Chapter_26_for_Class - Chapter 26 Performance Management...

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Chapter 26 “Performance Management and Evaluation”
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Organizational Goals and the Balanced Scorecard Objective 1 – SKIP this L.O. Describe how the balanced scorecard aligns performance with organizational goals, and explain the role of the balanced scorecard in the management cycle
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Performance Measurement Objective 2 – SKIP this L.O. Discuss performance measurement, and state the issues that affect management’s ability to measure performance
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Responsibility Accounting Objective 3 Define responsibility accounting , and describe the role that responsibility centers play in performance management and evaluation
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Responsibility Accounting As part of their performance management systems, many organizations Assign resources to specific areas of responsibility Track how the managers of those areas use those resources Evaluate managers at all levels in terms of their ability to manage their area of responsibility in keeping with organizational goals
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Responsibility Accounting (cont’d) Is an information system Classifies data according to areas of responsibility Reports each area’s activities by including only the revenue, cost, and resource categories that the assigned manager can control
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Responsibility Accounting (cont’d) Responsibility center An organizational unit whose manager has been assigned the responsibility of managing a portion of the organization’s resources The activity of the responsibility center dictates the extent of a manager’s responsibility
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Types of Responsibility Centers 1. Cost centers 2. Discretionary cost centers 3. Revenue centers 4. Profit centers 5. Investment centers
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Cost Center A responsibility center whose manager is accountable only for controllable costs that have well-defined relationships between the center’s resources and products or services Performance is usually evaluated by comparing an activity’s actual cost with its budgeted cost and analyzing the resulting variances
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Cost Centers (cont’d) Examples Assembly plants in manufacturing organizations Relationship between the costs of resources and resulting products is well defined Food services in hospitals and nursing homes Clear relationship between costs of food and direct labor and the number of inpatient meals served
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Discretionary Cost Center A responsibility center whose manager is accountable for costs only and in which the relationship between resources and products or services produced is not well defined Cost-based measures cannot usually be used to evaluate performance
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Discretionary Cost Centers (cont’d) Examples Administrative activities Accounting Human resources Legal services Research and Development Might measure number of patents obtained and number of cost-saving innovations developed Service organizations United Way might measure administrative activities by how low their costs are as a percentage of total contributions
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This note was uploaded on 02/07/2011 for the course BUS 209 taught by Professor Z.gougoumanova during the Spring '11 term at American University in Bulgaria.

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Chapter_26_for_Class - Chapter 26 Performance Management...

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