Lecture Fundamentals of cost accounting (4th edition): Chapter 18 - Lanen, Anderson, Maher

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(BQ) Chapter 18: Performance measurement to support business strategy. As we noted at the beginning of chapter 1, the goal of cost accounting is to help managers maximize value creation in organizations. In this chapter, we introduce methods and measures links performance measures to business strategy.

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Nội dung Text: Lecture Fundamentals of cost accounting (4th edition): Chapter 18 - Lanen, Anderson, Maher

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Performance Measurement to Support Business Strategy Chapter 18 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA McGrawHill/Irwin Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved.
Learning Objectives LO 18-1 Explain why management accountants should know the business strategy of their organization. LO 18-2 Explain why companies use nonfinancial performance measures. LO 18-3 Understand the reasons why performance measures differ across levels of the organization. LO 18-4 Understand how the balanced scorecard helps organizations recognize and deal with their conflicting responsibilities. LO 18-5 Understand how to apply the methods involved in an effective performance measurement system. LO 18-6 Identify examples of nonfinancial performance measures and discuss the potential for improved performance resulting from improved activity management. LO 18-7 Explain why employee involvement is important in an effective performance measurement system. 183
LO 18-1 Strategy and Performance LO 18-1 Explain why management accountants should know the business strategy of their organization. Business Strategy A company’s specific approach for deploying the organizational assets and capabilities required to meet its customers’ needs competitively, while delivering the desired returns to stakeholders. 184
LO 18-1 Strategy and Performance Value Proposition How the organization will create value for all stakeholders. Mission Why an organization exists; its purpose and goals. Mission Statement Description of an organization’s values, definition of its responsibilities to stakeholders, and identification of its major strategies. 185
The Foundation of a Successful LO 18-1 Business Strategy Identify Core Resources and Capabilities Methods of Achieving Success Cost Product Focused Leaders Differentiators Competitors 186
LO 18-2 Beyond the Accounting Numbers LO 18-2 Explain why companies use nonfinancial performance measures. Financial performance measures are useful for motivating employees to improve the company’s profits, but they do have several flaws. • Often not useful in identifying the cause of operational problems • Commonly reported only on a monthly, quarterly, or annual basis • Many people in the organization do not see how their work translates into financial results 187
LO 18-2 Nonfinancial Measures • Nonfinancial measures direct employees’ attention to those things they control. • In the case of a desk clerk at a hotel, measuring the clerk's performance in terms of customer satisfaction would be meaningful 188
Responsibilities According LO 18-3 to Level of Organization LO 18-3 Understand the reasons why performance measures differ across levels of the organization. Business Model Description of how different levels and employees in the organization must perform for the organization to achieve its goals. 189
LO 18-3 Business Model JYC Investments Business Model Build Knowledge Excellent Satisfy Build Advisers Customers Revenues Act Ethically Branch Satisfy Return Leadership Employees Profits Efficient Control Operations Costs 1810
LO 18-4 Balanced Scorecard LO 18-4 Understand how the balanced scorecard helps organizations recognize and deal with their opposing responsibilities. Balanced Scorecard Set of performance targets and results that show how well an organization has performed in meeting its objectives relating to its stakeholders 1811
Multiple Measures or a LO 18-3 Single Measure of Performance? Single Single Measure Measure Multiple Multiple Measures Measures Employee Employeesatisfaction satisfaction Customer Customersatisfaction satisfaction Profit Profit Employee Employeelearning learning Regulatory Regulatoryviolations violations Branch Branchcosts costs Branch Branchprofitability profitability 1812
Four Balanced LO 18-4 Scorecard Views or Perspectives 1813
Four Balanced LO 18-4 Scorecard Views or Perspectives Many, if not most, organizations include the four perspectives listed here. Objectives Measures Targets Initiatives 1814
Four Balanced LO 18-4 Scorecard Views or Perspectives Crown Castle's scorecard includes the following: Customer To achieve our • Relationships mission how should • Timeliness we should appear to our customers? 1815
Four Balanced LO 18-4 Scorecard Views or Perspectives Crown Castle's scorecard includes the following: 1816
LO 18-4 Strategy Map Financial Financial Improve Add Grow Perspective Perspective return customers revenue Customer Customer Satisfy Perspective Perspective customers Internal Internal Control Reduce Improve Business Business costs errors efficiency Perspective Perspective Learning Learning Develop Build Satisfy and andGrowth Growth leaders knowledge employees Perspective Perspective 1817
Continuous Improvement LO 18-5 and Benchmarking LO 18-5 Understand how to apply the methods involved in an effective performance measurement system. Continuous Improvement Continuous reevaluation and improvement of the efficiency of the organization’s activities Benchmarking Continuous process of measuring a company’s own products, services, and activities against competitors’ performance 1818
LO 18-6 Nonfinancial Measures LO 18-6 Identify examples of nonfinancial performance measures and discuss the potential for improved performance resulting from improved activity management. Customer Satisfaction Measures Quality Control Delivery Performance Bookings and Purchase Orders Market Share 1819
LO 18-6 Nonfinancial Measures Quality Control Increase customer satisfaction Delivery Performance Deliver goods and services when promised Bookings and Purchase Orders A decrease in booking and purchase orders sends a signal to management to devote more marketing effort to sales Market Share If the market is growing faster than the company's sales, the company is, in effect, experiencing a decline in sales 1820