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Chapter 9

Chapter 9 part II BU247.docx

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Greg Clark

BU247 Chapter 9 – Behavioural & Organizational Issues in Management Accounting Week 9 & Control Systems Using a Mix of Performance Measures: A Balanced Scorecard Approach The Need for Multiple Measures of Performance: Non-Goal-Congruent Behaviour -The way in which organizations and individuals measure performance send signals to all employees and stakeholders about what the organization considers as its priorities -If organizations choose performance measures without careful consideration, non-goal-congruent behaviour can occur -Department store managers have discovered that when salespeople are compensated using sae quotas, their attention is focused on selling as much expensive merchandise as possible -Another consequence of relying solely on commissions as a motivating tool is that other aspects of the sales function, such as straightening merchandise or restocking shelves become lower priorities Dysfunctional Behaviour -Dysfunctional behaviour refers to employees knowingly manipulating of falsifying performance measures -Data falsification is knowingly altering sales booking records in his or her favour -Data falsification is considered illegal -In addition to setting up boundary systems so that employees have a clear understanding of what is considered appropriate and inappropriate behaviour, organizations also can design performance measurement systems that encourage the desired behaviour -Organizations have an opportunity to design multiple measures to assess the work that is actually being done Using the Balances Scorecard to Align Employees to Corporate Goals and Business Unit Objectives -Designers can begin with a vision of what organizational participants would like their process or product to look like or how they would like it to function and then radically redesign it -Reengineering design changes have led to the need for new informational requirements and measures related to the costs and benefits of innovation Change Management -MACS sometimes have to be redesigned to be congruent with an organization’s new strategy -In particular, a firm may develop a new Balanced Scorecard strategy map to communicate and support implementation of the new strategy -The most important factor in making major changes to an organization is having top management support -Employees at all levels may feel threatened as new changes are suggested Empowering Employees to be Involved in MACS Design Participation in Decision Making -Employees who participate in decision making evince better morale and greater feelings of job satisfaction -People still perform the major portion of work and have superior information and understanding with regard to how work is best accomplished and, how to improve products and processes BU247 Chapter 9 – Behavioural & Organizational Issues in Management Accounting Week 9 & Control Systems Education to Understand Information -Ensure employees understand the information they use and on which they are evaluated -Employees at all levels must understand the organization’s performance measures and the way they are computer in order to be able to take actions that lead to superior performance -Unless restaurant owners and department store managers educate their employees about how their actions affect customer perceptions of service quality and repeat business, the energy devoted to improving customer satisfaction is wasted -For MACS to function well, employees have to be constantly re-educated as the system and its performance measures change Behavioural Aspects of MACS Design: An Example from Budgeting Designing the Budget Process Authoritative Budgeting -Occurs when a superior informs subordinates what their budget will be without requesting input -Straightforward and efficient -Superiors usually have less information about the process being budgeted than the subordinate -The most motivating type of budgets are those that are right, those with targets that are perceived as ambitious but attainable Participative Budgeting -An approach to budget setting that uses a joint decision-making process in which all parties agree about setting the budget targets -Allowing employees to participate in decision making provides an opportunity for them to use information that they develop through their training or experience on the job to jointly set their goals and negotiate the level of their budgets -Employees who participate in the budgeting process generally feel greater job satisfaction and higher morale because they feel greater control over their jobs Consultative Budgeting -Occurs when managers ask subordinates to discuss their ideas about the budget but no joint decision making occurs -The superior solicits the subordinates’ ideas and determines the final budget alone Developing Appropriate Incentive Systems to Reward Performance -Intrinsic rewards are those that come from within an individual and reflect satisfaction from doing the job and from the opportunities for growth that the job provides -Extrinsic rewards are any rewards that one person provides to another to recognize a job well done Choosing between Intrinsic and Extrinsic Rewards -Most organizations have ignored and continue to ignore the role of intrinsic rewards in motivation and blindly accept the view that only financial extrinsic rewards motivate employees -Some
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