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researchupdate The newsletter of CIMA research - September 2010

WCOA 2010: the future of accounting CIMA is a gold sponsor of The World Congress of Accountants (WCOA) Contents 2 CIMA has recently published the following publications 3 Seamless learning from CIMA 4 From ledgers to leadership 5 News 6 Sustainability practices in a time of recession and the accountant’s role 8 Management accounting and investment co‑ordination in networks 10 Enterprise wide risk management and the budgeting cycle 12 Shared services research: getting behind the backoffice 14 Diary dates

CIMA 26 Chapter Street London SW1P 4NP T. +44 (0)20 7663 5441 F. +44 (0)20 7663 5442 Naomi Smith Research and Development Manager Paula Downey-Jones Co-contributor Opinions expressed in Research Update are the authors’ own and do not necessarily represent the views of the council, the institute or the organisations by which they are employed.

The event will bring together over 6,000 high level international finance professionals to explore cutting edge issues on the future of accountancy. It will consist of a number of plenary sessions and workshops that will be chaired and delivered by highly experienced business leaders. WCOA is held under the sponsorship of IFAC (International Federation of Accountants) and is this year hosted by the Malaysian Institute of Accountants. The event will take place from 8–11 November. Since its inception in 1904, the WCOA is seen as the foremost international accounting event – the ‘Olympics’ of the accountancy profession. It has been held every five years since 1977 and every four years since 2002. CIMA is a gold sponsor of WCOA 2010 as it recognises the importance of supporting the global accounting industry. The 2010 World Congress theme is Accountants: sustaining value creation. Professional accountants operate in all facets of the global economy creating value and upholding business integrity in both the private and public sectors. In a world demanding short term solutions, professional accountants are challenged to sustain long-term growth. Accountants lead strategic teams and are charged with creating value and safeguarding assets. They are an important part of organisational governance, providing regulators and society with assurance that business has operated to the highest standards. This World Congress will explore issues related to key areas that directly and indirectly affect the continued relevance of the professional accountant in the coming years. WCOA 2010 will feature headline speeches by CIMA Chief Executive Charles Tilley and CIMA Professor of Accounting and Finance Wim A. Van der Stede. The event is geared towards professional accountants in business and public sectors, practitioners, industry leaders, policy makers, standard setters, academics and thought leaders.

Attending the WCOA 2010 offers:

• networking and gaining insights and first hand information from renowned business leaders • meeting the most influential and innovative minds in business, finance and decision makers from all over the globe • sharing and exchanging ideas on the latest business trends and global economic developments • developing and putting forth values to sustain long-term growth as well as identifying business and investment opportunities. WCOA 2010 promises to be one of the most relevant business events of 2010. For more information, or to reserve a place, visit To receive free news and updates on WCOA 2010 please sign up at

Global perspectives on governance: lessons from east and west is the first of two CIMA reports to be published in the run up to WCOA 2010. While the core principles of corporate governance are the same throughout the world, the Asian model places particular emphasis on trust and relationships. This paper discusses the key differences between the Western and Asian approaches to help business leaders explore the best aspects of both. Download your complimentary copy of the report at


publications CIMA has recently published the following reports These are all available to download free of charge at Tools to manage reverse logistics John Cullen and Jonathan Gorst, University of Sheffield, UK and Mike Bernon, Cranfield School of Management, UK This CIMA study focuses on the management of retail returns, explores the reverse logistics process from a holistic supply chain approach and the role that management accountants can play.

Reporting and managing risk: a look at current practice in the private and public sectors Margaret Woods, Aston University, UK This report summarises case studies on risk management practices at four major organisations – Tesco, Royal Bank of Scotland (RBS), Birmingham City Council and the Department for Culture, Media and Sport (DCMS)

Budgeting practice and organisational structure David Dugdale and Steven Lyne, University of Bristol This report summarises an investigation into budgeting practices in UK companies. The research stemmed from debates generated by the ‘beyond budgeting’ movement that emerged in the 1990s. Integrating management accounting systems in mergers and acquisitions: the role of the management accountant Agyenim Boateng, The University of Nottingham, Ningbo, China and Roberta Bampton, Leeds Metropolitan University, UK This summary examines and maps out the role of management accountants in the integration process of Management Accounting Systems (MAS) in mergers and acquisitions. Social capital: the role of management control systems in NGOs Robert H. Chenhall and David Smith, Monash University, Australia and Matt Hall, LSE, UK This report examines how formal controls can have both beneficial and damaging effects on building and preserving social capital in an NGO delivering welfare services. Garden designs to improve the line of sight: implementation of the balanced scorecard and an alternative costing system at RBGE Alasdair Macnab, Royal Botanic Garden Edinburgh, UK and Falconer Mitchell and Chris Carr, University of Edinburgh, UK This report investigated whether a strategy framework such as the Balanced Scorecard (BSC) (linked to a Performance Management System (PMS)) compared to a more standard model of strategic planning would improve focus and research output by botanic gardens worldwide.


Using management accounting to lengthen the time frame of managers E. Pieter Jansen, University of Groningen, the Netherlands This interventionist research project investigates the question of how the time frame of the company’s managers can be lengthened, and how management accounting can help to achieve this. The use and consequences of performance management and control systems: a study of a professional services firm Wendy Beekes, David Otley and Valentine Ururuka, Lancaster University, UK This research executive summary outlines results from a casebased study of employees at a regional branch in a large UK accounting firm on the use and consequences of performance management and control systems.

update Seamless learning from CIMA The gateways

The CIMA Business Flight Simulator and Certificate

During 2009-10 CIMA opened the gateways to allow ease of access to MBA graduates and members of other professional accountancy bodies into the strategic level of the qualification. After achieving success by undertaking and passing an exemption exam (aligned with an appropriate CIMA support package), they receive total exemption from all the examinations prior to the strategic level papers.

Trying to encourage students and members of the workforce at any level to engage with basic finance and accounting can be a challenge – whether as an introduction to an academic business degree or as a CPD or training initiative – and that is exactly what is being offered by CIMA and Metapraxis in partnership.

The route into the gateway is proving popular and is an ideal fit for MBAs who aim to move quickly within their area of management expertise. The package offers excellent exposure to

• • • •

high level risk management strategic decision making and performance management leadership and high level skill development appreciation and the ability to lead within complex relationships, networks and supply chains.

With only four strategic level papers to satisfy, ambitious and bright MBA holders and professionals can add value to their knowledge base and fast track into the future. West Midlands Business Operations Business Leadership Project: Foundation Degree Forward CIMA has become part of a comprehensive movement to align regional, employer-driven, academic and professional qualification initiatives for the benefit of employees. Through this pilot initiative the student is in the workplace and gains both academic and professionally accredited qualifications by undertaking a blended, work-based leaning package.

The CIMA Business Flight Simulator is an electronically based enabler which is played as a business game and culminates in real-time business challenge. The game has been tested on a wide range of audiences. The game focuses on the relationships between the income statement, the balance sheets and cash, illustrating the relationships therein between strategic decisions, working capital management, financing decisions and shareholder expectations. There is the ability to sit a series of e-tests and a final timebound individual assessment, culminating in the award of the CIMABFS Certificate for the successful delegate. These three examples are part of the broad range of global community learning support initiatives being undertaken by CIMA. Watch out for future developments like the ‘fraud and risk soap drama’ and other new concepts for CIMA’s engagement with generation now and multimedia, blended and flexible learning. To learn more about any of these initiatives please contact

Key players in the pilot are Aston University, CIMA Foundation Degree Forward, Metapraxis, ILX, Sterling Power and leading private sector employers e.g. ‘Eon’ in the West Midlands. Hopefully this will help students who have failed to secure a place in their chosen university due to recent government restrictions.


update From ledgers to leadership A journey through the finance function Is a finance professional’s business competency more important to organisations than their technical competencies? Identifying and developing commercial competencies for finance professionals involves a shift in paradigm similar to the move towards business partnering. Indeed it is even wider reaching since all finance professionals – both business partners, and finance specialists and generalists – will require better business and commercial skills going forward to provide the value that organisations expect from the finance function of the future. It is a shift that raises many questions. The CIMA Centre of Excellence at the University of Bath School of Management has been established to research, over a five year period and on a global basis, to determine best practice in the future development of the finance function.

Developing a finance team to take an organisation forward is an art, but CIMA’s new report tries to turn this art into a science. Input from over 4,500 finance and senior managers has created a unique insight to what skills, competencies and development finance professionals really need to add value to the organisation. For example. • Identifying the correct skills and competencies when recruiting - saving time and money. • To implement the right strategies to retain the finance stars. • Ensure the right staff is getting access to the most effective training and development. • Engage finance staff with the rest of the business. This CIMA research report uncovers the secrets of successful finance teams from senior leaders in finance.

Insight from thought leaders LEADERSHIP

‘… business partners do not want a ‘finance technician’ but a ‘finance leader’ with strong communication skills and business understanding.’ Dominic P Moorhead CFO, F. Hoffman La Roche

‘It is no longer adequate for a finance professional to be an expert in the technical aspects of finance alone.’ Sriram Kameshwar Head of Knowledge Services, Prudential’s shared services, India

‘… the stronger the relationship you have with the business the better able you are to add value and influence…’ Steve Cresswell, EMEA CFO and COO, Jones Lang LaSalle

Special offer The report is normally priced at £95 but it is available for just £70 when you quote FT008. Visit the website to order your copy


news CIMA Sponsors the Global Management Accounting Research Symposium (GMARS) 71 professors and doctoral students from around the globe attended GMARS at East Lansing, Michigan in June. GMARS brings together a diverse set of the highest quality international management accounting papers, plenary speakers, and researchers. In 2011, GMARS returns to Sydney from 21-23 June. GMARS 2011 includes an Emerging Scholars Forum to develop the next generation of thought leaders in management accounting research. GMARS thanks CIMA General Charitable Trust for its generous support of this conference.

Tips from the top Successful CIMA female business leaders share their secrets about how to overcome barriers and reach the top, in a new report Breaking glass: strategies for tomorrow’s leaders. This report is a very practical guide for those who want to progress up the career ladder. Though mainly aimed at women many of the tips and advice it contains are invaluable to men too. It includes insights and learnings from 20 of CIMA’s most senior women about their journey to the top, and an ‘action plan for success’ checklist. In-depth case studies on some of the women and ‘female friendly’ employer policies will accompany the report.

What is Management Accounting? The stereotype of the accountant is a mathematical, detailobsessed and socially awkward loner. Yet management accountants are constructive, assertive, practical, and a key component of management in their organisations. This is not just a problem about stereotyping an entire profession. It is also about not appreciating the different elements of that profession. Management accountants use their judgment rather than follow standards; they need strong communication skills, and have to cope with uncertain information and new scenarios. This is so different from the stereotype as to deter students with the right qualities from pursuing this career; and to seriously mislead employers or commentators about the contribution management accountants make. Management accountants make up about 40% of all accountants worldwide, so we are not a tiny minority. Financial accounting and audit does however have a greater public and political profile, since management accounting is carried out behind closed doors and to suit the organisation rather than any public interest. CIMA are publishing a suite of four reports in autumn 2010 about management accountancy, to explain the role, how it is seen or practiced differently across the globe or in various contexts and how it relates to other management or specialist disciplines. The reports will refer to relevant academic research and the results of CIMA’s own recent survey of practice. For more information please contact

The report is part of a wider ‘Women in leadership’ campaign to support the progression of female members into senior roles and to promote the accounting profession and CIMA to female students. The campaign will also include:

• a dedicated webpage with co-badged content from experts, in-depth case studies of successful women and employers ‘female friendly’ policies • an online women’s network on CIMAsphere • blogs on ‘Women in leadership’ • events and training. For more information please contact

Breaking Glass: Strategies for tomorrow’s leaders Successful CIMA female business leaders share their secrets on how to overcome barriers and reach the top.


focus Sustainability practices in a time of recession and the accountant’s role This study is the latest of three surveys tracking the impact of the global recession on the nature and extent of business adoption of socially responsible, environmental and peoplefriendly (sustainability related) practices in New Zealand. By Eva Collins, Stewart Lawrence, and Juliet Roper, Waikato Management School, New Zealand Economic downturns potentially have an impact on the implementation or continuation of sustainability practices and this latest study specifically focused on what happened to such practices during one of the worst global economic recessions in recent history. Changes and trends in practices from 2003 to 2010 Despite the economic downturn, there has been a general increase in environmental practices. However, although there are a number of positive short-term economic benefits, waste and energy targets decreased in 2009. Practices related to people issues also took a hit during the economic decline. 2003 to 2006 saw a general increase in the uptake of social practices, but in 2009 every single social practice saw a marked decline, with most practices below 2003 levels. Responsibility for policy development and implementation of practices It is unclear as to how much involvement the management accountant has in developing sustainability strategies within an organisation. The survey showed that organisations who were CIMA members had a higher rate of accountants participating


in developing these strategies than non-member companies, although this rate was fairly minor in comparison to other business managers such as the managing director, environmental, human resources and marketing managers. 64% of all responding companies stated that their managing directors were responsible for environmental strategy with accountants participating in only 4% of the cases. The results were analysed further for companies with more than 99 employees only, this was to eliminate any distortion related to small organisations. These results showed that the managing directors’ role in environmental strategy dropped from 64% to 48%. 32% of respondents indicated the organisation had an environmental manager, with operations managers the next most actively involved at 24%. Only 5% indicated that the management accountant played a role. 14% reported that no one in the company was responsible for environmental strategies. In addition, most companies have not modified their accounting systems to integrate environmental costs and savings. Only 11% of all respondents had modified their systems, the figure was 12% for large companies, and 14% for CIMA members.


Drivers and barriers to adoption of practices Perhaps not surprisingly, cost was reported as the most common barrier (56%) to adopting sustainability strategies. However, cost, specifically cost savings, was also reported as one of the top drivers (30%), reflecting the complex nature of the perceived costs and benefits related to sustainability. Companies can often get quick payback from some sustainability strategies. For example, investing in an energy audit and making the necessary changes to save energy can lead to immediate savings to the bottom line. However, extensive capital investment, for example, installing solar panels which may have positive longterm financial benefits, may be too costly in the short-term to implement. On the social side, companies may find that offering flexi-time is a low-cost family-friendly strategy that lowers the turnover of workers trying to balance work and family, but assisting employees to obtain tertiary education, while giving a company a more educated work force, may be too costly for many companies to do. Aside from cost, management time restraints (38%), other priorities (31%) and lack of knowledge and skills (28%) were the most commonly reported barriers. Only 15% of companies reported a lack of metrics to establish a business case for sustainability as a barrier. The most common driver to adopting sustainability strategies was by far corporate reputation and brand (57%). Adopting these strategies as a way to recruit and retain staff was the second most common driver (32%), followed by cost management/ reduction (30%). Government regulation was reported by only 14% of the respondents as a driver.

Businesses’ perception of the importance of such issues in the future A surprising effect of the recession was that many managers demonstrated a change in values. The number of managers citing personal values and beliefs as a positive influence in adopting social practices declined from a high of 46% in 2006 to 29% in 2009. Their change in values represents a move towards a survival instinct, shifting from treating their workers and the community well to trying to keep the business afloat. It may also reflect the state of the labour market with recruitment and retention easier in a recession.

Building a long-term picture The three surveys (2003, 2006 and 2010) represent one of the first national studies in New Zealand to focus on the impact of recession on business practices. This latest survey was sponsored by CIMA and covers the role of the management accountant in the formulation of sustainability practices. There was a 30% response rate for the 2010 survey. Of the 736 respondents, 15% had responded to the first two surveys allowing the research team to build both an overall picture of the nation and track individual companies over a seven year period. Work is continuing in order to gather deeper, richer research evidence. With support from CIMA the research team from Waikato University will interview CEOs and management accountants involved in sustainability policy formulation and implementation during the latter part of 2010. Further reports will be issued after those interviews.


focus Management accounting and investment co-ordination in networks Research on capital budgeting has limited itself to understanding the valuation of investments, rather than analysing the actual practices for managing long-term, interdependent processes of capital spending that often extend across the boundaries of firms. This research aims to redress that imbalance. By Peter Miller, London School of Economics and Political Science; Jodie Moll, University of Manchester; and Ted O’Leary, University of Manchester/ University of Michigan Developing complex technologies often involves long-term investments by networks of companies and other agencies. The returns on investment for any one organisation are likely to depend on how effectively its capital commitments can be co-ordinated with those of others. While such co-ordination is arguably crucial in some industries, we know remarkably little about the roles that management accounting plays, or might play, in aligning investment processes across organisational boundaries. The research setting The research examines the mechanisms that have been developed to facilitate the alignment of interdependent strategies and investment processes of organisations in the semi-conductor industry. Our specific focus is on two key investments: a proposal to introduce larger 450mm silicon wafers, and the development of so called ‘next-generation’ lithography. Both extend over long periods of years, require large capital expenditures, and involve extensive co-ordination. They also offer interesting contrasts.


The silicon initiative has proven to be a divisive one. Some organisations have argued that, while larger silicon will be needed at some future date, the current initiative is premature and not an effective use of capital. A small number of larger semi‑conductor firms nevertheless intend that the industry should pursue the increase in wafer size more immediately. We look at how these differences in strategy may be addressed within the co-ordination process. The ‘next-generation’ lithography initiative enables the study of how investments in alternative pathways of technology development are prioritised, co-ordinated and monitored in the industry. There is close to unanimity that advances in lithography continue to be of the highest importance. Such advances are core to the production of more complex semi-conductors. While current forms of optical lithography are deemed close to the limits of their capability, there is not yet a full understanding of which of the several alternatives might be technically and economically viable. We look at how industry evaluates and prioritises options, to facilitate the alignment of capital spending patterns.


Our research methods include participation in industry conferences, tracing of events within industry consortia, and interviews in the USA and Europe. We have interviewed top level executives from leading semi-conductor companies, consortia and suppliers and also legal counsel and consultants with expertise in the sharing of sensitive data across organisational boundaries. Interviews are continuing during the current summer to further refine our analysis. Initial results The research is a work in progress so the comments which follow are tentative and subject to change. We focus on three elements of the co-ordination mechanism which we term organising, modelling and intervening. Distinct consortia-based organisational arrangements are used to bring together representatives of semi-conductor companies, suppliers, and government and university laboratories to discuss technology forecasts. We look at how such discussions are structured to avoid issues arising from anti-trust legislation, disclosure of trade secrets and proprietary data, and perceptions that particular avenues of research and investment might be closed off prematurely or improperly. Inter-organisational co‑ordination requires forms of discussion that, while they intended to influence the resource allocations of individual participants, nevertheless need to be conducted in careful language that is explicitly pre-competitive, non-financial and non-proprietary. The second category of analysis is modelling, which may be contrasted with the familiar accounting concept of control system. When working across the boundaries of independent organisations, it is not meaningful to speak of a control system to co-ordinate investments. Rather, it is important to understand how organisations come together voluntarily to model and represent possible technology futures for an entire industry, and in ways that may then influence and inform their individual investment programs.

seem most likely to be technically and financially viable and worthy of continued or accelerated investment. Intervening hybrid engineering and financial appraisals, and it shapes the data incorporated in subsequent modelling exercises. We are looking at intervention practices as crucial but again sensitive steps in industry level co-ordination, insofar as they seek to mediate the strategies, investment priorities, and technology trajectories of legally separate and independent organisations. The research is concerned with mechanisms and instruments of mediation that organisations in the semi-conductor use to share information, and through that sharing seek to influence each others’ interdependent investment strategies. The work continues, and we look forward to reporting full results in due course.

A Benchmark for other industries Advances in the design and manufacture of semi-conductor devices, including microprocessors and application specific integrated circuits, are of great significance for the modern economy. Such devices are integrated within a host of end-user applications including consumer computers, medical diagnostic products and security systems. Within the semi-conductor industry much attention over the last few decades has been paid to inter-company co‑ordination mechanisms. Close analysis of this sector may have relevance for other industries where approaches to investment alignment are currently being sought.

The third category is intervening. By this we mean steps to promote or discourage patterns of investment in particular technology trajectories. There is a relay or feedback loop between intervening and modelling. Modelling may for instance set out multiple prospective means towards ‘next-generation’ lithography. Intervening includes experiments to test which


focus Enterprise wide risk management and the budgeting cycle The last 15 years have seen a rapid increase in interest in Enterprise Risk Management (ERM). Recent financial scandals have further increased the pressure to adopt and embed ERM in business processes. This research looks at the impact of ERM on budgeting across British and Italian companies By Michela Arnaboldi, Politecnico di Milano; and Professor Irvine Lapsley, University of Edinburgh Since the 1950s, both researchers and practitioners have conceded the need to consider risk in planning and have sought better models for dealing with uncertainty. Such attempts were given a new impetus by the escalation of interest in risk management in recent years with some authors claiming the need to exploit synergies between risk management and planning processes; proposing new integrated tools such as the risk scorecard and key risk indicators; and setting out regulatory guidelines for integration. The research focuses on companies in Italy and the UK, providing an in depth analysis of how ERM impacts management accounting processes, specifically budgeting. It shows the technical aspects of the impact of ERM on the budgeting cycle and organisational issues, and provides evidence of differences in practice across companies and the complexity of situations within these organisations. The specific objectives of the research were: • Analysing if and where ERM enters in the budgeting cycle. • Examining the organisational roles involved and the type of approach adopted. • Investigating the possible influence of the regulatory context, by comparison of companies in the UK to those in Italy.


Information was gathered from a wide variety of sources: face to face interviews, companies’ published reports, internal documents; archive data; and newspapers for statements by top management, and other public coverage of the companies. The companies selected for this research consist of two telecommunications companies (one Italian and one British), two utility companies (again one Italian, one British) and an Italian automation, information and control company. The range of integration of ERM The five cases show different levels of integration of ERM and budgeting, ranging from being fully embedded within business process to being run separately. Two companies (the British Utility Company and the Italian Automation Company) have ERM embedded firmly within their budgeting processes, although the companies have chosen


different methods of integration. In the Italian company, ERM and budgeting are run on a joint timescale to allow the risk analysis to be infused within the budgeting cycle. The Chief Risk Officer (CRO) and the Financial Controller collaborate in challenging managers to translate risk into their budgets. The British Utility Company uses a higher level of flexibility and the integration between the two processes has been depicted as ‘continuous and on a daily basis’. At the technical level risk and budgeting are combined using the concept of risk capital. In two cases (the Italian Telecoms Company and the Italian Utility Company) ERM had no impact on the budgeting process, with management accountants continuing to carry out their processes separately from the risk managers. In both cases ERM feeds into Internal Auditing, emphasising a management perception over the distance of ERM from business processes. During the budgeting cycle, risks are not neglected, but they are collected and processed by management accountants, without drawing on ERM analysis or consulting the CRO’s. The final company in our research (the British Telecoms Company) adopts a mid range position. The short-medium cycle of planning is not integrated with ERM; the process is organised by the budgeting function and draws on a risk ledger which is updated through a continuous interaction with the business unit managers. However ERM does enter the performance cycle through strategic planning. ERM is voluntarily positioned on a different level, distant from the short-term cycle, in an attempt to challenge managers to move from their present commitments and to think of possible future problems and opportunities. Here the risks are collated using an interactive approach, but limited to senior management as part of a strategic committee. Risks are then evaluated and positioned in a risk map according to their probability and impact.

Finally, the organisational roles involved (CRO, management accountants, internal auditors) and their reciprocal relationship. The introduction of ERM affects the power domains of actors dealing with control of the company, creating collaborations or potential difficulties.

The rise of ERM ERM is a product of the risk management explosion which started during the 1990s. It is designed to be a holistic approach for assessing and evaluating the risks an organisation faces. In the UK, the publication of the Turnbull Report created a close relationship between internal control and risk management and made ERM a central focus of corporate governance. The Turnbull Report attempts to make directors specifically accountable for the development of organisation-wide risk management practices, which were previously considered to be poorly integrated and designed without reference to commonly, used guiding principles. Today, more and more companies are adopting ERM, yet the strength of its implementation remains doubtful, with practices differing widely across organisations and low empirical evidence on how ERM impacts on business processes. Among these processes, budgeting is of particular interest, being itself a form of risk management.

The challenges of risk management and planning There are several challenges that companies face in considering the integration of ERM and the performance cycle. Firstly, the relationship between short-term and long-term planning. The companies presented here reveal different ‘solutions’ with potentially complementary pros and cons. Secondly, the type of technique adopted in translating risk. Two companies conceptualise risks in financial terms, the remaining three organisations have instead opted for a qualitative evaluation visualised via a risk-map.


focus Shared services research: getting behind the back-office By Ian Herbert FCMA and Professor Will Seal of Loughborough University

The SSC model Consolidating common service activities into a discrete Shared Service Centre (SSC), where expertise and technology can be brought to bear on work processes and information flows, is an emerging development in the continuing evolution of the multi-divisional form of organisation. The typical SSC sees a range of support services, such as finance, HR, purchasing and IT, taken out of front line business units and aggregated into a new, purpose-built, facility located either in a cheaper part of the home country or offshore. This study investigates the SSC as a hybrid governance mechanism that seeks to combine market principles with in-house control by setting up a new arm’s length organisational form. Proponents claim that significant efficiency savings can be achieved through business process re-engineering (BPR), the elimination of duplicate systems and moving to a cheaper location. Whilst, similar claims are made for outsourcing, the SSC enables a quasi-market feel to relationships with its ‘customers’ in the business units but crucially allows management to retain managerial control over service activities. The research method The project initially started in 2003 when the SSC journey of two companies came to our attention through a wider enquiry into business transformation. At the time, we did not appreciate just how fundamental the SSC model might one day prove to be, both in the public and private sectors. However, the ‘missionary’ zeal of the managers pioneering these two SSCs was hard to ignore. Financial support from CIMA has since allowed us to expand the enquiry to around 15 organisations and to visit SSCs located in Eastern Europe and Asia. In addition to conducting interviews with SSC managers and their ‘customers’ in business divisions, a roundtable workshop series, the CIMA-Loughborough SSC forum has been set up. This brings together a group of SSCs to discuss common issues; from cost reduction techniques, such as process re‑engineering and benchmarking, to higher added value services, such as preparing monthly


management accounts. The forum also encourages members to work together outside of the quarterly meeting to share more specific operating data and experiences. Implications for management accountants Changes in management accounting and the development of management accounting information across individual organisations were closely intertwined with ERP systems but, notwithstanding the reach and pervasive nature of the ERP system, the adoption of the SSC model caused the role of management accountants to be separated physically, and polarised psychologically from the retained divisional functions.


MAs in the business units became better able to support management in decision making through better information from the ERP and freedom from the tedium of transaction processing. Two new roles in managing the relationship between the SSC and the divisions have emerged: the MA as supplier and the MA as customer of accounting services both requiring formal contract negotiation and ongoing interpersonal relations. Other themes emerging The global reorganisation, reconfiguration, relocation, commoditisation and markets of knowledge work being led by shared service centres, is putting a new emphasis on employability. Individual workers now need to compete to keep the job they have, whilst at the same time keeping themselves up to date, and prospecting for the next job. In an IT-enabled, boundaryless world, many professional activities can now be undertaken, in the manner of those old-time Martini slogans, any time, any place, any where! Evidence from our case organisations illustrates how a series of evolutionary changes in business support functions might result in a more fundamental hollowing out of the professional space over time and distance, the so-called ‘hourglass’ profession with a mid-career funnel; in flat, competitive, hierarchies this will naturally be difficult to pass through. We believe that the empirical findings represents a timely challenge to extant career theory in the context of a global knowledge-based economy, below we suggest some further research directions on the implications for workers, employers and professional bodies.

And the future? It would appear that the UK has something of a lead in shared service organisation and technology. The next phase is likely to see an expansion of the scope of the SSC. Perhaps into higher level activities, so-called ‘business partnering’ providing advice to management and designing corporate policy, being undertaken within the SSC. Indeed, looked at from a knowledge management perspective, some SSCs have created such a level of intellectual property in the development of their systems architecture that the mother organisation has been able to sell the whole operation to a third-party, and then buy back the service on contract. This can be attractive once the all important business support processes have been stabilised and a track record of both performance and cost has been established. Further information and resources can be found on the project website at

However, we suggest that in the future there may be competition emerging for this professional territory from other professional groups, such as administration or information specialists, e.g. MBAs, MScs, etc. In the public sector, the SSC concept is consistent with the current political mantra to make savings but still protect front line services. The assumption in the Gershon, and more recently, the Total Place, reports is that there are significant savings to be found in back-office initiatives such as the SSC.


diary dates

Events and conferences 2010-2011 The conference season will soon be upon us and here we highlight just a few of the key events taking place during 2010 and 2011. DECEMBER 15–17 7th Conference on New Directions in Management Accounting Hotel Metropole, Brussels, Belgium This workshop is hosted by the European Institute for Advanced Studies in Management (EIASM) and CIMA. It will examine innovative management accounting practices and how to research them. Contact:

June 10–11 Global Management Accounting Research Symposium (GMARS) UNSW, Sydney, Australia GMARS is a research symposium that rotates annually around the world. Its aim is to promote a ‘global village’ of management accounting research by bringing together a diverse set of the highest-quality research papers, plenary speakers, and researchers from around the world. Contact:

JANUARY 5–8 Management Accounting Section (MAS) of the American Accounting Association Research and Case Conference InterContinental Buckhead Atlanta, Atlanta, Georgia, USA Papers accepted for the JMAR Conference are to be presented by the authors at a special session of the Mid-Year Meeting devoted exclusively to Conference papers. A discussant will also present comments at the session. Contact:

July 1–2 14th Annual financial reporting and business communication conference Bristol University, UK This event is a premier global conference, attracting an international audience and it will address key questions of interest to accounting academics and practitioners. Contact:

MARCH 31 Management Accounting Research Group (MARG) London School of Economics, UK MARG’s membership comprises academics and researchers from universities worldwide as well as practitioners. Practitioners include those working at controller level in large organisations and at finance director level in smaller organisations, from both the profit and not-for-profit sectors. Places for this event are limited and by invitation only. If you wish to join or reconfirm your membership, please e-mail Rebecca Farrier at

September 13–15 4th European Risk Conference – Risk Management – Critical Issues and Best Practice Aston Business School, Birmingham, UK The European Risk Research Network, based at Nottingham University Business School, is pleased to announce its third Business Risk Forum on the highly topical theme of Risk Management – Critical Issues and Best Practice. The call for papers will encompass risk management systems, Enterprise Risk Management, risk modeling, risk reporting and disclosures and internal audit. Contact:

APRIL 12–14 April BAA 2011 Annual Conference Aston Business School, Birmingham, UK The BAA’s flagship event is its Annual Conference which provides an opportunity for delegates to present their current research, develop their academic network. It also allows the professional bodies and publishers to meet with academics. Contact: June 1-3 8th ENROAC Conference ISCTE Business School, Portugal The theme of the 2011 Conference is Accounting and Public Reforms. Contact:


TEC004V0810 ISSN 1749 – 7698 (Online)

Research Update September 2010  
Research Update September 2010  

Please see the September 2010 edition of CIMA's Research Update publication.