Bài giảng Fundamentals of cost accounting - Chapter 18: Performance Measurement to Support Business Strategy

© 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 StrategyChapter 18Learning ObjectivesLO 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.Strategy and PerformanceLO 18-1 Explain why management accountants should know the business strategy of their organization.LO 18-1Business StrategyA 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.Strategy and PerformanceLO 18-1Value PropositionHow the organization will create value for all stakeholders.MissionWhy an organization exists; its purpose and goals.Mission StatementDescription of an organization’s values, definition of its responsibilities to stakeholders, and identification of its major strategies.The Foundation of a Successful Business StrategyLO 18-1Identify Core Resources and CapabilitiesMethods of Achieving SuccessCost LeadersProduct DifferentiatorsFocused CompetitorsFinancial performance measures are useful for motivating employees to improve the company’s profits, but they do have several flaws.Beyond the Accounting NumbersLO 18-2 Explain why companies use nonfinancial performance measures. 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 resultsLO 18-2Nonfinancial 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 meaningfulLO 18-2Responsibilities Accordingto Level of OrganizationLO 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.LO 18-3Business ModelBranchLeadershipSatisfyEmployeesExcellentAdvisersEfficientOperationsBuildKnowledgeActEthicallySatisfyCustomersBuildRevenuesControlCostsReturnProfitsJYC InvestmentsBusiness ModelLO 18-3Balanced ScorecardLO 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 stakeholdersLO 18-4Multiple Measures or aSingle Measure of Performance?Single MeasureProfitLO 18-3Customer satisfactionRegulatory violationsBranch profitabilityEmployee satisfactionEmployee learningBranch costsMultiple MeasuresFour BalancedScorecard Views or PerspectivesLO 18-4Four BalancedScorecard Views or Perspectives Many, if not most, organizations include the four perspectives listed here.ObjectivesMeasuresTargetsInitiativesLO 18-4Four BalancedScorecard Views or PerspectivesCustomerTo achieve ourmission how shouldwe should appearto our customers? Relationships TimelinessCrown Castle's scorecard includes the following:LO 18-4Four BalancedScorecard Views or PerspectivesCrown Castle's scorecard includes the following:LO 18-4Strategy MapFinancialPerspectiveAddcustomersImprovereturnGrowrevenueSatisfycustomersReduceerrorsControlcostsImproveefficiencyBuildknowledgeDevelopleadersSatisfyemployeesCustomerPerspectiveInternalBusinessPerspectiveLearningand GrowthPerspectiveLO 18-4Continuous Improvementand BenchmarkingLO 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’ performanceLO 18-5Nonfinancial MeasuresLO 18-6 Identify examples of nonfinancial performance measures and discuss the potential for improved performance resulting from improved activity management.Customer Satisfaction MeasuresQuality ControlDelivery PerformanceBookings and Purchase OrdersMarket ShareLO 18-6Nonfinancial 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 salesLO 18-6Nonfinancial MeasuresFunctional performance measures keep processesefficient and effective. Manufacturing Cycle Time Time involved in processing, moving, storing, and inspecting products and materials Manufacturing Cycle Efficiency Measure of the efficiency of the total manufacturing cycle; equals processing time divided by the manufacturing cycle timeLO 18-6Nonfinancial Measures Productivity focuses on the efficient conversion of inputs into outputs. Partial productivity measures express the relation between output and only one input.LO 18-6Nonfinancial Measures Total factor productivity: the ratio of the value of output to the value of key inputsLO 18-6Employee InvolvementLO 18-7 Explain why employee involvement is important in an effective performance measurement system. Many managers believe that when workers take on real decision-making authority, their commitment to the organization and its objectives increases.LO 18-7Employee Involvement When decision-making responsibility lies with workers closer to the customer, workers are more responsive to customer concerns and can make informed decisions. Giving decision-making responsibility to workers uses their skills and knowledge and motivates them to further develop those skills and knowledge in an effort to improve the organization’s performance.LO 18-7Employee Involvement For effective employee involvement the evaluation system must:Convey the organization’s objectivesand critical success factorsPromote goal congruenceBe applied consistently and accuratelyLO 18-7Difficulties in Implementing Nonfinancial Performance Measurement Systems Fixation on financial measures Reliability of nonfinancial measures Lack of correlation between nonfinancial measures and financial resultsLO 18-7End of Chapter 18