Strategic management accounting practices in medium sized UK construction companies: a mixed-methods approach

This study examines the extent to which strategic management accounting (SMA) is used by medium sized UK construction companies, explains the rationale for this and explores the contingent factors which affect its use in the construction sector. To the best of the Researcher’s knowledge the study is the first to investigate the use of SMA in this context. The use of SMA is considered as an aspect of the reality gap, the difference between management accounting theory and management accounting practice. Contingency theory is applied to examine the organisational contexts in which SMA techniques are deployed. Using the Researcher's own definition of SMA he identified a definitive list of twenty-five SMA techniques which satisfy this definition. The use of these SMA techniques is empirically tested using a mixed methods research design. An explanatory sequence design is used. The researcher started with a first phase in which quantitative data was collected and analysed. This was followed up with a second, qualitative phase, the results of which were used to explain the findings of the first phase. The study identifies a low level of use of the twenty-five SMA techniques, supporting the idea that a significant reality gap exists in relation to SMA theory and its use in practice. This reality gap is explained in terms of the non-relevance of many of the SMA techniques to senior executives in the participating businesses. It is also identified that quantity surveyors were often involved in SMA practices to the exclusion of their accounting colleagues, this is discussed as another aspect of the reality gap. The study identifies the 'strategic customer' to add to the list of contingent variables which affect the use of SMA. Specifically, the use of lifecycle costing and value chain analysis are highly relevant to the construction sector but will not be effective if the existing commercial practices of the sector remain. A case-study demonstrating where these techniques are productively used by a number of different businesses is presented which concludes that having a 'strategic customer' is one context in which these techniques are successfully deployed.