Textbook Notes (381,228)
CA (168,426)
UTSC (19,325)
MGA (381)
MGAB03H3 (41)
Liang Chen (12)
Chapter

Week 11 - 12 chapter notes

3 Pages
124 Views

Department
Financial Accounting
Course Code
MGAB03H3
Professor
Liang Chen

This preview shows page 1. Sign up to view the full 3 pages of the document.
Chapter 15 Performance Evaluation and Compensation Notes
Decision-Making Authority and Responsibility
x one approach to measuring, monitoring, and motivating employee performance is to give specific decision-making authority to
employees and then hold them responsible for and reward them for the results of their decisions
x shareholders give managers authority to decide how corporations’ resources are used
x then, shareholders hold the managers responsible for creating shareholder value
Centralized and Decentralized Organizations
x when decision-making is centralized, the right to make or authorize decisions lies within top levels of management
x when decision-making is decentralized, the rights and responsibilities for decision-making permeate all levels of the organization
General versus Specific Knowledge
x general knowledge Æ information that is easy to transfer from one person to another within an organization
x decisions based on general knowledge are likely to be centralized, made primarily by the CEO and other top managers
x transferring general knowledge needed for decision-making to organization’s headquarters is relatively easy and not very costly
x specific knowledge Æ detailed info about particular processes, customers, or products; info that is costly to transfer within firm
Choosing a Centralized versus Decentralized Organizational Structure
Centralized Organizations Decentralized Organizations
Advantages Disadvantages Advantages Disadvantages
x less monitoring of
decisions
x decisions are intended to
benefit overall firm
x if decision makers have
complete info, timely and
efficient decisions are
made
x good for stable operations
and economic conditions
x more monitoring of
employee effort because
they may be less
motivated
x decision makers may not
have complete info,
resulting in poorer-quality
decisions
x when knowledge from
subunits is required, the
decision-making process
slows down
x not appropriate for
dynamic processes and
volatile economic
conditions
x timely decision-making;
appropriate for dynamic
processes and unstable
economic conditions
x decisions are made by
people who have most
knowledge and expertise
x upper management has
time to focus on
organizational strategies
x decision-making authority
combined with reward
systems provide more
motivation to exert
optimal effort at the
subunit level
x decisions may meet
objectives of decision
maker’s subunit but not
meet organizational goals
x decisions may not be
coordinated among
subunits, resulting in less
effective decision-making
for full organization
x decision makers may not
understand or agree with
organizational strategies
x lack of coordination
among subunits may lead
to duplication of products,
services, and effort
Responsibility Accounting
x in centralized organizations, information produced by the accounting system for decision-making is used primarily by top
managers who are held responsible for both their effort and the quality of their decisions
x employees carry out tasks that result and are held responsible for their effort and compliance with top-down decisions
x therefore, individual and team efforts require close monitoring to determine their contributions to success
x managers use variance and productivity reports to gauge employee (individual and team) efforts
x in decentralized organizations, decision-making occurs throughout management levels and in the field
x employees in lower levels are held responsible for their efforts and the quality of their decisions
x therefore, accounting systems are used to provide decision-making information for all levels, from management to frontline
x broader accounting measures related to overall financial performance are used to measure and monitor performance
x responsibility accounting Æ assigning decision-making authority and responsibility to managers and monitoring performance
x responsibility centres Æ subunit over which managers are accountable for specific types of operating activities
Cost Centres
x cost centres Æ responsibility centre in which managers are accountable for producing goods or services efficiently (minimizing
costs for a certain level of output, or maximizing output for a certain level of cost)
x managers in these cost centres are responsible for producing their goods or services efficiently
x discretionary cost centres Æ cost centre for which output is not easily measurable in dollars or activities
Revenue Centres
x revenue centres Æ responsibility centre in which managers are accountable for revenues
x if the manager in a revenue centre is responsible for setting prices, gross revenues can be used as a performance headquarters
x else, managers’ performance can be evaluated using a combination of sales volumes measured in units and sales mix
x many organizations treat their sales departments as revenue centres and reward employees based on sales generated
Profit Centres
x profit centres Æ responsibility centre in which managers are accountable for both revenues and cost (i.e., profits)
x managers are responsible for decisions about inputs, product mix, pricing, and volume of goods or services produced
x because they include both revenues and costs, performance is measured using some combination of revenue and cost measures
x some measures of profits such as accounting earnings are used
www.notesolution.com

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Chapter 15 Performance Evaluation and Compensation Notes Decision-Making Authority and Responsibility N one approach to measuring, monitoring, and motivating employee performance is to give specific decision-making authority to employees and then hold them responsible for and reward them for the results of their decisions N shareholders give managers authority to decide how corporations resources are used N then, shareholders hold the managers responsible for creating shareholder value Centralized and Decentralized Organizations N when decision-making is centralized, the right to make or authorize decisions lies within top levels of management N when decision-making is decentralized, the rights and responsibilities for decision-making permeate all levels of the organization General versus Specific Knowledge N general knowledge information that is easy to transfer from one person to another within an organization N decisions based on general knowledge are likely to be centralized, made primarily by the CEO and other top managers N transferring general knowledge needed for decision-making to organizations headquarters is relatively easy and not very costly N specific knowledge detailed info about particular processes, customers, or products; info that is costly to transfer within firm Choosing a Centralized versus Decentralized Organizational Structure Centralized Organizations Decentralized Organizations Advantages Disadvantages Advantages Disadvantages N less monitoring of N more monitoring of N timely decision-making; N decisions may meet decisions employee effort because appropriate for dynamic objectives of decision N decisions are intended to they may be less processes and unstable makers subunit but not benefit overall firm motivated economic conditions meet organizational goals N if decision makers have N decision makers may not N decisions are made by N decisions may not be complete info, timely and have complete info, people who have most coordinated among efficient decisions are resulting in poorer-quality knowledge and expertise subunits, resulting in less made decisions N upper management has effective decision-making N good for stable operations N when knowledge from time to focus on for full organization and economic conditions subunits is required, the organizational strategies N decision makers may not decision-making process N decision-making authority understand or agree with slows down combined with reward organizational strategies N
More Less
Unlock Document


Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit