UEENSLAND UNIVERSITY OF TECHNOLOGY QUT Business School School of Accountancy AYB321 Strategic Management Accounting SEMESTER TWO 2015 MID-SEMESTER CASE STUDY (Weighting Total - 30%) Due: Team Contract - Wednesday 26 August 2015, 7pm (1 per group) Team Case Study Report - Friday 18 September 2015, 7pm (1 per group) Team Process Report- Friday 18 September 2015, 7pm (1 per group) Individual Team Work Reflection - Friday 18 September 2015, 7pm (1 per person) Submission: Blackboard - Team Contract Turnitin - Team Case Study and Team Process Report Blackboard - Individual Team work Reflection Type: Groups of three or four people. Students must be registered to the same tutorial Length: Case Study Report - 1,500 words maximum This assessment item assesses the following learning outcomes: Knowledge and Technological Skills (KS) 1.1 Demonstrate and apply integrated discipline (including technical) knowledge across the broad field of business with depth in one or more core business disciplines Higher Order Thinking (HO) 2.2 Exercise independent judgement and initiative in adapting and applying knowledge and skills for effective planning, problem solving and decision making in diverse contexts. Professional Communication (PC) 3.1 Use information literacy skills, and communicate effectively and professionally in written forms and using media appropriate for diverse purposes and contexts Teamwork and Self (TS) 4.2 Apply teamwork knowledge and skills for effective collaboration across diverse purposes and contexts AYB321 Mid-Semester Case Study Late Submission of Assessment: In both your QUT study and your professional life you will be expected to meet deadlines. In keeping with this expectation, assessment submitted after the due date and time will not be marked and will receive a grade of 1 or 0. You should submit the work you have completed by the due date and it will be marked against the assessment criteria. This will apply to all units unless otherwise specified. As this assessment involves a team of three or four students and the team has a number of weeks to complete the assessment task, it is exempted from the QUT assignment extension policy. Thus students will be unable to apply for an extension under the QUT assignment extension policy. If your team fails to submit the Team Contract (Step 1) by the due date and time, your team will lose marks. If your team fails to submit the Case Study Report and Team Process (Step 2) by the due date and time, your team will receive 0 for the case study component of the grade. That is you can only receive up to a maximum for 10/30. If you fail to submit the Individual Reflection (Step 3) by the due date and time, this will result in a reduction to your individual mark. Further information on late assignments and extensions https://www.student.qut.edu.au/studying/assessment/extension can be found at: The MOPP Policy relating to Late Assessment and Extensions can be found here: http://www.mopp.qut.edu.au/E/E_06_08.jsp Submission Processes: Step 1: The Team Contract (Appendix 1) is to be submitted electronically via Blackboard by Wednesday 26 August 2015, 7pm. Only one document should be submitted per group. The team member nominated to submit this contract is also responsible for submitting the Step 2 (Case Report and Team Process Report). Please ensure the names, student numbers and signatures of all team members are included on the document. Step 2: The Case Study Report and the Team Process Report (Appendix 2) need to be submitted online through the Turnitin link in Blackboard by Friday 18 September 2015, 7pm. Only one person in the team needs to submit these. It is expected that there will one a face-toface meeting each week from Week 5 to Week 9. A team meeting report needs to be completed for each of these meetings. Step 3: The Individual Team Work Reflection (Appendix 3) needs to be submitted online through Blackboard by Friday 18 September 2015, 7pm. Each student (individually) must submit this reflection in order to be awarded team marks for this assessment item. 2 AYB321 Mid-Semester Case Study 3 AYB321 Mid-Semester Case Study Harley-Bear Services Ltd Harley-Bear Services Ltd (H-B) was established in 2000 to take advantage of the young, upwardly-mobile, busily-active society that was beginning to develop at that time. It was apparent to Jenny Forster, the founder of the company, that a major part of the economy was soon to be composed of money-rich, time-poor consumers, where both adults in the family were employed as professionals, and where both had significant other interests which occupied their time. This new customer segment seemed to offer a great opportunity for a company that could provide a variety of quality services, saving the customers' time and enhancing their quality of life. The company began with a home cleaning service located in Brisbane, and eventually grew interstate. When the company started operating in Sydney, Forster decided to create a regionalised structure, setting up regional offices in Brisbane and Sydney (in addition to a small corporate head office in Brisbane). This was followed a few years later with two more regional offices in Melbourne and Adelaide. Each regional office was headed up by a regional manager who in turn employed well-trained cleaning staff who were available to perform inside-home cleaning on a weekly, bi-weekly, or monthly contract basis. The concept was powerful and the business grew rapidly through the late 2000s. However, in the early 2010 the company began to struggle financially. A number of other companies providing similar services began to emerge, and H-B lost a lot of customers to these new competitors. A number of experienced staff also left H-B to work for the competition. It is now 2015 and Forster has asked you, a respected management accounting consultant, to analyse the current situation and provide recommendations on how to turn this situation around. You began by interviewing Forster and several of his managers and staff. Below is a summary of your notes from these interviews. Interviews Forster Forster is happy with the current structure because it enables her to maintain control over the business. She and her head office team have put together a detailed procedure manual describing exactly how the cleaning services are to be performed. She believes consistency across the four regions is the key to customer service. She believes that one of the advantages the competition has over H-B is that they provide a variety of services. In addition to inside-home cleaning, they also offer services such as outside-home maintenance, vehicle maintenance, and garden maintenance. Customers who have left H-B have commented that they like the convenience of this 'one stop shop' approach. However Forster is not keen to expand in the same way as she does not feel that she, personally, has enough expertise in these other areas. The four regional managers are paid a generous salary with a small bonus based on total company profits. This, Forster believes, ensures they will work as a team for the benefit of the company as a whole, rather than competing against each other. 4 AYB321 Mid-Semester Case Study Forster is very concerned about the budget process (see below). She made changes three years ago, looking to improve the efficiency of the process, and also to avoid the 'argy-bargy' that went on each year as the regional managers sought to minimise their budget targets. But instead of improving, the budget process has grown rapidly worse. The managers' original submissions have become increasingly pessimistic, the managers have appeared less enthusiastic about achieving better results for the company, and none of the regions has achieved its full year target in any year since. Regional Managers (met all four separately) The regional managers appear very frustrated. They feel that the procedure manual they are required to follow is too restrictive, and actually inhibits customer service. They find that many customers have specific cleaning requirements that are not able to be accommodated within the rigidity of the corporate procedures. They also have a number of 'war stories' about customers who have reluctantly gone to the competition, citing one or more of the following reasons: o Total cost. Many customers say that, while the hourly rate is quite reasonable, the overall cost seems high. They feel the cleaning could be completed more quickly and efficiently than it often is. o Scope of services. The Melbourne Regional Manager said that it is particularly frustrating when a customer says they are very happy with the cleaning service HB are providing (albeit that it is a bit expensive), but is moving to a competitor because the wider variety of services they are providing (including outside-home maintenance, vehicle maintenance and garden maintenance) is so much more convenient. o Online presence. Some departing customers have cited the convenience of a new online scheduling service offered by the competition as another reason they are switching over. One of the regional managers (who for obvious reasons wish to remain anonymous) has been offered a job by a competitor, and has decided to take it. Interestingly, the competitor is offering a much smaller salary, but has agreed to a generous bonus for meeting performance goals. Performance will be evaluated partly on the basis of meeting an agreed profit target, and partly on the results of a 360 o feedback process. (The 360o process will include feedback from customers, suppliers and staff as well as the manager's supervisor.) But the clincher, according to this manager, was that s/he would be provided with a significant amount of autonomy over what services were offered, how the services would be delivered, and what rates would be charged. The budget process, which used to work reasonably well, is now 'a mess'. They liked the process from a few years ago, when they had an opportunity to argue their case, and to meet as a group which had the added benefit of enabling them to learn from each other. While they admitted to 'low-balling' the budget at the start of the old process, they felt that the end result was a fair, stretch target. But since the new, more 'dictatorial' process was introduced, they admit to gaming the process a lot more. One manager said that the budget adjustments were so severe that s/he had to come in way below what they considered to be a reasonable target, just to have a shot at ending up 5 AYB321 Mid-Semester Case Study with something achievable. More often than not, however, the end target, essentially set by Forster, was unreasonably difficult, and all managers reported that, as the year progressed, they realised they would not hit their sales target and just 'gave up'. Cleaning Staff (met with a sample of staff from each region in a conference call) Unlike Forster and the regional managers, the cleaning staff are quite happy at present. They are paid an hourly rate for the time it takes to do each job, but are not paid for any idle time between jobs. The cleaners are very happy with this arrangement, they say, because it means that they can do a thorough job for the client. One stated that it even gives them time to sit down and have a cup of tea with the customer from time to time. They are concerned though, that they are getting less work than they used to. They are aware that the company is losing customers, but do not know why. They say that they are not told much at all about how the company is performing, and get the feeling that their input regarding possible improvements would not be welcome. Many admitted to 'stretching out' some cleaning jobs to increase their pay and make up for the reduced number of clients. H-B's Budget Process Each year in the period leading up to the new financial year, the regional managers are responsible for developing a profit plan for the regions, committing their group to a level of sales and profits before taxes. Sales are billed to customers based on time spent on the job by cleaning and maintenance staff, multiplied by a standard hourly rate. Because the employees are paid only for the hours they work, rates charged to the customers are set by Head Office, and fixed costs are relatively low, profit levels for the company are primarily a factor of sales levels. As a result, the regional managers focus their control efforts toward hours sold. To help develop the sales plan, each regional manager is required to submit their budget to Forster, who reviews it with her Financial Controller, before additional discussions take place. Up until three years ago, the regional managers had met with Forster and the Financial Controller during the first week in October, in a seaside resort, to establish the profit plan for the regions and for the company as a whole. Together, they reviewed prior year results for each region, and in a collegial discussion established their sales and profit plans. Forster always made an inspirational speech at the start of the proceedings, and she persuaded and cajoled any regional manager who seemed to be proposing a lazy plan. But she also believed the regional managers needed to be treated as managers of their own businesses, and so she didn't pry deeply into the details of the region plans. The plans were used to keep things on track during the year - if a region was falling off plan, the regional manager would be asked to investigate and, if necessary, change marketing programs, increase field training, etc. The region plans were also used to forecast demand for accounting and computer services from the corporate group and, once the region plans were established, the corporate budget was set up and each region profit plan was then allocated a share of that corporate expense. The allocation was not changed during the year, regardless of the region's actual sales results. 6 AYB321 Mid-Semester Case Study But in 2005, Forster changed the process. She decided the company would save time and money if each of the regional managers would simply come and meet with her in her office, and establish the plan for their individual regions. By using this process, H-B is now able to finalise the budget in just over one week. Required: Analyse and report on the organisational architecture and budgetary framework in use at Harley-Bear Services Ltd (H-B) by answering the following specific questions. In doing so, please ensure your answers apply the relevant Strategic Management Accounting theory to the facts of the case. General responses that do not relate the relevant theory to the facts of the case will not attract high marks. 1. Briefly discuss how H-B's current organisational architecture is contributing to the difficulties it is currently experiencing. Support your answer with specific references to the facts of the case. 2. Based on the issues you have identified in Part 1, describe in detail an alternative organisational architecture that you consider will help H-B to become more competitive. In explaining your recommended architecture, you should ensure you describe the changes you would make to each of the following: H-B's strategy, based on its changed environment; The three elements of the company's organisational architecture; and The company's soft culture. 3. As noted above, neither Forster nor the regional managers are happy with the current budget process. Forster believes the process, although quicker than it was, is still wasting her time and that of her managers, and worse, it is starting to cause significant tension between her and her managers. She considers the budget to be critical for planning and for controlling profit and operations, but feels it is failing miserably at achieving these objectives, as she is never confident the budget has been set at the right level. She always walks away from the process feeling the budgets are 'soft', while her managers grumble that they are unachievably difficult. At a recent management conference, Forster heard about the concept of 'beyond budgeting' (BB), and asks you to advise her how it would work in H-B. In particular, she wants your advice on what specific changes she would need to make to H-B's processes to implement BB, and how these changes would be expected to eliminate the budgetary slack and budget difficultychallenges she is currently facing. 7 AYB321 Mid-Semester Case Study Report structure: The structure of your report is up to you, as long as it fully addresses the requirements of the case study. However, to give you some guidance, the following suggested structure is provided: 1. Q1: How H-B's organisational architecture is contributing to its current difficulties 1.1. Decision Rights 1.2. Rewards 1.3. Performance Evaluation 2. Q2: Alternative organisational architecture 2.1. Environment and Strategy 2.2. The Three Legs 2.3. Soft Culture 3. Q3: Beyond Budgeting 3.1. How could Beyond Budgeting work for H-B? 3.2. Changes Required to Implement Beyond Budgeting 3.3. Impact on Budgetary Slack and Budget Difficulty 4. Conclusion (a very brief summary of your report's conclusions) 5. Reference List 6. Team Process Report Please note that an abstract and table of contents are not required. Application of Theory: As with any analytical question in this unit, it is important that your response applies the relevant theory to the specific facts of the case. In doing so, you should clearly identify the theories you are applying, and how they support your conclusions. Remember there are no marks for simply stating the theory. Referencing: Please note that in-text referencing is not required in this assignment, unless you are using direct quotes. Word Limit The introduction, conclusion and reference list are not included in your 1500 word limit. 10% either way will be allowed, but anymore will be penalised. 8 AYB321 Mid-Semester Case Study Marking Scheme: Please see the criteria sheet for the allocation of marks to each section/criterion. Team Process: At the initial meeting it should be decided who has the responsibility of submitting, both the Team Contract as well as the Case Study Report and the Team Process Report. Team Contract: The team contract needs to be discussed at your initial meeting. The contract template can be found in Appendix 1 and must be completed by the group. This contract is due electronically via blackboard on Wednesday 26 August 2015, 7pm. Only 1 contract per team needs to be submitted. Team Process Report: It is required that your team will meet at least once a week, face-toface to undertake the assignment (from Week 5 and Week 9). A separate report for each meeting needs to be submitted as part of your assignment, so please ensure you are diligent in recording all meetings. The report template can be found in Appendix 2. You will need to duplicate it for each meeting. 9 AYB321 Mid-Semester Case Study AYB321 Strategic Management Accounting: Criteria Sheet, Mid-Semester Case Study - Semester 2, 2015 Student Name & Number: ________________________________________________________________________________________ Criteria 7 6 5 4 <4 higher order thinking (ho 2.2) ability to critically analyse a range of strategies and processes the student has demonstrated high level business environment, strategy, organisational architecture budgetary process. shown very strong describe architecture, articulate reasons for strategy environment as well identify specific changes required implement bb, explain how these would eliminate slack budget difficulty. acted flexibly appropriately throughout process, in concert with other team members; adhered contract conditions. contribution showed insight into factors influence dynamic positive ways achieve final output. great students some processes, evidence influencing good most activity was appropriate interactions generally terms achievement little or no limited inappropriate professional communication (pc 3.1) describe, develop written form teamwork (ts4.2) act situations; show dynamics outputs basic appropriateness evident made m arks>