Structure, Formality and The Importance of Financial and Non-Financial Information in Strategy Development and Implementation

Management Accounting Research 18 (2007) 331
Structure, formality and the importance of

financial and non-financial information in strategy
development and implementation
Alnoor Bhimani a, , Kim Langfield-Smith b
a
London School of Economics and Political Science, London, United Kingdom

Department of Accounting and Finance, Monash University, Vic. 3800, Australia
Abstract
The strategic management literature indicates that there is high variety in the form and nature of strategic processes within organizations. By contrast, writers on strategic accounting tend focus on the structure and formality
of strategic activities and call for a balance of financial and non-financial information to support strategic processes.
This study explores the conceptual basis for this perspective and also investigates empirically whether such characterisations hold in practice. The empirical part of the study draws on questionnaire responses by senior corporate
accountants and interviews held with a subset of respondents from this group. The results indicate that strategy
development and implementation activities tend to be structured and formal, and while greater emphasis is placed
on financial information in strategy implementation, in strategy development both financial and non-financial information are used. Differences however prevail across firms as to what is considered to be strategic and the role
played by financial and non-financial information varies across companies. A high degree of organization specificity also exists in the uses of strategic accounting information. The study found support for normative ideals within
the firms investigated but high organizational particularity also pervades the deployment of strategic accounting
information.
2006 Elsevier Ltd. All rights reserved.
Keywords: Financial information; Non-financial information; Strategic management accounting; Strategy development; Strategy
implementation
Corresponding author. Tel.: +44 20 7955 7329; fax: +44 20 7955 7420.
E-mail address: a.bhimani@lse.ac.uk (A. Bhimani).
1044-5005/$ see front matter 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.mar.2006.06.005
A. Bhimani, K. Langeld-Smith / Management Accounting Research 18 (2007) 331
1. Introduction
While different characterisations of strategy and strategic processes have been proposed by strategy
researchers (Andrews, 1987; Hart, 1992; Hitt and Tyler, 1991; Johnson and Scholes, 1999; Mintzberg,
1987; Whittington, 1993), it seems that management accounting researchers have appealed to only a subset of this strategic management research knowledge base to explore issues relating to the management
accounting system and strategy interface. Normative and empirical management accounting research has
largely adopted a rational perspective, often assuming that strategy development and strategy implementation are formal structured processes, relying on a mix of financial and non-financial information to
support strategic action (Bromwich, 1990; Kaplan and Norton, 2001; McNair et al., 1990; Nyamori et al.,
2001; Palmer, 1992; Wilson, 1995). The aim of this paper is to investigate whether strategy development
and implementation activities used in practice are formal structured processes, and whether financial and
non-financial information are of equal importance across strategy development and implementation activities. This will be undertaken through a literature review that explores the partial integration of strategic
management accounting into empirical management accounting research followed by a questionnaire
and interviews with senior corporate accountants of large UK-based companies.
Many academic studies concerned with the use and the structuring of financial and non-financial
information have focused largely on identifying dimensions of performance measurement (CIMA, 1993;
Chenhall, 1997; Coates et al., 1996; Govindarajan and Gupta, 1984, 1985; Ittner and Larcker, 1995,
1997; Ittner et al., 1997; Perera et al., 1997). A number of studies have specifically considered the extent
to which non-financial measures are strategically linked and how they connect to performance targets
(Banker et al., 1993, 2004; Ittner and Larcker, 1998) and others have focussed on how measures that
are strategy linked versus those that are common across business units affect performance evaluation
(Banker et al., 2004; Lipe and Salterio, 2000). The intent of the present investigation departs from these
prior studies by focusing on the associations between information type (financial and non-financial) and
strategy development and implementation. Such research is scant. Yet, it raises important issues. The
suggestion has been made that a strategic dialogue can be relevant to the formulation of strategy and
strategic control (Boyd, 1991; Norreklit, 2001; Picken and Dess, 1997). Evidence exists that information
in different forms can influence strategy development and implementation activities, just as it can aid
in the evaluation of strategic action (Kershaw, 2001; Lorange and Scott Morton, 1974; Lorange et al.,
1986). The role of financial and non-financial information in particular can extend to both interactive and
diagnostic processes (Simons, 1995, p. 200). Some investigations are strongly indicative of information
type having a bearing not only on strategy implementation and control activities but also on strategy
development (Chenhall and Langfield-Smith, 1998; Coates et al., 1992; Euske et al., 1993; Ittner et al.,
2003; Vaivio, 1999; de Haas and Kleingold, 1999; Preble, 1992). Assessing the appropriate information
mix to monitor the achievement of strategic intent is a relevant line of inquiry, but it is also important
to understand the associations between information type and the development and implementation of
strategy.
The motivation for the study derives from the schism between normative claims about the potential
of strategic analysis and descriptive narratives of organizational strategic processes. Normative models
tend to presume strategy development and implementation as rational technical endeavours entailing the
formulation of structured and formal statements of intent and the application of predefined instrumental
controls. This view is characteristic of many practitioner-oriented writings and has culminated in a body of
prescriptive literature which considers strategic management decision-making as amenable to sequential
and linear structuring, whereby choice making between alternatives and control processes can be aided
through properly constructed accounting information. In contrast, some accounting scholars have called
for caution to be exercised in the search for ways in which relationships can be forged between strategy
and accounting in attempts to make accounting more strategically oriented.
The managerial bias adhered to within much of the prescriptive management accounting research in
this area rests on the assumption that organizations are purposeful rational systems that are internally
consistent. However, this has been met with scepticism by some scholars who see strategic management
concerns as highly complex and relatively unstructured (Archer and Otley, 1991; Coad, 1996). The
interplay between strategic pursuits and accounting information production and use is viewed as being
influenced by a diversity of contextual, organizational, political and environmental factors (Dent, 1991;
Ezzamel et al., 1997; Mouritsen, 1999; Puolamaki, 2004). Conscious strategising is seen to enhance
interactions between different functional managers leading to more rather than less diffusiveness in
strategy formation (Andrews, 1987; Hickson, 1987; Jonsson and Gronlund, 1988). Notions of the partially
conscious, multi-level and poly-rational nature of strategy formation based on empirical descriptive
studies have generally been antithetical to ideals espoused within prescriptive strategy related accounting
writings. Warnings have been sounded against the normative view that suggests strategic management
decision processes and choice are sequential and rational in nature, and relatively unproblematic and
linearly structured (Coad, 1996; Hoque and Alam, 1999; Langfield-Smith, 1997; Lord, 1996).
Empirical investigations of strategic processes point to diffuse and inchoate relationships between
accounting and strategy (Roslender and Hart, 2003). They emphasise the relevance of considering certain
contextual elements of organizational processes and the contingencies at play which shape strategic organizational action and accounting practices (Jonsson and Gronlund, 1988). The proactive and sequential
logic assumed of prescriptive strategic orientations to management accounting is viewed by these writers
as being simplistic and inadequate given the dynamic flux constituting organizational life. Dent (1990)
considers descriptive writings on strategy from the longer established strategic management literature as
usefully extending our appreciation of strategic decision-making beyond the partiality of the mechanistic imagery of strategic activities portrayed in the prescriptive strategic accounting literature. He warns
that we should be cautious and selective in our use of strategic theory to inform accounting research
(Dent, 1990, p. 21). But the argument has also been made that interrelationships between functionalist
and interpretive perspectives on accounting generally need to be more deeply understood so as not to
uphold a polarised perspective in guiding ones research enterprise (Ahrens and Chapman, 2005).
In the context of the above noted normative-descriptive schism, the present investigation finds motivation in exploring the possible existence of a similar dichotomy between what is advocated in the
prescriptive strategic accounting literature and what is prioritised in practice. If conceptions of strategy
processes condition calls for strategy-based accounting information, then the basis for this literature and
the issue of whether such information conforms to corporate perceptions of strategic processes in practice
is worthy of investigation.
In this light, the paper seeks to make two distinct but interdependent contributions. First, it explores
the partial integration into strategy-focused accounting writings of models drawn from the strategic
management literature. The paper develops arguments about what is surmised within advocated strategic
accounting ideals as to formality and structure of strategic processes and the importance of financial
and non-financial information for strategic processes. As a separate but connected objective, this study
assesses the extent of structure and formality characterising organizational strategy development and
implementation activities according to large UK-based companies, drawing on responses to questionnaires
and interviews held with senior accounting managers. This second part of the study also explores the
desirability for balance in the use of financial and non-financial information in strategy development and
implementation in these firms.
The paper is structured as follows. In the next section, the strategic management literature is discussed
prior to considering assumptions made within strategic management accounting writings about strategy
development and implementation. In the subsequent part of the paper, the methodology for the empirical
portion of the study is outlined. Section 5 discusses the questionnaire and interview results. The concluding
section of the paper considers the studys broader implications and points to further potentially useful
research which may be carried out in the area.
2. The strategic management literature

To assess the perspective adopted in the accounting literature concerning the role of information in
firms strategic activities, it is essential to consider the distinction between prescriptive and descriptive
notions of strategy as found in the strategic management literature.
The prescriptive strategy literature considers strategy as a formalised statement of intent or plan which
identifies objectives and intended actions. Organizations are assumed to engage in strategic choice making
in an economically rational manner within the constraints of limited information, cognitive biases and
causal ambiguity (Amit and Schoemaker, 1993; Barney, 1992; Ginsberg, 1994; Peteraf, 1993; Phelan
and Lewin, 2000; Reed and De Fillippi, 1990). Strategy is seen as consciously identified, proactive and
formulated prior to decisions and actions.
This prescriptive view of strategy finds early expression in the writings of Ansoff (1965), Penrose
(1959) and Steiner (1969) and has continued to be developed and refined in the works of more recent
strategy theorists. Porter (1980, 1985), for example, views strategy as the positioning of the firm within its
competitive environment, and prioritises building sustainable competitive advantage as a way of shielding
the enterprise against competitive forces. He develops several tools for analysing and determining a firms
position in competitive markets including the diamond of industry attractiveness, generic strategies and
value chain analysis (Porter, 1996). Porter argues that firms should build sustainable competitive advantage
by consciously choosing a specific strategic position, developing unique activities and determining how
they fit within a chain of value-adding activities (Porter, 1996, 2001). He delineates these strategic
positions using a generic typological framework.
Porters framework has been extended by Grant (1996), for example, who links Porters concepts
of industry forces and competitive advantage to different facets of firms. Others describe how a firms
competitive advantage is based on its non-marketable strategic resources, assets and capabilities (Cool
and Dierickx, 1994). Rather than focusing on the competitive product markets, imperfections in markets
have also been viewed as leading to sustainable competitive advantage where a firms strategy focuses on
developing dynamic capabilities to ensure future competitiveness (Barney, 1986; Peteraf, 1993; Peteraf
and Salancik, 1978; Prahalad and Hamel, 1990). Strategic thinking underpins rational economic propensities concerning resource distribution decisions and organizational conduct and outcomes (Oliver, 1997;
Sabherwal and King, 1992; Teece and Pisano, 1994).
Prescriptive conceptions of strategy presuppose the deployment of formal management information
systems. The achievement of objectives requires the analysis of data which feeds into decision-making
processes. If strategic decision-making is a structured and planned endeavour, it will draw on informa-
tion that is purposively and formally prepared. As such, prescriptive conceptions of strategic processes
assume a largely predictable and determinate environment in which organizations can identify internal
and external strategic opportunities and threats proactively without negating the possibility of strategic
innovation (Barney, 1986; Mahoney and Pandian, 1992; Schoemaker and Amit, 1994). They assume that
managers formally analyse competitive forces and purposively assess resource allocations and utilisation
as part of strategy development. Formal information systems would enable such analysis. The implementation of strategies would likewise entail extensive analysis of economic, quantitative and qualitative
information. Ultimately, seeking to achieve sustainable competitive advantage is seen as an outcome of
discretionary managerial choices and strategic resource accumulation and use, which is dependent on the
output and deployment of effectively designed management information systems (Conner, 1991; Grant,
1996).
Prescriptive views within strategy writings exist alongside descriptive and explanatory expositions
of firm structures and activities. Descriptive views of strategy see a role for interactions between management, employees and the environment where strategic processes are considered to be complex and
to exist in a state of flux with consequences that sometimes depart from those that may have been initially planned. Strategy is regarded as organizationally grounded and decision-making processes and
implementation are considered to be complex, dynamic and multi-faceted (Smircich and Stubbart, 1985).
Organizational activities are taken to be shaped by diverse interests including enterprise specific forces
as well as institutional pressures (Quinn, 1978, 1980). Strategies are not necessarily viewed as being
developed top down and new patterns of action are considered to emerge in a diffused manner partly
through grass root decision-making (Mintzberg and McHugh, 1995). The task for managers within this
perspective is to create a context for strategy formation and to detect patterns that emerge and help them
take shape (Mintzberg, 1979). A balance is sought between thought and action, control and learning,
and stability and change. Information sources are diverse and not necessarily derived from formalised
systems. Communication of information affecting strategic processes is non-uniform and information
form and exchange can be highly unstructured (Goold and Quinn, 1990).
Mintzberg (1987) presents a view of different interrelated and complementary definitions of strategy
which are organization-specific (Andrews, 1987; Mintzberg and Quinn, 1991). Mintzberg (1979, 1982,
1987, 1994) distinguishes between deliberate strategies which arise from defined intentions of organizational actors and culminate in planned results, while emergent strategies are devoid of express intentions
by the enterprise. However, in many organizations strategies may fall between these two extremes (Lord,
1996).
While the strategic management literature evidences different degrees of the problematisation of strategic activities within the enterprise (Miller, 1992), writings on strategic aspects of accounting have tended
to adopt a more one-sided view. This is discussed below.
3. Strategy and management accounting

The literature addressing the links between strategy and management accounting systems is relatively
recent, emerging only since the 1980s (Langfield-Smith, 2005). While reviews of the accounting-strategy
literature have been presented elsewhere (see Chenhall, 2005; Langfield-Smith, 2005; Nyamori et al.,
2001; Roslender and Hart, 2003), the purpose of this section is to consider the conceptual basis upon
which strategy has been associated with accounting systems.
Some accounting commentators have noted that the interplay between strategic action and accounting
practice needs to be understood in terms that are reflective of the complexity of organizational uncertainties and social processes which condition their relationships (Archer and Otley, 1991; Burns and Vaivio,
2001; Granlund, 2001; Hoque and Alam, 1999; Hopwood, 2000; Lord, 1996; Mouritsen, 1999; Roberts,
1990; Roslender, 1995; Tomlinson, 1990). Here decision-making activities and managerial action are
seen as dynamic, multi-level and context-specific rather than planned, structured and sequential. However, generally, management accounting writings have tended to adopt a less problematic and largely
normative view of strategy. Many practitioner-oriented and educational writings on strategic aspects of
accounting (Kaplan and Norton, 2004; Ward, 1993; Wilson, 1995, 1999) regard strategy in deterministic
and rationalistic terms and present accounting prescriptions designed to support corporate strategic pursuits. A key focus is on information deployment (Brouthers and Roozen, 1999; Dixon and Smith, 1993)
and there is a presumption that non-financial information is needed to capture the decision relevance of
strategic options alongside established financial information analyses.
The term strategic management accounting (SMA) first appeared in the prescriptive accounting literature two decades ago (Simmonds, 1981). The literature concerning SMA has been slow to evolve.
According to Tomkins and Carr (1996, p. 165): there are no more than about 20 key articles on the subject in mainstream academic journals, and more recently, Roslender and Hart (2003, p. 255) noted that
there is still little or no agreement about what constitutes strategic management accounting. Whereas
scholarly interest in SMA has been muted, there are studies which indicate that senior accounting officers
within organizations play a growing role in the provision of information for strategic decision-making
(Bhimani and Keshtvarz, 1999) and that they are increasingly engaged in strategic corporate activities
(Guilding et al., 2000; Guilding and McManus, 2002). Otley (2001, p. 245) has also remarked that strategic
management accounting has had a major impact on the thinking of practicing management accountants.
Within the SMA literature, strategy development and implementation are viewed as formal endeavours
to which strategically oriented management accounting practices can contribute. Palmer (1992) suggests
that the task of integrating the SMA system into organizational strategic management processes places the
onus upon management accountants to identify the organizations strategic orientation and to prepare the
necessary supportive decision-making information. Simmonds (1981, 1982) supports this view suggesting
that SMA should seek to promote management accounting information which relates to such factors as
competitive position, pricing, costs and volume. Knowledge about competitors is considered to enable
managerial decisions which take account of possible competitor responses. In making a case for SMA,
Bromwich (1990, p. 28) defined the field as:
The provision and analysis of financial information on the firms product markets and competitors
costs and cost structures and the monitoring of the enterprises strategies and those of its competitors
in these markets over a number of periods.
Bromwich situates SMA explicitly within Porters (1980) model of competitive positioning by considering the benefits which products offer customers and how these contribute to building and sustaining
competitive advantage. Such information becomes an input into the formulation and operationalisation
of strategy. He places particular significance on the relevance of financial information in developing
long-term forward looking competitive knowledge and balancing this with non-financial information
concerning an enterprises strategic endeavours.
Shank and Govindarajan (1988, 1989, 1992) have also drawn on the Porters framework to advocate the
analysis of cost data for developing superior strategies to enable enterprises to achieve sustainable com-
petitive advantage. Under their strategic cost management approach, value chain analysis, cost driver
analysis and competitive advantage analysis using accounting information inputs is recommended as supporting more strategically appropriate decisions compared to more conventional management accounting
approaches. Shank (1996) further demonstrates the manner in which aspects of strategic cost management need inter-linking financial and non-financial information to enable a comprehensive and balanced
assessment of strategic issues of import.
Other management accounting perspectives which appeal to a prescriptive strategic frame of reference developed by strategy theorists include life-cycle based strategic accounting (Wilson, 1995),
target and kaizen costing (Cooper and Slagmulder, 1997; Tanaka, 1993; Yoshikawa et al., 1995),
interactive management controls (Simons, 1995), the balanced scorecard (Kaplan and Norton, 1992,
1996, 2001), activity-based management systems (Kaplan and Cooper, 1998), quality costing (Tayles
et al., 1996), inter-organizational cost management (Cooper and Slagmulder, 2004) and customer and
competitor focused analysis (Donelan and Kaplan, 1998; Foster and Gupta, 1994; Moon and Bates,
1993; Rickwood et al., 1990). A theme common to these accounting approaches and other related
SMA writings (Bruggeman and Slagmulder, 1995; Drury and Tayles, 1995; Drury and McWatters,
1998; Emore and Ness, 1991; Innes, 1999; Kawada and Johnson, 1993; Libby and Waterhouse, 1996;
MacArthur, 1996; Nanni et al., 1992) is that they rely on the examination of structured data relating
to competitive advantage and changes in the firms external environment and uphold balance between
financial and non-financial measures in the formulation of strategy and the control of corporate strategic
activities.
In summary, the prescriptive SMA literature has presumed strategic activities to be largely formal
and structured and has advocated the balanced deployment of financial and non-financial information
in the development and implementation of strategy. The scholarly conceptions of strategic management that view strategy development and implementation as emergent, unstructured and in continual
flux have only selectively been integrated within the SMA literature. A question for this investigation is whether strategy development and implementation activities in practice are structured and
formal, and whether financial and non-financial information are equally important across strategy
development and implementation activities. To empirically assess this, the following propositions are
presented:
P1: Strategy development and implementation tend to be structured and formal, rather than unstructured
and informal.
P2: Financial information is as important as non-financial information for strategy development.
P3: Financial information is as important as non-financial information for strategy implementation.
The next section of the paper presents the method used to test these propositions.
4. Research method
The data for this research is derived from questionnaire responses and interviews undertaken with a
subset of questionnaire respondents. The questionnaire focused on the degree of formality and structure
of the strategy development and implementation as well as the importance of financial and non-financial
information in strategy development and implementation. The purpose of the interviews was to elaborate
on these issues to provide additional insights into practices.
10
Table 1
Descriptive statistics
Q1: Formality/structure in strategy development and implementationa

Q2a: Financial information for strategic developmentb
Q2b: Non-financial information for strategy developmentb
Q3a: Financial information for strategy implementationb
Q3b Non-financial information for strategy implementationb
a
b
Mean
Standard
deviation
Actual
range
Theoretical
range
2.3725
4.1961
4.1765
4.6863
4.2400
0.720
0.693
0.654
0.583
0.716
14
25
35
25
35
15
15
15
15
15
A low score indicated more formality and structure.

A low score indicated low importance.
4.1. Sample selection

The target population comprised the most senior accounting officers within large UK firms (those
employing more than 4000 employees). Respondents names and addresses and key company statistics
were obtained from the Financial Analysis Made Easy (FAME) database. The database contains contact
details, industry classifications, holdings, parent companies, financial figures and employee numbers. The
FAME database does not provide names of chief accounting officers, so these were identified from The
Directory of Directors, the Macmillan Stock Exchange Yearbook or by telephone calls.
4.2. Questionnaire administration and response rates
To achieve a sufficiently high response rate the questionnaire was kept succinct (one double-sided
sheet) and consisted of three scaled question and an open-ended question.
The first question asked the extent to which strategy development and implementation was structured and formal. This was scaled 1 (entirely structured and formal), 2 (significantly but not entirely
structured and formal), 3 (equally structured and formal as unstructured and informal), 4 (significantly
but not entirely unstructured and informal) and 5 (entirely unstructured and informal). The second and
third questions asked respondent to indicate the importance of nancial and non-nancial information
in strategy development and in strategy implementation. These were scaled from 1 to 5 (very low to
very high). Descriptive statistics for these questions are provided in Table 1. The fourth question allowed
respondents to describe how strategy development and strategy implementation took place in their organization and whether accounting-based information contributed to these processes. At the end of the
questionnaire, respondents were asked to indicate whether they would be willing to participate in the
interview phase. The survey instrument was pilot tested with four academics and accountants working in
10 firms who were not included in the final sample. This did not result in any changes being made to the
questionnaire.
The questionnaires were sent with cover letters and self-addressed envelopes to the senior accounting
officers in 167 large UK firms. After a four-week period, 25% of the survey population responded (42
replies). Of these, 11 companies stated that it was against their policy to respond to research questionnaires. A second mailing of the questionnaire resulted in 4 more refusals and 20 additional completed
questionnaires. Overall 51 usable questionnaires were returned. Respondent organizations were from a
range of industries including manufacturing, utilities, construction, agriculture and mining, and food.
11
Table 2
Background information of companies involved in interviews
Company
Industry
Sales
Interviewee
Utilities management water and sewage infrastructure

services. Electricity distribution and supply
Sale, service and hire of motor vehicles. Manufacture of
aircraft equipment. Manufacture of childcare products
and parts
Newspaper publisher
1.3 bn
Chief Accountant
660 m
Financial Accountant
750 m
Group Accountant
C
D
Power and energy trading

Generator distributor and retailer of electricity
1.7 bn
Chief Accountant
Beer, wines and spirits distillers and distributors

Restaurant franchisers
Food manufacturer and distributors
4 bn
Group Controller
Non-response bias tests were undertaken to detect differences in the means of key variables for the two
categories (all companies versus the companies which completed the questionnaire). These variables were
the number of employees, revenues, return on common equity and return on average capital employed.
No significant differences were found.
4.3. Interview questions
Interviews were held with the accountants in five companies, who volunteered from the questionnaire
respondent group. Table 2 provides background information on the five companies. The interviews were
semi-structured and included the following questions.
1. What does the company do?
2. What does the company consider strategic decisions to be? Please describe your companys principal
strategies. Examples?
3. Does accounting play a role in strategic decision-making? Who uses the information (production/marketing, etc.)?
4. How structured and formal are strategy development and implementation activities?
5. How far are these strategic activities based on qualitative/quantitative and financial/non-financial information?
However, interviewees were encouraged to discuss broader aspects of strategy development and implementation in their companies and to clarify the nature of information used in their strategic processes and
activities.
5. Results
5.1. Questionnaire results and discussion
The results of the questionnaire indicate that 9.8% of respondents adopted an entirely structured and
formal approach and 47.1% adopted a significantly structured and formal approach (see Table 3). Thus,
12
Table 3
Responses on formality and structure in strategy development and implementation (proposition 1)
No of responses
% Responses
1. Entirely structured and formal

2. Significantly but not entirely structured and formal
3. Equally structured and formal as unstructured and informal
4. Significantly but not entirely unstructured and informal
5. Entirely unstructured and informal
5
24
20
2
0
9.8
47.1
39.2
3.9
0
Total responses
51
100%
Mean = 2.375, standard deviation = 0.7200.
nearly 60% of respondents considered strategy development and implementation in their companies to be
more structured and formal than unstructured and informal. Only 4% of respondents indicated that their
strategy development implementation tended towards unstructured and informal. Thus, P1 is supported.
T-tests (two-tails) were undertaken to test the relative importance of financial and non-financial information in strategy development and implementation. The results in Table 4 indicate that no significant
differences were found in the importance of financial and non-financial information for strategy development, supporting P2. However, financial information was found to be more important than non-financial
information for strategy implementation. Thus, P3 is rejected. Also, while not proposed, it is noted that the
average importance of financial information for strategy implementation (4.686) is significantly higher
than for strategy development (4.196).
What are the implications of these results? The tendency to use more structured and formal processes
supports the rational perspectives of the strategy and management accounting literature. However, it could
be argued that formality may be more commonly associated with companies of the size that were selected
for this study. In large companies, formality and structure may provide coordination and encourage shared
understandings that are needed when managers responsibilities and company operations span diverse and
complex areas. The finding may also be partially due to accountants participation in strategic processes
being related to the more structured aspects of strategy development and implementation. Perhaps nonaccounting managers participation in these processes are less structured?
Balanced scorecard approaches emphasise the value of integrating financial and non-financial measures in the implementation of strategy (Kaplan and Norton, 1996, 2001, 2004). However, the companies
Table 4
Comparison of responses on the importance of financial and non-financial information for strategy development and implementation (propositions 2 and 3)
Strategy development
Mean
Standard deviation
Financial information
Non-financial information
At 5% confidence, t = 0.15, p = 0.88, P2 is supported
4.196
4.176
0.693
0.654
Strategy implementation
Mean
Standard deviation
Financial information
Non-financial information
At 5% confidence, t = 3.43, p = 0.009, P3 is rejected
4.686
4.240
0.583
0.716
13
surveyed here appear to place a stronger emphasis on financial measures for strategy implementation,
but this bias was not found for strategy development. A possible explanation for is that non-financial
information is regarded as being of equal relevance in conceptualising strategic pursuits but controls to
monitor the implementation of these strategies continue to place heavier reliance on financial monitors.
This may be due to accountants traditional preferences for financial information provision (Armstrong,
1987; Armstrong and Jones, 1992; Jones et al., 1993; Roslender, 1995, 1996). It could also stem from
accountants being more likely to participate in strategy implementation rather than strategy development
in UK firms, as has been reported in various surveys (Bhimani and Keshtvarz, 1999; Guilding et al., 2000).
This could also explain why greater importance was attached to financial information in strategy implementation compared to strategy development. Responses to the open-ended question in the questionnaire
provided further clarification of these issues.
The fourth open-ended question allowed respondents to describe how strategy development and implementation takes place in their organizations. In general, respondents indicated that the process of strategy
development and implementation were differentiated and relatively structured and formalised. Strategic
processes were planned and deliberate and there was no indication of ad-hoc and spontaneous processes
shaping strategy development and implementation, which provides support for P1. Some strategic decisions concerning corporate plans were tied to annual planning cycles which played an important role in
the development of business unit strategies. For example, the Head of Accounting of a manufacturer of
construction products explained:
The business planning cycle operates as follows: (1) June/July review by executive directors of PLC
3 year plan; (2) business medium term top-down goals set; (3) business units develop individual
plans to achieve targets and construct financial models; (4) group plans are consolidated and group
targets are added; (5) December board approval of one year budget and three year plan.
Also, a respondent from a global brewing company remarked on the formality of strategy development
in the company:
Strategy development is a core process with plans put in place for every operating unit. Implementation is managed by local management with detailed plans prepared by each function. There are
regular periodic reviews (stop and think meetings) with senior management to challenge strategic
thinking during the strategy development process.
There was evidence of top-down involvement with bottom-up input being less prominent in the strategy
development process. Formal systems involved the development of plans within business units or divisions
to allow for monitoring and review. Most respondents indicated an important formal role for the annual
planning and budgeting exercises in relation to strategy implementation, which lends further support for
the survey findings. For example, a respondent from a large chemicals company reported:
[the corporate parent] provides structure, discipline and support to the strategy development process
but the Business Units are the owners and implementors of their own strategies. The budgeting
process provides an essential framework and forum for strategy presentation, development and
monitoring. The Corporate Business Development function acts across BUs on projects exceeding
pre-defined scales and on strategic moves, acquisitions and divestments.
Several respondents described corporate strategy as being developed by top management with support
from specialist staff departments, which suggests a differentiation between strategy formulation activities
14
and their implementation. Thus one respondent noted that:

There is a high level strategy input to the executive team from the strategy department. Executives
feed back strategy decisions to the Strategy Department. This is then formally structured in a strategic
plan, which is approved by the PLC Board and implemented through a three year detailed business
plan (Director of Finance of a utilities company).
Also:
We have a dedicated strategic planning team that develops the strategy on a continuous basis having
regard to macro-economic trends and sector specific trends. Implementation is by identification of
key objectives in each business unit and monitoring of achievement (Finance Director of a UK
construction company.)
5.2. Interview results and discussion
Interviews were undertaken with a subset of the questionnaire respondents to further clarify the issues
of formality and structure of strategic development and implementation and the use of financial or nonfinancial information in these processes. These are discussed below.
5.2.1. Company A
Company A managed the supply of utilities and their infrastructure. Strategic activities were defined
in terms of strategic investments in particular markets, where returns may not necessarily generate the
required rates of return but new opportunities could evolve from the investment. In contrast, non-strategic
investments were those in a current line of business which would be assessed using financial rate of return
hurdle rates. Both informal and unstructured information as well as formal financial information were
input to strategy development.
On the question of the use of accounting information in strategic decisions, Company As Chief
Accountant observed that such information had to be constructed from other available systematised data.
. . . we will build up specific models for each investment. In terms of costs for example, we will use
unit costs from other investments to use as inputs into the discounted cash flow calculation. Because
you use some basic information, in order to get some reliability, we tend to build these up formally
from scratch . . . but utilising historical information as applicable.
While financial information was part of the input to strategic investment calculations, Company A also
engaged in qualitative information evaluation as an input to the development of its future strategies. For
example, the interviewee remarked that:
We would monitor government thinking on areas of public infrastructure, as to where they are going.
So for example, we have positioned ourselves by making one or two investments overseas in private
industries which would put us in a very, very good position when the private infrastructure starts to
take off.
He gave the following example:
. . . in terms of the provision of sewage and the fluid treatment to private companies, clearly we
are monitoring the position that the environmental agencies are taking on discharge consents, and
15
we look at the way that companies are . . . making movements towards outsourcing of non-core
activities. We see ourselves as getting in there early and placing ourselves so that we would be at
the leading edge for when expansion takes place. If it does, it does . . . if it doesnt, it doesnt, but all
the other investments would still be making a reasonable return. That is the kind of thought process
behind our strategy.
The Chief Accountant explained that:
By actually being in that particular market, but not in that geographic segment, when that segment
opens up we clearly have some strategic advantage over others because we are already in that game.
So we would do that. We would monitor that position. That is the type of qualitative information
we use to make an assessment of where we think policy will go.
This is indicative of the role of both formal financial as well as non-financial and qualitative information
input into strategic development decisions within Company A.
The collection and blending of information of different forms is an important part of strategic analyses
in this organization. The Chief Accountant pointed out that the information that is formally collected
serves, in part, the needs of regulators:
The regulated business is subject to a vast array of controls in terms of performance, in terms of
cost and output. There are people, like the Drinking Water Inspector or Environmental Agency . . .
a whole host of other people. Obviously we have got an interest in the performance of our asset
base, but we also have the regulators, so we have to engage in a very large monitoring of actual
performance of any asset or group of assets.
For this company, the information collected served therefore, an evaluative function which was closely
associated with the actual process of strategy development. However, the basis of evaluation was derived
from organizational action which can more appropriately be regarded as strategy implementation. That
is, information relating to the attainment of strategies had to connect to the development of the strategy.
Where an information shortfall existed, the strategic information had to be made obtainable. Strategy
development and implementation in Company A were consequently closely intertwined:
. . . if this is not sufficient for us to efficiently manage, we develop information . . . so the information
requirements of statutory agencies is probably in fact less than our internal requirements.
Consequently, the externally imposed information collection is, for this company, relevant to identifying the internal managerial information needs of strategic relevance. Such needs bring to light the
interconnected nature of strategy development and implementation.
Company As Chief Accountant considered strategic decisions in terms of engaging in new lines of
activities whereby informational analysis is undertaken in a structured and formal manner. Whilst both
financial and non-financial measures play a role in the development of strategies, commenting on a recent
major strategic investment, Company As Chief Accountant noted that the accounting information is
probably not recognisable. He remarked that:
In terms of the availability of the sort of subjective analysis, cross-analysis, etc . . . there was probably
not a great deal of information about say the cost of servicing a particular asset.
16
But the monitoring of the investment is chiefly done through the analysis of financial performance
measures. This lends support to the findings of the aggregate survey results in relation to the propositions.
Company A thus developed strategies using both financial and non-financial information where novel
opportunities could emerge in the strategic activity. In terms of monitoring strategies, financial information took precedence. Strategy-based information collection was largely guided by external factors and
in particular changing legislation. The nature of information usage was therefore significantly specific to
the companys prospector-like stance on strategy (Miles and Snow, 1978) combined with the legislation
driven pressures within the industry it operated in. The emphasis on financial and non-financial information types in strategy development combined with the greater articulation of financial detail in strategy
implementation coincides with the questionnaire findings. However, what is clear also is that the actual
analysis of information is extensively tied to the particular notion of strategic processes adopted by the
firm and is dictated by its organization-specific concerns and priorities.
5.2.2. Company B
Company B is a manufacturer that in operates in distinct business areas: rear vision systems for vehicles, aircraft interior systems, safety seats for children and specialised police and emergency equipment
vehicles. The Financial Accountant described a recent strategic decision as a shift away from motorcar
dealership and vehicle leasing and investments to aircraft interior business and specialised vehicle markets, which had greater potential for market share growth. Market growth and market share were regarded
as key non-financial targets, which were important to achieving financial goals.
The process of strategy development and implementation in Company B was relatively structured and
formal:
Ten times a year we will sit and discuss this year . . . on a strategic planning forward-looking basis
. . . The planning process is geared around achieving an appreciation in our share price relative to a
peer group over the next five years. Therefore we consider what is happening to our top-line growth
given our relative market shares and the industry growth. We compare that with the performance that
has been achieved by our peer group and from that we conclude what we need to do to outperform
the peer group. That will involve in some cases, vertical integration, so we can bring more of our
cost base in house. We will also include aggressive acquisition plans to grab hold of technology that
we do not have but we believe to be of future importance. It will include establishing green-field
sites in areas where we have a weak market share. They are the sorts of actions that we discuss in
our strategic planning.
Thus, as with Company A, Company B had close links between information used to evaluate strategies
and that used to develop strategy. The Financial Accountant noted that for strategic purposes:
. . . we report for each of the four divisions separately. There are certain statistics that we compare
from division to division such as return on assets managed and the efficiency of working capital . . .
we also look at, over a three and five year planning basis, the expected yield from their operations
in terms of value added, EVA and discounted value of the future cash flows from the business.
Company B had a formal accounting system to produce a collection of long-term data which was used
only for strategy development. But Company Bs strategic decisions indicate a close interplay between
development and implementation pursuits:
17
We considered the market position, the opportunity for leveraging elsewhere geographically or
leveraging technology that is acquired into existing customers and long-term returns . . . the returns
in excess of cost of capital . . . and a positive NPV.
He added however that:
. . . before we went ahead and made a deal with a negative NPV . . . we would need to be reasonably
sure that the NPV, taking into account the softer variables, would end up as positive. We quantify
as far as we can: if the financial case doesnt stand we have to look at the better broader strategic
reasons, why we would do something. In general we are driven by the strategic imperatives. We do
quantify things. If the quantification gives us a wrong answer than we look again at the strategy. It
is possible that we would not do something that appeared to be strategically desirable if it simply
could not be made to work financially, but the main driver is strategic.
Thus, decisions at the interface of strategy development and implementation drew on both qualitative
and quantitative information of financial relevance. To Company Bs Financial Accountant, strategy
analysis implied an assessment of non-financial factors in the presence ideally of positive financial signals.
Company B viewed corporate strategy decisions as taking the company into new lines of business activity
and thereby justifying central involvement. Strategic decisions at the divisional levels would be more
focused on expanding existing lines of business activities. The Financial Accountant noted that:
. . . adjacent expansion from our existing core would be discussed centrally. However if we are
talking about bringing out a new model of child safety seat, or new wing mirror for a different
model of motor car, that would not be discussed at the centre. If, however we were to talk about
introducing a wheeled version of a child safety seat, so we got into prams or pushchairs that would
be discussed at the centre. So as long as it is within our core, we dont discuss it. If it is outside our
core we would.
In summary, Company B stressed the coupling of financial and non-financial information in strategy
development though it placed considerable emphasis on financial measures in strategy implementation
and monitoring activities. As noted, the interface between the two engaged a more diffuse mix of information types. A formalised and structured approach to strategic decision-making was taken. In developing
strategies, the company assessed financial concerns extensively but these could be overridden by qualitative factors. The opposite was also true, but seldom occurred. Once implemented, financial measures
were key to monitoring strategic performance. Strategic significance was where a decision was deemed
core to a divisions activities. Within Company B, what constituted strategy and how strategic decisions
were to be evaluated was particularly well defined. The companys preference for balance in the mix
of financial and non-financial information in strategy development together with its greater emphasis
on financial information in strategy implementation activities parallels the generic survey findings. The
Financial Accountants articulation of strategy concerns and the particular nature of information analysis
are however indicative of a pronounced degree of firm specificity.
5.2.3. Company C
Company C manages newspaper and magazine publishing operations in regional sectors of the UK and
its operations are more industrially narrow than those of Company A or B. In Company C acquisitions are
considered strategic decisions as well as other types of opportunities, including those in e-commerce and
18
mobile design and development. A strategic decision would entail establishing a working party to assess
its viability and then Board approval would be sought. In terms of information used for such decisions,
the Group Accountant noted that:
. . . you are basically looking at as much information as you can . . . on a particular market, to
determine whether you can actually get into their market. So return on sales is a key factor for
uscapital involved is another.
He further noted that Company C focused particularly on the nature of its expertise compared to
competitors. It sought to maintain a close watch on whether there is a knowledge gap within the business
which we would try to rectify. Strategic decisions in Company C thus involved the formal assessment
of financial and non-financial information. Developing an understanding of the market and competitors
was regarded as important:
We collect information systematically on a regular basis . . . our reports come on a quarterly basis
and Xs [the main competitor] comes year round, and we go out and get that information ourselves
for regular comparisons.
In relation to the role of financial information in strategy evaluation, the Group Accountant at Company
C noted that developing knowledge of competitors cost structures was essential:
. . . two significant items in our industry are clearly labour and newsprint. You can get quite a good
handle on the newsprint side of things when comparing internal costs to competitors. Labour is not
always as apparentit is difficult to make sensible comparisons because you do not know what
their structure is exactly. But, yeah, cost overall is an important factor to look at.
Thus, like Companies A and B, Company C noted the extensive role of structured and formal systems
for considering both financial and non-financial information in strategic decisions. All three companies
emphasised financial performance measures in the implementation of strategies whilst placing relatively
equal significance on financial and non-financial measures in strategy development. Company C considered its strategic processes to be focused around factors which it regarded as having core significance in
terms of its specific resources and organizational characteristics versus those of others in the industry.
It viewed itself as differentiated from its competitors by virtue of the manner in which it determined
its actions in the market. Whilst information was derived from different sources including management
accounting systems, outlining the companys strategic activities based on comparative benchmarks with
competitors was a central element of this companys management approach.
5.2.4. Company D
Company D engages in five different commercial areas in the energy industry: generation, distribution,
power/energy trading, supply/retail of electricity and gas, and metering activities. Some activities face no
competition (electricity distribution) whilst others such as retail electricity and gas face UK and overseas
competition. A strategic decision for Company D according to its Chief Accountant . . . would be an
acquisition . . . or a decision to go for big organic growth in a particular sector. However, across the
companys areas of activities, what might be regarded as a strategic issue differed. As a consequence, the
relevance of financial information in strategic decision-making at Company D depended on the specific
area of activity:
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. . . if you look at electricity distribution, then quality is a big issue because the only measures apart
from input measures are quality measures. But in retail or trading, electricity and gas are treated as
a commodity . . . In retail, its all about how cheaply you can do it and in power and energy trading
its more about how big a volume you can pass through your doors.
The Chief Accountant of Company D further explained that the type of information utilised in strategy
development was diverse, comprising both financial and non-financial information, and was relatively
structured in its assessment of non-financial factors:
. . . we have a standard template, so we use effectively fairly standard investment appraisal techniques, which we add to by the use of a balanced scorecard as a technique. So we try to look at a
project in fairly broad terms on financial bases in terms of cash flow and also a balanced scorecard
basislooking at the impact a project might have on the environment or people, society, customers,
etc . . . all the dimensions of our business.
He added:
Essentially what we do is an internal due diligence which involves not only preparing impartially
what we think the financial outcome of the project will be, but we also look at the potential risks
and how they could be mitigated, what are the particular commercial exposures there might be and
other sensitivities. And impacts on things like credit rating, financing, etc. We look at all those in
addition to the balanced scorecard stuff.
In terms of the implementation of strategies, the Chief Accountant commented that:
Just because you are an accountant does not mean that you sit all day and add numbers up . . . and
therefore what we have got is a bunch of people who are qualified in that sort of area and who are
also capable of involving a strategic perspective.
Once again, Company D, like Companies A, B and C, placed an equivalent degree of importance
on both financial and non-financial information in strategy development. It considered the extent and
nature of strategic information evaluation as being dictated largely by the business sector in question. In
areas where the product was highly commoditised, increasing volume of product sales was regarded as
an important objective rather than achieving premium pricing via product diversification. Company D
was reliant on a formalised system for engaging in strategic processes which involved both financial and
non-financial information analysis. It made intense use of information derived from structured sources
and formal systems. However, some aspects of a strategys implications for exposure of the business in
the market and stakeholder sensitivities were assessed outside of the parameters of the formal system.
The companys broad approach to the use of financial and non-financial information does not depart from
that of companies in the aggregate survey findings. However, in terms of the enterprises classification
of forms of information and their perceived relevance, the companys practices were indicative of a high
degree of refinement and categorical judgment.
5.2.5. Company E
Company E operates in four sectors: wines and spirit distillation and sales, restaurant retailing, beer
and foods. The company was created following the merger of two companies both of which placed a high
emphasis on financial data preparation and reporting to support decision-making activities. The Group
20
Controller indicated that a relatively structured approach to the finance function was in place:
If you look at our operating companies, the way that we structured our finance function is that we
separated it into twothe traditional, get the numbers down, roll them up, make sure that they all
tie, getting the financial reports done, all that is one department in Finance. The other department
within our operating companies is what we call our decision support function, which works actively
with the management teams to make sure that we make the right decision.
Effectively, the finance function within Company E was responsible for undertaking standard operational and statutory activities. Additionally, it was seen as a source of intelligence for the company to
develop strategies appropriately. The Group Controller expanded on the role of information deployment
in strategy development:
We recently designed a new strategic planning process. Out of that we have Finance working very
closely with the teams in the market. The things that we are looking at are: What is the brand
portfolio? How much value is there to be created within the segments that we are operating within?
Should we have a company on the ground ourselves, or should we think about the Joint ventures or
distribution agreements or whatever. What is going to be the key driver for us to generate superior
returns for our shareholders? What is the City looking for from each of our business?
Thus, although information of relevance in developing a strategy reflected a variety of forms and
sources, ultimately, the questions the company sought to answer according to the Group Controller all
had financial consequences. The implementation of strategy rested on the analysis of financial data. The
Group Controller noted that:
What is our ultimate purpose in life? It is to enhance stakeholder value . . . The way we have decided
to do this is by having a detailed strategic and financial review of every part of the business.
Company E actively engaged in benchmarking and measured their performance against their peers
in terms of shareholder returns.
Company E blended financial and non-financial information in implementing strategies:
The driver of value ultimately is top line growth. So we created a balanced scorecard approach
which is saying, What are the key drivers of value in each of our businesses? You generate value
when you optimise pricing decision, when you look at the value chainright from producing the
product in the factory to delivery to the customer. What are the key drivers of value along this chain
where we can optimise value? And what that has actually done is that we developed a whole series
of KPIs, which are financial and non-financial.
Company Es Group Controller further indicated the diversity of performance indicators which needed
to be monitored in the strategy implementation process:
We look at working capital, and are we maximising our return on capital employed? We also focus
KPIs on people. How many women employees have we got? How many ethnic minorities? How
many employees you regard as high potential?
Thus, financial and non-financial metrics are regarded as essential both in aiding strategic development
and monitoring their implementation in Company E. But certain core concerns determined the areas of
21
focus for performance indicators:

Our belief is that business is based on three pillars. One is building brand equity, which is important
for a consumer good company. You have to build the health of your brand, because our ultimate
profit streams depend on that, so we have a whole series of measures to look at the equity of our
brands in every market around the world. The second area is building the right sort of people in
the company. Their strengths will ultimately drive the business as well, because quality people will
drive quality results. And the third area is the whole sort of performance ethic that we have in the
company almost like we will deliver the financial results, and this is how we are going to deliver
it and actually really embedding that in the corporate culture. And then, along with the traditional
financial measures, design things to monitor this in terms of a strategic level efficiently.
The notion that financial results feed into strategy development and implementation activities was not
independent of the managerial perspective which was espoused within Company E in terms of the role
of management accounting in the strategy process:
The management accounting function prepares the information, and financial analysts in the decision
support function take that information and they are the ones who sort of lead the charge in the whole
strategic planning area.
Within Company E, the Group Controller identified a gradual alteration of the management accounting
function toward a wider role in producing information of strategic relevance, and stressed that strategic
decisions require methodical input of structured data via finance and management accounting activities:
The whole strategic decision making process is structured and formalised because you need to be
rigorous . . . you have to have that sort of discipline within the business because otherwise you just
would not know what is going on. This is about using those numbers to actually drive performance
in the business.
Thus, Company E engaged in extensive analysis of financial and other types of quantitative information.
Equally, it considered non-financial measures to be relevant in both developing and monitoring strategy.
Company E indicated a highly formalised method of integrating a variety of financial, quantitative and
non-financial measures viewed as key to strategic activities. Whilst not departing in this respect from the
general survey findings, Company Es use of accounting information in strategic analysis was reflected
in and influenced by the perspective it adhered to in relation to the role it desired of the finance function.
5.2.6. Summary
In summary, the survey results and the interviews suggest that what the management accounting
presumes regarding the structure and formality of strategic processes broadly aligns with the views of the
responding group of accountants. However, the balance between financial and non-financial information
was more prevalent in strategy development than in implementation. The key aspects of the approach
taken by each company in implementing structure and formality is summarised in Table 5.
The interviews have also pointed to contextual insights concerning the manner in which notions of
structure and formality are expressed and the nature of the information that is relied on. For example, the
information provided for strategy development for Company A was heavily influenced by the requirements of and concerns about regulators. Company C faced a narrower industry context than the other four
companies and hence focused heavily on benchmarking against competitors cost and technical knowl-
22
Table 5
Strategic approach of the five companies involved in the interviews
Strategic decisions and distinctive
features of the strategic approach
Company A
Utilities management and
infrastructure
Strategic investments in particular

markets
Strategy development and
implementation were closely
intertwined
Prospector-like strategy
External factors, especially government
regulation and policy, influenced
information generation and strategic
opportunities
Focus on structure and formal analysis,

with specific models for each
investment. A blending of financial and
non-financial information. Long-term
future focus on environmental issues,
regulation and policy. Sometimes the
rate of return was not sufficient, but
investments were needed to provide
new opportunities
Financial information dominated with

monitoring of investment through
financial measures. Information
collected to service the needs of the
regulators who evaluated processes and
performance influenced what was
collected internally. Close links
between information to evaluate
strategy and to develop strategy
Company B
Sales, service and hire of
motor vehicles,
manufacturer of aircraft
equipment and
childcare products
Proposal to move from one market (e.g.

motor vehicle dealership) to another
(e.g. aircraft interior business) and
decisions that were core to a divisions
activities
Strategy development and
implementation were closely
intertwined
Formal and structured processes

involving meetings10 times a year.
Planning process geared around
evaluating share price relative to peers.
Strategic imperatives dominate when
financial case is not strong. Key
evaluation criteria were market growth
and market share. Accounting system
produced long-term data specifically for
strategy development
Greater emphasis on financial measures

in the implementation and monitoring
of strategies
Company C
Newspaper publisher
Smaller than other cases
with narrower industry
focus
Acquisitions and opportunities that take

advantage of e-commerce and other
technological developments
Comparative benchmarking of
performance against competitors
Formation of a working party to assess

the viability of a new strategy. Formal
assessment of financial and
non-financial information to understand
the impact in terms of market and
competitors. Return on sales, capital
involved and assessment of expertise
relative to competitors were important
criteria
Quarterly benchmarking reports of

financial and non-financial information
against competitors cost structures to
assess any knowledge gaps in expertise
compared to competitors
Company
Table 5 (Continued )
Strategic decisions and distinctive
features of the strategic approach
Company D
Power and energy trading,
electricity trading,
distribution and retailer
Some area of the business
faced no competition,
others faced local and
overseas competition
An acquisition or a decision to
undertake organic growth in a particular
sector
Degree of formality and forms of
relevance of information varied
depending on the area of the business.
Some areas characterised by broad
assessment criteria and high levels of
formality in strategy development
Diverse range of financial and

non-financial information used.
Structured processes with use of a
template to encourage standard
investment appraisal techniques, and
balanced scorecard to view impact of
proposal on range of stakeholders.
Broad assessment criteria involved
financial outcomes, risk, risk mitigation,
and stakeholder sensitivities. The
relevance of financial information to a
decision depended on the particular
area of activity of the proposal
Accounting data was provided in a way

that supported strategic perspectives.
The use of financial and non-financial
information
Company E
Beer, wines and spirit
distillers and
distributors, restaurants
franchiser, food
manufacturer
Decisions that generate increased

returns to shareholders, including
expansion, joint ventures, distribution
arrangements
Specialist accounting department to
provide specific relevant information
for the strategic planning area
Formal processes to analyse data and

evaluate strategic opportunities. Use of
both financial and non-financial
information and benchmarking of
performance (e.g. shareholder returns)
against peers
Use of a balanced scorecard approach

to analyse the key drivers of value and
establish KPIs that covered financial
and non-financial areas. An emphasis
on the extensive analysis of data
Company
23
24
edge. Companies A and B relied extensively on formal meetings to develop strategy and saw strategy
development and implementation as closely linked. The concerns of Company D in its obligation to
multiple stakeholders were reflected in the high formality of its strategy development processes and its
broad evaluation criteria.
What is also evident from the interview comments is the diversity of ways in which strategic activities
are considered to be formal and structured processes and the context defined salience of what constitutes
strategic information and indeed, strategic activity itself. Strategic decisions for Company C fell clearly
within its defined publishing market, whereas for Company B it entailed considering opportunities in
other markets.
6. Discussion and conclusion

The aim of this paper was to investigate whether strategy development and implementation activities
used in practice are formal structured processes, and whether financial and non-financial information are
of equal importance across strategy development and implementation activities.
6.1. Summary of results and implications
The questionnaire-based results of the study confirm that that strategy development and implementation were relatively structured and formal activities in the companies investigated. While financial
and non-financial information were considered equally important for both strategy development and
implementation, the companies surveyed placed greater importance on financial information for strategy
implementation. The interviews largely corroborate the survey results, but also suggest a high degree of
organizational specificity in terms of notions of what constitutes strategic decisions, what analyses these
entail and what criteria are legitimate in determining what underpins relevant strategic information.
The interviews suggest that in considering strategic processes as being formal and structured, firms also
determine what can be viewed as identifiable and visible and as affording managerial action. Whilst senior
corporate accountants generally considered it desirable to use financial and non-financial information in
strategic processes, the results of the study indicate that strategy development and implementation must
be translated into tangible and identifiable activities to make them amenable to structured informational
visibility. There seemed to be a perception among some accountants that making strategically relevant
information more visible was as desirable as strategic engagement itself.
In the companies that were interviewed there is recognition that whilst strategy development and
implementation are organization-wide processes, their objectification is designed to suit senior managers
predilections to strategic planning and action. The utilisation of formal information by business unit senior
management was regarded as valuable although the internally defined procedures through which such
engagement takes place tend to be centrally demarcated and to be extensively organization-specific.
Information deployment for strategic activities evidences particularity that derives from diffuse but still
central input from within the organization. The structural demarcation between financial and non-financial
data collection and reporting is in effect extra-functionally and para-organizationally determined. The
perceived need for strategic information, both financial and non-financial, is largely standard across the
organizations investigated though the basis and nuances in the deployment of this information is locally
derived and contextually defined.
25
As noted, the strategy-linked accounting literature is largely based on the articulation of normative
models which presume structure and formality of strategic processes. The results presented here suggest
that senior corporate accountants broadly subscribe to such a conception of strategic processes. However,
strategic activities and corresponding information analyses appear also to be operationalised with a high
degree of context specificity and organizational particularity.
The investigation has relied on data generated from a questionnaire and interviews, and both these
sources present difficulties in terms of the reliance that can be placed on the findings (see Birnberg et
al., 1990; Cook and Campbell, 1979). For example, the qualitative questionnaire responses may have
encouraged respondents to present a more rational and structured characterisation of strategic activities
than they perceive. This can result from the perception that normative rationality is important to signal
externally. The interviewees possibly also slanted their portrayal of strategic processes in this same regard.
Additionally, it may be that some questionnaire respondents did not a priori consider informal processes
and unstructured data as being connected to strategic endeavours. Their responses could therefore bias
the results unwittingly toward perceiving formality and structure within organizational systems tied to
strategic processes. The focus on accountants as respondents may also mean that their view is not shared
by other managers involved in the strategic management processes within the particular organization.
The interviews undertaken with the subset of questionnaire respondents mitigates the interpretational
hurdle which this poses. However, more extensive triangulation of data would be desirable to enhance
the integrity of the broad study results.
6.2. Areas for future research
The results point to various avenues for future research. One is to gain more qualitative insights on
how particular organizations determine what is seen to be strategic and the manner in which they develop
approaches to dealing with decisions regarded as strategic. This ultimately will generate an understanding
of how organizational nuances as to formal information generation and use come about. Engaging in
such research requires more extensive enterprise-based longitudinal studies which seek to assess wider
organizational factors and their impact on strategic decisions. Of equal interest would be investigations
as to the extent to which management accounting practices actually influence strategies within particular
organizational settings. It is likely that different organizations operationalise accounting information in
different ways and with differing impacts on strategic processes (Chenhall, 2005; McBarnet et al., 1993;
Mouritsen, 1999). Whilst in aggregate terms, organizations may determine ways in which they might
seek to utilise financial and non-financial information, detailed organization-focused studies will likely
point to nuanced differences in information usage and variety in strategic processes and consequences at
the interface of such deployment.
The results of the present investigation have pointed to formal information of strategic relevance
which is deployable by business unit senior managers as emanating from centrally demarcated and
organizationally defined parameters. These findings complement research of performance measurement
systems and their linkages with organizational level. Lipe and Salterio (2000) in this regard, suggest
that situationally adapted and unit-specific measures are not highly relevant to evaluations by higher
organizational levels where there is stress on corporate-wide control measures. Similarly, Banker et
al. (2004) also suggest that evaluators rely more on common measures than on unique measures, but
that strategically linked measures take precedence in the presence of information on strategic linkages.
Taken together, these findings point to strategic information content determining perceived usefulness at
26
different organizational levels. Juxtaposing business unit versus firm-wide perspective on strategy-based
information usage thereby opens potentially worthwhile research avenues.
Senior accountants in the sample of companies investigated here desired balance in the use of financial
and non-financial measures in strategy development. However, information input into strategy implementation processes tended to give precedence to financial measures. Within the firms investigated,
integrating financial assessment into strategic analyses was regarded as being important and particularly
relevant to strategy implementation. Some prior studies have indicated that within British firms, strategy
implementation comprises a greater focus of accountants input of responsibilities as compared to strategy development (Bhimani and Keshtvarz, 1999; Guilding et al., 2000). Scholars have argued also that
strategic thinking is, at least in UK firms, likely to be represented in financial and technical terms given
the training of accountants (Armstrong, 1987; Roslender, 1995). In this light, Ahrens (1996, 1997a,b)
and Ahrens and Chapman (1997) have noted UK management accountants particular involvement in
operational aspects of strategic management. Appleyard and Pallett (2001) have likewise remarked on
UK management accountants being especially focused on adding value to wider decision-making activities rather than being procedurally correct. One study of UK and German companies by Coates et al.
(1995, 1996) reports that financial measures are highly important in the UK firms in the monitoring of the
performance of divisional units. A study by CIMA (1993) has also indicated the extensive use of financial
measures such as return on working capital and financial yield in British manufacturing firms. Likewise
an investigation of UK, German and US multinational enterprises by Coates et al. (1992) reported greater
detail of profit-focused performance measures among the UK firms. These studies point to a possible
UK-specific enterprise reliance on financial measures which may underlie the financial information stress
placed by the firms investigated here in their strategy implementation practices. Cross national investigations of the deployment of financial and non-financial information in strategic analysis would be useful in
drawing out the existence of country-specific predilections. Triangulation of survey derived information
inevitably will provide richer bases of interpretation particularly in multi-country studies.
Acknowledgments
The authors gratefully acknowledge the comments of Thomas Ahrens, Oliver Bohlen, Robert Chenhall,
Eva Labro, Jan Mouritsen, Andries Oudshoorn, Robin Roslender and Juhani Vaivio as well as participants
at seminars at Copenhagen Business School, London School of Economics and ISCTE (Portugal) where
earlier versions of this paper were presented.
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Management Accounting Research 18 (2007) 331

Structure, formality and the importance of

London School of Economics and Political Science, London, United Kingdom

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2. The strategic management literature

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3. Strategy and management accounting

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Q1: Formality/structure in strategy development and implementationa

A low score indicated more formality and structure.

4.1. Sample selection

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Utilities management water and sewage infrastructure

Power and energy trading

Beer, wines and spirits distillers and distributors

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1. Entirely structured and formal

Mean = 2.375, standard deviation = 0.7200.

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and their implementation. Thus one respondent noted that:

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focus for performance indicators:

Strategic investments in particular

Focus on structure and formal analysis,

Financial information dominated with

Proposal to move from one market (e.g.

Formal and structured processes

Greater emphasis on financial measures

Acquisitions and opportunities that take

Formation of a working party to assess

Quarterly benchmarking reports of

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Diverse range of financial and

Accounting data was provided in a way

Decisions that generate increased

Formal processes to analyse data and

Use of a balanced scorecard approach

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6. Discussion and conclusion

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