Professional Documents
Culture Documents
Evaluate, Reward
Monitor, Report
2007 Pearson Education Canada Slide 13-4
Top management and critical process managers develop critical success factors and performance measures. They also specify objectives
Critical process managers and lower-level managers develop performance measures for objectives.
2007 Pearson Education Canada Slide 13-5
Functional
VP Marketing VP Production VP Human Resources VP Finance
Divisional
Matrix
Functional VPs Mkt. Prod. H.R. Fin. Divisional VPs
President
Staff
President
VP Division A
VP Division B
VP Division C
A B C
Slide 13-6
Responsibility Centres
Set of activities assigned to a manager or a group of managers/employees Based on principle of responsibility accounting which holds that managers should be evaluated on the activities which they can influence or control
Cost Centre Area for which cost data is accumulated such as an assembly department Expense Centre Area dominated by discretionary expenses such as legal or accounting Revenue Centre Area primarily responsible for generating sales such as a sales office Profit Centre Area responsible for controlling costs and generating revenues
Investment Centre Area responsible for income (revenues - expenses) in relation to its invested capital
2007 Pearson Education Canada Slide 13-7
Controllable Cost
Uncontrollable Cost Measuring Financial Performance
Slide 13-10
Controllable Cost
Cost which is directly influenced by the manager of a responsibility centre during a particular time period Absolute or total control is not required in order for a cost to be classified as controllable Key is to look for the manager or managers who are in the best position to explain the results achieved
Slide 13-11
Uncontrollable Cost
Any cost that cannot be affected by management of a responsibility centre within a given time span
Slide 13-12
Principle of responsibility accounting holds that it is fair to evaluate managers only on the costs under their control Uncontrollable costs should be ignored in evaluating the manager because nothing he or she does will affect these costs
Slide 13-13
Controllable Costs
Direct Costs
Evaluate manager on "contribution controllable by segment manager" (all controllable costs) Evaluate segment on its "contribution by segment" (all direct costs)
2007 Pearson Education Canada Slide 13-14
Slide 13-15
Control of Quality
Quality requires meeting customers' requirements and maintaining this level throughout the production and sales process Four categories: 1. prevention 2. appraisal 3. internal failure 4. external failure
Slide 13-17
Control of Productivity
Relationship of outputs to inputs for material, labour and equipment Multiple productivity measures may include
Labour cost as a % of sales dollars Sales per employee Machinery & equipment investments per employee Total labour cost per hour
Slide 13-18
FINANCIAL STRENGTH
CUSTOMER SATISFACTION
ORGANIZATIONAL LEARNING
Slide 13-19
Balanced Scorecard
Performance reporting approach which links organizational strategy to actions of managers and employees Combines financial and operating measures Links performance to rewards Recognizes diversity in organizational goals
Financial Strength Customer Satisfaction Business Process Improvement
2007 Pearson Education Canada Slide 13-20
Organizational Learning
Important to properly train and motivate employees to achieve organization's goals and consistent monitoring of objectives in accordance with critical subgoals
Slide 13-21
Goals and objectives are less clear Professionals less receptive to control systems Lack of profit measure makes measurements more difficult Less pressure to improve from "owners" Budgeting is more of a bargaining game to acquire additional funding and less of a planning tool Motivations and incentives of organizational employees are often drastically different from for-profit organizations
2007 Pearson Education Canada Slide 13-22
Organizational Goals
Organizational Structure Performance Measurement Responsibility Centres