This document presents research on factors influencing strategic management accounting system design in the service industry, specifically hotels. The study aims to investigate the application of strategic management accounting techniques in hotels, examine their relationship with contextual factors, and relate usage to historical hotel performance. A survey was conducted of 106 Greek hotels, measuring variables like environmental uncertainty, organizational structure, information systems quality, and life cycle stage. The results were analyzed using partial least squares modeling to test hypotheses about how these factors relate to strategic management accounting usage.

1. A survey of factors influencing Strategic
Management Accounting System design
in a service context
DR ODYSSEAS PAVLATOS

2. Presentation Outline
1. Research objectives
2. Literature review
3. Research hypotheses
4. Research methodology
5. Survey results
6. Conclusions, limitations and future research
2Dr Odysseas Pavlatos

3. Motivation of the study
Innovative management accounting techniques and Strategic Management
Accounting (SMA) (Zawawi and Hoque, 2010)
Minimal empirical enquiry of the nature and the context of SMA application (Cadez
and Guilding, 2008)
There is a need for more research into service organizations on management
accounting system design and contextual variables (Chenhall, 2003; Auzer &
Langfield-Smith, 2005, Modell 1998)
Much of the research undertaken in the service sector has focused on not-for-profit
organizations (Sharma, 2002), tended to be case studies or focused in a single
organization (Auzer & Langfield-Smith, 2005)
3Dr Odysseas Pavlatos

4. Research Objectives
1. Investigate the application of strategic management accounting
techniques in a service context
2. Provide a more unified knowledge and understanding of SMA and
their context by extending contingency relationships established in
manufacturing firms to profit seeking service firms
3. Examine the relation between SMA usage and historical
performance in services
4Dr Odysseas Pavlatos

5. The hotel industry and the examination of
SMA
1. The hotel industry is market oriented (Kotas, 1997) which has been found
to be more conducive to SMA usage (Cadez and Guilding, 2008)
2. Collier and Gregory (1995) concluded that strategic management
accounting is increasingly being adopted in hotels
3. Little innovation has occurred in hospitality management accounting tools
(Potter and Schmidgall, 1999)
4. Active interest in financial hospitality management and particularly in
management accounting practices of hotels (McManus, 2012; Pavlatos and
Paggios, 2009a; 2009b; Anderson and Guilding, 2006)
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6. Literature review and conceptual
framework (1)
Little or no agreement about what constitutes SMA (Roslender and Hart,
2003)
Guilding et al. (2000) provided an original distillation of SMA techniques as
well as criteria for viewing a particular accounting technique as “strategic
16 SMA techniques have been identified by Cadez and Guilding, (2008).
These techniques have been classified into five broad categories:
◦ costing
◦ planning, control and performance measurement
◦ decision-making
◦ competitor focused accounting
◦ customer accounting
6Dr Odysseas Pavlatos

7. Literature review and conceptual
framework (2)
There are an evident number of surveys of SMA practice that have been
carried out (e.g. Guilding et al., 2000; Guilding and McManus, 2002;
Cinquini and Tenucci, 2010). The above surveys have been conducted
only in manufacturing industries
The contingency theory approach to studying SMA practice (e.g. Cadez
and Guilding, 2008; Chenhall and Langfield-Smith, 1998; Anderson and
Lanen, 1999)
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8. Literature review and conceptual framework
(3)
In the hotel management literature there has been minimal work
conducted in regard SMA (Collier and Gregory, 1995)
These studies have mainly focused on customer focused accounting (a
part of SMA) (e.g. McManus, 2012; Anderson & Guilding 2006)
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9. Conceptual framework
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10. Conceptual framework
Selection of the independent variables
Management Accounting literature reports that there are a lot of contingent
factors affect MAS and SMA (e.g. Chenhall, 2003; Cadez and Guilding, 2008):
◦ Contingent factors, such as PEU and Structure have been identified in prior studies as
influencing the design of MAS in hotels (McManus, 2012; Pavlatos, 2010; Pavlatos,
2011; Sharma, 2002)
◦ Pavlatos and Paggios (2009) found that there is a relationship between Quality of IS
information and Cost system design in hotels
◦ Organizational life cycle stage, have been identified in prior studies as influencing the
MAS design in service organizations (Auzer & Langfield-Smith, 2005; Brignall, 1997;
1991; Moores and Yuen, 2001)
◦ Empirical evidence supports the notion that organizations which experience
performance downturns are more likely to take risks and to adopt innovations (see
Naranjo-Gil et al., 2009 for a review)
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11. Conceptual framework
Selection of control variables and industry specific factors
Organizational Strategyand Size have been identified in prior studies as
influencing SMA usage (Cadez and Guilding, 2008)
Management status, Age of the organization, Category, and Type of
hotel have been been identified in prior studies as affectingMAS design
in hotels (Pavlatos 2012, Pavlatos 2011, Pavlatos and Paggios, 2009)
11Dr Odysseas Pavlatos

12. Conceptual framework
Research Hypotheses (1)
H1: Hotels perceiving a higher degree of environmental uncertainty use
more strategic management accounting techniques than hotels that
perceive lower environmental uncertainty
H2: Hotels characterised as decentralised use more strategic
management accounting techniques than hotels characterised as
centralised
H3: There is a positive association between the quality of IS information
and the SMA usage
H4: SMA usage is greater among hotels in maturity phase than among
hotels in a growth phase
H5: Strategic management accounting usage is higher in hotels that have
a relatively low historical performance than in hotels that have a
relatively high historical performance
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13. Conceptual framework
Research Hypotheses (2)
H6a: The negative effect of historical performance on SMA usage is more
pronounced for hotels perceiving a higher degree of environmental uncertainty
H6b: The negative effect of historical performance on SMA usage is more
pronounced for decentralised hotels
H6b: The negative effect of historical performance on SMA usage is more
pronounced for hotel in maturity phase
H6d: The negative effect of historical performance on SMA usage is more
pronounced for hotels provide improved IS information quality
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14. Research Methodology
Sample characteristics and data collection
The sample surveyed included the leading Greek hotel enterprises (ICAP’s
Directory) (sales and number of employees 2010)
A pilot test took place (interviews with 6 CFOs of hotels)
The questionnaire was accompanied by one glossary that explained the
terminology of the strategic management accounting tools adopted by Cadez and
Guilding (2008)
The participation form was sent to 320 hotel companies
◦ The response rate was 33% (106 hotels)
◦ The questionnaires were answered by Chief Financial Officers (CFOs)
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15. Research Methodology
Variables measurement (1)
“Structure” was measured by the Gordon and Narayanan (1984), six-item, seven point,
Likert-scaled, fully-anchored instrument. Respondents were asked to strongly disagree
or strongly agree with six statements regarding that the authority has been
completely delegated to appropriate managers or employees to make decisions
“Perceived environmental uncertainty” was measured by the Gordon and Narayanan
(1984), seven point, Likert-scaled, fully-anchored instrument. It was slightly adapted to
be understandable in the hotel context. Respondents were asked to strongly disagree
or strongly agree with five statements regarding the perceived environmental
uncertainty
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16. Research Methodology
Variables measurement (2)
“Quality of IS information” was measured by the Teng et al. (1995) five-item, seven
point, Likert-scaled, and used by Dunk (2004). Respondents were asked to rate their
information systems on a scale anchored by (1) ‘very low’ and (7) ‘very high’, in terms
of its accuracy, precision, reliability, completeness and relevancy
“Organizational life cycle stage” was based on the Kazanjian and Drazin (1990) self
categorization measure; this instrument was used by Auzair and Langfield-Smith
(2005). Three stages of organizational life cycle were measured: formation, growth
and mature stages.
◦ Thus, only two stages were analyzed – growth (38 firms) and maturity (68 firms) stages
16Dr Odysseas Pavlatos

17. Research Methodology
Variables measurement (3)
“SMA Usage” was measured drawingon the scale by Cadez and Guilding(2008)
◦ It was slightly adapted to be understandable in the hotel context based on
information from the interviews with six managers who specialize in
management accountingin hotels
◦ It comprises of an eleven-item seven-point Likert-scaled instrument anchored
by (1) ‘to no extent’to (7) ‘to a great extent’
◦ These techniques have been classified into five broad categories according to
Cadez and Guilding (2008)
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18. Research Methodology
“SMA usage” measurement
Category Technique
Costing life cycle costing, value costing
Planning, control and performance
measurement
benchmarking, integrated
performance measurement
Decision-making strategic costing, strategic pricing
Competitor focused accounting competitor cost assessment,
competitive position motoring,
competitor performance appraisal
Customer accounting customer profitability analysis,
valuation of customers as assets
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19. Research Methodology
Variables measurement (4)
◦ “ Historical Performance”: We acquired operational performance data for the three years before
the survey administration from the Association of Greek Tourism Enterprises (SETE) and Hellenic
Chamber of Hotels Dimensions:
Hence, we decided to rely on five performance indicators, according to Kim et. al., (2013):
1. Average room rate (ARR);
2. Revenue per available room, (RevPAR);
3. Total revenue per available room (TrevPAR);
4. Restaurant F&B revenue per occupied room
5. Banquet F&B revenue per occupied room
19Dr Odysseas Pavlatos

20. Dr Odysseas Pavlatos 20

21. Research Methodology
Variables measurement (5)
◦ “Organizational strategy” is measured with a single item seven-point Likert-scaled
adopted from Govindarajan (1988) ranging from cost leadership to product
differentiation
◦ “Size” was measured using the number of beds adopted by Tavitiyamanet. al (2012)
◦ “Age of the organization” was measured by Kallunki and Silvola (2008) (age of the hotel
in years since it was found)
◦ “Category of hotel” (stars), “Management status” (membership in chains, private), and
“Type of hotel” (city hotel, resort) were measured as categorical variables adopted by
Pavlatos and Paggios (2009)
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22. Data analysis
Descriptive statistics of the variables in the study
22
a,b,c,d: Translated into dummy
variables
Dr Odysseas Pavlatos
Variable N Mean
Std.
Deviation
Theoretical
Minimum
Theoretical
Maximum
Actual
Minimum
Actual
Maximum
SMA usage 106 4.11 0.66 1 7 1 7
Quality of IS information 106 4.02 0.38 1 7 1 7
Organizational life cycle stagea 106 0.64 0.48 0 1 0 1
Perceived environmental uncertainty 106 4.32 0.72 1 7 2 7
Structure 106 4.05 0.54 1 7 1 7
Historical Performance (€) 106 79.12 35.3 - - 53.24 135.42
Control variables and specific industry factors:
Strategy 106 4.87 0.55 1 7 1 7
Size (No of beds) 106 329.12 239.51 - - 85 1185
Management status b 106 0.18 0.39 0 1 0 1
Age of the organization 106 29.12 15.12 - - 3 48
Category c 106 0.45 0.50 0 1 0 1
Type of hotel d 106 0.39 0.49 0 1 0 1

23. Data Analysis and Results
The research model has tested using Partial Least Squares (PLS), a multivariate
analysis technique for testing structural models (Chin, 1998)
A PLS model is analyzed using SmartPLS (version 2-M3) and interpreted in two stages:
(1) the assessment of the reliability and validity of the measurement models, and (2)
the assessment of the structural models
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24. Correlations from PLS model (n=106)
NOTE: * indicates Correlations is significant at the .05level (2 tailed)
**indicates Correlations is significant at the .01 level (2 tailed)
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Variable 1 2 3 4 5 6 7 8 9 10 11 12
1. SMA usage
1
2. Perceived environmental uncertainty 0.432* 1
3. Structure 0.484* 0.069 1
4. Quality of IS information 0.402* 0.112 0.268 1
5. Organizational life cycle stage 0.388* 0.235 0.136 0.213 1
6. Strategy 0.364* 0.018 0.189 0.018 0.110 1
7. Size 0.342* 0.099 0.203 0.085 0.354** 0.185 1
8. Management status 0.102 0.112 0.050 0.149 0.128 0.132 0.184 1
9. Category 0.118 0.002 0.022 0.136 0.128 0.184 0.118 0.182 1
10.Age of the organization 0.124 0.005 0.114 0.114 0.120 0.162 0.185 0.041 0.012 1
11. Type of hotel 0.134 0.004 0.118 0.214 0.084 0.214 0.214 0.145 0.142 0.121
1
12. Historical Performance -0.464* 0.224 0.201 0.195 0.184 0.289** 0.364* 0.205 0.015 0.209
0.132 1

25. Reliability and validity analysis of multi-item constructs (n= 106)
Constructs ICR Alpha AVE Items Loadings
SMA usage 0.842 0.804 0.654 11 into 5
categories
0.721-
0.834
Quality of IS
information
0.855 0.856 0.692 5 0.822-
0.895
PEU 0.832 0.814 0.624 6 0.724-
0.824
Structure 0.822 0.802 0.632 6 0.804-
0.834
Historical
Performance 0.851 0.819 0.689 5
0.812-
0.862
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26. Results from PLS analysis (n= 106)
Dr Odysseas Pavlatos 26
A. Main effects model
Path to: SMA usage
Cohen’s f2
Path from: Path coefficient
Perceived environmental uncertainty
0.290*
(2.984)
0.27
Supported H1
Structure
0.203*
(2.046)
0.20
Supported H2
Quality of IS information
0.228*
(2.315)
0.22
Supported H3
Organizational life cycle stage
0.204*
(2.052)
0.20
Supported H4
Historical performance
-0.264*
(2.634)
0.25
Supported H5
Control variables and specific industry factors
Strategy
0.229*
(2.412)
0.23
Size
0.184*
(2.064)
0.17
Age of the organization
0.132
(0.154)
Management status
0.152
(0.168)
Category
0.182
(0.211)
Type of hotel
0.104
(0.102)
R2 =0.291
Q2 = 0.016
B. Full model (interactions effects)
Path to: SMA usage
Cohen’s f2
Path from: Path coefficient
Perceived environmental uncertainty
0.272*
(2.815)
0.25
Supported H1
Structure
0.194*
(2.146)
0.18
Supported H2
Quality of IS information
0.250*
(2.507)
0.22
Supported H3
Organizational life cycle stage
0.201*
(2.054)
0.20
Supported H4
Historical performance
-0.215*
(2.134)
0.21
Supported H5
Historical performance X Perceived environmental uncertainty
-0.261*
(2.614)
0.24
Supported H6a
Historical performance X Structure
-0.105
(0.109)
No Supported H6b
Historical performance X Organizational life cycle stage
-0.144
(0.144)
No Supported H6c
Historical performance X Quality of IS information
-0.180
(0.155)
No Supported H6d
Control variables and specific industry factors
Strategy
0.218*
(2.205)
Size
0.182*
(2.054)
Age of the organization
0.143
(0.154)
Management status
0.154
(0.168)
Category
0.192
(0.201)
Type of hotel
0.102
(0.119)
R2 =0.343
Q2 = 0.014

27. Dr Odysseas Pavlatos 27

28. Conclusions (1)
This paper set out to increase our understanding of why some profit seeking
service organizations are more likely to implement strategic management
accounting.
Survey revealed that 6 contingent factors affect SMA usage in a service context:
1.Perceived environmental uncertainty
2.Structure
3.Quality of IS information
4.Organizational life cycle stage
5.Historical performance
6.Strategy
7.Size
28Dr Odysseas Pavlatos

29. Conclusions (2)
Hotels perceiving a higher degree of environmental uncertaintyuse more
strategic management accounting to help them to reduce uncertainty and
improve managerial decision-making, managerial planning and control
◦ Hotels managers that perceive their environment to be highly uncertain require
more external information to manage the uncertainty
Hotels characterized as decentralized user more SMA tools than hotels
characterized as centralized
◦ Decentralized hotels have a greater need for SMA techniques, as these provide
additional information to help lower level managers in their decision-making
processes
29Dr Odysseas Pavlatos

30. Conclusions (3)
Quality of IS informationplay a positive role in the SMA usage in hotels
◦ Improved IS information quality should further help managers use more
contemporary management accounting techniques
SMA usage is far much greater in hotels at maturity phase than those in growth
phase
◦ Mature hotels analyze competitor positions within the industry more, use more cost
data based on strategic information to develop and identify superior strategies that will
produce a sustainable competitive advantage
30Dr Odysseas Pavlatos

31. Conclusions (4)
Hotels following a differentiation strategyand large hotels (control variables) use
more SMA tools
◦ These findings confirm Cadez and Guilding (2008)
Strategic management accounting usage is higher in hotels that have a relatively
low historical performance than in hotels that have a relatively high historical
performance.
Hotels with lagging performance likely adopt and use more strategic management
accounting tools in order to help them to increase their performance in the future.
31Dr Odysseas Pavlatos

32. Conclusions (5)
The findings also indicate that lagging performance affects strategic management
accounting usage and that this effect is moderated by the perceived environmental
uncertainty.
While on average hotels with lagging performance are more likely to use SMA this effect of
historical performance is more salient for hotels perceiving higher degree of
environmental uncertainty.
32Dr Odysseas Pavlatos

33. Limitations
The use of perceptual measures and the potential of common-method
bias
Data were collected from the Greek hotel industryand the results may
be generalizable only to that population
A email survey prevents the respondent from effectively clarifying his or
her understanding of the questions
The use of the single item of measure of strategy. The use of a single
item measure precludes any investigation of construct reliability
33Dr Odysseas Pavlatos

34. Contribution (1)
This study contribute as constituting a holistic perspective of all
contingent factors that affect the SMA system design in a service
context
Fill an existing gap in the literature as prior studies have focused on
multiple industry analyses of SMA (mixed industries or mainly
manufacturing industries)
An overdue enquiry into the validity of viewing strategic management
accounting as a coherent empirical construct in a service environment
34Dr Odysseas Pavlatos

35. Contribution (2)
Adds to the knowledge in MAS design in hotels (service shop).
◦ The results provide the first empirical evidence of the relation between SMA
usage, organizational factors, external factors and historical performance in
hotels.
Fill the empirical gap that exists concerning with how SMA systems
operate under environmental uncertaintywhich is mainly driven by
recession and economic crisis
◦ Data were collected from Greece, which is under recession the last 5
years
Enhance the understandingof management accountingpractices
among firms in Greece
35Dr Odysseas Pavlatos

36. Contribution (3)
The accounting profession and hotel managers will also benefit as the
study aims to identify the most relevant SMA tools adopted in the hotel
industry and further the relationship between these tools and other
external and organizational factors
Help practitioners to develop new approaches in designing MAS system
within service organizations
36Dr Odysseas Pavlatos

37. Future research
Examine all service process types (professional services, mass services
and service shops) in Greece and in other countries (Silvestro et al.,
1992)
Investigate the relationship between SMA and top executives’
characteristics (CEO’s and CFO’s) in services
Examine other innovative management accounting tools in services
(e.g. value based management)
37Dr Odysseas Pavlatos

38. Dr Odysseas Pavlatos 38

39. Connect with me:
http://eap.academia.edu/OdysseasPavlatos
http://gr.linkedin.com/in/odysseaspavlatos
Odysseas Pavlatos
opaulatos@gmail.com
Dr Odysseas Pavlatos 39