Ralph Kober, Associate Dean Programs and Professor of Management Accounting at Monash Business School, pays a visit to the CoBS where he is interviewed by Professor Adrian Zicari, ESSEC Business School, on research that grew from impact measurement to observation of real-time crisis management during the COVID pandemic in Australia. 

Sensemaking in Times of Crisis by Ralph Kober and Adrian Zicari. Edited by Tom Gamble. Related research: Coordination in a not-for-profit organisation during the COVID-19 pandemic: organisational sensemaking during planning meetings, Ralph Kober and Paul J. Thambar, Accounting, Auditing & Accountability Journal, Emerald Insight.

Go straight to the video version of this interview.

Adrian: Hello. Here we welcome Ralph Kober from Monash Business School, Melbourne, Australia. Welcome, Ralph. Thank you for being here today.

Ralph: Thank you very much for inviting me, Adrian.

Adrian: Today I would like to talk with you about your recent research paper about a food relief association in Australia. It’s a very interesting paper and I like the paper for several reasons. One is because it’s a case study done in a very unusual situation.

Ralph: Yes, definitely. We’re very fortunate actually that the food relief association contacted us in February to do an impact evaluation. It’s a unique organization in that they have a different model of food relief. They actually give people a weekly box of fruit, vegetables and bread for 40 weeks, and they operate through primary schools as opposed to the traditional food bank approach where people have to come to a charity and get one-off lots.

From impact measurement to managing the COVID crisis

They didn’t have any idea of whether their approach worked, or what the benefits were. So they contacted us to develop a social impact measurement framework and to evaluate the benefits of their program. We commenced that work in February 2020, and then in March 2020 the whole world changed due to the pandemic and lockdown. We had to put the project on hold, but then we became aware that all their meetings had moved online because of work-from-home restrictions, so we asked if we could sit in on their meetings.

The organization was great. They let us observe all their meetings. And as researchers, we were very fortunate that we could go online and observe all their meetings online – especially because all prior research and accounting that looked at crises had all been retrospective – it was always researchers interviewing managers or surveying managers of past events. We were very fortunate and made the best of a really bad situation in observing in real time how this organization was coming to terms with the COVID-19 pandemic and the crisis. As such, we observed the crisis as it unfolded.

Adrian: Yes, a crisis during the crisis. And during the “battle”.

Ralph: Yes, that’s right.

Adrian: Do you imagine that the results would have been different in another situation or perhaps, given that we live in VUCA times, that crisis is permanent nowadays?

Ralph: Yes, that’s a good question. I’ve been thinking about that actually. I believe it probably depends on the operating environment that a company or business faces. For a business that’s operating in a high uncertainty environment, I think the results would probably hold, as you said, in these VUCA times and constant change.

A lot of companies are faced with high levels of uncertainty. They’re in this constant mode of having to deal with mini-crises as they unfold. On the other hand, for companies that are operating in low uncertainty environments, where it’s business as usual, I think the results probably wouldn’t hold for those companies. I think it’s dependent on the operating environment.

Using accounting to guide decisions

Adrian: In your paper, performance indicators play a key role. Could you tell us about them?

Ralph: What we observed in the paper was that accounting information – and in particular performance reports for this organization – triggered sensemaking. This means that accounting information was being used by the managers in the organization to understand the impact that the COVID-19 crisis was having on the charity. They were using performance reports in terms of the number of food packages, boxes delivered, and comparing it to forecasts.

They were also using forecast information like accounting cash flows and how much cash reserves they had left before they would run out of money. This information was triggering the sensemaking process, and it was being used by people within the association to understand the impact on the charity. It made it real to the people in terms of the impact of the crisis.

Leadership and sensemaking

Adrian: The interesting point of the research paper is the role of the CEO, the leader of the organization, who at some point has a more top-down view of sensemaking, and then, as the crisis unfolds, changes his approach.

Ralph: Yes, that’s right. I think this was probably due to the fact that no one really knew what was happening. The COVID-19 pandemic was a crisis that none of us had ever experienced previously, and that had those dual health and economic aspects. In times of uncertainty, the initial reaction of a lot of leaders is to make unilateral decisions – and in the of the association, the CEO did just that. We observed that in the initial meeting in May when Australia was coming out of its first lockdowns.

I think there was probably a sense of optimism, and there were discussions about how the organization should fund or how the charity should fund itself. He was adamant that they should continue their current model of funding where they were primarily reliant on one corporate donor who was donating 90% of their funds. Then as times changed, he understandably changed his mind as well.

New information came to the fore, and we saw that in June 2020 at the association’s June meeting. The state of Victoria in Australia had entered its second lockdown. People started realizing that COVID wasn’t going away. It was going to be here for a while. At one of the meetings in June, the chief operating officer presented his cash flow forecast, and it showed the organization only had three months’ worth of cash reserves to survive.

Understandably, the CEO then realized that he had to change his mind. He changed his position and realized that the organization had to diversify its funding. Then they started looking for philanthropic organizations, doing public campaigns and stuff. Also at this time, we observed that, as you said, it became a lot more participatory as well. There was what we call guided organizational sensemaking, where different people, different managers, would sense give and all debate about what their preferred position was and what their preferred decision was. There were very interactive levels of discussion taking place.

We also observed what we called reflexive sensemaking, which is a new sensemaking approach which only come into research literature in 2021. It’s very unique. It’s where the CEO realizes that the organization needs to change, but isn’t sure of what the change needs to be. We saw a lot of that in this organization because the crisis was so unusual that the CEO knew that they had to change but didn’t know what the solution was.

He actually guided others within the organization. We saw that at meetings where there was a lot of debate and discussion about what should happen, but the CEO never imposed his view. In both these instances, when this participatory approach to sensemaking was engaged, the decisions that were arrived at were followed through, and they didn’t change.

Data and performance indicators as a tool for dealing with crisis

Adrian: All these processes, in a sense, were supported and accompanied by performance indicators. Is that right?

Ralph: Yes. Every single aspect of sensemaking that we observed was all due to accounting information. Indeed, accounting information triggered the need for this sensemaking. The performance reports, the cash flow forecasts all made it real to the managers within the charity of what the impact of COVID-19 was on the organization. Interestingly, in the restrictive sensemaking – where the CEO imposed what his position was – and even in the reflexive sensemaking – where the CEO guided the managers – accounting information didn’t play any further part in the process. It triggered the need for sensemaking, but it wasn’t involved in the sensemaking.

In the guided sensemaking, where all the organizational actors were trying to impose what they thought the preferred option was on the others, and there was a lot of debate, we saw that they were drawing on accounting information to try and argue for their side of things. In that one form of sensemaking, we did see a lot of use of accounting information. We think it was to try and convince others – a need for some sort of device to try and convince people – and they were using accounting information to try and play that role of convincing others.

Adrian: I think it’s not the first time that you’ve work with this kind of organization. From the beginning of the process of research to the end, did you have any surprises? Were there things that you never expected to happen?

Ralph: I suppose the biggest surprise was the COVID pandemic. As I mentioned, for this organization, we had actually only just commenced working with them in February 2020. It was a very new organization. I suppose in terms of surprising, one of the things we didn’t notice which we’ve written about in another paper, is the extensive use they made of accounting information.

A lot of prior research in charities has said that accounting information is not used that much by charities, or it’s not that useful. We did notice that this charity had very well-established financial reporting systems in place, even prior to the crisis. In another paper, we talk about how we believe that this actually helped the organization, so that when the crisis hit, they had all these measures that they could actually draw upon.

That then allowed them to have this information to use in sense-making processes. Interestingly, I’ve just read a working paper from someone else that actually looks at a health department in Australia, and it shows that that was very different. They didn’t have the accounting information prior to the crisis. When the crisis hit, the first thing they needed to do was actually establish the measures to gain that understanding, whereas in the case of the charity we were analysing they had that. That gave them that advantage to help navigate the crisis.

Adrian: So, accounting can serve a purpose. After all, it’s not just merely a legal obligation but can also be a useful tool. It’s important to claim that accounting can help.

Ralph: Oh, definitely. That’s one of the things that we talk about in the first paper that we wrote on this organization. The actual role that accounting information plays, the very important role that it played in navigating the crisis because the charity had accounting systems in place so that when the crisis hit, they could draw on accounting information to gain that understanding of the impact of the crisis.

Adrian: Thanks a lot for your visit, Ralph.

Ralph: Thank you very much, Adrian. It’s been great talking to you.

Watch the interview in video format:

Useful links:

• Link up with Profs. Ralph Kober and Adrian Zicari on LinkedIn
• Read a related article: Why measuring social impact is good for business
• Discover Monash Business School, Australia
• Apply for one of the programmes at Monash.

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