BU247 Chapter Notes -Performance Measurement, Professional Code Of Quebec, Business Process Reengineering

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13 Apr 2014
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BU247 Lecture 17-19 Thursday, July 11 Thurs. July 18 2013
1 | S O Y B E A N P A R K
CHAPTER 9 BEHAVIOURL AND ORGANIZATIONAL ISSUES
A cost mgmt. system is the central performance measurement system at the core of the larger
entity called mgmt. accounting and control system (MACS): goal is to motivate employee behaviour
congruent with the desires of the organization
Control: procedures, tools, measures that guide & motivate all workers to achieve goals
4 management control types = results, action/task, personnel, cultural controls
A system is in control if it is on the path to achieving its strategic objectives
Company must have knowledge and ability to correct situations that are out of control
1) Plan: objectives, activities to achieve goals, measures to determine how well the goals were met
2) Do: implement the plan
3) Check: monitor by evaluating the system’s current level of performance; compare feedback
4) Act: return the system to an in-control state
CHARACTERISTICS OF WELL-DESIGNED MACS
Technical Considerations
Technical factors fall into 2 categories
1) Relevance of the info generated: measured by 4 characteristics
1. Accurate: inaccurate info is not relevant or useful for decision making because it is misleading.
Thus, designers should develop a system that leads to the most accurate info possible use
systems that trace costs more directly from support activities to products
2. Timely: Results must be fed to appropriate units in fastest way possible high-speed computers
3. Consistent: provide consistent framework applied globally across the entity. The language used
and technical methods of producing info do not conflict within various parts of the company. ex:
one division uses ABC and another division uses volume-based overhead allocation method
4. Flexible: allow employees to use the system’s info in a flexible manner so that they can customize
its application for local decisions. Inflexibility means worker motivation to make the best decision
may be lessened for the decision at hand, especially if different units engage in different types of
activities. Well-designed MACS must accommodate the local needs of each division.
2) Scope of the system must include all activities across the entire value chain of the organization
Assessing performance in only the actual production process means that the performance of
suppliers, the design activities, and the postproduction activities are ignored. Without a
comprehensive set of information, managers can make only limited decisions.
Behavioural Considerations
Because human interests and motivation can vary significantly, a major role for control systems is to
motivate behavior congruent with the desires of the organization.
Four major behavioral characteristics should be considered when designing a MACS:
1. Embedding the organization’s ethical code of conduct into MACS design.
2. Using a mix of ST & LT qualitative and quantitative performance measures (or BSC Approach)
3. Empowering employees to be involved in decision making and MACS design.
4. Developing an appropriate incentive system to reward performance: implement new systems
considering the behavioral implications to promote goal congruence, motivation, &ethics
THE HR MGMT MODEL OF MOTIVATION
Earliest attempt at understanding mgmt. = scientific mgmt. school. People found work
objectionable, cared little for making decisions or creativity, and money was the driving force
Management believed that employees should follow highly detailed, prescribed procedures and that
behavior should be monitored and controlled very carefully through time-and-motion studies.
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BU247 Lecture 17-19 Thursday, July 11 Thurs. July 18 2013
2 | S O Y B E A N P A R K
The human relations movement: people had needs beyond performing a simple repetitive task at
work. Financial compensation was only one aspect of what workers desired. Employees want
respect, discretion over their jobs, and a feeling that they contributed
Most contemporary mgmt. view of motivation = HR model of motivation (HRMM).
o Based on initiatives to improve the quality of working life and Japanese practices, HRMM
introduces a high level of employee responsibility and participation in decisions
o The central assumptions = people find work enjoyable; and people want to participate
o Individuals are motivated by both financial and nonfinancial means of compensation.
o Assumes that employees have knowledge about their jobs, the application of which will improve
the way they perform tasks and benefit the organization as a whole.
o Individuals are assumed to be highly creative, ethical, and responsible, and participative
The HR model = basis of the presentation of the 4 behavioral considerations in MACS design:
ORGAZNIZATION’S ETHICAL CODE OF CONDUCT & MACS DESIGN
Boundary system: standards of acceptable behavior ethical principles
The ethical framework embedded in system design will influence the behavior of all users.
The key user groupmanagersinteracts a great deal with the MACS. Often managers are subject
to intense pressures from their job circumstances to suspend their ethical judgment:
1) Requests to tailor information to favor particular individuals or groups.
2) Pleas to falsify reports or test results.
3) Solicitations for confidential information.
4) Pressures to ignore a questionable or unethical practice.
To incorporate ethical principles into the design, system designers might attempt to ensure:
1) That the organization has formulated, implemented, and communicated to all employees a
comprehensive code of ethics through the organization’s beliefs system.
2) That all employees understand the organization’s code of ethics and the boundary systems
3) That a trustworthy system exists to detect and report violations of the code of ethics.
Fraud triangle:
1) Pressure/incentive: pressure on workers to misappropriate cash or other organizational assets
2) Rationalization: frame of mind or ethical character that allows workers to intentionally
misappropriate cash or other assets and justify their dishonest actions
3) Opportunity: circumstances that allow an employee to misappropriate cash / other assets
Avoiding Ethical Dilemmas
Although no universal hierarchy exists, 5 categories capture ethical considerations: legal rules,
societal norms, professional memberships, organizational or group norms, and personal norms.
This hierarchy is listed in descending order of authority.
For example, an action that is prohibited by law should be unacceptable by society, by one’s
profession, by the organization, and then by each individual.
any hierarchy of this sort has a number of gray areas, but it provides general guidelines
Ethical conflicts occur when one system of values diverges from a more fundamental system.
Ex: suppose that the company’s code of ethics commits it to meeting only the law regarding
disclosure of a product defect in one of its goods that could prove hazardous. However, societal
expectation is that organizations should be disclosing more potential product defects. A decision
maker may face an ethical conflict when code of ethics implies doing nothing about the defect since
there is no definitive evidence of a product problem.
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BU247 Lecture 17-19 Thursday, July 11 Thurs. July 18 2013
3 | S O Y B E A N P A R K
Dealing with Ethical Conflicts
Specific and unambiguous ethical codes can create an environment that will reduce ethical conflicts.
One step in avoiding ambiguity is to maintain a hierarchical ordering of authority, which means that
the code of ethics should not allow any behavior that is either legally or socially unacceptable
Because most professional codes of ethics reflect broad moral imperatives, such as loyalty, an
organization would create public relations problems if its code conflicted with a professional code
Another variable to reduce ethical conflicts is the behaviour of the chief executive. Organizations
whose leaders exhibit unethical behavior cannot expect their employees to behave ethically.
There’s potential for explicit ethical conflicts with the code itself, like conflicts between:
1) the law and the organization’s code of ethics
2) the organization’s practiced code of ethics and common societal expectations
3) the individual’s set of personal/professional ethics and the organization’s practiced code
o If organization’s code of ethics is more stringent than an individual’s code, conflicts may arise.
o However, if adherence to the organization’s ethical code is required, it is possible to diminish
ethical conflicts if, as part of contract, the individual is expected to pursue a stringent code
o Another outcome is that individuals may raise their own ethical standards without conflict.
o Issue = when personal code of ethics prohibits certain types of behavior that are legal, socially
acceptable, professionally acceptable, and acceptable (or even desirable) to the organization.
o Ex: a worker may have deep religious objections to working on a holy day.
o As a practical matter, employees faced with ethical conflicts must make sure to document the
events and discussions and list the parties involved so that a case can be made
Any other conflicts relate to personal values that were acceptable prior to the new code of ethics
Conflicts between the Organization’s Stated and Practiced Values
When senior management engage in unethical behavior, it’s the most difficult conflict because the
organization is misrepresenting its ethical system, forcing the employee to make a choice between
going public with the information or keeping it quiet.
Most experts recommend that the employee work with respected leaders in the organization to
change the discrepancy between practiced and stated ethics
Whistle-blower: a unenviable position. Most choose personal integrity over their loyalty.
Individual should first ensure that the facts are correct. Second, by speaking with superiors,
determine whether this conflict is institutional or whether it reflects a small minority of employees.
individual has several choices, including the following:
1) Point out the discrepancy to a superior and refuse to act unethically: may lead to dismissal
2) Point out the discrepancy to a superior and act unethically: rationale is that the employee
believes that this affords protection from legal sanctions.
3) Take the discrepancy to a mediator in the organization if one exists.
4) Work with respected leaders in the organization to change the discrepancy recommended!
5) Go outside the organization to publicly resolve the issue.
6) Go outside the organization anonymously to resolve the issue.
7) Resign and go public to resolve the issue.
8) Resign and remain silent.
9) Do nothing and hope that the problem will dissolve.
have an effective ethical control system to ensure and provide evidence that the stated and
practiced ethics are the same means to point out inconsistencies without fear of retribution.
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Document Summary

A cost mgmt. system is the central performance measurement system at the core of the larger entity called mgmt. accounting and control system (macs): goal is to motivate employee behaviour congruent with the desires of the organization. Control: procedures, tools, measures that guide & motivate all workers to achieve goals. 4 management control types = results, action/task, personnel, cultural controls. A system is in control if it is on the path to achieving its strategic objectives. Technical factors fall into 2 categories: relevance of the info generated: measured by 4 characteristics, accurate: inaccurate info is not relevant or useful for decision making because it is misleading. The language used and technical methods of producing info do not conflict within various parts of the company. Ex: one division uses abc and another division uses volume-based overhead allocation method: flexible: allow employees to use the system"s info in a flexible manner so that they can customize its application for local decisions.

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