Appunti AFC - Accounting, Finance & Control - prof. Lettieri

Social Media in Management Accounting

Social media (SM) is defined as "a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content" (Kaplan and Haenlein, 2010, p. 61).

The diffusion of social media is incomparable to any other media: "it took 13 years for television to reach 50 million users, while [...] Twitter only 9 months. Today, there are 2.4 billion online users" (McCaughey et al., 2014). Population of online users in 2016 is 3.4 billion and 2.3 billion of social media.

"It's no longer a choice of whether or not you are on social media. You've got to be there. And if you're there, you have to have governance" - Mrs. Callison, Global Marketing and Corporate Affairs Compliance Executive of Bank of America (Forbes, November, 2015).

Companies adopt the largest social networks. Facebook, Twitter and Linkedin show the

Social Media Uses in Companies

Inside Company

SM use within the company: ROI, cost savings

Public Relations

SM for content & communication: sales, reputation awareness

Data Intelligence

SM for data analysis, use, connection: efficiency, benefits

Possible Uses

Marketing, development, communication, sales, customer experience, customer relationship management.

Sales

Example: Starbucks

Direct mentions are a key tenet to Starbucks' strategy. By keeping a close watch on when people discuss the company or its products, the Starbucks social media team can create conversations with potential customers. For instance, say somebody mentions wanting to try something new in his or her coffee routine. When a student mentions that he or she is at a nearby Starbucks cafe studying, the team tweets back well wishes for the exam. These discussions are the meat and potatoes of Starbucks' sales strategy on Twitter.

Customer Relationship Management (CRM)

Customer relationship management (CRM) is a term that refers to practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention, and driving sales growth.

Communication: crisis example of Burger King: The Burger King Twitter account was recently hacked and the person who gained access to the account changed the name to McDonald's and began promoting McDonald's in their tweets. By the time Burger King had regained control of their account and issued an apology, they had gained 30,000 new followers. This led some to suggest it wasn't a crisis at all, but actually wielded positive results. Either way, it taught us all a lesson in the importance of password security.

Social Media opportunities:

• Timeliness information (immediate analysis, feedback for service, product, of the specific group) for decision-making, planning
• Trend analysis

Benchmark with competitors- Cost efficient and Cost cutter for CRM activities, Marketing, Communication

- Co-creation and collaboration with clients and end-users

- Fostering internal collaboration between different departments and all over international companies

Social Media information for managers

Methods & Metrics

Example of KPI features

• Tailoring for the specific needs are diverse.
• SM efficiency and effectiveness, not much connected to ROI or to similar, marketing measures of campaigns not always adequate for SM activities.
• Integrating social media information with other sources, specific characteristics. Next step, could be matching this information with internal databases of customers and their real spending's (privacy issues).

Social Media KPIs performance

Threats of Social Media information and KPIs

• Privacy issues
• Data collection
• Personal data treatment
• Different laws across countries
• Risk management
• Crisis management

• Audit implications

11. MANAGEMENT REPORTING

Where we are so far

What we are going to discuss

The part concerning the Control phase, analysing if there are differences between the target and the reality measured: it is the variance analysis.

The feedback is the corrective action, it is in charge of the managers.

The reporting system is a process of communication to a manager who is responsible for the allocation or the use of specified resources of information regarding the actual vs. target performance that is relevant for his/her decision-making.

Manager = is a person in charge of deciding (responsible).

Main source of information: "management reports"

Structure and contents change according to:

• Addressees: Board of Directors/CEO, Head of Divisions/SBUs, Country/Area Managers, Head of Global Sales/Operations/SC, etc.
• Purposes: pure monitoring of actual performance, identification of corrective actions – i.e. changes to existing plans for the months to come – etc.

Frequency (daily vs. weekly vs. monthly vs. quarterly vs. annual reporting)

Management Reporting for Whom?

I layer: by function

II layer: by division

III layer: by function

It is important to understand of what these units are responsible.

We discuss about responsibility centres.

Different Responsibilities

- COST CENTER = An organizational unit whose manager has control over costs, but not over revenues or investment funds (however they can affect revenues, so they have to interact with the other centres); resource consumption is related to volume of production. Main goal is to minimise the costs, maximise the efficiency (ATR). Managers can answer to the question: If I need to produce one unit more, what is the cost?

→ Operations

- EXPENSE CENTER = An organizational unit whose manager has control over costs, but not over revenues or investment funds; resource consumption is NOT related to volume of production.

→ Marketing, sales, general costs, …

- REVENUE CENTER = An organizational

manager's goals may not be those of the organization

In order to fix the first two problems (coordination and big picture) there is the budgeting process, which aim is to align the managers, increase synergies and provide managers with the big picture.

How to build up a management report, which kind of content should we provide to different levels?

PMS Requirements & Hierarchy Stability across time → only relevant for the financial report

Corporate → It's important to have the big picture (completeness) and the long-term orientation.

Business Units → they are interested in measurability (they are going to be measured), they have to show results "tomorrow", so they are not oriented in the long-term. They need to react immediately (timeliness). They want that the top managers can assign responsibilities (specific responsibilities)

PMS Requirements & Indicators' fit

Value-based →

Accounting-based → they are complete and measurable, but

For instance, measurability is only limited to the financial reports.

Value drivers → they are daily activities, so they are very measurable and timely. It’s clear their responsibilities.

PMS Requirements & Indicators’ fit

At the corporate level, the main elements for the manager reports are the value-based indicators. For the business units they are the accounting-based indicators, while for the responsibility centres they are the value drivers (the main indicator is the EBIT).

11.1 CORPORATE LEVEL

What Content for CEO/Top Managers?

• Information about external (exogenous) variables (macro-economic indicators – GDP values and trends in the main market countries, inflation rates, interest rates, currency exchange rates, other important facts occurred in the period, etc.)
• One or more Income Statements
• For a diversified Company: consolidated P&L, P&L for each Division/SBU.
• For a Group: also P&L of some companies (the holding, the main subsidiaries,

includes the expected results for the whole year (usually called "forecast" or "pre-closing") vs. the total budget values (as from initial budget) and/or vs. previous forecast (if any)- Sometimes actual and budgeted data are compared also with the corresponding actual data of previous year (to enable a "year of year" comparison)

An example- Assumptions:

• Quarterly reporting
• P&L "by function"
• Focus on profitability of core business activities (EBIT)

Three sections:

1. actual vs. budgeted data for the 2nd quarter
2. actual vs. budgeted data "year-to-date" (cumulated first + second semester)
3. forecast 2011 (i.e. actual data YTD + revised budget for 3rd and 4th quarter) vs budget 2011

11.2 FROM CORPORATE TO BUSINESS UNITS

A Business Unit is an organizational unit