Chapter_26_for_Class - Chapter 26 Performance Management...

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Chapter 26“Performance Management andEvaluation”
Organizational Goals and theBalanced ScorecardObjective 1 –SKIP this L.O.Describe how the balanced scorecard alignsperformance with organizational goals, andexplain the role of the balanced scorecard inthe management cycle
Performance MeasurementObjective 2 –SKIP this L.O.Discuss performance measurement, and statethe issues that affect management’s ability tomeasure performance
Responsibility AccountingObjective 3Defineresponsibility accounting, and describethe role that responsibility centers play inperformance management and evaluation
Responsibility AccountingAs part of their performancemanagement systems, manyorganizationsAssign resources to specific areas ofresponsibilityTrack how the managers of those areasuse those resourcesEvaluate managers at all levelsin terms oftheir ability to manage their area ofresponsibility in keeping with organizationalgoals
Responsibility Accounting(cont’d)Is an information systemClassifies dataaccording to areas ofresponsibilityReports each area’s activities byincludingonlythe revenue, cost, andresource categories that the assignedmanagercan control
Responsibility Accounting(cont’d)Responsibility centerAn organizational unit whose manager hasbeen assigned the responsibility ofmanaging a portion of the organization’sresourcesThe activity of the responsibility center dictatesthe extent of a manager’s responsibility
Types of Responsibility Centers1. Cost centers2. Discretionary cost centers3. Revenue centers4. Profit centers5. Investment centers
Cost CenterA responsibility center whose manager isaccountable only forcontrollable coststhathavewell-defined relationshipsbetweenthe center’s resources and products orservicesPerformance is usually evaluated bycomparingan activity’sactual costwith itsbudgeted costandanalyzingthe resultingvariances
Cost Centers (cont’d)ExamplesAssembly plants in manufacturingorganizationsRelationship between the costs of resources andresulting products is well definedFood services in hospitals and nursing homesClear relationship between costs of food and directlabor and the number of inpatient meals served
Discretionary Cost CenterA responsibility center whose manager isaccountable for costs onlyand in whichthe relationship between resources andproducts or services produced isnot welldefinedCost-based measures cannot usually be usedto evaluate performance
Discretionary Cost Centers(cont’d)ExamplesAdministrative activitiesAccountingHuman resourcesLegal servicesResearch and DevelopmentMight measure number of patents obtained and number ofcost-saving innovations developedService organizationsUnited Way might measure administrative activities by howlow their costs are as a percentage of total contributions
Revenue CenterA responsibility center whose manager isaccountableprimarily for revenueand

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Term
Spring
Professor
Z.Gougoumanova

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