Lecture Fundamentals of cost accounting (4th edition): Chapter 18 - Lanen, Anderson, Maher

(BQ) Chapter 18: Performance measurement to support business strategy. As we noted at the beginning of chapter 1, the goal of cost accounting is to help managers maximize value creation in organizations. In this chapter, we introduce methods and measures links performance measures to business strategy.
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Lecture Fundamentals of cost accounting (4th edition): Chapter 18 - Lanen, Anderson, Maher© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in anymanner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. PerformanceMeasurementto SupportBusinessStrategy Chapter18 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPAMcGrawHill/Irwin Copyright©2014byTheMcGrawHillCompanies,Inc.Allrightsreserved. LearningObjectivesLO 18-1 Explain why management accountants should know the business strategy of their organization.LO 18-2 Explain why companies use nonfinancial performance measures.LO 18-3 Understand the reasons why performance measures differ across levels of the organization.LO 18-4 Understand how the balanced scorecard helps organizations recognize and deal with their conflicting responsibilities.LO 18-5 Understand how to apply the methods involved in an effective performance measurement system.LO 18-6 Identify examples of nonfinancial performance measures and discuss the potential for improved performance resulting from improved activity management.LO 18-7 Explain why employee involvement is important in an effective performance measurement system. 183 LO18-1 StrategyandPerformance LO 18-1 Explain why management accountants should know the business strategy of their organization. Business Strategy A company’s specific approach for deploying the organizational assets and capabilities required to meet its customers’ needs competitively, while delivering the desired returns to stakeholders. 184 LO18-1 StrategyandPerformance Value Proposition How the organization will create value for all stakeholders. Mission Why an organization exists; its purpose and goals. Mission Statement Description of an organization’s values, definition of its responsibilities to stakeholders, and identification of its major strategies. 185 TheFoundationofaSuccessful LO18-1 BusinessStrategy Identify Core Resources and Capabilities Methods of Achieving Success Cost Product Focused Leaders Differentiators Competitors 186 LO18-2 BeyondtheAccountingNumbers LO 18-2 Explain why companies use nonfinancial performance measures. Financial performance measures are useful for motivating employees to improve the company’s profits, but they do have several flaws. • Often not useful in identifying the cause of operational problems • Commonly reported only on a monthly, quarterly, or annual basis • Many people in the organization do not see how their work translates into financial results 187 LO18-2 NonfinancialMeasures • Nonfinancial measures direct employees’ attention to those things they control. • In the case of a desk clerk at a hotel, measuring the clerks performance in terms of customer satisfaction would be meaningful 188 ResponsibilitiesAccording LO18-3 toLevelofOrganization LO 18-3 Understand the reasons why performance measures differ across levels of the organization. Business Model Description of how different levels and employees in the organization must perform for the organization to achieve its goals. ...