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Emerging Management Practices: Questions
Emerging Management Practices: Questions
Emerging Management Practices: Questions
Chapter 19
CHAPTER 19
EMERGING MANAGEMENT PRACTICES
QUESTIONS
1. Business process reengineering, BPR, is a method of examining processes to
identifyandtheneliminate,reduce,orreplacefunctionsandprocessesthatadd
littlecustomervaluetoproductsorservices.
BPRisatooltoachieveradicalchangesinbusinessprocesses.Managersapply
BPRtoachievewholesalegainsincostorquality.
2. BPRisatoolthatleadstorevolutionarychangesinoperations.Oftenthesechanges
leveragetechnologyandreducetherequiredlaborcontentofaprocessorproduct.
Theconsequenceofreduceddemandforlaborisreductionoftheworkforce.
3. Downsizingisanymanagementactionthatreducesemploymentandrestructures
operationsasaresponsetocompetitivepressures.Tomaintainorincreasemarket
shareintodayscompetitivemarkets,firmsmustcontinuallystrivetoincreasethe
qualityandfunctionalityofproductswhilereducingcosts.Thesepressurescause
firms tocontinually evaluate their processesandincreasetheir dependence on
evolvingtechnologies.Asthelevelofautomationincreases,efficiencyincreases,
andthedemandforlaborisreduced.Layoffsaretheinevitableresult.
Risksincludedepletionoffuturetalentpools,permanentlossoforganizational
knowledge,lossoftrustbetweenmanagementandworkers,anddestructionofa
corporatecultureofcooperationbetweenmanagersandworkers.
4. Expansionofoperationsaroundtheglobehasincreasedtheworkforcediversityof
manyfirms.Employeesoflargefirmsoftenspeakdifferentlanguages,andhave
differentcultures,religions,andworkhabits.
The accounting systems in global firms face an increased burden because
accounting is often the only language that is common to all managers and
employeesand,therefore,theonlylanguageinwhichcommunicationcanoccur
freelywithoutaninterpreter.
5. IntheUnitedStates,increaseddiversificationhasresultedfromboththepassage
of new laws and the selfserving actions of firms. Federal, state, and local
governments have enacted statutes to pursue affirmative action programs and
outlawdiscrimination.However,manyfirmsnowpursuediversificationbeyond
thelegal mandates becausemanagers believe amorediverseworkforceoffers
advantagesinservingadiversecustomerbase.
6. ERPsystemsarepackagedsoftwareprogramsthatallowcompaniestoautomate
datagatheringandprocessingandintegrateinformationfeedersystemstoprovide
usefulrealtimeinformationtomanagers.
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Chapter 19
ERPsystemsdifferfrompriorgenerationsofsystemsbytheextenttowhichthe
various feeder systems (e.g., payroll, accounts payable) are integrated into a
commondatabase.ERPsystemsalsointegratesupply(value)chainstoamuch
greaterextentthanpreviousproductionmanagementsystems.
7. Strategicalliancesareagreementsbetweenfirmsthatresultintheircombining
competencies and resources to create products and services for customers.
Strategic alliances are increasingly used today because they are an effective
response to competitive pressures. Firms have been forced to select core
competenciestomaintainanddefend.Ifproductorservicedeliveryrequirescore
competenciesnotpossessedbyagivenfirm,thatfirmmustcontractwithanother
firm orfirms to providethosecompetencies. A strategic alliance is a flexible
approachtocombiningtheneededcompetenciestodeliverhighqualitygoodsand
servicestocustomersatcompetitiveprices.
8. Openbookmanagementreferstothesharing(generallyfinancial)ofinformation
withallorganizationalemployees.Thecentralideaofopenbookmanagementis
thatinformationshouldbesharedandconsumedbyallorganizationalparticipants
not just managers. This view about information contrasts with the more
traditional view in which information is regarded as an asset that must be
safeguarded,andaccesstoitmustbelimitedtomanagerswhoaretrainedinits
use. Such a closed mentality means that many individuals are deprived of
important information that could help guide them in their decisionmaking
processes.
9. Theimplementationofopenbookmanagementchangestherolesofaccountants.
Accountantsmustnolongeractasguardiansofinformationbutbecomepurveyors
of information. Additionally, accountants must devise ways to help
unsophisticated users of information develop skills and abilities in consuming
financialdata.Gamesareoftendevisedtoaidinthisprocess.
10. Thefirststrategyistocleanupenvironmentalcontaminantsaftertheyhavebeen
produced.Thesecondstrategyistodevelopprocessestoreduceandrecyclewaste
thatiscreated.Thethirdstrategyistoavoidproducingpollutantsinthefirstplace.
Economically, none of these strategies will dominate the others in every
circumstance. However, over the long run, the goal should be to reduce the
productionofenvironmentalwaste.
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Chapter 19
EXERCISES
11.a. Without training the firm will have a smaller probability of successfully
implementingthesoftware.Additionally,trainingisnecessarytounderstand
thetechnologys featuresandfunctionsandtoaccelerate thegeneration of
implementationbenefits.
b. Financialexpertsinabusinessplayimportantrolesintechnologyacquisitions.
Beforetechnologyisacquired,financialexpertsanalyzethecostsandbenefits
todetermineifnewtechnologyisjustified.Next,financialexpertshelpscreen
theproductsofcompetingvendorstoidentifytheproductthatmeetsthefirms
needsatthelowestcost.Finally,thefinancialexpertsmanagetheprocessof
implementationtoensurethattheproductfunctionsaspromisedbythevendor
andconfirmthatthecostsincurredandbenefitsgeneratedareconsistentwith
theexpectations.
12. Theuseoftechnologyiscommonplaceinbusinesstoday.Further,technologyis
increasinglyamajorcomponentofstrategiesbeingplannedandexecutedbyfirms.
Financial professionals, having responsibility for managing the process of
technologyacquisition,mustnowhaveabroaderunderstandingoftheirbusinesses.
Without fully understanding competitive strategies and business operations,
financialprofessionalswillbeunabletomaketheappropriaterecommendations
aboutacquiringnewtechnologyandwillnotbecapableofunderstandingwhether
technologyisservingasaneffectivestrategicandoperationaltool.
Agooddiscussionoftheimportanceoftechnologyisprovidedinthefollowing
article:BenWorthen,CutThoseCosts!(ButNotTech.), WallStreetJournal
(February27,2012),p.R5.
13. Eachstudentwillhaveadifferentanswer;nosolutionprovided.However,thereis
currentlydebateintheacademicandpractitionercommunitiesastohowTQM
andBPRrelatetoeachother.WhilesomearguethatBPRcanbeviewedasatool
ofTQM,othersarguethatBPRisaphilosophyaboutachievingrevolutionary
changesinoperationswhileTQMismoreaboutseekingcontinual,incremental
improvementsinoperations.
14. Eachstudentwillhaveadifferentanswer;nosolutionprovided.
15. Eachstudentwillhaveadifferentanswer;nosolutionprovided.However,the
Japanese management culture has long embraced the ideal of lifetime
employment. Downsizing in a Japanese company that has faithfully pursued
lifetimeemploymentwouldbebestaccomplishedbyreductionsinfuturehiring
andnaturalattrition.Anylayoffsofemployeeswouldbeverydisruptivetothe
business culture. Japanese managers typically prefer to make cuts virtually
anywhereelseintheiroperationsbeforelayingoffemployees.
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Chapter 19
16. Eachstudentwillhaveadifferentanswer;nosolutionprovided.Onecanmakea
casethatthelayoffsaregoodnewsorbadnews.Thelayoffswouldbeviewedas
goodnewsifitwasevidentthattheresultwasamoreefficientcompanythatwas
abletomaintainitsexistingrevenuesbutincurlowercosts.Alternatively,one
couldviewthelayoffsasbadnewsbecauselayoffsinevitablyresultinalossof
expertiseandorganizationalexperience(lossofhumancapital).Suchalosswould
beviewedasreducingafirmsabilitytocreate,produce,andsellproducts.
17. Eachstudentwillhaveadifferentanswer;nosolutionprovided.
18. Whereaseachstudentwillhaveadifferentanswer,thefollowingpointsshouldbe
made. At a minimum, the accounting and financial professionals can monitor
compliance with existing laws and ethical guidelines pertaining to diversity.
However,ifgreaterdiversityisanorganizationalobjective,thefinancialexperts
inthebusinesscandevelopcontrolsystemstosetobjectivesfordiversity,monitor
achievements,andconnectachievementstomanagerialrewards.Bydeveloping
formalmeasuringandreportingsystems,managerswillbeforcedtoconsiderhow
their hiring, promotion, and performance evaluation criteria influence the
objectiveofgreaterdiversity.
19. Althougheachstudentwillhaveadifferentanswer,thefollowingpointsshouldbe
made.ThroughtheInternetstorefrontmuchdemographicalinformationcanbe
gatheredaboutpurchasersofproductsincludinginformationaboutgender,race,
age,maritalstatus,economicstatus,hobbies,andbuyinghabits.Thisinformation
can be related to product sales. The idea is to develop profiles of buyers of
particular types of products. Once such profiles are compiled, specific target
groupsofcustomerscanbecontactedusingquestionnaires,phonecalls,ande
mailtoobtaininputaboutdetailsoffeatures,pricepoints,andqualityexpectations
sothatasthecarisdesigned,fairlyprecisespecificationsregardingprice,quality,
andfunctionalitycanbefollowed.
20. Whileeachstudentwillhaveadifferentanswer,thefollowingpointsshouldbe
made.
a. Customer satisfaction should improve because a closer link between
manufacturing and marketing allows more customer feedback to be
incorporatedintoproductdesign.Further,marketingexpertswouldbemore
readilyabletoprovidetheirperspectivesonproductdesignissues.
b. Muchofthetimerequiredtobringanewproducttomarketisconsumedinthe
designstage.Byhavingagreaterflowofinformationbetweenengineering
andmarketing,engineeringcouldbemorequicklyandcompletelyinformed
aboutcustomerconcernsandpreferencesaboutproductfeaturesandquality.
c. Costmanagementeffortswouldbenefitfromagreaterflowofinformation
between marketing and engineering. One specific benefit should be a
reduction in nonvalueadding features in products because of the greater
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Chapter 19
MONOPOLYisawidelyknowngamewithwhichmanagersandemployees
arelikelytobefamiliar.
MONOPOLYprovidespayoffstoplayersincashandrequiresplayerstosettle
theirobligationswithcash.Thus,thegamewouldhelpintroducesimplecash
flowconceptsandsubsequentaccountinginformation.
ThereisonlyonewinnerinthegameofMONOPOLY,andthatistheindivid
ualwhoaccumulatesthemostcashandproperty.Thus,thegamereinforces
theobjectoftheexercisetowinbybecomingthemostprofitable.
Training must also be provided to the accounting staff and managers. The
accountantsmustbetrainedtodevelopmeasurementsystemsforthegamesthat
are created and to provide training to workers to understand and use the
informationintheirgames.
Managers must be trained to understand the role of games in openbook
managementandtolearnhowtodevelopgamestoimproveoperations.Finally,a
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Chapter 19
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Chapter 19
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Chapter 19
PROBLEMS
29. Eachstudentwillhaveadifferentanswer;nosolutionprovided.
30.a. One of the most important intangible assets of most companies is human
capital. Human capital represents the value of the knowledge, skills, and
abilitiesofemployees.Layoffswouldinevitablyreducethevalueofhuman
capital. Furthermore, the more experienced and knowledgeable are the
workerswhoarefired,thegreaterwouldbethelosssufferedbythefirm.
b. TheBPReventwouldlikelyshowonlythecasheffectsofthelayoffs.For
example, if severance pay is offered to the fired workers, that cost would
appear in the income statement. However, because human capital is not
reportedonthebalancesheet,theonlyeffectonthebalancesheetwouldbea
reductioninownersequityandcashcausedbythereductioninprofitsforthe
periodfromthedirectcashcostsofthelayoffs.
c. No. Clearly there is human capital that is important to an organizations
successandsurvival.However,accountinghasnotevolvedtofairlypresent
effectsoftransactionsonhumancapital.
31.a. The accounting system poorly captures all of the costs associated with
downsizing.Bydesign,theaccountingsystemisaclosedsystemthatonly
measures activities occurring within the entity. In the case of downsizing,
much of the cost is borne by society rather than the firm. For example,
dismissed workers may apply for unemployment compensation and other
benefitsprovidedbylocal,state,andfederalgovernments.Thesecostsmaybe
quitesignificantbutarenotcapturedbyanyfirmsaccountingsystem.
Ifalldownsizingcostswerebornebythefirm,itislikelyfewerfirmswould
electtodownsize.Evenifafirmsaccountingsystemfullyidentifiedthecost
ofdownsizing,firmsmightstillchoosetodownsizegiventhatmanyofthe
costsidentifiedbytheaccountingsystemwouldstillnotbebornebythefirm.
b. Opinionsabouttheethicalresponsibilitiesofemployerstoformeremployees
willvarywidely.Ifoneassumesthatthereisnoimplicitorexplicitagreement
thatafirmisofferinglifetimeemployment,layoffsmaybeviewedasanatural
actionofprofitseekingbusinesses,andthatsuchbusinesseshavenoethical
obligationstoprovideasafetynetfordisplacedworkers.Alternatively,many
studentswilltakethepositionthatemployersdohaveanethicalobligationto
provideasafetynettoworkers,especiallythosewhoseskillsmaybeuniqueto
theemployerand,therefore,notvaluedbyotherpotentialemployers.
32. Theaccounting function canhelptopmanagement identifytalented managers.
Although layers of middle managers have been eliminated by business
restructurings,theeliminationshavebeenmadepossiblebythedecentralizationof
information,authority,andresponsibility.Theaccountingfunctionhasassumed
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Chapter 19
Chapter 19
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Chapter 19
35.a. Thelevelofcompetitionintheglobalbusinessenvironmentrequiresahigh
level of cooperation and information sharing between managers and
employees.Ifthereismistrustbetweenthetwogroups,theperformanceofthe
organization will suffer. Unethical treatment of employees will cause
employeestonottrustmanagers.Bothgroupswillultimatelysufferbecause
the performance of the firm will be below levels that could have been
achieved. Consequently, the ethical treatment of employees is likely a
prerequisiteforafirmtoachievehighperformance.
b. Openbookmanagementisaphilosophythatrequiresaveryhighleveloftrust
between employees and managers. A companys use of downsizing as an
organizational strategyis inconsistent withthecultureinwhichopenbook
managementcouldbesuccessfullyimplemented.
36.a. Strategic alliances involve a greater degree of integration of two or more
companies than is obtained in traditional supplier/customer relationships.
Accordingly,thereisgreaterdependencebetweenthepartnersindetermining
thequalityoftheoutput.Also,itmaybemoredifficultforafirmtoexert
pressureonapartnerthanasuppliertoimprovequality.Eachpartnerislikely
to have some autonomy in determining how it will fulfill its role in the
alliance.Therefore,theabilitytomanagequalityinastrategicalliancemay
dependheavilyonselectingpartnersthatarequalityoriented.
b. Asinallbusinessenterprises,theaccountingfunctioncancontributetothe
measurement, and therefore the management, of quality. And, as in all
businesses, the contribution of the accounting function will be maximized
whenitsmeasurementsofqualityarelinkedtoincentivesofspecificmanagers
whocancontrolquality.
37.a. Servingarotationinproduction,quality management, andotherfunctional
areas wouldbetterallowthefinancial specialisttounderstandthebusiness
functions that she/he is charged with measuring. During the rotation, the
financialspecialistwouldbetterunderstandtherelationshipsbetweenquality
managementandproductioncosts,andwouldenhancehis/herunderstanding
ofcostdriversandcostdependenciesamongfunctionalareas.
b. With acost management specialist onthe team, theteam would bebetter
equippedtounderstandtherelationbetweentheiractionsandcostincurrence.
Further,theteamwouldhaveanenhancedabilitytomodelthecostofvarious
businessfunctionsandwouldhaveabetterinsightintohowtoreducecostsby
managingcostdrivers.
38.a. Transparency refers to making financial information truthful and easy to
comprehendbytheinformationconsumer.Thesecharacteristicsrequirethe
adoptionofaccountingpracticesthatrevealfinancialresultsinaclear,timely,
andcomprehensiblemanner.
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11
Chapter 19
Chapter 19
costs.Second,theenvironmentalcostsshouldbechargedtospecificjobssothata
moreaccuratecostcanbedeterminedforallproductsproduced.
Next, responsibility for controlling environmental costs should reside with a
specificindividualorsetofindividuals.Oncethechartofaccountsismodifiedto
better capture environmental cost data, formal strategies can be developed for
reducingthosecosts.Thisrequiresthatspecificmanagersbemadeaccountablefor
achievingenvironmentalcostcuts.
To achieve environmental cost cuts, specific strategies must be devised for
controlling environmental effects. Beginning with the most toxic wastes,
strategies must be developed to eliminate waste where feasible, reduce waste
elsewhere,andproperlydisposeofanywastethatremains.Astrategyshouldbe
developedforeachcategoryofwaste.Accountabilityforeliminating,reducing,
recycling,andproperlydisposingofwastemustbeestablished,andmethodsmust
bedevisedtomeasureresultsandrewardthemanagersfortheirefforts.
41. Whileeachstudentwillhaveadifferentanswer,thefollowingpointsshouldbe
made.
a. Wastetoxicitycanbedepictedasacontinuum.Somewasteisharmlessand
somerepresentsathreattolargepopulationsofpeopleandotherorganisms.
Realistically there are some waste materials that should not be produced
regardlessoftheeconomicgainthatissacrificed.
b. Manyexamplesexistofcompaniesknowinglydisposingofwasteimproperly
forfinancialgain.Inmanyinstancesimproperdisposalwassimplyregarded
astheleastexpensivewayofconductingbusiness.Therearemanyarguments
againstimproperlydisposingofwaste.
Ethically,itisdifficulttojustifytheendangermentofaninnocentpopulation
topreservejobs.Thetacitnatureofimproperlydisposingofwastenecessarily
meansthatmanypeopleendangeredbythewasteareuninformedofthethreat.
Ifthecompanysonlymeansofsurvivalistheimproperdisposalofwaste,its
economicfutureisnotindoubt.Itisonlyamatteroftimebeforethecompany
will fail. The improper disposal of the highly toxic waste is hardly worth
merelyextendingtheinevitablefailure.
Thegreaterthewastetoxicity,thegreateristhelikelihoodthatadverseeffects
will result. However manifested, these effects will exist as clues of the
improper disposition and increase the likelihood of ultimate detection. If
detected, the financial consequences will surely far exceed the costs of
properlydisposingofthewasteinthefirstplace.
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