Management Accounting Education Priorities

Jim Reeve, University of Tennessee

The Teacher’s Dilemma with “The New Idea”

Practice → Understanding– We don’t know much– However, I know more now than I did 15 years

ago.

So we cope– Teach technologies before they are understood– Suggest taxonomies incorporating organizational,

control, strategy, and decision interactions.

The Teacher’s Dilemma with Students

Students believe observation is truth. Why? is not in their vocabulary—only What? and How?

If why? is asked, its usually at a level direct to their experience.

We want to avoid management accounting being treated as isolated tools and techniques. Stuff to be put in the tool bag and stored for later reference.

Some Priorities Don’t Change

Improbability of single solutions (intensity of complexity, volatility, and uncertainty)– Budgeting is still appropriate in many settings– Feedback control appropriate (facilitate learning)– Costing will still be needed– Traditional investment controls will still apply in

many settings– Issues of capacity and fixed costs

Some Priorities are Evolving

Hybrid Governance Structure Controls (Supply Chains)

– Target costing, value chain analysis, open book– Customer and supplier surplus generation and sharing

Organizational Controls– Incentive systems, systems and procedures, non-market

pricing

Controls in highly adaptive environments Causal Performance Chains (Strategy Mapping)

Increase ROCE to 12%

Revenue Growth Strategy Productivity Strategy

New Sources of Non-Gasoline Revenue

Increase Customer Profitability Through

Premium Brands

Become Industry Cost Leader

Maximize Use of Existing Assets

ROCENet Margin (vs. industry)

Non-Gasoline Revenue & Margin

Volume vs. Industry Premium Ratio

Cash Expense (cpg) vs. Industry

Cash Flow

Speedy Purchase

Clean Safe Quality Product Trusted Brand

Friendly Helpful Employees

Financial Perspective

Customer Perspective

Help Develop Business

Skills

More Consumer Products

Recognize Loyalty

Share of Targeted Segment

Mystery Shopper Score

Dealer Profit Growth

Dealer Satisfaction

Differentiators

“Delight the Consumer” “Win-Win Dealer Relations”

Basic

Create Non-Gasoline

Products & Services

“Build the Franchise” “Increase Customer Value” “Achieve Operational Excellence” “Be a Good Neighbor”

Improve Environmental,

Health and Safety

Understand Consumer

Segments

Best-In-Class Franchise

Teams

Improve Hardware

Performance

Improve Inventory

Management

On-SpecOn-Time

Industry Cost Leader

New Product Acceptance Rate Environment

Incidents Safety Incidents Dealer Quality

Rating

Yield Gap Unplanned

Downtime

Inventory Levels

Run-Out Rate

Activity Cost vs. Competition

Internal Perspective

A Motivated and Prepared Workforce

• Aligned• Personal Growth

Climate for Action

• Functional Excellence• Leadership Skills• Integrated View

Competencies

• Process Improvement

Technology

Personal BSC Employee Feedback

Strategic Skill Coverage Ratio

Systems Milestones

Learning & Growth Perspective

Mobil NAM&R Strategy Map: Kaplan and Norton

Some New Priorities to Consider

Long Lag Causal Chains– R&D pipelines– Environmental spending– Geographic expansion– Employee investments

Fragile Causal Chains– Organizational learning and adaptation– Environmental scanning

Control Systems and Gov./Org/Inst. Structures Budgetless organizational control (Hope and Frasier) vs. RCA

Some Pedagogical Requirements

Complex, volatile, and uncertain Causal performance chains can be

discovered and applied Compressed time phasing Environmental scanning required Risk taking and decision responsibility Conflict and tradeoffs Discovery of leading indicators

Some new pedagogies: Marketplace simulation (www.marketplace-simulation.com )

Team-based Global Competitive Environment Deep decision complexity

– Assess customer values by market segment– Design product to fit segment(s), design ads– Open sales offices and web portals, place ads– Determine HR policies and incentive schemes– Intangible time phased investments (training, web

enhancements, product enhancements, manufacturing process enhancements)

– Plant capacities, Min/Max rules, setup, quality control studies

– R&D joint ventures

Sample Time Phased Decision: Quality Study

Sample Tradeoff Decision: Min Max Production Rules

Environmental Screening Exercise

Environmental Screening Exercise

Environmental Screening Exercise

Developing Causal Linkages: Sales Performance

Developing Causal Linkages: Leading indicators

Developing Causal Linkages: Competitor Data

Some New Pedagogies: Scenario Planning

Images of the Future– Plausible– Internally consistent– Challenging for users, out of the box

Method (The Art of the Long View, Schwartz)– Issue– Factors and Forces– Dimensions– Scenarios and guideposts

A DECISION: OUR NUCLEAR LEGACY AND REMEDIATION

Public Concern (high)

Private Ingenuity Full Speed Ahead

Public Funding (low) Public Funding (high)

Not Enough The Greater Good

Public Concern (low)