Design of a Management Decision and Control System - Case Study Example

Design of a management decision and control system: Sydney Cove Oyster Bar Executive summary The paper focuses on designing a management decision and control system for the Sydney Cove Oyster Bar, a leading seafood restaurant in Sydney. The restaurant is not satisfied with its current performance measurement system, which relies primarily on a profit and loss prepared at the end of each month and has therefore asked the team to develop a new management decision and control system for the restaurant. However, the management of the restaurant has also raised various concerns regarding the implementation of the system, which includes facing resistance from the employees. Thus, the paper would not only need to provide a business intelligence system for the restaurant but also needs to analyse the current situation and the future strategies of the company to come out with a best possible solution for the restaurant. Stakeholder analysis As per Heath (1997) stakeholders are considered to be people or group of people who have the power or value to use it as a constraint or reward during the process of exchanging goods, services or developing company policies or standards for operating a business. In this section of the paper, the stakeholders for the Sydney cove Oyster Bar would be identified. These stakeholders would be both internal as well as external. In order to prepare a strategic plan for the restaurant, it is important to undertake this stakeholder analysis. As stakeholders influence in almost all spheres of business including the operations and the future strategies of a company, it is critical to identity them. Further, the stakeholders also influence various subsidiary plans such as the marketing strategies and communication plans as well. Identification of the stakeholders also help in understanding issue management as it aids in determining the current and possible issues related to the company, which might affect in meeting the goals and missions of the company (Heath 1997). Research indicates that in case a company successfully develops an issue management program, it would help it in identifying the issues, monitoring them, analysing them, prioritising them as well as avoiding them beforehand and thereby, protecting the reputation of the company. However, in most cases these issues are often caused by the media, general public or the regulatory authorities. Therefore, it is important to identify these external stakeholders as well to avoid issue conflicts during the strategy stage (Heath 1997). Therefore, stakeholder analysis would help the restaurant to identify its various stakeholders and find means to communicate with them and determine whether their future strategies would be in sync with the expectations of the stakeholders or not. Further, such an analysis would help the restaurant to understand any underlying issues and solve them before it turns into a crisis. Stakeholders of the Sydney cove Oyster Bar The major stakeholders of the Sydney Cove Oyster Bar are given in detail and in the below mentioned figure. The restaurant was established in 1988 by Barry Manton and a business partner. Over the years the business expanded considerably and the self-service outlet has now changed into a fancy diner. The restaurant has been shaped to the current position due to the influence of various stakeholders. Some of these prominent stakeholders are: Regulators: The most important regulator that influenced the business is the Sydney Harbour Foreshore Authority (SHFA). The building as well as the outside areas is being leased by the SHFA, which has the responsibly of managing the public assets on the Harbour foreshore. Some of the area in the harbour includes Darling Harbour, the Rocks and East Circular Quay. The restaurant is therefore expected to support the vision of SHFA which includes to be a ‘place maker’, to create ‘unique places’ so the public and enjoy the harbour, to support tourism, and support the community. Some of the other regulators who have also influenced in shaping the business include the Sydney City Council, the Public Works Department and the Maritime Services Board. Consumers: The consumer demand and expectations has also helped in shaping the restaurants over a period of time. In the last 22 years, the restaurant has become a landmark in Sydney for offering fresh seafood and attracts not just domestic tourists and local public but also international tourists, politicians, rock stars/movie stars and opera/theatre attendees. The major stakeholders of the company are being mentioned in the figure below: Stakeholders of the Sydney Cove Oyster Bar  Addressing stakeholders’ interests As stakeholders are an important component of the entire business set-up, it is critical to understand their interest and fulfill their expectations. The below table would focus on some of the stakeholders interests and how the restaurant is planning to fulfill their demands. Stakeholders Stakeholder expectations Means to fulfill these expectations Measuring the success of the methods used Customers Best quality at affordable prices Quality services Fantastic dining experience Introduction of new menus Providing training to the waiters Introducing loyalty programmes Consistent customer feedback Employees Training Increased benefits Security during lean periods Providing training and growth path Providing more benefits to the permanent staff Hiring temporary support staff during lean periods Introducing 360 degrees appraisal system Open communication between the HR and the staff Management Increased knowledge about the internal environment of the restaurant Accessing the customer preference Increasing the revenue Increased communication with the managers/staff Studying the customer feedback Strategising to increase revenues by introducing new menus/promotional events Studying the balance sheet at the end of quarter and comparing with the balance sheet of the quarter when these strategies were not introduced Owner/Partner To become a role model in the industry To become a top restaurant in the country serving seafood Concentrating on CSR efforts, such as saving the marine life in and around the restaurant, preserving the natural surroundings etc. Creating promotional events based on seafood promotions Studying the media coverage gained for such events Certifications and awards received for conducting such events Regulators To protect the natural beauty of the harbour To support the community To encourage tourism Creating promotional events to promote tourism, environmental protection and supporting the local community Certificates and accolades given by the regulators Media Projecting the true quality of the restaurant Finding out whether the restaurant provides value for money The brand image and social responsibility showcased by the restaurant Providing information to the media about the restaurant on a consistent basis Inviting restaurant critics and journalists to review the restaurant Ensuring coverage for major events taking place in the restaurants Studying the reportages published in the media and identifying the tone of the articles. Positive articles would mean media support and therefore, increase in brand image. Competitive and operational strategy The Sydney Cove Oyster Bar is considered to be one of the best fresh seafood restaurants in the harbour area of Sydney. However, it still needs to undertake various competitive and operational strategies to become a major seafood restaurant in not just Sydney but also in Australia. Some of these strategies are being discussed in the following sections. Competitive strategy Currently, the Sydney Cove Oyster Bar follows the Broad Based Differentiation Strategy propagated by Michael Porter. As per this strategy, the restaurant focuses on providing high quality and innovative seafood and wine to its customers, along with superior customer services. Such a strategy undoubtedly complements the fantastic location on which the restaurant is situated. This strategy also helps the restaurant in following the unique proposition that other restaurants that has advantage of location also follows (Porter 1980). Therefore, the current strategy is only focusing on following what other businesses in the same field are undertaking. Thus, the central character of the restaurant is similar to its competitors, namely the restaurants around the East Circular Quay, Circular Quay, West Circular Quay and The Rocks, all of whom also follow the same strategy of providing excellent food and services, complementing with the fantastic location. Therefore, in order to stay ahead of the competition and become a major restaurant in the country, the restaurant should take advantage of the current renovation and come out with strategies that would provide a unique character to the restaurant. Some of the strategies that the restaurant may implement are as follows: Emphasising on the theme of the restaurant: As it is a seafood restaurant, the management may decide to emphasise on the theme of marine life and project the same in the restaurant. They can tie up with various marine institutes to educate or provide trivia to their customers. Also, the restaurant may give passes to marine museums for selected customers during promotional events. Focusing on the CSR initiatives: The restaurant is presently not undertaking much of CSR work, as prescribed by the SHFA. It should look at cleaning the harbour in and around the restaurant as well as help in protecting the marine life. This would send a strong message among its stakeholders and create a responsible brand image for the restaurant. Undertaking various promotional events: The restaurant should also engage its customers by conducting promotional events, especially during the lean season. It can organise cookery competitions, wine tasting events or even discussions on conserving marine life. Such strategies would help the restaurant in carving a niche for itself in the industry and creating a distinct image as a popular seafood restaurant in the country. Operational strategy Operational strategies are undertaken to support the competitive strategies of the organisation. The current operational strategy of the restaurant is to invest in a new menu and wine collection by procuring the best quality seafood and improving the kitchen processes. This strategy fits in quite well with the decision of the restaurant to renovate the place to cater to the changing taste of the customers. Further, the restaurant is looking at training its staff, retaining good staff and serving the customers by providing information about the menu. Again, the operational strategy is only focused on how to run the restaurant and retain its customer base. However, the strategy does not include ideas on how to increase the consumer base or meeting the requirements during the peak seasons. Some of the operational strategies that the restaurant may implement are as follows: Hiring temporary staff for peak seasons: Instead of going for full-time, permanent staff, the restaurant may hire graduate students or temporary staff during the peak season or peak time. This would help the restaurant to address the problem of over-staffing during the lean period and firing people during such times. Further, the restaurant can therefore, retain and provide more benefits to their permanent staff members. Training the staff: The staff should be trained about the menu thoroughly and provide suggestions to the customers about the menu and the wine that can complement the food. The staff should also be trained to spot repeat customers and give them extra attention. Further, the staff needs to be given proper training to ask the customers about their experience in the restaurant and solicit feedback from them. Management decision and control system A management account system is used to provide financial and non-financial information to the managers. This helps the managers to plan and control various activities within an organisation. Such a management control account system provide a process and management structure that ensures that the managers are able to achieve the organisational goals properly. However, in order to achieve these organisational goals, it is important to control the human behaviour, as these goals can only be achieved through controlling the management and the people associated with the organisation. It is also important to understand the affect of accounting on organisational behaviour, as it influences the decision to design a management accounting control system. The paper found that in order to achieve the above mentioned competitive and operational strategies, the management needs to allocate sufficient budget for the entire process. Further, as the restaurant is currently undertaking renovation work, this is possibly the best time to develop a management decision and control system, which would help the restaurant not only in creating a new image for itself but also sustaining it in the long run. However, in order to undertake such a huge operational task, the management needs to engage its stakeholders in the process, especially its employees, as the new image would affect them the most. These employees would be responsible for maintaining the brand image of the restaurant, retaining the existing customers, getting more customers and promoting the restaurant as a socially responsible brand. Thus, post the renovation, the responsibilities of the employees towards the restaurant would increase manifold. Therefore, the employees should be included in the process right from the beginning of the renovation, so that these strategies are imbibed in these employees from the onset. However, involving employees at the budging stage might not be the best possible solution. Although, employees would be means through which the restaurant management would implement its strategies, these employees might not be the best people to help the management in taking budget related decisions. For instance, Hofstede (1967) investigated the factors that impact the participation of the employees during budgeting. It has been said that employee participation would mean higher motivation among the employees and therefore higher performance. However, Hofstede found mixed results about the effectiveness of such participation. He concluded that although participation during the budgeting stage may appear necessary for the employees, but is not sufficient for them. These employees are looking for much more level of participation such as leadership opportunities and influencing the cultural set-up of the organisation. Further, for motivating the employees to take part during the budgeting stage, the managers and the supervisors have to efficient enough. They should encourage communication between various employees, deciding on correct target levels, following a proper performance appraisal system and showcasing appropriate leadership behaviour. Thus, the employee participation for finalising the budget may depend on the efficiency of the manager and how he or she can influence the employees to provide innovative ideas. This might be a flawed process as the manager might not be efficient enough to encourage or motivate the employees to provide ideas. Therefore, participative budgeting might not be the best method to use as it is totally dependent on the efficiency of the managers who might slack from the work and bring in their own biasness while estimating the budget by overstating expenses and understating revenues (Onsi 1973). These managers may create budgetary slack due to pressure from the higher management or for personal gains. It has been found that involving employees in the budgeting process helped in improving the performance of the employees to a certain extent. However, with the increase in interference from the management, the performance declined again. Further, the performance is also dependent on individual skills and aspirations. It was seen that in case the budget is considered to be a challenge to achieve but is a reasonable one, the employees were motivated enough to undertake the process and adjusted their aspiration levels accordingly. However, in case the employees felt that the budget is not possible to be achieved, he or she would get de-motivated and would either look for another challenging work or would undertake his or her present work without any enthusiasm (Hofstede 1967; Stedry and Kay 1966). This results into conflict between the decision making process to decide about the budget and motivating people to perform as per their aspiration level (Hopwood 1976). Another important theory that the team would consider for selecting a business intelligence system is the Balanced Scorecard. This is known as an all-inclusive performance measurement and strategic control system. The system measures the performance areas that were mostly used in traditional accounting. The major aim of this system was to interconnect various objectives the organisations need to accomplish in order to stay ahead of their competitions (Kaplan & Norton 1992). The balanced scorecard helps in measuring the performance in terms of lag and lead indicators. The lag indicator helps in monitoring the progress of the organisation in achieving the objectives and summerising the market share, financial measures and customer satisfaction data. The lead indicator on the other hand helps in measuring the results and providing facts and information to the management that are logical and actionable. Some of the central components of the balanced scorecards are the financial perspective, customer perspective, internal perspective and the learning and growth perspective. The financial perspective looks at increasing the shareholder value. It is being measured through the analysis of cash flow, growth and profitability. The customer perspective aims at creating value for the customer and measures the market share and customer satisfaction data. The internal perspective focuses on the internal functioning of the organisation and is measured through delivery time, product quality, customer satisfaction data etc. The learning and growth perspective highlights on the various skill sets, technology and corporate environment required to achieve the organisation’s goals. This is being measured through employee satisfaction, training, retention rate, launch of new products etc (Ittner et al 2003). Keeping in mind the above theories, the team decided to find a management decision and control system that would provide best-possible solution for the Sydney Cove Oyster Bar. The team found that although, the operational and the competitive strategies drawn out by the management would require the support from the employees, the management might have to exclude or only take selective responses from the employees when it comes of taking budgeting decisions. Therefore, the management would keep a strict vigil on the employees to find out whether they are following the strategies adopted by the management and put added responsibilities on the managers to ensure that the employees are motivated enough to continue working with the restaurant. The management would also encourage employees to participate during the various decision making phases undertaken by the company. However, during the budgeting process, the management might ask the employees to participate or take a few suggestions given by the representatives of the employees. Thus, the team would be selecting such an accounting system for the restaurant which would require minimum employee intervention in the decision-making stage. Instead, the system should only require the employees to feed in the data at a regular interval without any error. Further, the team decided to implement such a system that would also take care of the components of the balanced scorecards i.e. financial perspective, customer perspective, internal perspective and the learning and growth perspective, as these were also important organisational goals for the restaurants. Business intelligence system A business intelligence or BI system is used as a term to define various software applications that helps an organisation to analyse its raw data. The concept of BI includes all sorts of related activities such as undertaking analytical processing online, creating reports, developing queries and data mining. Most organisations use a BI system for improving their decision making process, cutting costs and identifying opportunities for conducting new businesses. However, BI not just a corporate reporting tool that analyses and finds out data from the enterprise systems. An appropriate BI system can help the management identify the business process problems and create solutions as per the issue (Haag and Cummings 2007). Most restaurant chains all over the world use BI software to help them take various strategic decisions. BI software helps the management to decide about adding new dishes in their menus, removing non-performing dishes or introducing combo offers. A compatible BI system may also help the management to negotiate contracts with its suppliers as per the requirements of the restaurant. Further, such a system helps in identifying the problem areas as well as the opportunities for improving the process. As a restaurant is dependent on a good operational strategy, a BI system is appropriate for such businesses which are looking at improving its business process and operations (Haag and Cummings 2007). In this case as well, the Sydney Cove Oyster Bar is looking at implementing a BI system that would help in streamlining its operations as well as implementing its new operational and competitive strategies. The restaurant is not satisfied with its current performance measurement system, which relies primarily on a profit and loss prepared at the end of each month. Therefore, the management wants to implement another management decision and control system for its restaurant. For the Sydney Cove Oyster Bar, the team decided to implement a BI system that would use restaurant enterprise system and include a strong data warehouse system which could also be accessed through Internet. Therefore, the team suggested to implement mymicros.net, a BI system developed by MICROS. This system is based on a website which would provide the central repository of information about the point-of-sale, data warehousing, back office etc. It is an integrated system that is although simple is also very powerful. Further, due to the use of restaurant enterprise system, the management would be able to access all the information related to the finances and operations of the restaurant easily. Further, this system also took care of the challenges that the management of the restaurant mentioned. The management was wary of the fact that the introduction of a new system might not go too well with the employees and they might protest against it. Therefore, it was necessary to implement such a system that would be user friendly and require very little input from the end user. Thus, the team advised to implement mymicros.net that had intuitive capabilities which helped in enhancing the communication between the employees, storing the data in accurate folders, consolidating related information and data and helping in retrieving the data at the shortest possible time frame. Some of the major features of the system are: Information website: The BI system has a data warehouse feature called Enterprise Information Portal (EIP) that could also be integrated with a website. This would help the management in identifying the issues and opportunity from a remote location itself, rather than visiting the restaurant on a daily basis. Data maintenance: The system also provides the feature of automatic storage of data the moment it is uploaded in appropriate folders through Enterprise Maintenance Service (EMS). Further, point-of-sale items are also maintained as per the menu price, item, discounts etc. This helps in updating the menu on a regular basis as per the customer preference. Loyalty cards: The system includes iCare, a customer loyalty program module that would help the employees to input data about the customer and generate loyalty cards and points in the system. Robust inventory management: This system has an inventory management application called myinventory that can provide the entire details about the purchase and stock details as well as the recipes and ingredients used. This can also be password protected to help the management protect its recipes and other details. Training module: In order to leverage the free time left with the employees during the lean period, the BI system provides a training module for the employees called mylabor. In this module, various tasks and case examples are given for the employees to solve and grades are allocated accordingly. This can also be used as a requirement for the appraisal process. Problem detection: In case of any problem at the point-of-sale, the system is designed in such a way that it would create a detailed report and send it to the management for analysing the problem. Thus, the management may take adequate action to tackle the problem right at the onset. Problems associated with implementing the system Although, business intelligence systems can create great value for companies, implementing such a system might create various cultural as well as technical challenges for the companies. In this case as well, the management itself has been wary of introducing such a system as it believed that the employees protest against the system and their performance might also suffer. Therefore, the team decided to implement a system that would be user friendly and does not require much of input from the end user. However, even such a system would require some amount of data to be input by the employees to create an error free report. Thus, the system would mean added work for the employees to feed in the correct data in a proper manner into the application. Further, these employees need to be consistent in their effort to input the data on a regular basis. The system also requires to be maintained on a regular basis. It has to be debugged and monitored. However, the management is not ready to spend any additional money to monitor the system as it considers the system to be too simple to require any added funding for its maintenance. This might create a problem for the restaurant at a later stage when the data would be too huge to be maintained by a single administrator. The management is also not ready to spend too much on training the employees on the new system. This would again create problems as the employees might not accept a system they are not familiar with and may start neglecting their duty to feed in data regularly. This would mean loss of valuable data which might have helped the management to take critical decisions. Further, it would result in giving skewed outputs as well. Recommendations and discussions In order to make this BI system effective, the management might decide to undertake the following recommendations: Providing proper training to the staff: Even before rolling out the new system, the existing staff members should be given proper training to use the system. They should also be encouraged to use the system right from the day one of its implementation. Further, any new member should also be taught about the system during his or her orientation as well. Implement the system quickly: Do not take too much time to implement the system. The system might not be the perfect solution for the business, but do not take too much time to making the system perfect. Instead implement the system and keep tweaking it as per the business requirements. Create a workable strategy: Always create a workable and logical strategy while implementing a BI system. The data warehousing should be compatible with the future strategy and should be flexible enough to accommodate huge data as per the business growth. Define the return on investment: Even before starting the project, it is imperative to understand the return on investment on the project. Every organisation expects a certain amount of return while undertaking any new development. Similarly, for the implementation of this system as well, the management needs to decide on the ROI for the system as well. Reference: Haag, Stephen and Cummings, Maeve 2007, ‘Information Systems Essentials’, McGraw-Hill College. 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