3.7 may%204%20%26%206%20ch11.ppt

3.7 may%204%20%26%206%20ch11.ppt - ACIS 222 Performance...

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ACIS 222 Performance Evaluation & Compensation Reading: Eldenburg et al. (2008) Chapter 11
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Ch11- Ch11- 2 Topics Agency theory Other theories Responsibility centres ROI, RI, and EVA Compensation and motivation Transfer pricing International issues
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Ch11- Ch11- 3 Agency theory a principal contracts an agent to act on his or her behalf principal can observe outcomes of agent’s actions cannot observe agent’s behaviour or effort level
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Ch11- Ch11- 4 Agency costs costs/lost benefits when agent does not act in the best interests of the principal losses from poor decisions losses from incongruent goals monitoring costs goal alignment costs contracting costs
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Ch11- Ch11- 5 Agency costs can be reduced by giving specific decision making authority to agents by holding agents responsible for their decisions by designing a compensation plan to minimise agency costs
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Ch11- Ch11- 6 Centralised and decentralised entities centralised organisation top management have decision making authority and responsibility decentralised organisation decision making authority and responsibility given to lower levels of management
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Ch11- Ch11- 7 Reasons for decentralisation cognitive limitations timely response possible focusing of central management training and evaluation motivation
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Ch11- Ch11- 8 Reasons against decentralisation higher monitoring costs possibility of duplication segment managers may have different goals
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Ch11- Ch11- 9 Responsibility centres organisational subcomponents headed by a manager who must be effective must be efficient is only responsible for aspects over which he/she has control
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Ch11- Ch11- 10 10 Types of responsibility centres Cost centre / production centre Discretionary cost centre Revenue centre Profit centre Investment centre
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Ch11- 11 11 Cost centre / production centre manager only has control over
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This note was uploaded on 12/23/2009 for the course BCOM ACIS 222 taught by Professor Neilcrombie during the Spring '09 term at Canterbury.

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3.7 may%204%20%26%206%20ch11.ppt - ACIS 222 Performance...

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