this design research and will guide the rest of the research.
2.4 Methodology
As mentioned previously in order to solve the problem for AAB the functional requirements for an adequate MA information system needs to be designed. Therefore, this research can be characterized as a design research. To design functional requirements the design model DOV (de Leeuw, 2000) will be used.
For AAB to manage and control AOL effectively decisions need to be based on accurate and relevant MA information and important performance areas need to be measured and monitored. For the design of a MA information system, functional requirements are necessary to guarantee that only relevant information is generated. Because of the challenge of a clear formulation of the problem and information needs by employees of the organization (Watson and Frolick, 1993), qualitative data is needed. In-depth knowledge about the current situation, in order to get a clear understanding of the problem at AAB, needs to be gained. Therefore, qualitative research results in much insight information on this specific topic at AAB that is necessary in order to design the functional
Diagnosis Design (Analysis) of
requirements for an adequate MA information system for AAB. In addition, literature study will provide a basis for interpreting particular events that are subject in this study.
An important aspect of data collection for analyzing a specific organizational situation is the use of multiple sources of evidence (Yin, 2003). Regarding the practical study, this study uses three data collection techniques, semi-structured interviews, documentary data (namely internal reports and business plans) and observations. These three collection techniques are necessary to obtain primary information and insight in the MA information system used for AOL and important information requirements. Quotes of managers are not used to support qualitative data, but for an illustration of the culture that is existent in the organization. Semi-structured interviews are used because they create the possibility to explore the main subject and to restructure and add questions. Also, one-on-one interviews are used to enable the possibility for the interviewees to speak more freely and open (Kaplan and Duchon, 1988).
3 Diagnosis of the current situation for Access Online
3.1 Introduction
Before clarifying strategy an introduction to the complex current situation at AAB will be described in subsection 3.2. Subsection 3.3 clarifies the strategy and strategic objectives for AOL at AAB. Then, the current MA information used for AOL will be explored in the subsection 3.4. All important activities related to AOL are identified in order to structure the most important areas of performance. In addition, the current MA information on these performance areas will be discussed. Finally, in subsection 3.5 the main conclusions regarding the current situation for AOL will be stated.
3.2 Enacting in a dynamic environment
3.3 Clarifying Strategy
Because the MA information needed is highly dependent on the kind of strategy (Simons, 1990) and therefore in this study the strategy for AOL, this will be clarified now. The dynamic and uncertain times due to the integration with Fortis Bank and separation from the Royal Bank of Scotland that takes up almost all time and effort at the moment caused an extra need for a clear strategy for all stakeholders. Customer Intimacy best describes the strategic intentions at the moment according to managers of AOL. However, this strategy is not communicated to all related stakeholders to AOL. Customer Intimacy means knowing where the customer fits in the industry, customer needs for now and the future and how customers respond to product changes (Cuganesan, 2008). Customer Intimacy as stated by Treacy and Wiersema (1995) means that the organization excels in customer attention and customer service and therefore tailors its products and services to individual customers. Important characteristics of these organizations are sharing information and building trust, looking at customer problems like their own and building cooperative relationships (Treacy and Wiersema, 1995). Three strategies can be distinguished: Customer Intimacy, Operational Excellence (cost efficiency) and Product Leadership (leader in the market). An organization needs to excel in one strategy and should not under perform in or abandon the two other strategies (Treacy and Wiersema, 1995).
The motivation for a Customer Intimacy strategy is grounded in the idea that the whole bank is aiming at putting the customer at the first place, improving service and offering products or services above expectations. Therefore, understanding and serving the customer as good as possible by listening to specific customer requests and building a long-term relationship is the strategic direction AAB is pursuing. Furthermore, the usability of AOL is a major problem; many calls at the service desk are a result of the challenge of usability. Therefore, one strategic objective is to improve this usability. In addition, performance and availability of AOL are seen as crucial for enacting in Customer Intimacy; AOL should have minimal breakdowns and respond fast to actions and requests of the customer. Also, fast and excellent service levels including setting up a contract, adding accounts or the service at the International Service Desk are stated by AAB as strategic objectives. Finally, anticipating customer needs to improve customer satisfaction is of great priority. In summary, the strategic objectives stated by AAB for enacting in Customer Intimacy for AOL are:
- Improving usability of AOL
- Performance and availability of AOL (e.g. less break downs)
- Facility service levels (modifications and on boarding quality and time) - Excellent and fast customer service
These strategic objectives, formulated by AAB, are necessary to enact in Customer Intimacy because they stimulate serving customers excellent (Treacy and Wiersema, 1995). By investing in a long-term relationship, AAB can put the customer at the first place (again), provide great service and adjust AOL to the customer needs.
3.4 Current Management Accounting information for Access Online
3.5 Conclusions
Some conclusions can be drawn from diagnosing the current system. Firstly, most information has a short-term focus (e.g. technical information about performance and availability) for day-to-day decisions only. There is hardly information provided for long-term, strategic goals. A manager stated the following:
‘There is no information to make sound strategic decisions concerning new business cases.’
In addition, only some operational performance measures are used in the current situation. It is extremely important to develop adequate measures related to important performance areas in order to control the strategic performance of AOL. Secondly, there is no comprehensive report or dashboard that contains all relevant information. There is MA information present in the organization, however this is not structurally reported, it is spread out over several departments and not complete. Data for MA in line with the strategy is usually available somewhere, the difficulty is pulling it together (Garrison et al., 2006). Information has to be requested in a timely manner from different departments and in a standard form. The manager of payment channels exemplified it as follows:
‘ I really believe there is enough MA information on e.g. customers in the company, the question is which specific information is needed and where is it?’
Thirdly, operational information about day-to-day activities is captured in a CRS, however is not developed to provide relevant MA information. This system has already had some improvements; nevertheless a system suitable for the provision of MA information is needed. In addition, there is no integrated system that is accessible to people from several departments related to AOL in the organization. A manager of AOL claimed:
‘A well established system for the support of customer relationship management will not only help serving customers better, but should also provide MA information more easily.’
4 Design of the Management Accounting information system
4.1 Introduction
When taking into account Customer Intimacy strategy and the diagnosis of the current situation previously described, the functional requirements for an adequate MA information system for AOL can be created. The three main conclusions point to the shortcomings of the current system. These shortcomings cause the need for the design of a new MA information system. For designing a MA information system functional requirements need to be developed (Sun, 2009). The complexities of MA information systems require different functional requirements (Chen et al., 2008). Functional requirements are functions of a system or its component and encompass all necessary characteristics of the system. Functional requirements in this study are of great value for AAB in order to specify the functionalities needed for a new MA information system and will be used as a basis for constructing a system needed to manage and control AOL. This is described in subsection 4.2. Then, subsection 4.3 sets out the design of functional requirements that will represent the capabilities of the MA information system necessary at AAB. Finally, conclusions will be drawn in subsection 4.4.
4.2 Value of functional requirements
Functional requirements for the design of a MA system are derived from strategy and strategic objectives (Mylopoulos et al., 1999). The strategic objectives, described in section three, result implicitly or explicitly in future information requirements (Watson and Frolick, 1993). The main goal of developing functional requirements is to define the required behaviour of a system in terms of functionality (Mylopoulos et al., 1999). The MA information system needs to support and deliver correct information at the right time and to the right person. These aspects stimulate the need for functional requirements in order to design an effective system (Mylopoulos et al., 1999). Functional requirements will be the main output of this study and can be clearly defined (subsection 4.3).
4.3 Developing functional requirements
The specific functional requirements designed in this study include the focus of the system (4.3.1), criteria of the system (4.3.2), descriptions of the MA information that needs to be included in the system (4.3.3) and the related performance measures (4.3.4). Besides functional requirements, the features of the deliverable in technical terms need to be covered by technical requirements. The technical requirements (e.g. encryption security) are very important to take into consideration when building a MA system, however only functional requirements will be part of this study.
4.3.1 Focus of the system
The major source for setting up functional requirements for the system is strategy (Watson and Frolick, 1993). Therefore, the strategy of Customer Intimacy needs to be taken into account when creating these functional requirements. For pursuing Customer Intimacy it is important to know the customer very well to extent the knowledge of customer needs at the current situation and anticipate them in the future. The possibilities for MA in knowing customers and pursuing Customer Intimacy are significant (Cuganesan, 2008). Accounting has been studied as a formal measurement activity of customer orientation and performance (Mouritsen, 2009; Ogden et al., 1997; Vaivio, 1999). According to Cuganesan (2008) the focus of Customer Intimacy must be on customer relationship management, CRS, delivery of products on time and above expectations, reliability and being close to the customer. Cuganesan (2008) provides insight in the implementation of customer focused non-financial performance measures relating to product quality, delivery levels and sizes, customer complaints, user convenience and customer satisfaction in order to enact in Customer Intimacy. It can even be necessary to look at information of how the organization is performing in enacting Customer Intimacy relative to its competitors (Cuganesan, 2008).
Therefore, customer information is of great importance for AOL to determine customer performances. MA methods should be accompanied with measurable routines that link the customer directly to important organizational activities (Mouritsen, 2009). Customer focused measures become part of the modernized MA (Vaivio, 1999). Ergo, concerning AOL it is important to know accurate information on customer complaints and questions, availability and performance of AOL, quality and time of facility service levels, quality of AOL, market performance and customer satisfaction. These areas are seen as the most important ones by management of AAB. MA information on these performance areas needs to be available and used in order for AAB to better manage and control the payment channel and pursue the strategy of Customer Intimacy.
2009). In conclusion, the MA information system needs to focus mainly on aspects of Customer Intimacy to be able to manage and control AOL and to pursue this strategy. This does not mean that other ‘harder’ figures and facts should not be included. Financial aspects should also be included in the system; this will be further explained in subsection 4.3.3.
4.3.2 Criteria of the management accounting system
Three levels of control, strategic, managerial and operational, need to be taken into account when analyzing MA information (Guilding et al, 2000; Simons 1990; Brecht and Martin, 1996). The distinction between these three levels show the way strategic objectives need to be translated into managerial and operational levels. Strategic control is concerned with tracking and implementing the strategy and making adjustments when necessary. On the other hand, managerial control functions as a result of the established strategy (Chenhall and Morris, 1986). This often concerns project groups or cross functional groups responsible for a specific product or a service of an organization. Finally, operational control needs to ensure that day to-day activities are consistent with the strategy and strategic objectives (Guilding et al, 2000). Operational control has in contrast to strategic control a short-term planning horizon. Therefore, each level requires different criteria and this distinction is therefore important to this study (Chenhall and Morris, 1986; Tillema 2005). The first conclusion from the analysis of the current situation points to the lack of managerial or strategic MA information. Therefore, one important feature of the new MA information system is providing MA information on the correct level. Different levels of the MA information practice need to be distinguished to eventually control AOL in the long-term. The three different MA information practices for each level of control are visualized in figure 2.
Figure 2: Three different MA information practices for each level of control of AOL
The specific MA information criteria on each level are listed in appendix IV. The first level MA information is the total overview of performance (comprehensive report), needed to manage and control AOL in the strategic and long-term. This helps to define the way AAB competes and does
business, because this determines how managers make use of information to focus and structure the organization for future changes. For strategic control both financial and non-financial MA information needs to be included in this comprehensive report. The feature of a comprehensive report is also very important and resulted from the second conclusion in the previous section (the lack of a comprehensive report on the performance of AOL).
The second level contains MA information provided in a dashboard and is needed for product and functional managers and encompasses activities from several departments. Many studies propose more non-financial oriented dashboards and MA is taking a way beyond financial measures (Kaplan and Norton, 1992, Ezzamel et al., 2007). In addition, the dashboard for AOL should be used interactively for maintaining an active dialogue in the ‘core-team’.
The CRS and other local system correspond with the third and operational level. An adequate and integrated CRS is necessary for operational control and for the delivery of relevant MA information. This results from the third conclusion from the previous section (3) that states that the current CRS is not developed for the provision of relevant MA information and is not accessible to several departments. Therefore, a revision of the current or a new CRS that can easily provide relevant MA information is a criterion in order to effectively manage and control AOL. The second and third levels are essential for results at the highest level (Guilding et al, 2000). The lines between the levels in the figure are dotted to emphasize the overlap between the levels. Strategic objectives and performance measures are translated top down to the third level.
4.3.3 Management accounting information needed for the system
by also measuring the actual cost of processes and departments, AAB can make more sound and valid decisions concerning AOL. Therefore, both financial and non-financial customer oriented MA information needs to be in scope of this study to get a total overview of the performance of AOL. Finally, externally gathered information (by conducting surveys and benchmarks) is needed due to the customer focus and necessary for pursuing Customer Intimacy.
The new form of MA practice needs to include both general requirements and the requirements mentioned below to eventually give a total overview of the performance of AOL. The selection of performance areas (financial and non-financial) is a result of the analysis of the current system, discussions with managers of AOL and literature study (e.g. Mouritsen, 2009; Cuganesan, 2008; Ogden et al., 1997; Vaivio, 1999). These most important performance areas for AOL are: customer perceptions and satisfaction, performance of the service help desk, facility service levels, quality of AOL, market performance, cost and budgets. Most information on these performance areas has been somewhere in the organization, only now it needs to be considered as important.
The objects of organizational attention need to be put into the summarized standardized and numerically documented format that is necessary for control. In appendix V, the requirements for MA information, the user of information, the level of analysis and the source of financial and non-financial MA information are listed. The provision and report of this MA information about the performance of AOL will help managers in the organization to make sound and valid decisions. Furthermore, the focus of control on these performance areas will give strategic direction to related stakeholders. When this relevant MA information is reported and gathered in a dashboard, appropriate performance measures need to be set and controlled. This will be discussed in the next subsection.
4.3.4 Performance measures
long-term. Critique on financial measures of being short-term focused, internal oriented and not sufficiently for strategic decision making also resulted in a greater interest in non-financial measures (Chenhall, 1998). Only when realistic customer oriented measurements are used the organization is able to monitor these performance areas. This study uses the strategic objectives for AOL as a starting point for developing the performance measures that need to be included in the MA system for AOL. This link is visualized in figure 3. The source of MA information for each performance area is stated on the bottom of the figure. The acknowledgement of these measures throughout the organization is extremely important (Otley, 1999).
33
Strategy Customer Intimacy
Strategic Facility service levels Performance & availability Anticipating customer needs Improving usability Fast & excellent
Objectives customer service
Performance • Number of on boarding • Load of the system • Customer satisfaction • Usability grade • Total number of complaints & questions
Measures • Quality of on boarding • Speed of the system • Number of calls regarding • New, in progress & handled questions
(SLA*: nr of repairs, rejects, STP*) • Number of breakdowns usability • Average response time to questions
• Time of boarding (SLA*) • Main complaints & questions
• Number of modifications • Qualtiy of modifications (SLA*: nr of repairs, rejects, STP*) • Time of modifications (SLA*)
Source • F&S, ISD (CRS) • Functional maintenance • Customer survey • Customer survey • Customer survey
• CTS (consultants) • ISD • ISD
* STP: Straight Through Processing • CTS (consultants)
* SLA: Service Level Agreements
As mentioned before, besides the focus on non-financial performance measures (e.g. customer satisfaction, complaints and quality), financial performance measures (costs and budget measures) for financial control, need to be introduced. The overview of both financial and non-financial performance measures designed for AOL is presented in appendix VI.
The literature on performance measurements state several methods e.g. Balanced Scorecard (Kaplan and Norton, 1992) and EFQM Excellent Model (Sandbrook, 2001). However, in this research a customized format is used (figure 3). Already established models have particular characteristics and relationships between measures. Through mainly interviews the strategy, strategic objectives and important performance areas for AOL have been identified in order to come up with functional requirements for the MA information system. This customized method of categorizing important performance areas and corresponding activities will increase the usefulness of this practice at AAB because it gives a deep understanding of the performance areas and activities important for AAB. Therefore, no other performance measurements systems are used in this study.
4.4 Conclusions
35
Criteria of MA information Financial MA information Non financial MA information Focus of performance measures
Strategic • The MA information needs Internal data source:
level to be long term focused and used • Total direct costs for AOL • Facility service levels: modifications & on boarding • Facility service levels (lead time and quality)
Head of for strategic purpose only • Budget information • Performance & availability • Performance & availability (speed/break downs)
channels and • Supports long term planning (one to five years) • Customer complaints/questions • Customer complaints/questions (nr, main complaints, handling time)
Product • Embraces a forward looking timeline for problemsolving • Total direct costs for AOL
manager • Includes external data sources (market, survey information) • Budget related measurements
• Provided in one comprehensive and structured report External data source: • Customer satisfaction (customer needs, usability) • An already analysed report • Customer satisfaction (customer needs, usability) • Market performance (performance competitors)
• Monthly or yearly reported • Market information (benchmarks)
Managerial • Medium level MA information for purpose of the 'core-team' • Facility service levels: modifications & on boarding • Facility service levels (lead time and quality)
level • Supports medium term planning (up to one year) • Performance & availability • Performance & availability (speed/break downs)
'Core-team' • Embraces an anticipating timeline for problemsolving • Customer complaints/questions • Customer complaints/questions (nr, main complaints, handling time)
• Gathered in a dashboard
• Dashboard needs to give summarized and structured overview • The owner of this dashboard is the productmanager • The productmanager is the one that analyses this MA information and constructs the global report • Monthly reported MA information
Operational • Supports short term planning (daily based) • Part of department cost • Facility service levels: modifications & on boarding • Facility service levels (lead time and quality)
level • Embraces a reactive problemsolving timeline dedicated to AOL • Performance & availability • Performance & availability (speed/break downs)
Individual • Gathered through a CRS • Detailed budget information • Customer complaints/questions • Customer complaints/questions (nr, main complaints, handling time)
departments • The same system needs to be used by • Detailed MA information on specific • Different departments need their own detailed measures
and accessible to several departments topics for own purpose
• The CRS needs to produce relevant and summarized MA information • The MA information needs to be daily updated • Systematic logging is a condtion
• Monthly reported MA information
5 Implementing the Management Accounting information system for Access Online
5.1 Introduction
In the previous section functional requirements for a MA information system for AOL has been designed. This design encompasses several important functional aspects of a new MA information system. Designing the functional requirements for a new MA information system is the objective of this study and therefore the objective is achieved. However, in order to successfully use MA information this study will also give insight in important change processes. Discussing these processes is extremely relevant because many organizational factors in the current situation are the reason for the MA challenge at the moment. Gathering the information (on the correct level) and using adequate techniques is highly important, however the change implementation and change management also requires important factors that need to be well understood and influenced. In subsection 5.2 the concept of MA change will be outlined in order to get a more thorough understanding of the processes that are critical for a successful MA change. Furthermore, subsection 5.3 explains the role of Organizational Learning (OL). Finally, subsection 5.4 will state the most important conclusions from this section.
5.2 MA Change
To implement MA change successfully there is need for alignment between functional system aspects and organizational aspects (Bhimani et al., 2007). The MA information system should be implicated with day-to-day issues, decisions and actions of the business. Implementing MA could be called successful when the MA information has an impact on ways of thinking within AAB for AOL (Bhimani et al., 2007). Hence, the introduction of a new MA practice mainly focused on customer aspects can be seen as a challenge for an organization. Therefore, AAB should be recognized as a dynamic object in which different knowledge is embedded (Burns and Scapens, 2000). Resistance or ignorance to new practices can be easily developed and should be taken into consideration when implementing such a system (Bhimani et al., 2007).
5.2.1 Process of change
requirements designed in the previous section, requires a shift in existing ways of thinking and practice. This is a change in existing institutions due to the fact that most departments now need to measure their performance on several of these customer aspects for the total control of AOL and pursue of Customer Intimacy. A re-examination of the current activities directly related to Customer Intimacy cause a change in the way of thinking. Therefore, according to the institutional theory implementing a system in line with the proposed design of functional requirements will be categorized as a revolutionary change in the organization because new routines need to be established (Burns and Scapens, 2000). Implementing MA practice for AOL may result in new routines, which can become institutionalized (have a significant impact on organizational reality) at AAB. Rules on MA practice for AOL are needed for coordination and coherence because rules and routines together shape the actions that people take (Burns and Scapens, 2000). Routines are also behavioural and organizational aspects that are present in the organization. Only when MA rules and routines are in line with the organizational behavior and culture, MA can become implemented (Burns and Scapens, 2000). Rules should be established for the introduction and routine of MA practice. Only when all assumptions embedded in habits or customs of related stakeholders stroke with this practice, MA can become institutionalized into the organization (Burns and Scapens, 2000). The three factors mentioned below, can facilitate the MA change.
5.2.2 Organizational factors that influence the change process
In addition, Jansen (2008) describes the influence of leadership style of management on the process of MA change. Jansen (2008) states two types of leadership style: transformational and transactional. Transformational leadership style refers to socio-emotional needs (e.g. trust and respect). On the other hand, by a transactional leadership style accounting data is extremely important and used to measure and evaluate performance (Jansen, 2008). For AAB, the new MA information system implies a major change, because management control for AOL at AAB can be characterized as rather implicit (transformational). Several decisions concerning AOL derived from the intuition and experience of employees and less by the use of explicit MA information. However, management of AOL is starting to focus more on explicit controls. Therefore, the functional requirements designed in section four (figure 4) focuses more on MA information and relating performance measures. This change of leadership style and control need to be considered as extremely important in influencing the change process (Jansen, 2008). In addition, it is important that management of AAB realizes the affect on work satisfaction of employees of this particular change.
Furthermore, the proposed MA change in this study can be characterized as a type of three change described by Jansen (2008). This is a change of three aspects: a change of a MA information system (more emphasize on financial and non-financial performance areas and measures), a change of control (more emphasize on interactive control) and a change of leadership style (more emphasize on transactional leadership style). A dynamic and unpredictable environment, due to the separation, integration and changing laws concerning transaction payments, causes the need for the introduction of interactive control. Therefore, lower management not only need to work with new information, they also need to learn to apply MA in a different way (interactively) and under the influence of a different leadership style. A gradual change can be a way to cope with the change of leadership due to the change of MA. In addition, coaching can be an instrument to change the leadership style of lower managers (Jansen, 2008).
Finally, Vaivio (1999) and Scapens and Roberts (1993) recognize non-financial measurement as an important instant of MA change. Therefore, the non-financial (customer related performance measures) developed for AOL can help stimulate a successful implementation of performance measurement. Innes and Mitchell (1990) also mention that for introducing new MA practices there are at least three sets of factors, namely facilitators (these are necessary although not sufficient), motivators (influence observed change) and catalysts (concerned with the timing of change), involved in the process of MA change. These factors will be explained below.
Facilitator
measures should represent the strategic direction for AOL and be at priority of the agenda. Only when all measures are coordinative integrated it can have significant impact on reality (daily tasks). All this information needs to be recognized as important and be collected in a systematic way (in a dashboard). After collecting, the identification, analysis and articulation of strategically critical activities need to be done (Vaivio, 1999). For the performance measures to function as a facilitator all related stakeholders need to understand the relevance of this MA information and corresponding performance measures: the aim of MA and dashboard needs to be clear (Hopwood, 1987). Also, strategy and strategic objectives need to be known and well understood by all related stakeholders to AOL in order to practice MA and pursue Customer Intimacy. This is especially important when there are conflicting interests. At AAB every department is responsible for the performance of their own department; nevertheless there is need for looking at the broader perspective (total performance of AOL). Then, a systematic and comprehensive format, like a dashboard, should make sure the figures are integrated and circulated at AAB. The dashboard will build shared meaning; people need to know each other figures to understand the total package of performance of AOL. The facilitator role of non-financial performance measures is extremely important, but additional forces of change are needed for MA practice implementation (Vaivio, 1999).
Motivators The manager of payment channels should act as a strong motivator in this process. Involvement of MA practice leader is needed to facilitate the process of MA practice. Hierarchical power or the power of a strong individual can introduce MA practice (Vaivio, 1999). Besides the work of an actor, calls at the service desk, usability problems and other performance issues stimulate the need for comprehensive MA information to make sound decisions. Especially in these uncertain times the need for MA emerges. MA is needed to visualize these areas of performances before taking further actions for improvement. These organizational challenges also work as a motivator for implementing MA practice for AOL.
Catalyst
5.3 Organizational Learning
OL describes the way that organizations use knowledge to improve the fit between the organization and its environment (Simons, 1990). The use of MA and information stimulates producing and sharing information and therefore OL. The focus of organizational attention and exchange of information will influence the process of learning throughout the organization (Simons, 1990). Building up interpretations about the performance of AOL is a basic requirement for AAB. OL means that information, about for example customers, gets meaning by communicating and sharing e.g. discovered trends (Simons, 1990). Then, decisions towards this new discovery need to be taken. When thriving for excellent customer service and offering customers high quality products, departments need to cooperate. The need for an integrated CRS with structured customer information, as being suggested in the previous section (4) would stimulate this cooperation and therefore OL. Several departments also need to cooperate to streamline processes and share customer knowledge and therefore frequently meetings with relevant stakeholders of AOL are needed to work as efficient and accurate as possible. This is already done by regular meetings of the ‘core-team’ (horizontal cooperation and management) and should be continued to control and manage AOL effectively and to guarantee OL about important areas of performance. Within these meetings MA practice needs to become embedded in a social platform which maintains an interactive dialogue and where potentials can be discovered (Vaivio, 1999). Team based, cross-functional orientation is also a way to overcome the current problem of ill-defined responsibilities concerning AOL (as was stated in the diagnosis of the current situation). Furthermore, a coordinated approach for designing, collecting and implementing customer research (e.g. questionnaires) will ensure a better alignment between customers and strategies.
5.4 Conclusions
The process and factors that influence MA change at AAB have been described in this section. Paying attention to these important factors at AAB is needed in order to gain a better understanding of the processes that contribute to MA practice and change in an organization. Institutional theories from Burns and Scapens (2000) and Innes and Mitchell (1990) help to think about these important processes and factors that can influence MA change. In addition, AAB needs to realize the influence of a change of leadership style on the MA change process (Jansen, 2008).
6 Conclusions and recommendations
6.1 Introduction
In this final section the outcome of the study will be described. The objective of this study is the design of functional requirements for a MA information system needed at AAB in order to effectively manage and control AOL. In order to answer the main research question, conclusions to the three corresponding sub questions will be stated in subsection 6.2. In addition, recommendations will be given in subsection 6.3 and limitations of the study will be discussed in subsection 6.4. Finally, the possibilities for future research will be outlined in subsection 6.5.
6.2 Conclusions
In the current situation MA for AOL takes a modest form. There is no comprehensive report or dashboard present in the organization. In addition, the main figures that are used at the moment are on operational level and the CRS is not developed for the provision of relevant MA information. In order to manage and control AOL, an adequately developed MA information system is needed. The purpose of this study is to design the functional requirements needed for a new MA information system. The research question of this study is:
How can ABN AMRO effectively manage and control Access Online by designing functional requirements for a new Management Accounting information system?
This research question was divided into three sub questions. These three sub questions correspond respectively to section three (diagnosing), four (designing) and five (changing and implementing) of this study. The answers to each sub question are outlined below.
1. What does the Management Accounting information system for Access Online at ABN AMRO Bank currently incorporate?
2. Which functional requirements for a Management Accounting information system does Access Online need?
Functional requirements need to be developed in order to design a new MA information system for AAB. The main goal of developing functional requirements is to define the required behaviour of a system in terms of functionality (Mylopoulos et al., 1999). Functional requirements for a system design are derived from strategy and strategic objectives. The strategy of Customer Intimacy, best describes the strategy for AOL. Therefore, this strategy and corresponding strategic objectives will be used as a basis for developing functional requirements. The specific functional requirements designed in this study include the focus, criteria, specific MA information and related performance measures. Due to the strategy of Customer Intimacy the focus of the system must be on non-financial customer based performance areas. However, financial MA information should also be included for internal financial control. These important areas were identified through a combination of analyzing the current systems, literature study and discussions set up with managers. A distinction between three levels of control: strategic, managerial and operational is needed to deliver MA information on the correct organizational level. Respectively a strategic report, a dashboard and an adequate CRS are needed. These all have different criteria as described in section four (appendix IV). In addition, non-financial, customer focused information for enacting in Customer Intimacy and financial focused for financial control needs to be included in the system. Finally, performance measures were set on these areas of performance that need to be the focus of control for AOL (figure 3 and appendix VI).
3. How can ABN AMRO Bank apply the designed Management Accounting information system? Besides the functional requirements as designed in this study, it is extremely important to look at the organizational context that influences the change in MA routines. The MA information included in this study (appendix V) is tightly coupled with the practical side of the organizations direct concerns. MA practice needs to become integrated in the regular management processes to be able to manage and control AOL. Institutional theorists make a contribution to the theoretical understanding of processes which shape MA practice. According to a typology of Innes and Mitchell (1990) certain factors are important for understanding and influencing MA change. These factors are studied in the context of AAB. Finally, the concept of OL, the condition for the implementation of MA practice, is described. OL points to the maintenance of an active dialogue on performance areas that need to be the focus of control in order to manage and control AOL.
