Strategic Household

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Strategic Household

The practical value of True Cost Accounting

- a case study at a Dutch healthcare provider

January 2020

Rik de Jonge

Student number 2975408, r.de.jonge.10@student.rug.nl

MSc BA – Management Accounting & Control Faculty of Economics and Business

University of Groningen

Supervisor: dr. J.S. (Joanna) Gusc, j.s.gusc@rug.nl

Second assessor: dr. B. (Ben) Crom

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Abstract

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1. Introduction

The Dutch healthcare sector faces several challenges: ageing population, decreasing financial results, a lack of skilled employees (Genet et al., 2012) and healthcare institutions that have to abide by law and regulations (Cooke & Bartram, 2015). Moreover, organizations are changing their strategy and operations towards the changing market rather than following their own vision of how to operate business. During the 1990s, small-scale and independent healthcare organisations had grew to large, bureaucratic and management-driven structures. As a consequence of this change the organisations somehow moved away from their core task: caring for people. It resulted in an increased level of overhead work, extra layers of management within the organizations and less efficient application of employees’ knowledge (Van der Boom, 2008).

The growth was not infinite and in 2012 mass layoffs of skilled (more expensive) personnel and replacing those with a cooperation of caregivers enabled financial cuts to keep healthcare affordable (Nieuwsuur, 2019). Another consequence of the further outflow of the employees is a consequence of, amongst others, management problems, high work pressure and a lack of experienced flexibility (NU.nl, 2019). All these developments and current challenges at health require a new approach: innovation, meant as a reorientation on the changing sector and the organizations within the sector (Janssen & Moors, 2013).

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and consequently loose the quality of the services as TCA provides more balanced information for decision-making.

Thereby this study answers the call (Burrit & Schaltegger, 2010; Unerman et al., 2018) for more well-described applications of TCA in the literature. Besides that, this study explores the theoretical and practical interactions (Malmi & Granlund, 2009) of management accounting during that application with the following research question:

How does True Cost Accounting add value to strategic decision-making?

It is interesting to investigate the relationship between TCA, (strategic) decision-making and the TBL for numerous reasons. Burrit & Schaltegger (2010) call for future research towards the importance of considering social capital in MA and Kaur & Lodhia (2019), Hopwood et al. (2005) and Giddings et al. (2002) state that the MA department should be involved in the development of sustainable accounting in order to get the best fit between the “traditional” MA and new trends in this field. Since management accountants are not just bean counters anymore but have become part of the management having an advisory role (Zainuddin & Sulaiman, 2016), they are involved in strategic decision-making. This means that the way an MA department does its work and adapts to novelties in MA has influence on the information the board bases strategic decisions on. Another interesting statement comes from Tucker & Lowe (2014). They concluded that there is research-practice gap in MA, forthcoming from the business’ limited accessibility of MA research and literature, which means that the papers written about MA are not always insightful and the content of the papers can, because of the predominant academic approach, be found hard to understand from practitioners’ perspective. For example: “man should learn from academic literature which MA system could be applied

in certain circumstances, but there is also a need for theories that describe how to change MA practices” (Malmi & Granlund,2009). The difference between both is, according to Malmi &

Granlund (2009), balance between academic and practical interference: guidelines for how to act in any given situation is not only more practical, but also the “broader view” on how to change MA practices is predominantly academic. The literature towards the theoretical concepts of the TBL, TCA and strategic decision-making will be described in the next part.

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within management accounting (Unerman et al., 2018; Albalaki et al., 2019) and the execution of concepts like TCA in practical situations, in order to create a framework that is applicable in a broader scope (Boyer et al., 2016). The organisation to be researched is a suitable organisation to explore the TCA application as it is currently changing its strategic course and is actively searching for methodologies to improve their strategic decisions for itself and its stakeholders. Moreover, while writing this thesis I have almost unlimited access to company (re)sources as one out of three controllers of the organisation, which makes conducting the research feasible. The case organisation is described in detailed in the methodology section.

This paper will contribute to the existing literature by investigating the value of TCA for strategic decision-making and the relation between those two and the three pillars of the TBL. On top of that the study will bridge the gap between theory and practice in the sense of applying TCA within a specific company. There is a call for application instructions regarding TCA on sectoral and single level. By first studying to which extent TCA is relevant for a single organization an expectation for the relevance application of TCA for the Dutch health care sector will be provided.

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2. Literature review

2.1 Triple Bottom Line

The Brundtland Report (1987) was an important driver for the increased interest in corporate governance, peoples’ and companies’ values and transparency. The report resulted in a strive for balance between shareholders and stakeholders (Elkington, 2013) and managing organisations’ objectives while trying to compromise the ecological, economic and social dimensions of the TBL (Unerman et al., 2018). The TBL directs attention to the social, ecological and economic added value rather than approaching issues solely from economic perspective (Elkington, 2013). Economic

sustainability, as a part of the TBL, is relatively well understood. It considers the financial impact of operations and/or decisions. Theoretically the TBL’s three elements should be in balance, but in practice this concept is often perceived as an utopia (McKenzie, 2004; Elkington, 1999). The economic and environmental dimensions of the TBL are in general far more developed than the social aspect of the framework. According to McKenzie (2004), the main reason for it is that the economic and

environmental perspective as part of the TBL were related in first instance, and the social aspect was added in later. However, recent studies still rely on the findings (Longoni & Cagliano, 2015; Cuthill, 2010) of McKenzie (2004), which means that research towards the social pillar of the TBL still is underdeveloped. This can be due to a missing framework for application of the TBL, especially for the social pillar (Boyer et al., 2016). The findings of Boyer et al. (2016) suggest there should be studied how it is possible to turn several single-case applications of social sustainability concepts into systematic frameworks for use in a broader scope. This suggestion is an argument for doing the current research within the ZorgZaak Group (the organisation to be researched) since the outcome of this research is useful for building a sustainability accounting framework that can be general applicable.

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The environmental perspective is about the ecological stake, considering (the reduction of) emissions, use of energy and waste. Social sustainability has to do with equality, diversity and concepts like corporate social responsibility within the company and its stakeholders (Gimenez et al., 2012). This third aspect of sustainability has to do with the social capital of an organisation. Social capital can be described as “multiplying’ existing community assets, such

as trust, reciprocity and cooperation, shared values and norms, pro-activity and leadership, and a strong sense of community that can result from interaction and participation in strong social networks in a community” (Simpson, 2005), but in this study social capital is approached

as an asset that can be invested in and – when the investment is done well - provides returns. According to McKenzie (2004) and Longoni & Cagliano (2015) social capital stands for a focus on the creation and development of skills and capabilities on the long term in order to create a good quality of life inside and outside the company. This definition is the one to be considered during this study, since Simpson’s definition seems to be quite abstract and possibly less applicable during action research in a relatively undiscovered field. When further studying the definition of social capital the one as found by Brown, Dillard & Marshall (2006) sounds rather practical and from a single perspective, namely “an attempt to capitalize the “value” of the

employees, management skills, and business acumen that generated wealth for shareholders”.

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9 2.2 True Cost Accounting

Full Cost Accounting (FCA) is a technique that has been developed in the 2000’s (Bebbington et al., 2001), but the practical application is still relatively new. The companies that apply FCA in practice call it True Cost Accounting (Morren et al., 2018; Allianz SE, 2018) and because of the type of action research in this study the concept of FCA will be named further as TCA. The motivation for the use of TCA has, according to Bebbington et al. (2001), two aspects: (1) current prices do not contain so-called ecological value and (2) there is a trend of consumers that switch to more ecological transparent companies, which causes a growing demand for transparency, even in accounting terms. Applying TCA means that (external) social and environmental consequences of economic activities are considered and reported. Bebbington et al. (2001) describe it as “internalizing externalities”, meaning that the right price (e.g. the economic costs plus the social and environmental costs) is used in MA practice and reporting, or more concrete: TCA “is a means by which market prices can be ‘corrected’ in order to

create an economic system that is more likely to deliver ‘sustainable development’.”

The practical outcome of internalizing the externalities has become more recognized in the past decades, but the concept of TCA is still not institutionalized. This is probably due to a lack of feasibility and sufficiency in practice and the wall between sustainability and financial reporting (Unerman et al., 2018). If academics want to see TCA as an institutionalized concept in adapting sustainability in MA, there has to be discovered how the current MA reporting procedures can meet the conditions and goals of TCA. Therefore multiple investigations in the practice of MA have got to be done, since it has been stated that practitioners can hardly do anything with TCA implications that theorists provide (Malmi & Granlund, 2009; Tucker & Lowe, 2014; Unerman et al., 2018). One of the practical motivations to apply TCA is that since time (long-term instead of short-term focus), transparency of organizations’ operations and people’s and companies’ values have become considerable points for attention for the organizations themselves and even their stakeholders. Hardly any organization can disregard sustainability reporting and accounting in their conduct (Unerman et al., 2018).

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application of sustainable development, as stated by Matos & Vairinhos (2017) and Boyer et al. (2016). Besides that, they forecast that the social dimension of the TBL and TCA becomes more important and, moreover, a competitive instrument for insight in the value of social capital and its development over a certain period of time. So, especially for MA in healthcare as a service sector with decreasing financial margins and lots of social capital involved (Matos & Vairinhos, 2017; Cavicchi, 2017; Boyer et al., 2016), there is a significant importance to investigate the in-house social capital both in theory and practice, how findings of these investigations affect strategic decision-making (Burrit & Schaltegger, 2010) and vice versa. Sustainability (TBL) affects decision-making at all levels and functions in organisations, thus also management accounting decisions (Busco et al., 2017). But in which sense is the combination of TCA as sustainability trend in MA and strategy relevant for management accountants and the literature about MA?

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Summarizing the literature of TCA with the part about the TBL results in the following theoretical findings:

1. TCA is meant to use the basic concept of the TBL (balancing the economic, environmental and social outcomes of actions) in practice and is becoming to be a strategic concept in the theory of MA;

2. The social perspective is underdeveloped in the TBL and the concept of TCA as a “follow-up of the TBL” in both literature and practice;

3. The lack of practical implications of sustainability accounting from the literature make it difficult for management accountants to apply it in daily business;

4. Management accountants are no longer bean counters, but have become strategic advisors for the purpose of higher-level decision-makers and to keep up with “strategic accounting trends” they have to take TCA as a serious instrument.

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12 2.3 Strategic decision-making and sustainable MA

Abstract and lacking structure; that is how strategic decision-making is described by Schwenk (1984). Strategic problems are difficult to define and the deeper one digs for the problem the more complex it becomes. In most of the cases strategic decision-making takes place at the higher layers of an organization (Schwenk, 1984) with all types of specialists involved. Elkington (2013) found that the interest in the TBL moved these higher layers in the past decades, which is shown in figure 2.

Figure 2 – TBL agenda moves from factory fence to boardroom (Elkington, 2013)

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Schaltegger (2010): “[…] accounting can indeed be produced and used in relation to complex

strategic decision situations.” This sentence only says something about the quantitative -

meaning only delivering data and reports with respect to strategic decision-making, but when making use of TCA another perspective – sustainability- of MA as a base for strategic decision-making will occur. The qualitative added value can be seen as the value the MA department has on processes and content of strategic decision-making from a management accountant’s perspective. Looking at the long-term consequences of lacking the sustainability perspective as mentioned by Unerman et al. (2018), management accountants and strategic decision-making groups should consider novel MATs in order to avoid getting stuck at current MA methods, but to stay a valuable market player on MA and strategic level (Zainuddin & Sulaiman, 2016; Burrit & Schaltegger, 2010; Kaur & Lodhia, 2019; Hopwood et al., 2005; Giddings et al., 2002). The findings in the literature about strategic decision-making and the findings in paragraph 2.1 and 2.2 suggest that there is a need for (further) research in (1) the social aspect of the TBL, (2) practical TCA implications and (3) the added value of sustainability accounting in strategic decision-making. These three and their interdependent relations are summarized in the conceptual model presented in figure 3. In the next paragraph will be explained why it is worth it and how to study a single organisation’s awareness of sustainability factors and their potential added value, the application of sustainability within MA and the relation with strategic decision- making.

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3.

Methodology

As a controller at the ZorgZaak Group I have responsibility for facilitating the operational part of doing business. My finance director always says: “business first, then control”. The control department recently got the task to structure operations from the perspective of our specialties in finance, accounting and reporting. By doing so, we hope to clarify the causes for and consequences of decisions that will be or are taken at all levels in the organisation. We have to get and remain the organisation in control while the rest of the organisation has to be in

business. Every month the control department has to report to the board and directors and a few

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15 3.1 Case selection: the ZorgZaak Group

The Dutch healthcare sector has to deal with several strategic challenges and changes. To provide a few examples: how to deal with the raising demand for (extra) care due to the ageing population, decreasing financial margins, the high experienced workload (Genet et al., 2012) and all the laws and regulations within the sector (Cooke & Bartram, 2015)? The ZorgZaak Group is one of the organisations that has to deal with these issues. This is a group of several legal entities that is active in the north-eastern part of the Netherlands. There are different divisions within the ZorgZaak Group: (home)care, counselling, household care and several residential locations where care is given. To provide an overview of the organizations that are relevant for this research the organogram in figure 4 is created.

Since 1993 the ZorgZaak Group’s vision is: make a difference in people’s life. This vision means that the ZorgZaak Group distinguishes itself from other parties in the branch by combiningbeing innovative and facing the future realistic with fitting the supply and demand of the care in its area. This means that the organization focuses on self-reliance and independence and applies state-of-the-art technologies and care insights. In the quality report of 2018 the ZorgZaak Group emphasizes this vision by mentioning that the organization prefers

an integral approach from the physical and psycho-social perspective and paying attention to healthy and fit elderly (De ZorgZaak, 2019).

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Probably the biggest change took place in 2009: the Dutch government wanted the ZorgZaak Group to convert the cooperation with self-employed persons into employees with an employment contract and a collective labour agreement (CLA). This caused an enormous increase in administration, taxes, adjusting towards the specific CLA and, most important, a loss of the flexibility of the company, which used to be its unique selling point. From then on the organization became massive and more bureaucratic and several legal entities were added to spread the risks of the different activities within the ZorgZaak Group at that moment. Nowadays the biggest risks have still to do with the employees, absence and being dependent of the CLA. One of the former directors mentioned once: “the consequence of becoming a

mature organization means that employees become older as well. This means increased wages (because the CLA wants us to do so), higher absence percentages and being inefficient.” The

increasing number of permanent contracts at the expense of temporary contracts – as a consequence of laws and regulations with regard to employment contracts - can cause more job security for the employee. However, from the employer’s perspective it can be seen as a threat since the sickness absence rates are likely to increase when having a permanent contract (Virtanen et al., 2003). There are several reasons for the raising absence rates in the health care sector, and one of the most important is the experienced work pressure, which causes (emotional) stress among the employees.

Supervision from diverse (governmental) organizations, accounting firms and certification bodies create a demand for extra workload. These can be seen as an increasement in overhead expenses, since it is not allowed to declare the “indirect” time spent on the clients. So, these accountabilities of health care organizations (CBS, 2019) press these organizations to combine the indirect with the direct hours as efficient as possible, with an increasing work pressure rate as a result. The main trigger for the organization to do so is to stabilize the margins and spend money to direct activities instead of overhead processes that do not directly add value to the core business of care. For the bigger part the management accounting & controlling department has the responsibility to analyse the performance of the deployment of hours and advice the board how to deal with those (in)direct hours in the future.

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wants to gain insight in how and to what the public money is spent and the organization must comply with several (MA) reporting criteria that are set by the government. Kaur & Lodhia (2019) stated that the public sector has a significant impact on the society in, amongst others, the sense of consuming. This means that the government has a big influence on and responsibility for sustainability within the society (Rijksoverheid, 2019) and therefore it wants their stakeholders to do so as well (Ball & Grubnic, 2007; Ball et al., 2014). This results in a raising demand for sustainability accounting: balancing the social, environmental and economic costs and benefits in order to develop organizational (strategic) decision-making (Kaur & Lodhia, 2019; Hopwood et al., 2005; Giddings et al., 2002).

3.2 Research method

This paper will contribute to the findings of Malmi & Granlund (2009), meaning that academic writing is often meant for other academics at the expense of practitioners, who should benefit from the research outcomes (Jansen, 2018). The unexplored field of (practical) sustainability accounting implication (Unerman et al., 2018) calls for case-specific exploratory research. In order to briefly carry out the research techniques the research onion (figure 5) of Saunders et al. (2008) is used in the way of “peeling the peels” from the outside in.

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As I am part of the subject to be investigated, this study is a process of exploring and understanding relations and motivations and to which extent the existing theory is applicable in practice, as Jansen (2018) suggested. Westin & Roberts (2010) endorse this research process by stating the following: “The individual qualities, research trajectory, and personal make-up

of the researcher impact strongly the socialization into the practical setting, and subsequently define the theoretical contributions obtained.”

The research method will consist of interviewing and observing regarding the current knowledge and developments in TCA, social capital and strategic decision-making. Because of the demand for practical investigations regarding to the application of TCA (Boyer et al., 2016) and my function as a controller at the ZorgZaak Group there is chosen for action research. Travis (1999) mentioned that action research is the most distinctive interpretivist method, because of the interventionist character of action research. According to Westin & Roberts (2010) interventionist research in relation to action research is meant to unfold how and why changes (in MA) occur and are processed plus evaluating “theory-in-use” (Agryris, Putnam & McKain Smith (1985). Through socialization (Massa et al., 2015) and discovering and sharing the organisation’s knowledge about the subjects to be researched this research will contribute in interpretivism sense to the (possible) value and implementation of TCA within the organisation. Ter Bogt et al. (2012) reviewed the paper of Van Helden & Northcott (2010) and found that through interaction and socialization specific knowledge in MA can be gained and shared, and academics will be asked to advice in situations where impartiality is needed. This means that qualitative research, partially based on quantitative data as described in the next subparagraph, facilitates a deeper investigation and mutual understanding between a “practical advisor” and the organisation that faces a challenge. A mixed method is suitable for this research process, since MA “products” will be used to analyse reporting about social capital and being a subject to ask questions about to the managers, which will lead to the qualitative part of the study.

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discussion sessions with all management team members1 will be held and reports from the sustainability projects will be used to get insight in the change in sustainability focus over the past period. The frequency of the several qualitative research methods can be found in Appendix A. The interviewees represent the organisation’s strategic decision-makers and those who are involved in (social) accounting at management level, which strengthens the reliability of this research (May, 2002). As I have been controller for over a year, have done previous research at the ZorgZaak Group three years ago (Dijkhuizen, de Jonge, van Laar & Wever, 2016) and am familiar with the organisation for about five years, there is already relevant knowledge from the past. Taking this into account, a longitudinal study is most suitable as a time horizon. One of the conditions of a longitudinal study is to measure the subject of change at least three times (Wang et al., 2017; Ployhart & Vandenberg, 2010), but due to the relatively short period that is set for this specific study and the studying change in MA-practices over time it is more relevant to look from a longitudinal perspective. Taris & Kompier (2003) state that the frequency of measurements during a longitudinal study depend on the relation between theory and practice: “the interval between the phases of a study if often based on pragmatic

grounds”. Because of the lack of literature regarding practical implications of change in MA

(Albalaki et al., 2019; Unerman et al., 2018) the frequency of and interval between measurement phases is not clear yet. Through three months of daily observation and taking part in management meetings I expect to have a clear view of the organisational processes and habits. Therefore this research can be seen as a longitudinal study.

3.3 Data collection

The time path of intensive research took three months; starting mid-October and ending in January 2020. Initially it was the purpose to start in September 2019, but due to the depart of the managing director the organisation’s management tasks had to be restructured first. This event caused a one-month delay, but on the other hand it offers a representation of the cycle of changes the ZorgZaak Group has been through in the past years. May (2002) has his doubts about reliability of researchers spending small amounts of time at the organisation they study. The period of this study can be seen as relatively short, but due to historic information, gained through interviews, observations and reading through the organisation’s files, a general pattern (May, 2002) can be found.

1_{One healthcare manager, one housing director, five HR employees including the HR manager and four members}

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To gain insight in the organisation’s knowledge about accountability the questions as given in Appendix B will be used as a starting point for discussion. These questions will be asked to members of the HR department, the management team members and the board of the ZorgZaak Group. Due to privacy and anonymity of the organisation and its members the outcomes of interviews and group sessions will be summarized and approved by the directors. In this way of doing research and presenting results the release of sensitive information will be avoided, according to the organisation’s wishes.

I have access to all databases of the ZorgZaak Group2_{, which means that quantitative data from} the company to be researched is available and can be used for providing an overview of current and past performance (trends) and as a base for the qualitative part of this study. During my daily work I face several datasets, reports and explanations of how these reports are built and by using these quantitative data for this research I want to discover how the MA department of the ZorgZaak Group already reports about social capital and what the underlying thoughts of reporting in that way are. I expect that the organisation does so, but the underlying reasons for reporting is not clear to me, as well as how the management interprets the data about social capital. It seems to be obvious that a service-based organisation takes its social capital serious, especially in a market that is highly pressured, but this can only be confirmed by “looking inside

the black box”, as the board director mentioned.

I wondered whether or not my colleagues from the management team – as end users of our reports - knew that the MA department made reports for them to use during their job as HR, healthcare, housing, facility, operational or board director. Therefore I shared data with them and asked them how to interpret these data. Some of the management team members were asked these questions during group sessions, some of them were questioned by mail or during the coffee break. (See Appendix B for the overview of the research project.) Especially interpretation of data seems to be difficult for those who do not have a background in economics or finance. They often struggle with the reports and cannot work with it, without reporting this to the MA department. My expectation is that the information about social capital is available, but, due to limited knowledge regarding to interpretation, the information is not used in an optimal way.

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The answers to the questions of Appendix B will lead to an overview of the knowledge and opinions towards (dealing with) the different forms of TCA-capital and balancing them, especially for strategic issues. During the interviews, group sessions, observations and data-research the underlying motivations for the current and historic processes regarding sustainability MA will be discovered. The data-collection will cover the absence rates and trends, standard and extra payments, productivity/effectivity rates and file creation of employees. These atasets will represent the current way of reporting in a quantitative sense, and with the comments of the organisation’s members a broad view of reporting about the human capital will be offered.

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4. Results

In this paragraph the findings of the research will be presented. First, a general summary of the research process and its main outcomes will be given. The next part covers analysis of the social capital stakeholders, according to the interviewees. Stakeholder analysis through the organisation’s eyes is needed to get insight in the way the management identifies and prioritizes the stakeholders of social capital (Sedereviciute & Valentini, 2011), which is a starting point of how the organisation values them and sees them as social capital. Stakeholder analysis discovers also the ethical values and grounds for the management’s decision-making (Goodpaster, 1991), so it is useful to get more to the core of the organisation’s values and norms in order to get to know why and how they execute sustainability accounting. The stakeholder analysis will provide a sort of introduction to the knowledge of the TBL, TCA and social capital, which will be discussed afterwards. This will gain insight in the organisation’s capabilities regarding implementing and executing sustainability accounting in the sense of TCA. After assessing the feasibility of TCA-implementation I will provide a solid guideline for the so-called future path of TCA implementation and daily practice.

The most notable issue that came out of all observations, interviews, group sessions and the organisation’s files was the involvement of the staff. Everybody felt responsible for their job (“They have heart for care, we have heart for them.”5_{) and although the staff does not always} agree on certain topics, they try to find a way out. On the other hand, this “middle-of-the-road structure” costs a lot of time and as a consequence of people not keeping up with the work that has to be done. The past and present are faced rather than the (strategic) future. Only the board looks further forward, because this is in general the task of a board, since the board director mentioned that he has “to reflect future challenges to today’s operations and find a way to start

facing the challenge from now on.” All HR department employees mentioned that they are

always too busy for realizing a proactive mindset, which is confirmed in e-mails I got from the HR manager in December 2019 and January 2020:

“The new regulations about fixed hours in a contract will be active from January 1 2020. We do not know how to calculate those hours and what the expected difference is between the total amount of fixed hours, compared to the current flexible working hours.” – HR manager

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The department was seriously lagging behind with adapting labour contracts to the new regulations, and therefore asked me as controller to do some of their tasks. It can be an exception to ask colleagues from another department to do the HR department’s core tasks, but the organisation has to be aware of the fact that this is not possible in every case the department is lagging behind.

4.1 Stakeholder analysis

The stakeholder analysis started with asking the healthcare department, the HR department and the board to rank three main parts of the ZorgZaak Group, and the following results came up:

The HR department, the healthcare manager and the board director all have different focus. One of the HR employees, who has been working at the ZorgZaak Group for over five years, noted that before the big changes around 2010 the employee was at first, followed by the client and the organisation. Nowadays the rank is 1) client, 2) organisation, 3) employees. The HR employee had a clear argument for the change: it occurred when the margins of the group decreased, partly because of the high standard wages of older employees who have been working for the ZorgZaak Group for a long time. The organisation is for the large share financed by the government and it cannot independently decide on the tariffs for the different types of healthcare services. If this was the case it would be easier to offer more incentives to the personnel, but this is not possible at the moment, even not in a branch where the demand for staff is relatively high. So, according to the HR department, the focus on the employees made way for the interest in the client, due to “limited opportunities to value the personnel” and “the client is seen as the most important source of income, and we have to consider that”.

The healthcare manager finds that, when choosing from the three above, employees are the most valuable part of the organisation, reasoning that when the employee is skilled and satisfied, he or she will spread that satisfaction to the clients. To get her staff satisfied she wants to facilitate them as good as possible, but also teach them to be familiar with the organisation’s

Organizational part HR Department Healthcare manager Board director

Rank

1 Client Employees Organisation

2 Organisation Clients Employees

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(digital) tools and processes and the strict quality policy for delivering and reporting about the healthcare to their clients.

The board director finds that the organisation is always at the first place, because when an organisation is structured well and processes are efficient and effective the employees will be satisfied. The only difference between the findings of the healthcare manager and the board director is that the first one wants to motivate the employees from the outside-in perspective: by “pushing from the outside” such as trainings and explaining rules en duties she wants to increase the quality. The board director thinks from an inside-out perspective in the sense of asking his staff why they act as they do and if that is the best way to provide excellent services. He thinks that the socialization process is about 90% of all business within the ZorgZaak Group, so there should be focus on people’s manners and a frequent evaluation of their habits in order to develop their social en professional skills.

It is remarkable that these three “departments” of the organisation differ in opinion towards the most important part of the organisation. The HR staff doubted the most about who or what to prioritize. They were not sure if they could speak freely and seemed to be afraid to give their opinion about the organisation and the role of HR. A few minutes after I introduced the subject and asked my first question about their role and stake in the organisation it became quit. The HR manager started to share her findings and after a while her staff began to speak as well. Due to the lack of proactivity I expect the HR department to not think about about how they can provide the best treatment and incentives for the employees, and probably they feel pressed by the board and all changing labour law and regulations. This can cause constraints in improving their HR skills and quality. The healthcare manager and the board director seemed to be more convinced, since they came up with prepared and clear argumentation, whereas the HR department was relatively quit and doubtful.

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director tried to do so, but due to the short stay of two former general directors, the continuity and structure were somehow neglected.”

During the interviews and group sessions the interviewees were asked to list the stakeholders that could be related to the social capital of the ZorgZaak Group, following the stakeholder mapping method from Bryson (2015). Table 1 shows who the stakeholders are, and what their influence is and to which extent they have interest in the organisation.

Table 1: Stakeholder map (Bryson, 2015)

The stakeholders that are seen as important for the organisation seem to have a high interest in and influence on it, which means that the ZorgZaak Group has to serve multiple interests that can be contradictive. This makes it difficult to formulate a general direction and maintain that direction, since the internal and external power can disturb the course that is set. The board director mentioned that “care must always continue and when the organisation is able to do all the indirect businesses such as adapting to laws and regulations and recommendations from several institutions we will do it as best as possible.”

Most organisations state that the customer is always at first. I could agree, but in practice the organisation has to be a well-oiled machine in order to deliver the best service to the customer and facilitate the best work environment for my employees.” – Board director

Competitors

Ayslum seeker centers

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This citation represents the vision of the board director and the way of doing business: despite the fact that the healthcare branch is under pressure by all institutions and laws and regulations, the board director prioritizes care-giving above adapting to all the conditions the stakeholders prescribe. “I take one hundred percent responsibility for this and if anyone wants to know why I think about it like this, they are free to come over and have a dialogue with me.” The HR department and the healthcare manager have a different view on that; they find that they are dependent on laws and regulations. After the interview with the HR department, the HR manager said the following.

“[…] of course I want to write a unique HR policy, but due to the limited financial resources and our obligations according to the collective labour agreement it is hardly possible to write a policy that is far beyond those from our competitors.” – HR manager

By mentioning this, it can be stated that HR feels very dependent of others, which is the main cause of the obstruction according to a proactive mindset. The healthcare manager sees the relationship with stakeholders as is shown in the bottom right corner of table 1 as “[…] mutually

independent. We have to exchange knowledge to deal with it more efficiently and to strengthen each other, in order to offer a suitable offer for every single care demand.” In summary, the

way these three interviewee (groups) prioritize their stakeholders based on dependency: when the organisation is dependent on a stakeholder, it seems to be hard to do things according the organisation’s own direction, but when there is less dependency, the organisation can act more proactive and is able to follow its own path. While having an unplanned dialogue with one of the controllers, the difficulty of valuing en prioritizing the different kinds of clients6_became clear: “in the past we had several issues with care offices and main and subcontractors about who would pay our bills. In some cases it is hard to unfold the complex cooperation of healthcare organisations and how the money should flow.” If it is not clear who is responsible for the contract and who is the driving spirit behind the revenue, it seems quite difficult to value stakeholders economically – the easiest way to value stakeholders (Elkington, 2013). If that is a difficulty, how can it become possible to value stakeholders from the perspective of social capital?

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During the observations I noticed that a large part the of organisation sticks to some kind of tunnel vision by hearing things as: “that is a task for the HR department, but I expect them to

have a lack of time or knowledge”7, “it is not my responsibility to determine the budget for

education and I do not know who’s responsibility it should be”8_{. In conclusion, everybody says} that they are very busy with their job. They are only facing their own desk and not looking for cooperation or synergy. In mid-December I received a mail from the operations manager, and she notices the aforementioned:

“A clear structure should facilitate the department’s autonomy and decrease dependency. We have to cooperate to reach a higher level of efficiency and a useful system, which can make your work more easy and pleasant.” – Operations manager

The advice of the operations manager can solve the problem of tunnel vision because of the interaction between the different departments. Information will be shared better and with the collective knowledge of the departments bottle necks in processes can be found more quickly. One of the core tasks of the Control department is to facilitate business by reporting about results and forecasts, but before doing so, it should be checked if the end user interprets the data well. For example: there is a report that provides an overview of the employees overtime and the amount of money that is involved by a pay-out of those hours. During a meeting with an HR employee it became clear that the report they received every month from the controller was

“very unclear, so we did not do anything with the overtime for the last three months.” This is

a waste of time, so it can be useful to build the report with the help of both the controller and an HR employee. This idea is supported by the board director who wants managers to come up with issues themselves instead of discussing and evaluating problems after they occurred and have already crept into the organisation. So, first the ZorgZaak Group has to think about on which base they can prioritise the stakeholders on their value for the organisation, their potential investment in social capital and the return on it. When a collective opinion on that ranking is created, it will be easier to move the organisation to a next level in the sense of (re)structuring tasks and responsibilities towards the “new ranking” of the stakeholders and their interests and needs. If this is supported by all departments, collaboration and socialization throughout the

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organisation will grow because of the collective vision, mutual understanding and insight in each other’s work.

Since the board director sees the ZorgZaak Group as relatively independent of stakeholders it should be useful communicate his vision and mission with the management team, in order to spread it through the organisation. Another argument for this method is the responsibility he takes for doing so, and the fear of responsibility of other staff members at the head office. This is a win-win situation in the sense of everybody feeling comfortable with his task and responsibility. I expect that spreading the ideas of the highest management level will create an oil slick effect in the sense of employees adopting the vision of the board director. Due to rapid changes of general directors this process had some delay, but as described above, it will be done this way by the current board director. When this plan is carried out and executed, every member of the organisation will face the same direction and share the same ideas. As a consequence of this, it will also be easier to prioritize tasks when considering the relative value of stakeholders. This means that when an enormous and time-consuming change for a stakeholder with a high value of social capital and a small-scale and easy issue regarding a low-valued stakeholder occur at the same time, the high-value stakeholder change has to be done first. The board director sees himself as responsible for this “spread”, as he said that it is his responsibility to monitor the culture and continuity. In January 2020 he was still making plans how to manage this monitoring process, so there is not a clear plan yet.

4.2 Current knowledge about TCA

Before meetings and interviews took place I studied several policy documents13 and MA reports14 to get insight in the current knowledge about TCA. Albalaki et al. (2019) and Unerman et al. (2018) found that sustainable management accounting is still not integrated in current MA systems and techniques and that the wall between sustainability and financial reporting has to be broken down. To do so, there should be 1) sufficient knowledge about MA in combination with sustainability, 2) guidelines to investigate if the organisation is ready for application and 3) general application frameworks to benchmark the sustainable results and values of organisations over time. I investigated what the people at the headquarter knew about sustainable MA and especially the social capital as part of the TBL and TCA.

13_{The quality report (De ZorgZaak, 2018) and the staff plan 2018-2022 of MartiniZorg (2018), a subsidiary that}

provides care in the province of Groningen, the social annual report of the ZorgZaak Group (2018) and a summary of the start of the Front-runner Project (2019).

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The social annual report (De ZorgZaak, 2018) consists of two parts: social and financial. Page 3 of the report writes about perceived risks:

“Attracting new talent that fits our entrepreneurial and innovative way of care giving is due to labour shortage a risk for the next year. […] The ZorgZaak faces – despite all development and insecurities – the future with confidence and ambition.”

The so-called external limitations, coming from financers, is clearly mentioned in the year report. But the bigger part of the documents and reports I studied only provided “social results” in terms of revenue, costs, labour hours and margins. Figure 6 gives an example of how the ZorgZaak Group reports about social capital:

Figure 6 – monthly productivity analysis (division is anonymous)

The report above has probably the most social character of all fifty MA reports that are provided every months. The other reports have to do with revenues, financial results, calculation of reservations for the pay-out of overtime and no show15. These reports are the base for determining the KPIs16 of the organisation, which are all rather financial. The way de ZorgZaak

15_{The amount of minutes that are wasted if the employee is at the clients door and the client is not home.} 16_{Total revenue, costs and result per FTE, total result, paid hours, average hourly wage, amount of clients,}

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Group reports about social capital has less to do with valuing the social capital as defined by McKenzie (2004) and Longoni & Cagliano (2015): social capital stands for a focus on the creation and development of skills and capabilities on the long term in order to realize a good quality of life inside and outside the company. Figure 6 provides the productivity rates, how indirect time17 is spent and what the trend in absence rate is. The healthcare manager (as the end user of this analysis) mentioned that education should be mentioned specifically in the indirect time spending analysis, since it is seen as an investment in the future, which means that it adds value to the social capital. When asking her what that added value exactly would be, she answered that knowledge is gained and added to the organisation, but monetarizing it according TCA prescriptions seemed impossible to her. As already mentioned and acknowledged by the other controller of the ZorgZaak group, the no show “has a social value in the sense of

determining what the external effects of no show are. Questions you could ask, are: what are the external costs of no show? What does it cost when someone is not home? What are the alternative costs?” These questions are likely to ask when determining the value of social

capital, and it looks like that the other controller knows what the essence of valuing social capital is (“then we can communicate our added value and needed value to our stakeholders”), but it is not clear how it should be carried out. The no show report is shown in figure 7, and it gives insight in the amount of minutes no show per client per month, but has a lack of external costs in order to answer the aforementioned questions of the other controller.

Figure 7 – No show report (clients anonymized)

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On page 10 of the social annual report 2018 is mentioned that the ZorgZaak Group wants to cooperate as much as possible with external relations, but when it leads to endless meetings without progression, the organisation is not afraid to stop the cooperation immediately. This can be interpreted that the ZorgZaak Group only wants effective collaborations instead of adapting to the bureaucratic atmosphere of the market. But when a relation seems useful, the organisation tries its best to get the maximum out of it. For example: several external relations have to do with understaffing, and when the ZorgZaak Group’s employees are available, they are seconded. In the sense of social capital it should be valuable to internalize such external secondments and determine the value of it, because the organisation’s main target – providing care – can be reached, and the way to it should be valued. Beside that there is one other social capital-related issue as mentioned in the external reports: education. The client council of the ZorgZaak Group evaluates, together with the board, the progress of the expertise development project. It is good to evaluate such projects, but it is not clear what the targets are, how they should be reached and how the timeline of the project should look like. The HR manager is writing a plan for how to do organise this project, but there is no more information about it, which makes it pretty vague.

When having formal and informal conversations with colleagues from other departments it became clear that they see terms as social capital, TCA and sustainability accounting as abstract subjects that would hardly never touch their work. After inviting the HR department for the group session the HR manager came to me and said: “I think you have frightened them with

your introduction to the theme. Maybe you should formulate it in a way they understand based on their current knowledge.” She meant that there is little knowledge base about the subjects

and what they are meant for. With this knowledge I walked into the HR’s office and told them that I just wanted to talk about the way they do their job and how their opinion towards the employees and organisation is. During the meeting I gave a simplified introduction and started with some small-talk about daily businesses. I explained that TCA is meant for internalizing externalities (Bebbington et al., 2001) and asked the colleagues to make a mind map with terms that came up when thinking about potential externalities, focussing on the social part of the TBL. After the meeting all group members felt relieved, because “it is not as abstract as it

seems, but it contains our daily practice. We did never know that…” This did not mean that

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in knowledge of (application of) TCA is between the listing and valuing part. For example: the absence coordinator thought that absence and its causes and effects in relation to the organisation are tight related to social capital, but she was not able to find an answer including argumentation on what the value of one day of absence is for the organisation. I suspect that this situation represents most of the TCA-application nowadays. Due to a lack of guidelines and application frameworks, which is also recognized in the literature (Boyer et al., 2016) organisations are able to list their externalities, but still find it hard to value them. The ZorgZaak Group can cooperate with other care providers and/or social institutions such as accounting firms, universities, the Dutch Central Planning Office, the Ministry of Social Affairs and labour unions, in order to gain an agreement on how to determine values of absence rates, in- and outflow of staff, education levels, specialty skills, et cetera. The aforementioned institutions have insight in results and rates about the whole sector, which can make it easier to develop valuing tools rather than single healthcare providers determine those values on their own. An umbrella organisation such as the Dutch Calculation Room must be able to provide the valuing standards – agreed on by the “project partners” for the whole sector. As Unerman et al. (2018) advised: there should be a TCA-framework for the whole sector and the individual organisations within that sector as well, but before calculating on a single level there should be general standards.

4.3 Strategic decision-making and TCA

As shown in figure 2 the TBL agenda has moved from PR managers via project managers and designers to the boardroom and strategists. It seems that the ZorgZaak Group got stuck in the 1970s-1980s (Elkington, 2013), because there are two project managers out of 850 employees, including 50 overhead employees, that deal with sustainability and social return projects. I had a short meeting with one of the managers, who had been doing social sustainability projects for the last two months. She could tell me everything about how she wanted the housing locations to be a kind of social workplace and what the success of that would be. After she told me her ideas, I asked her if she could value the processes and outcomes of the projects, but she

“personally could not.” However, there is a project of the municipality of Groningen, called Social return in the region, which consists of a tool of valuing social impacts and changes

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accounting and her project could realize synergy advantages, and she admitted that she had never thought of it. Due to these internal collaborations the knowledge is exchanged through the different departments of the organisation, which can be helpful in creating support for developing sustainability in MA and other divisions. Considering her specialty in sustainability and social responsibility and my specialty in MA this collaboration will create a kind of joint venture, working towards a better balance in the pillars of the TBL and grounded argumentation for how to deal with the TBL and TCA. We have planned an appointment in February, so the path towards TCA-application is travelled a little further. We want to create awareness for sustainability accounting in all parts of the organisation, especially in the board because of its main stake in strategic decision-making. It seems that so far the decisions are mostly taken with a bias towards economic grounds. The board and management acknowledge this way of decision-making reasoning that the organisation has limited influence on their tariffs, revenues and margins. In the annual report of 2018 the road to the multi-year policy consists of four bullets:

• “Continuous improvement and innovation in daily healthcare in the way we offer to our

clients, from the thought: how can it be better, faster or cheaper?

• A healthy financial policy, both for short and long term; • Productive acting on expected developments in the market; • Further professionalising of the internal organisation.’’

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“Finally I understand the report you provide. I do not understand Excel pretty well, but the way you make it feasible for my level of interpretation helps in finding the troubles in my team and act proactive on those findings.” – Healthcare manager

So, reporting about social capital as a part of the TBL and TCA will help the management and the board to take decisions that provide more detailed solutions for the several “social” issues the organisation deals with. The MA department should check if the end user understands the reports and can take further steps with it. According to Burrit & Schaltegger (2010), Kaur & Lodhia, (2019), Hopwood et al. (2005) and Giddings et al. (2002) there are relations between the TBL, TCA and strategic decision-making, but it has not been thoroughly investigated yet. When drawing together with the board director a cycle of applying TCA and social capital in relation to strategic decision-making, the following result came up:

1) Taking strategic decisions;

2) Executing the things that are decided;

3) Reporting about the consequences of the decisions (adapting to TCA directions); 4) Evaluating the (sustainable) impact and adjust the strategic decisions.

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5. Future path for implementation of TCA

5.1 Conclusion

This study provides insight in the daily practice of TCA application and its added value to strategic decision-making, considering the model as given in figure 8. The loop of cause-and-effect shows that strategic decision-making affects the three pillars of the TBL, and these three forms of capital/sustainability influence TCA by considering the different externalities in accounting, as mentioned by Bebbington et al. (2001). Due to the underdeveloped research of social sustainability and social capital in the sense of TCA there was focussed on that specific part of the TBL and TCA. To complete the loop (the application of) TCA affects the process of strategic decision-making and the grounds for strategic decision. In order to get more insight in how TCA affects strategic decision-making, I asked the question:

How does True Cost Accounting add value to strategic decision-making?

To find the answer on this question I did action research within the ZorgZaak Group. By applying qualitative research methods, such as interviewing, observing and other forms of socialisation, I gained insight in the current knowledge about TCA, if the organisation is already suitable for TCA and how it can be used in relation to strategic decision-making. Also the quantitative part of analysing datasets of the MA department, discussing them with colleagues and getting an overview of the main processes and purposes within the ZorgZaak Group’s reporting contributed to broaden the perspective of this study.

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that every individual person and organisation probably has its own method. The process of internalizing externalities as proposed by Bebbington et al. (2001) went well until the monetarisation process occured. Since monetarisation is an important part of TCA and valuing (social) capital there is still a need for guidelines how to monetarise the capital. Before monetarising the externalities of social capital the organisation should be (re)structured and follow the vision of the board director, since he determines which direction to follow. In order to create support of the staff this vision should be spread throughout the organisation.

By doing action research I found that we have to develop a path towards TCA to make MA suitable for social sustainability accounting. To create this suitability description and instruction of processes have to be clearer. This has been developed over the past years (De ZorgZaak, 2018; MartiniZorg, 2018) so the tasks and task division of the staff become clearer to them. On the other hand, descriptions and processes are for the bigger part only on paper, but not operationalised yet. There should be checked if every staff member keeps up with his task, function and responsibility. Due to a new task division within the management team there is created a function of an operations manager who has to check if the policies and task descriptions are executed as determined by the board and management. This must cause efficiency and accountability, but there is still room for improvement in the sense of reporting about the processes and results. Therefore several conditions have to be met, starting with levelling of knowledge of reporting, assessing the feasibility of the different reporting tools and the relevance for the organisation.

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forms of social capital are important to consider for their daily work. Several management team members mentioned that in the sense of social sustainability reports about education would be very useful to determine the staff’s present and future value. The MA department should then investigate how to conduct a certain report and if the end user is able to act on the outcomes of it. During my daily work I have discovered that building a report together with the end user has a positive effect on the usability and quality of the report. For the sake of efficiency the departments of healthcare, HR and finance should have access to the reports at every time of the day, without waiting for someone else to give them access or deliver the specific reports.

When the reports are conducted well and used in daily practice, they have to be discussed with the Control department monthly, so results can be evaluated and compared to other periods. However, it can be possible that a certain way of reporting is suitable only for a single organisation. In order to benchmark social capital and its development throughout the sector (as mentioned by O’Dochartaigh & Maughan) the standards for valuing should be discussed with other healthcare providers and institutions.

After a few months trends in the output of the reports can be analysed and threats and opportunities can be defined - both for long and short term. A situation could be: the net flow of employees in the counselling division is negative over the past six months. What is the cause? Efficiency and less need for counsellors, a decreasing amount of customers, less attractive work environment? How can we solve this? Do we have to take action immediately or do we have to wait? This is the proactive situation of analysing a trend and act on it instead of monthly sending an Excel file that is read once a year and discovering the trouble far too late. Such a development is valuable for the organisation, but it does not meet the conditions of TCA yet. At this stage there is just a solid basis for investigating the usefulness and relevance of TCA. Questions that come up at this stage are: How do we value the outcomes that are not monetarized? Are we able

to do so? Do we need our stakeholders to do so? What does the outcome of the monetarization tell us? Is such an outcome relevant for the organisation and its continuity?

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contributes to the quality of MA and according to the findings of this study the expectations regarding TCA application in relation to strategic decision-making are positive. The added value of TCA to strategic decision-making consists for the bigger part of providing information about the most important part of the organisation: people. Especially information about what the in-house social capital is and how the return on it can be increased is useful information to build strategies and policies on. Strategic decisions will be more “broadly grounded”, meaning that a multiple- perspective (social and economic instead of only economic) will help to develop business for the purpose of financial results and the people that create the result – both in a sustainable way.

5.2 Discussion

The aim of this paper was to discover the added value of TCA to strategic decision-making. Due to the high pressure on the Dutch healthcare market, a lack of practical TCA application, underdeveloped research on social capital and the gap between theory and practice in MA the ZorgZaak Group was chosen to execute action research.

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At the start of my investigation I expected that the ZorgZaak Group would already be familiar with the concept of TCA and that the only obstruction for applying TCA was the lack of practical guidelines. During this study I found that relatively little was known about the concept. That made it difficult to carry out implementation of TCA and conducting a project of developing social capital reporting during the study. It could have been better to first check if the organisation was suitable for TCA instead of supposing that the organisation already is and going one step beyond by discovering added values and influences of the concept. On the other hand, by doing action research it becomes possible to investigate underlying reasons for cultures and processes thoroughly, since I noted that socialization during research can really help to find the core of the problem. I did not expect that the effect of socialization, as stated by Westin & Roberts (2010) would be that strong.

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