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Chapter 11

Chapter 11 BU247.docx

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Wilfrid Laurier University
Greg Clark

BU247 Chapter 11 – Financial Control Week 11 The Environment of Financial Control -Financial control involves the use of measures based on financial information to assess organization and management performance -Financial control focuses on financial results -In for-profit organizations, financial control looks at the drivers of profit such as the organization’s ability to use its assets effectively and control costs for a given level of sales -In not-for-profit organizations, financial control looks at the organization’s ability to use its resources in the most effective way to accomplish its service objectives -Plays an important role in the PDCA cycle Financial Control -Internal financial control supports decentralizing of decision-making information in large organizations The Motivation for Decentralization -Decentralization is the process of delegating decision-making authority to frontline decision makers, evolved for two reasons -As organizations become larger, it became increasingly difficult for a central decision maker to make all organizational decisions -As organizations became larger and more geographically dispersed, it became increasingly difficult to gather and transmit information about the organization’s environment for evaluation and processing at the organization’s centre -Organizations often develop standard operating procedures to ensure that: they are using the most efficient technologies and practices to promote both low cost an consistent quality, and there are no deviations from the preferred way of doing things -Being adaptive usually requires that the organization’s senior management delegate or decentralize decision-making responsibility to more people in the organization -Decentralization allows motivated and well-trained organization members to identify changing customer requirements quickly and gives frontline employees the authority and responsibility to develop plans to react to these changes Responsibility Centres and Evaluating Unit Performance -A responsibility centre is an organization unit or which a manager is held accountable -Ex. A hotel in a chain of hotels -A responsibility centre is like a small business, and its manager is asked to run that small business to achieve the objectives of the larger organization Coordinating Responsibility Centres -The company can measure efficiency i
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